I am a UCLA financial professor, so we talk. Which figures are more meaningful to you?
Having $ 50 to $ 100 cash in your pocket (moderate average for an American) or knows the total US currency in the circulation of $ 2.4 trillion?
Acquired to $ 7,300 on your credit card (average balance of those who do not pay this monthly) or visualize the total US credit card debt of $ 1.2 trillion?
Of $ 250,000 debt in your home (average among American conspraves with debt) or seeing that the country’s overall residential debt is $ 12.8 trillion?
Holding $ 250,000 to your 401 (K) or IRA account (average for Boomer children, now enough to need) or knowing overall accounts for about $ 27 trillion?
Receive a monthly Social Security Check of $ 2,000 (the average) or considered the Social Security Trust Fund balance to $ 2.7 trillion?
I was researching and taught the economy for more than 30 years, and I still can’t do my head around trillions of dollars. I know you can’t, even if our senators and representatives determine the federal budget. However, our government insists on speaking with us in this unbearable language.
Too bad, even our best media outlets will rarely translate the incomprehensible government abstractions to budget defenses, how much the Budget Budget exchanges on the Megret.
And I want to help people understand the federal budget and the resulting national debt, as well as ways of spending our government. (Both parties to blame; no political need here.)
The national debt now stands about $ 37 trillion. This means that each of our 347 million people are in hook for about $ 110,000, or about 2.75 years of median income of $ 40,000 per year.
Of course, not every US resident has earned income or paying income taxes. With “only” 154 million taxpayers, this means that an average piece of taxpayer at $ 37 trillion federal debt is about $ 240,000, or six years in median income.
Think of it as your part of our federal debt. The government may have lent it, but eventually you are in hook for it. Feel better now? Maybe not. For most people, knowing that you owe $ 240,000 more than hearing that the national debt is $ 37 trillion.
And your piece of our joint problem is still growing. Every year, our federal government takes about $ 35,000 per taxpayer ($ 5 trillion) and spend about $ 45,000 per taxpayer ($ 6.75 trillion). Lawmakers now do not pay our debt but adds about $ 10,000 per taxpayer each year to the current well-known balance of $ 240,000.
Unfortunately, we have another problem. Our unique debt is issued to low interest rate (about 2.3% per year). It’s about to change. If it is first, Refinance interest rates are likely to be more like 4% per year. Federal interest spending rises from the current level of about $ 6,000 a year per taxpayer at $ 10,000.
Back to “a big beautiful bill” that the Wall Street Journal reports to. It is important that SIOCT, more than 10 years, the Congressional Budget Office estimates the legislation to add a general disability of $ 18,000 per taxpayer. Any loan balance we expect to reach for about 10 years, under this new budget, we hope to reach debt in nine years.
Himself, debt is not bad. For example, as the value of your home is growing, the percentage of mortgage shrinks. If your we get up, it can also help. Our 25-year-old business school students, with no current earnings but take a six-digit loan, which will always pay for their debts and also support a good lifestyle.
Unfortunately, not for our federal malaise. Our income and tax bases have increased as close as low as our obligations.
With growing disadvantages and increases in interest rates, instead we make our obligations easier. Adding our runawators to run, although we think we can increase our economic output, the tarugo with an economists with a metaphorical judge of bankruptcy. Fortunately, this is not impossible.
So what can happen to happen?
First, we can be more lucky: economic growth can reach higher than before.
Second, our politicians are able to lift taxes, restraint spending or doing two. However, we have no collective appetite for it. (Those actions can slowly grow up to the point they become opponent.)
Third, we can “print” money. However, it leaves us in a fiscal situation similar to many developing countries, with inflation in inflation and unreliable money. Who will lend us? It doesn’t “make America good.”
Living beyond our ways is not a Republican or a democratic problem. Our parties do not agree with what to spend money, but the two shows through their actions they agree to spend more than expenditures. Politicians are the reflections of their electorate, and we are people not ready for any pain. If our voters can begin to understand our problem, we will be in a solution first.
Ivo Welch is a Professor of Finance and Economy of Anderson Graduate School of Management at UCLA./Tribribune News Service
