US Debt Made Simple

Some Elected Politicians, economists, academicians and others may say US Debt is complicated, and then offer mathematical, economic, political formulas and theories.  Some may even say US Debt of $22 Trillion is not a problem

Frankly, to understand US Debt one needs to understand: 1) basic math,  2) how individuals become and remain Elected Politicians, and 3) how to “Follow the Money.” Then decide if $22 Trillion in Debt is a problem.

Basic Math – when Elected Politicians spend more in a year than we all pay in taxes that results in overspending, or a loss. This is called the “Annual Deficit”. It’s a basic math formula: revenue – expenses = gain or loss.  We then must borrow from someone, much of it from Trust Funds, Retirement Accounts, foreign sources, and others to cover the loss. This is called “Debt”.  When this happens year after year after year the Debt keeps growing to $22 Trillion, an astronomical level. It is rising faster than GDP and the interest on the debt is increase, crowding out other spending. This is called “Mismanagement”, possibly Gross Mismanagement.

Individuals become and remain Elected Politicians by making promises, commitments and manufacturing and presenting a false sense of security that they are primarily looking out for your best interest. Elected Politicians do this in exchange for current political contributions from lobbyists and special interests, for opportunities for future monetary and non-monetary benefits, and by convincing you to vote for them.

Their primary objective is to get elected, and re-elected – again and again, and possibly get appointed to an important sub-committee or move to higher office which will attract greater money from lobbyists. Often, they do this by obscuring the truth, making misleading statements, telling half-truths, making promises and taking money with little, if any, regard to the overall financial stability and safety of the US and your future security. These promises and commitments result in Elected Politicians spending more than they take in revenue each year. They force US to borrow money and go deeper into Debt to cover their overspending. Here is the tricky part – Elected Politicians, or the “Government” as some may say, don’t owe the money they borrow. They are borrowing using your credit. You, the Taxpayer, owe the money!

Follow the Money – revenue, expenses and Debt – for Operating and Old Age.

Revenue – taxes you pay and fees collected to be used by Elected Politicians for the day-to-day operations of the US. Elected Politicians establish the rules in the US tax code which become the basis for the amount of taxes individuals and corporations pay each year. Income taxes represent the largest amount of annual income Elected Politicians have available to spend to run the day-to-day operations of the US.

Spending – costs incurred for the day-to-day running of the US and research development for the future –  e.g. educating citizens, operating parks, roads, ports, bridges, other infrastructure, and protecting the environment and for earned benefits and defense.

Revenue should be set to cover Spending and some should be left over for a “rainy day fund” to pay down the debt to a manageable amount and to cover unanticipated expenses. Alternatively, Spending levels should be set to not overspend Revenues in significant amounts year after year.

Contributions for Old Age and Medical money taken from Taxpayers’ salary and matching contributions from their employers to be set aside to provide financial and medical security in old age.  Throughout their working lives, individuals and corporations make mandatory contributions to The Social Security Trust Fund and Medicare Trust Fund. These Trust Funds were established to provide a level of financial and medical security for their old age. Elected Politicians established rates for these Mandatory Contributions. Taxpayers have been lead to believe these monies will be held in a Trust Fund, or fiduciary capacity, for their financial and medical security.

Obligations to pay Old Age and Medical Benefitsthe amounts paid to and on behalf of old age individuals from the mandatory contributions deducted from their salary during their working lives. When Social Security Trust Fund was created in 1939, the average life expectancy was about 61 years old and the average retirement age was about 65 years old. Beneficiaries in the early years were receiving payments for a much shorter period. At that time, there were approximately 16 workers paying in for every person receiving social security. Today, there are less than 3 workers paying in (and declining) for every person receiving social security.

Simple enough? Sure, that is until: 1) Elected Politician kept promising and spending more in Operating Expenses than was available to them from Operating Income, and 2) they grossly mismanaged the formula to match old age benefits with the Trust Funds available. To make matters worse, they took Trust Fund assets and bought US Treasury securities – IOU’s from the Treasury. The Treasury used the Trust Fund money to cover the overspending in day-to-day expenses.

Elected Politicians took from Peter to pay Paul, as the old saying goes. They left only an IOU that Taxpayers must ultimately pay back despite the fact that Taxpayers have already paid into the system. Outside of the US Government this would be identified and prosecuted as a Ponzi or Madoff Scheme. A scheme where current Taxpayers contributions are not being held for their future security but rather paid to pay former Taxpayers to cover Elected Politicians’ mismanagement of spending and Trust Funds.

US Financial Summary
2000 to 2017 ( in $Trillions)

Year GDP (Nominal) GDP (Real) Annual Revenue Annual Spending Annual Deficit Debt Oustanding Debt to GDP (Nominal) Debt to GDP (Real) Debt to Revenue
2000 $10.3 $12.6 $2.0 $1.8 $0.2 $5.7 54% 45% 280%
2001 $10.6 $12.7 $2.0 $1.9 $0.1 $5.8 54% 46% 292%
2002 $11.0 $12.9 $1.9 $2.0 -$0.2 $6.2 56% 48% 336%
2003 $11.5 $13.3 $1.8 $2.2 -$0.4 $6.8 58% 51% 381%
2004 $12.3 $13.8 $1.9 $2.3 -$0.4 $7.4 59% 54% 392%
2005 $13.1 $14.2 $2.2 $2.5 -$0.3 $7.9 60% 56% 368%
2006 $13.9 $14.6 $2.4 $2.7 -$0.2 $8.5 61% 58% 353%
2007 $14.5 $14.9 $2.6 $2.7 -$0.2 $9.0 61% 61% 351%
2008 $14.7 $14.8 $2.5 $3.0 -$0.5 $10.0 67% 68% 397%
2009 $14.4 $14.4 $2.1 $3.5 -$1.4 $11.9 83% 83% 566%
2010 $15.0 $14.8 $2.2 $3.5 -$1.3 $13.6 90% 92% 627%
2011 $15.5 $15.0 $2.3 $3.6 -$1.3 $14.8 95% 98% 642%
2012 $16.2 $15.4 $2.5 $3.5 -$1.1 $16.1 99% 105% 656%
2013 $16.7 $15.6 $2.8 $3.5 -$0.7 $16.7 100% 107% 603%
2014 $17.4 $16.0 $3.0 $3.5 -$0.5 $17.8 102% 112% 590%
2015 $18.0 $16.4 $3.2 $3.7 -$0.4 $18.2 101% 111% 559%
2016 $18.6 $16.7 $3.3 $4.0 -$0.6 $19.6 105% 117% 587%
2017 $19.4 $17.3 $3.3 $4.0 -$0.7 $20.2 104% 117% 612%
2018(E) $20.4 $18.1 $3.3 $4.1 -$0.8 $21.5 106% 119% 651%

US Financial Detail
2000 to 2017 ( in Trillions)

Revenue Spending
Year Income Taxes Social Taxes Other Taxes Business Taxes Total Revenue Pensions Health Defense Interest All Other Total Spending Annual Deficit
2000 1.2 0.7 0.1 0.03 2.0 0.5 0.5 0.4 0.2 0.2 1.8 0.2
2001 1.1 0.7 0.1 0.03 2.0 0.5 0.6 0.4 0.2 0.2 1.9 0.1
2002 1.0 0.7 0.1 0.02 1.9 0.5 0.7 0.4 0.2 0.3 2.0 -0.2
2003 0.9 0.7 0.1 0.02 1.8 0.5 0.7 0.5 0.2 0.3 2.2 -0.4
2004 1.0 0.7 0.1 0.02 1.9 0.5 0.7 0.5 0.2 0.3 2.3 -0.4
2005 1.2 0.8 0.1 0.02 2.2 0.6 0.8 0.6 0.2 0.3 2.5 -0.3
2006 1.4 0.8 0.1 0.03 2.4 0.6 0.8 0.6 0.2 0.4 2.7 -0.2
2007 1.5 0.9 0.1 0.03 2.6 0.6 0.9 0.7 0.2 0.3 2.7 -0.2
2008 1.5 0.9 0.1 0.03 2.5 0.7 1.0 0.7 0.3 0.3 3.0 -0.5
2009 1.1 0.9 0.1 0.03 2.1 0.7 1.2 0.8 0.2 0.6 3.5 -1.4
2010 1.1 0.9 0.1 0.1 2.2 0.8 1.3 0.8 0.2 0.3 3.5 -1.3
2011 1.3 0.8 0.1 0.1 2.3 0.8 1.3 0.9 0.2 0.4 3.6 -1.3
2012 1.4 0.8 0.1 0.1 2.4 0.8 1.2 0.8 0.2 0.4 3.5 -1.1
2013 1.6 0.9 0.2 0.1 2.8 0.9 1.2 0.8 0.2 0.3 3.5 -0.7
2014 1.7 1.0 0.2 0.1 3.0 0.9 1.3 0.8 0.2 0.3 3.5 -0.5
2015 1.9 1.1 0.2 0.1 3.2 1.0 1.4 0.8 0.2 0.3 3.7 -0.4
2016 1.8 1.1 0.2 0.1 3.3 1.0 1.5 0.8 0.2 0.3 3.9 -0.6
2017 1.9 1.1 0.2 0.1 3.2 1.0 1.5 0.8 0.3 0.4 4.0 -0.7
2018(E) 1.9 1.1 0.2 0.1 3.3 1.0 1.5 0.9 0.3 0.7 4.1 -0.8