By Michael Gold
To the vast majority of taxpayers, the Federal government is a very distant thing. And it’s vast and growing barrel of debt may seem so abstract that it’s difficult to see how it will affect us as individual taxpayers.
I decided to do some research into this issue, to learn what the current $39 trillion in Federal debt will do to individual citizens – you and me.
The U.S. government is the largest borrower in the world. No one else is even close. China is second, with almost $19 trillion in debt. Japan is third, with $9.8 trillion.
What’s the source of this problem? Our tax revenues simply do not match what we spend. In the fiscal year of 2025,which starts on October 1st and ends on September 30th of the next year, the Feds collected $5.2 trillion. But we spent $7 trillion. (source: https://www.cbo.gov/publication/61953).
That means there’s a deficit in the budget of $1.8 trillion – for just one year of government operations. That’s a lot of money, even to somebody like Jeff Bezos.
How do we make up this difference? By borrowing cash from the U.S. Treasury.
How does the Treasury do that?
The Feds issue Treasury bonds, bills and notes. It sells these instruments in financial markets. Various entities buy them – foreign governments, investment banks, private equity funds, financial services companies, hedge funds, insurance companies, pension funds, and even individuals, like Warren Buffett.
I looked up this information on the Treasury Department’s kids’ site, which is about the level of my financial sophistication (source: https://www.treasurydirect.gov/kids/what/what_borrow.htm).
Anyone who has the money can buy a Treasury bill for as little at $100. Mostly, though, its organizations that loan the U.S. government money. The only way the organizations would buy them is if they earned a good amount of cash on their loan when the bills they purchased mature. The current interest rate is 3.78 percent on a one-year T-Bill (source: https://ycharts.com/indicators/1_year_treasury_rate).
You can buy Treasury securities that mature in three months, three years or 30 years. There are all kinds of time frames on offer.
The country is so deep in the hole at this point that we’re borrowing money to pay off the massive amount of interest we already owe our many creditors. That’s the Federal debt – $39 trillion, as I mentioned earlier. We keep borrowing more and more money because we’re not collecting enough. This has happened consistently over the last quarter century. The last time we had a balanced budget, where we spent exactly what we had, was 2001. We even had a budget surplus that year – about $127 billion.
So, you may be wondering, how does this affect me as I go about my life, doing my job, paying off the mortgage, raising my children and spending the money I need to take care of my family?
To most people, the Federal debt is just one of those things where you feel like a kid in high school geometry class, when the teacher is talking about right angle trigonometry and your eyes glaze over just before your head hits the desk. You’d much rather hit the donut shop with your friends than think about sine, cosine and tangents.
I admit I had no idea how it affects me. So I looked it up. The Government Accountability Office’s (GAO) website showed me the way.
The government’s gargantuan, multi-decade borrowing binge may make it harder for other investors to get the loans they need, the GAO says.
“The crowding out effect asserts that rising government spending often negatively influences private sector investment,” states Investopedia, a financial media website.
“Mainly, this occurs because as the government increases taxes or borrows more funds, it raises interest rates, making borrowing more costly for businesses and individuals. Consequently, this decreases disposable income and can discourage private investment, posing significant questions about the real impact of government involvement in economic activity,” Investopedia says.
Mainly, what this means is there is a limited amount of money to go around. The great lumbering beast that is the U.S. government stands to get the cash it needs before Apple or General Motors, or you.
So, if there’s less money to go around for the business world and homeowners, the cost of borrowing the remaining money is going to go up. If businesses can’t get loans at an affordable cost, they can’t invest in new products that can raise the standard of living. If they do borrow at a higher interest rate, they may decide they can’t give their employees a raise.
“The federal government’s debt is growing faster than the economy—this is unsustainable over the long term,” the GAO explains (source: https://www.gao.gov/americas-fiscal-future/how-could-federal-debt-affect-you).
One of the interesting things here is that the government itself, or least one part of the government, the GAO, is saying that accumulating all this debt is really bad, even while the vast majority of our elected representatives, from the President down to the lowliest representative seem to completely ignore the problem.
This is a monumental disgrace, yet it takes place in the shadows. Sure, we’ve got big problems. Gas prices are rising. The Iran War, which nobody asked for but the President, is causing inflation to rise. A.I. taking everyone’s jobs is a looming threat. Farmers are struggling. They can’t sell their soybeans, for example. Tariffs have increased costs in the economy. Russia is battering Ukraine. China wants to take over Taiwan and dominate the rest of Asia. Climate change is causing the American West to dry out. Corruption seems to permeate the White House.
But even if nobody is paying attention, the Federal debt matters. On a basic moral level, it’s responsible to pay our bills when they come due. Sure, we can borrow money, but it should be at a level we can afford. This orgy of borrowing the U.S. government has been engaged in over the decades is stealing from the future.
If we don’t take steps now to try to solve this problem, the ultimate reckoning will come as a great shock to the economy, and ultimately, us. We could all suffer mightily because our leaders failed to act in time.
Our elected representatives need to treat this like the emergency it is and work to get our house in order. We can’t keep treating the country as if it can provide an open credit line until the end of time.
Michael Gold is a Westchester based reporter whose work has been published in The New York Daily News, The Albany Times-Union, The Hartford Courant and other newspapers. He’s a volunteer trustee with the Putnam County Land Trust.
