New Castle News
NEW CASTLE —
Congratulations! You’re now $50,000 in the hole.
We’re not talking about your mortgage, student loan or some other obligation. This is strictly your share of the national debt, which passed $16 trillion last week.
It’s difficult for the average individual to fathom $16 trillion. It’s a number so huge and so esoteric that it’s rendered meaningless.
But $50,000 per person? That hits home. And the idea of carrying around this extra financial burden will cause the average individual to wince.
Of course, your share of the national debt differs from other obligations. If you aren’t paying off your regular debts in timely fashion, you soon wind up in trouble.
While the nation’s debt is constantly paid off, it’s being done by borrowing ever larger amounts of money. In simple terms, the national debt — and your share of it — continues to grow because Uncle Sam is spending more than he’s taking in with taxes.
And an increasing part of that spending is the interest that must be paid to cover Washington’s debt. According to the U.S. Treasury Department, interest paid on the debt in 2011 was more than $454 billion. In 2001, it was $358 billion.
Yet the larger question in all of this must be: How significant is $16 trillion in debt for the United States of America? An individual can have debt, such as with a mortgage, and manage it without problems. The issue is the amount of debt relative to one’s ability to pay it off.
In this regard, America will never pay off its debt. Based on history, it’s a figure that’s likely to grow. That’s not necessarily bad — if the spending remains a manageable portion of the nation’s overall wealth and the money spent helps to build the country’s future.
It’s when debt becomes unmanageable — for individuals as well as governments — that it creates a critical concern. Internationally, countries such as Greece and Spain are dealing with the consequences of excessive debt. And worries about their ability to cover their obligations are roiling economies around the planet. The uncertainties about the debt of these relatively small countries is a major impediment to economic recovery in the United States and elsewhere.
America’s debt crisis is not at that state — yet. But the inability of Washington to deal effectively with matters of spending, debt reduction and borrowing led to a lowering of this country’s bond rating this year from AAA to AA-plus. The move was meant as a psychological blow to encourage Washington to get its fiscal and political houses in order. Unfortunately, it didn’t work.
Excessive government borrowing ultimately leads to high interest rates and borrowing costs in the private sector. And the uncertainty over what Washington will do with its fiscal situation produces economic hesitation across the board.
Debt always has consequences. America needs to work to reduce its obligations.