What is the Cause For the National Debt?
Just what is the cause for the national debt? If you’re wondering how our country got into such a financial hole, you’ve probably asked yourself that question. If you’re in debt yourself, you’re in good company, because hey, our nation is in the same boat as you are. First of all a definition of national debt is in order to clear up any misunderstandings about what the national debt actually is.
The national debt is cumulative amount our federal government has spent in excess of the revenue it has collected. This is done by the federal government issuing debt securities (bonds, notes, and bills) which are sold to investors. These securities are issued by the Federal Financing Bank and are known as public debt.
In addition to the debt sold to private investors, there are also intra-governmental holdings. These are government securities that are issued by one government agency and held by another. Such debts can include revolving accounts and trust funds. These intra-governmental holdings amount to about 40% of the entire national debt and are actually growing at a faster rate than the public debt portion of the national debt.
The national debt is not the total private debt of U.S. citizens, so don’t think that outstanding debt on your Visa is contributing directly to the national debt. It’s not, it’s only hastening your own financial demise.
Although federal tax revenues have grown to record numbers either in spite of, or because of the Bush tax cuts, depending on whose side of the aisle you happen to sleep on, our federal debt has ballooned out of all proportion to the country’s population increase. Although Bush cut the tax rate, the amount of revenue actually grew. This helps to illustrate that if you’re trying to increase total tax revenues, you have to cut taxes to the point where the increase in economic activity generated by the larger amount of money in the private sector maximizes total tax revenue; no more and no less. If the tax rate is too high it takes money out of the private sector to the point where economic activity contracts, and tax revenues are actually reduced. If the tax rate is too low, the increase in economic activity doesn’t compensate for the decrease in the tax rate.
As I write this our national debt is approximately $9.37 TRILLION. After you complete the task of wiping the vomit from your keyboard, you should know that it hasn’t always been like this. If the growth rate of the national debt from 1945 to 1970 was maintained, our national debt would stand at about $1.9 trillion after adjusting for inflation, a staggering sum, but only a fourth of it’s actual total. Even taking the growth rate from 1970 to 1975 our debt would be at about $3.9 trillion, or only about half what it is today. What the hell happened that has caused our national debt to explode in such a sick fashion?
A succession of over spending administrations and congresses have combined pork barrel projects, entitlement programs, and defense spending have caused the total of our national debt to spiral out of control. With the exception of the last 2 years of Carter, the first 2 years of Regan and Clinton’s second term, the spend happy federal government has devoted most of it’s energy to pleasing all those in the private and public sector, in addition to different voting blocks, that have been lining up with their hands out.
The mindset of many people in the country seems to be that of “buy me more stuff and I’ll vote for you”. Just as coddling your kids in a search for popularity can run up your visa bill, congress and the various administrations have sought to please this block of voters and that by basically bribing them for their votes with entitlement programs and special projects, and in so doing, have blown up the national debt.
Say what you will about President Clinton, and I’ve said most of it myself, one thing he did help to do (aided tremendously by the Republican congress, before it jumped on the “let’s spend more money” express) was actually reverse the growth of the national debt. As America swings more toward being a nation of citizens that expects to be provided for, (and politicians that are only too eager to comply), rather than one populated by self reliant, independent (I use that in economic, rather than political terms) citizens, the trend of a ballooning national debt will be harder to contain.
Where do we spend our federal dollars that have caused the national debt?
Here is where the Intra-governmental funds are spent according to the treasury’s National Debt Schedule from 2007 and the agency that is responsible for it.
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