US Public Debt and Consumer Debt: Rising and Dangerous in 2008
According to the latest report on consumer debt by the Federal Reserve, the US consumer debt exceeds $ 2.5 trillion. Every year, the amount of credit card debt in the United States increases more and more. Why is American credit card debt spiraling out of control? Well, there are several reasons for the annual increase in US consumer debt.
One of the reasons Americans are borrowing more is because wages have not risen enough to cope with rising inflation. The 2007 report Trends in Income Variability Over the Last 20 Years from the US Congressional Budget Office (CBO). Earnings fall “a decrease of more than 40 percent. This significant decrease in income for Americans It means that as the price of gas, food, groceries, clothing, utilities, and other basic necessities rises, the average salary simply isn’t keeping up.
Another reason that US consumer debt is increasing is because credit card companies spend billions each year winning new customers and increasing rate caps for current customers. Average credit card debt for Americans is over $ 9,000 and even with the current credit crisis, the steady stream of credit card offers continues to flow.
However, credit card offers don’t mean that recipients have to sign up. Credit card debt in America would not be growing at the rapid rate it does if consumers were more realistic about their budgets. The attitude of our society has become “I want it now, even though I can’t afford it, so I’ll collect it.” If consumers were to exercise more discipline in their spending, credit card debt in the United States would reverse its current course.
Regardless of the reason you may be in debt on your credit card, you need a solid debt reduction option. Credit card debt consolidation and debt consolidation loans are similar debt relief methods that can benefit consumers with good credit. Debt settlement and bankruptcy are viable debt reduction options for consumers with bad credit.
United States public debt in 2008
The Public Debt of the United States (of the federal government) has been increasing for decades. Gross federal debt has skyrocketed from $ 909 billion in 1980 to an estimated $ 9.575 billion in 2008. (Federal debt was approximately $ 9.509 billion in July 2008). In these 28 years the increase has been around $ 8,666 billion or approximately. 10.53 times for an increase of around 953%. (Source: US Office of Management and Budget, US Government Budget, Historical Charts, Annual). In 2008, we are facing a federal deficit of between $ 560 billion and $ 900 B. (The official figure will be closer to $ 560 billion for political and commercial reasons). How much more will you owe if we only spent another $ 600 billion than we raised in US federal taxes in 2008? If you divide $ 600 billion by 100 million workers, you get $ 6,000 per worker. If you divide a federal deficit of $ 600 billion by 160 million workers, you will get $ 3,750 for each worker. The population of the United States in mid-2008 was approximately 300 million citizens. Dividing $ 600 billion by 300 million equals $ 2,000 for every American citizen, including children under the age of 10 and people over the age of 90.
Some of the increases in our American public debt (national debt, US federal) between 2003 and 2012 are due to our wars in Iraq and Afghanistan, if the battles continue until 2012. What will the costs be? While hard numbers are hard to come by and estimates are often off by 50% or more, the cost of these wars in 2007 was roughly $ 200 billion. This $ 200 billion over 10 years would equal $ 2 billion or $ 2 trillion. Since there were only a few years since 1965 that we paid off any national debt, we probably won’t be able to pay off this $ 2 billion over the next 10 to 15 years. The interest of $ 2 billion at 6% for one year is $ 120 billion. Now you can start to see the scope of the problem. The costs, including interest, of these wars could easily run to at least $ 3 trillion from 2003 to 2022. The $ 3 trillion or $ 3 billion divided by 300 million equals $ 10,000 for every American citizen. Expensive wars lasting more than 2 or 3 years tend to generate large amounts of new debt for the US government and citizens.
US trade deficits are another major source of increases in US public debt.The following table is data from the US Census Bureau website (www.census.gov/foreign- trade / statistics / historical on July 15, 2008):
Annual trade balances
Year US Trade Percentage
Previous balance
in billions of dollars a year
1994 -98.5
1995 -96.4 98
1996 -104.1 108
1997 -108.3 104
1998 -166.1 153
1999 -265.1 160
2000 -379.8 143
2001 -365.1 96
2002 -423.7 116
2003 -496.9 117
2004 -607.7 122
2005 -711.6 117
2006 -753.3 106
2007 -700.3 93
2008
Jan -57.9
Feb. -60.6
Feb -56.5
Apr. -60.5
May -59.8
Figures are seasonally adjusted.
The monthly average for 2008 is -59
First 5 months annualized for 2008 $ -709 billion
You may notice that the foreign trade balance has increased from a deficit of -98.5 billion in 1994 to -379.8 billion in 2000 to a projected trade deficit of around $ -709 billion in 2008. The total increase of 1994 to 2008 is around 620%! It is surprising that in about 14 years the US trade deficit will be more than 7 times the amount in 1994. If inflation were to increase by 5% over 14 years, then the factor would only be about 2 times.
According to the United States Treasury (http://www.treasurydirect.gov/NP/NPGateway), the national debt of the United States as of July 3, 2008 was approximately $ 9.492 billion or approximately $ 9.49 trillion . The national debt as of July 3, 1998 was approximately $ 5.53 trillion. So in 10 years it has increased about 72%. While the interest rate for the next 12 months is unknown, at 5% interest, the dollar interest on the US national debt would be about $ 0.475 trillion or $ 475 billion. Dividing $ 475 billion by 100 million taxpayers equals $ 4,750 for each taxpayer. (I use the number 100 million because it is one-tenth of a billion, so you can multiply an amount in billions by 10 and get the dollar amount per individual, and probably no more than 100 million individual taxpayers could afford to pay. things like interest on the national debt and trade deficits. So dividing $ 475 billion by 100 million taxpayers equals $ 475 x 10 = $ 4,750 for each taxpayer).
How does this affect you? In different ways; it would take a book to explain them. Some of the ways are as follows: Increasing US National Debt Means that total US debt has increased. Part of this debt is owed to foreigners. When interest is paid, some of that money leaves the US economy to foreign governments, corporations, and individuals. Rising US national debt often means that interest rates in the US go up. For example, mortgage rates and auto loans often drive up interest rates. Increases in US trade deficits mean money and jobs are leaving the US The remaining jobs may pay less in direct money and fringe benefits. Technology loss generally follows engineering and IT jobs. Tax increases may be necessary to pay the increased interest on the US national debt.
The increase in the US national debt and the added trade deficit means that the value of the US dollar decreases compared to the most stable currencies in the world. It is somewhat easier to export but imports cost more. That’s one reason imported oil has risen from $ 60 a barrel several years ago to more than $ 140 in July 2008. Headline inflation rises with higher federal deficits. Inflation in the years 2008 to 2012 could easily be between 8% and 15% each year. However, we may have some deflationary forces in 2009 to bring the rate to around 2%.
When the federal government borrows more money, it is often more difficult for individuals and small businesses to borrow additional funds. Lenders lend money to the federal government rather than to a higher risk individual or small business.
Social Security payments to individuals will grow over the next 10 years and beyond. Part of the money to finance the annual federal deficit comes from the Social Security Fund. For example, if the federal deficit is $ 800 billion in 2010, then $ 400 billion can come from loans from the Social Security Fund. One year there will be less than $ 100 billion to borrow from the fund, as almost all of the money will be paid to the beneficiaries. After that, when we have a total national debt of more than $ 10 trillion and an annual deficit of more than $ 500 billion, it will be very difficult to pay Social Security recipients. Profits will have to be cut, taxes raised, or both. Therefore, increases in the national debt are detrimental to future Social Security payments.
Debt relief options in 2008
Although US consumer debt has grown at alarming rates, consumers still have several debt relief options at their disposal. The important thing for consumers to remember is that each debt reduction option has its own benefits and drawbacks. A credit card debt calculator can also help you determine the best debt relief method for you. Choosing the right debt reduction option is critical to getting you back in financial harmony. We offer a debt calculator and debt relief options on our website at [http://www.DedicatedToDebtRelief.com] .
Update for October 9, 2008
The credit crisis and the federal bailout are now done. The sections above were written in July 2008, except for the comment that inflation in 2009 could be around 2 percent. Even during July, many economists and so-called financial experts were saying that we were not in a recession and that the economy was basically sound. (What is your definition of a “sound economy”?) On October 9, Congress and the President of the United States had already signed a financial rescue package for about $ 850 billion. While oil was below $ 100 a barrel, I expect it to be above $ 130 in August 2009 and it could be more than $ 150. And this $ 850 billion federal bailout will add to inflation during 2009- 2013, although inflation may drop to around 2% in 2009 due to the recession, a shortage of funds to borrow and a lack of consumer confidence.
Small business and individual loans will be more difficult to obtain in 2009. This will likely lead to more layoffs and bankruptcies by small businesses and individuals.
In October 2008, I wrote an article “Ransom: Taxpayers and Ordinary Citizens Are Paying America’s Bailout.” This article explains some of the key ransom factors and some long-term dangers.
Copyright 2008 by Kenneth S. Sumerford