Our National Debt - Crazy Math and You

Discussion in 'Economics' started by lrm21, Jan 6, 2009.

  1. lrm21

    lrm21

    Crazy Math

    With Obama talking about a Trillion Dollar Deficit for years to come. I thought I would toy around with the old excel

    Lets go with a raw figure of an Estimated 2010 National Debt (as reported in some area) of $15 trillion, not even touching future obligations like S/S and Medicare

    Using a figure of a 115 million households in the U.S.

    What would be your respective burden if we cut the National Credit Card and just paid off our debt in 30 years

    30 Year Loan Fixed Rate
    Assuming Average Household Burden at $130,434
    Interest Rate || Monthly Payment || Annual Payment || Lifetime Payout
    2% || $482 || $5,785 || $173,560
    5% || $700 || $8,402 || $252,073
    10% || $1,145 || $13,736 || $412,077
    15% || $1,649 || $19,791 || $593,739


    So, forget college and that Vackay you and the wifey have been talking up. Time to get another Job or three and pay that debt.

    But wait, we know that straight distribution does not exisit, so lets assume we divde this up the way the tax burden is currently divided for individuals.

    Now, I couldn't find the distribution for households. So I am using individual tax burden distribution in this scenario, its not wholly accurate but its a decent approximation.

    So what is the respective burden of each household as it relates to their current tax burden to payoff the deficit.

    Using a highly Favorable 5% Interest Loan over 30 Years, here is what your respective share of the debt under current tax burdens.

    Top 5% || Top 6-10% || Top 11-50%
    Est. Household Income $150K + || $100-149K || $50-99K
    Est. Households 5,750,000 || 5,750,000 || 44,850,000
    Respective Marginal Tax burden 53% || 12% || 31%
    Avg. Per Household Share in Respective Bracket $1,382,609 || $313,043 || $103,679

    Monthly Household Payment $7,422.14 || $1,680.49 || $556.57
    Annual Household Payment $89,065.71 || $20,165.82 || $6,678.85

    Top 5% || Top 6-10% || Top 11-50%
    Foreign Playas (25% of total national Debt held by Foreigners)
    % of Total National Debt (Public & Private) and Corresponding Annual Cut of Payment
    Chinas Cut 5% || $4,453.29 || $1,008.29 || $333.94
    Japans Cut 5% || $4,453.29 || $1,008.29 || $333.94
    UK Cut 2% || $1,959.45 || $443.65 || $146.93


    I apologize for any errors in advance. Also, I am not claiming 100% accuracy, this is just working the exercise to bring the numbers to a more digestable size.

    So if your household is making between 50k and 100k you are on the hook for an avg of a 100K of debt. Is that really a big deal?

    Now remember this is on top of your existing annual tax burden.



    Ref:
    http://en.wikipedia.org/wiki/Household_income_in_the_United_States
    http://www.taxfoundation.org/files/sr151.pdf
    http://quickfacts.census.gov/qfd/states/00000.html
    http://www.hoover.org/research/factsonpolicy/facts/6771827.html
    http://en.wikipedia.org/wiki/United_States_public_debt
     
  2. Mvic

    Mvic

    Don't, its too depressing.

    There is a great book called "Where doe sthe money go" that goes in to our upcoming unfunded liabilities. I bought copies for everyone I knew when it came out last year but with the deficits that we will be running the next several years I am close to the point of just not caring, the road seemed difficult enough before all of what has transpired in the last 6-9 months bit I think it is impossible without some miracle engine for growth or hyperinflation that none of us will enjoy living through. My own answer is to buy commodities, short the long bond, and hope that the inevitable price controls come later rather than sooner.

    http://www.publicagenda.com/wheredoesthemoneygo
     
  3. God forbid anyone should ask how or when this lunacy will ever get paid for? I hope I'm dead by then.
     
  4. You're oversimplifying it, of course.

    Here's another oversimplification. It's the government that holds the debt, and primarily foreign countries that own the debt. The Federal Reserve can print money until the dollar is worth less than the 1994 peso. Ha ha, screw you China. Don't mess with round eye. We invented this game.
     
  5. Unfortunately, it's not ONLY "screw China" (and other foreign Treasury holders), but it's also SCREW ALL AMERICANS. The buying power of all our assets denominated in fiat will evaporate... and nearly all of us will be bankrupted.
     
  6. Looking at the history of this thing, and at the actions of the politicians, the rational thing to conclude is that it will never be paid for, nor do they intend to try. There is no political motive to do anything but spend more than is made, and to continually increase that spending, always. Lip service may be given and increases kept within some range to avoid panic, but there's no long-term belief that this will ever really be paid off.

    At some point, when american supremacy is really gone, or the economics of it simply won't hold, they'll push the reset button, go through the political and social breakups, then regroup and start the game all over again.
     
  7. The miracle of heudonically adjusted price data will save us.

    It will keep inflation low, and allow us to still have the buying power to purchase beans and rice and flour with our Social Security checks.
     
  8. That printed money will make it's way to the general public. It will be worth less, but we'll have more of it. Maybe that's what Regan meant by trickle down economics.

    We'll adjust. If not, another world war will pull us out of the depression.
     
  9. 1. It will seem to work that way for a while, but the print-money will escalate until the money no longer has adequate buying power, regardless of how much you have.

    2. We won't be able to fight another war. Our money won't be accepted in exchange for the materials to do so. We won't be able to float more Treasury Bonds... nobody will want them.
     
  10. lol:D
     
    #10     Jan 7, 2009