Our national debt will be $40 trillion within the next two years
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Russia and Ukraine. The Middle East. And what if China invades Taiwan?
No, America doesn’t have the Avengers, and we can’t be in all places around the world at one time. But there’s a much deeper and looming problem facing us that nobody seems to be talking about.
According to the U.S. National Debt Clock, the interest we pay every year on the money we borrowed from ourselves has now surpassed the money we spend annually on the fiscal budget for defending the United States of America.
A man walks past the National Debt Clock on 43rd Street in midtown New York City, Feb. 15, 2019. The debt has now passed $35 trillion. (Getty Images)
If we aren’t careful, it’s only a matter of time before the net interest on the debt is the single biggest line item on the fiscal budget for our country.
STOP THE INSANITY. OUR NATIONAL DEBT NOW TOPS $35 TRILLION...
How did we get here?
Simply put, the national debt is similar to you using credit cards for your incessant spending problems on Amazon and Whole Foods and not paying off the full balance each month.
Credit card debt is a growing problem in America, but the principle of racking up debt remains the same as it does for America. The cost of purchases exceeds the income we bring in and that results in a deficit. The accumulated deficits over time represent a person’s overall debt.
Notable recent events triggering large spikes in the debt include the Afghanistan and Iraq wars, the 2008 Great Recession, and COVID-19. From FY 2019 to FY 2021, spending increased by about 50%, largely due to the COVID-19 pandemic. Tax cuts, stimulus programs, increased government spending and decreased tax revenue caused by widespread unemployment accounted for sharp rises in the national debt.
At the end of 2023, the nation’s gross debt had reached nearly $34 trillion and now at the end of 2024 we will approach $36 trillion. Of that amount, about $27 trillion, or 79%, was debt held by the public – representing cash borrowed from domestic and foreign investors.
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The remaining $7 trillion (21%), was intragovernmental debt, which simply records transactions between one part of the federal government and another.
Can this be fixed?
Let’s start with the big lie: "The wealthy don’t pay their fair share." This rhetoric has been used for many elections and is now being placed front and center by Kamala Harris saying that wealthy people pay the same tax rate as the "working class."
Here’s how this notion of the "wealthy pay lower taxes than the middle class came about as a talking point." Forbes ran an article in 2021 that stated, "400 (richest families in America) paid an average income tax rate of 8.2% from 2010 to 2018."
The study, by economists Greg Leiserson of the Council of Economic Advisers and Danny Yagan of the Office of Management and Budget, used annual "Forbes 400" lists and public data to estimate the incomes and federal income taxes paid by members of that elite group. This is the smallest of sample sizes, measuring the 400 richest people in America.
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Saying the wealthy don’t pay their fair share is well… misinformation, as the Democrats would say. Here are the facts:
- Personal income taxes account for 48% of government revenue
- Payroll taxes account for 33% of government revenue
- Corporate taxes account for 10% of government revenue.
The National Taxpayers Union Foundation’s data from 2021 showed that the top 1% of earners made an average tax rate payment of 26.3% of adjusted gross income (AGI) and they paid 45.8% of all federal income taxes.
On the other hand, according to H&R Block, for $50,000 of taxable income in the 2023-2024 tax year the tax rate is 12.6%. That means the "wealthy (the top 1%)" pay a 100% higher tax rate than the average middle-class person in America? Does that seem fair?
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But this is the deception on taxes that we see Democrats telling Americans about tax rates versus the actual taxes paid. By the way, this doesn’t include state taxes, local taxes, payroll taxes, and real estate, which would add these numbers up to be even higher.
The challenge to fix this problem is that only the wealthy can potentially really solve part of this equation it because you can’t get blood from a stone. It’s why Social Security may inevitably become a tax that looks like Medicare and why ultimately capital gains tax rates and ordinary income tax rates will go up.
On the other hand, with government spending out of control, there is absolutely no question that we need to decide where spending cuts must happen on the other side of the ledger to effectively balance our budget.
Will we be able to defend America?
Actions have consequences. As will this election. There is absolutely no question that Congress will be forced to raise the national debt ceiling soon and that our national debt will be $40 trillion within the next two years. The interest on the national debt will soon cost us fiscally more than $1 trillion a year.
If the war in Ukraine, the war being waged by Iran and its proxies, the war at the border, and who knows what’s next doesn’t scare you, you should be worried that we may not have enough money to build our own future fleet of Iron Men based upon the budgets we set forth today to defend our country and leadership position around the world. Maybe it’s time we took our national credit card debt seriously.
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Ted Jenkin is CEO and co-founder of Oxygen Financial and president of Exit Stage Left Advisors.
