OK, so get this.
If we stacked all the US national debt in dollar bills,
it could literally reach the moon and back twice.
Whoa.
Yeah, no, seriously, we're talking about $35 trillion.
It's an astronomical sum.
It's mind boggling.
Right.
And that's exactly what we're diving into today,
trying to wrap our heads around this financial behemoth.
How did we even get here?
And what does it all even mean?
Well, it's definitely a topic that can feel pretty
overwhelming for sure.
Absolutely.
So we're going to try to break it down.
We're taking a look at this recent analysis on US debt.
OK.
And hopefully, we can do this without getting too
lost in all the jargon.
So you ready to unpack this?
Yeah, let's do it.
All right.
Now, I'm guessing most of us listening
aren't economics professors or anything.
So before we get into trillions with a capital T,
can you remind us how debt actually works?
Not even just for me personally, but for entire countries.
Yeah, absolutely.
So it's actually not that different from how
we handle our own money.
Really?
Yeah, so imagine a country, right?
It spends more on things like social programs or defense,
maybe infrastructure even, than it makes back
through things like taxes or other stuff.
That creates what's called a budget deficit.
That makes sense.
It's like when I buy those extra pair of shoes,
it throws my budget totally out of whack.
Exactly.
So to cover that deficit, countries
do what a lot of us do.
They borrow money.
And they often do this by offering government bonds,
which are basically these IOUs.
Props need to pay back that amount with a little extra
interest to investors.
And those investors could be like anyone, right?
Yeah, it could be individuals, corporations, even
other countries.
Wow.
OK.
So it's like taking out a massive loan.
OK, so it's like one giant loan.
Got it.
Exactly.
And now here's where it gets interesting for the US, right?
Since 2001, almost every year, we've had a budget deficit.
So we've been spending more than we're making.
Pretty much, yeah, consistently.
And all those deficits, they just
keep piling on top of each other year after year.
And that's how we end up with this insane $35 trillion debt.
Yeah, and visually, it's pretty striking.
I bet, yeah, the analysis actually
has this chart showing the debt increasing over time.
And let me tell you, it's kind of terrifying looking at that.
And this is where rolling over debt comes into play,
which adds another layer of complexity to it all.
OK, wait, hold on.
Rolling over debt.
See, that sounds like the financial jargon
I was talking about.
Oh, right.
Yeah.
Can you break that down a bit?
Sure.
So essentially, when debt reaches a certain date,
a maturity date, the government often
borrows even more money to pay it back.
So it's like not really paying it off so much
as kicking it down the road.
It's kind of like refinancing your mortgage,
where you're basically swapping out one debt for another.
OK, so it's not like paying off your credit card every month.
It's more like what?
Just making the minimum payment.
You got it.
And this is where those interest rates become a major factor,
you see.
When the government borrows money,
they have to pay interest on that loan, just like we do.
Yay.
Right?
So when those interest rates are low,
the cost of borrowing is manageable.
But when rates go up?
That's when things can get tricky.
It's like those interest rate hikes that have been happening.
Exactly.
And it means the US government has
to pay way more just to service its existing debt.
And that can't be good.
No.
Because to cover those higher costs, they have to.
You guessed it, borrow even more.
Leading to even bigger deficits in the future.
Exactly.
Economists call this a debt spiral.
OK, yeah, that sounds kind of ominous.
It's definitely something to keep an eye on.
I mean, it's clear that US has been spending more money
than it brings in.
But it's not like they're just lighting it on fire, right?
Where's all this money even going?
It's not like frivolous spending.
No, a lot of it goes towards important things.
Right.
Like essential programs, you know?
Social Security, Medicare.
Yeah, those are important.
Yeah, millions of Americans depend on those.
Makes sense.
And then there's defense spending,
health care costs in general.
Right, all this stuff that keeps the country running.
Exactly, a whole bunch of necessary expenditures.
OK, so if that's the spending side,
what about the income side?
Where does all that money come from in the first place?
I mean, it's mostly taxes, right?
Yeah, you're right.
Taxes are a big chunk of the government's revenue.
OK.
Like the majority of it actually comes
from individual income tax.
Right.
And then there are the contributions
to Social Security and Medicare.
OK, so we've got this whole flow of money in and out.
And we're trying to make sure there's enough coming in
to cover what's going out.
Yeah.
While still making sure we're taking
care of these essential programs,
it sounds like a pretty tough balancing act.
It definitely is.
And the challenge is that, well, no one really
wants to pay higher taxes, right?
True.
And no one wants to see cuts to the programs they rely on.
Of course not.
It's a tough spot to be in.
Yeah, no kidding.
It's like politically, you're stuck between a rock
and a hard place.
It really is.
And this analysis from the Congressional Budget Office,
they're actually projecting that the deficit will just
keep growing.
Oh, no.
If something doesn't change.
Over the next decade.
Over the next decade, yeah.
Wow.
So yeah, it's a big deal.
So what can we even do?
I mean, I keep hearing this thing about the US just
like printing more money to pay off its debt.
Is that even possible?
It feels like, I don't know, is there some secret money tree
solution that we're missing out on here?
The classic just print more money solution.
Right.
It's definitely an idea.
And it's not totally without merit.
OK.
Let me give you an example.
Imagine a mortgage, but from the 1970s.
OK, hold on.
I'm picturing like avocado green appliances
and some shag carpeting.
I'm with you so far.
But what does that have to do with like inflation and stuff?
Well, think about how much a dollar was worth back then.
The source talks about this.
OK.
A $24,000 house then would be a steal today.
Right.
That same house now could be like what $400,000?
Exactly.
But that $24,000 is still $24,000.
The price of everything else went up.
That's inflation.
Exactly, inflation makes money worth less over time.
Right.
I get it.
So theoretically, a government could print more money.
OK.
Which doesn't erase the debt, but it
makes it less of a burden because now the currency itself
is worth less.
Oh, I see.
So you're basically paying back the same amount
but with like cheaper dollars.
You got it.
That's kind of sneaky, actually.
It is but.
And there's always a but.
Yeah, I was just thinking that.
There's got to be a catch.
The biggest risk with intentionally causing inflation
is that it could get out of control.
What?
It'll just keep going up and down?
Exactly.
Prices for everything could just keep skyrocketing.
Groceries, gas, rent, all that.
Everything.
And that throws the whole economy out of whack.
Yeah.
That's not good.
No.
And it leads to a whole new set of problems.
OK, so it sounds like intentionally trying
to use inflation to get out of debt is less a solution
and more like, I don't know, playing with fire.
It's a pretty accurate way to put it.
You don't have enough inflation.
The debt's still there.
But if you have too much, then the whole economy
goes haywire.
That's a great way to think about it.
It's a tightrope walk, for sure.
Definitely.
And this is where central banks like the Federal Reserve
come in.
Right.
They have to manage interest rates and inflation
really carefully.
But try and keep everything stable.
Exactly.
It's a big job.
It is, with huge consequences.
OK, so if just printing more money
isn't a good long term solution, what
are we supposed to do?
What does this analysis suggest?
Well, the analysis points to a couple of key things,
like boosting productivity and getting
that deficit under control.
So basically, like we were talking about earlier,
spend less, make more.
Pretty much, yeah.
Works for governments and for my own bank account, I guess.
It's universal, right.
And when we say increased productivity,
we're talking about the economy growing,
meaning more tax revenue, without having
to raise rates or anything.
Right.
And with the deficit, it comes down to, well,
making tough choices, looking at where we're spending,
and maybe even making changes to the tax code.
I mean, that's always easier said than done.
For sure.
Especially with how, I don't know,
it seems like there's so much gridlock in politics
these days.
It's definitely a challenge.
No one can agree on anything.
It can feel that way sometimes.
But it sounds like there's no quick fix here.
It's just going to take a lot of hard work and compromise.
It's a long game, for sure.
Definitely not a sprint, more like a marathon.
Exactly.
So what's interesting is that the analysis actually
compares the US to Australia.
OK.
Because Australia recently managed
to do something that I think a lot of countries,
including the US, kind of dream about.
They had a budget surplus.
They did, which is pretty impressive.
A surplus, like they had more money coming in than going out.
Yeah.
What's their secret?
Did they find a magical money tree after all?
I wish it was that simple.
Right.
Basically, they've kept their economy growing,
while also being careful about how much they spend.
Which, again, sounds simple.
But I'm sure it's way harder in practice.
It's a delicate balance.
But that's still pretty encouraging, right?
I mean, it means that having a sustainable budget
isn't impossible.
It shows it can be done, yeah.
But I imagine it's different for every country, right?
Like, what works in Australia might not work here.
Absolutely.
You can't just copy and paste solutions like that.
Right.
It's not like doing your homework.
You can't just cheat off someone else's paper.
It's more about seeing what worked,
understanding the challenges, and then figuring out
how to apply those lessons in a different context.
So OK, we've thrown a lot of information out there.
Where do we even go from here?
Like, for the average person who's not an economist
or a politician, but still wants to understand
this whole debt thing, what's the key takeaway here?
I'd say the biggest takeaway is that managing a national debt,
it's a long process.
OK.
It requires looking at the big picture,
making responsible choices.
Right, and thinking long term, not just about, like,
the next year or two.
Exactly.
It's about making sure things are
sustainable in the long run.
Exactly.
And that takes, well, a lot of courage
to make those tough decisions.
For sure.
No one said it was going to be easy.
Definitely not.
Well, I've got to say, this deep dive has been really eye
opening, it seems like.
There's no simple solution here.
But at least now, I feel like we understand
the problem a little better.
And that's always the first step, right?
Absolutely.
So for everyone listening, we want to hear from you.
What do you think is the best way to tackle the US debt?
It's a complex issue that affects all of us.
So let's keep the conversation going.
Thanks for joining us for another deep dive,
and we'll catch you next time.