Our Shared Deficit

While a somewhat popular topic in terms of importance or when discussing threats to our nation, I believe that the national debt does not get the attention it deserves. To put it starkly, debt payments on our shared national debt is over 1 trillion, that is T for trillion, dollars a year. This expense is quickly becoming the biggest line item on the debit side of our national ledger, Trump's ridiculous statements that he wants to spend $1.5 trillion next year on defense aside.

First, I commented on this subject way back in early 2011. In that post I attempted to explain the research and information I had encountered before composing my commentary. In essence, I related that, at the time, 40% of the debt was owned by one United States Government agency over another, that, in essence we owed ourselves 40% of the debt. As an example, I had cited the accumulation of monies paid into Social Security that hadn't been paid out to beneficiaries yet.

The other 60% was held by various banks in America and around the globe. Upon learning this I commented that perhaps the prospect of those banks "calling our loans" was preposterous considering that bankrupting the United States would do great damage to the world economy as well.

Here is a link to that post.

https://wurdsfromtheburbs.blogspot.com/2011/02/deficit-components.html 

Sadly, perhaps our politicians believed that as well, as, even though I go on to say that we need to begin having serious discussions about the trend that had added an average of $1 trillion each year to the overall debt from 2002 to that year 2011, (the national debt in 2002 was a bit over $6 trillion, 9 years later in 2011, it was close to $15 trillion), the trend has only worsened since.

Here is a link to a chart that I found which goes to 2023.   

https://www.thebalancemoney.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287

It is startling! 

From 2011 to 2023, 12 years of budgets, the debt increased by over $19 trillion, an average of over $1.5 trillion each year. The chart also provides a column detailing the major event that may partially or primarily have caused the debt increase. Another column of this chart compares the ratio of national debt to GDP. Again very interesting data.

The last link I will supply is to access the current US debt clock. It is a real time estimate of our overall debt, with the last few days, increase or decrease, and the current number, in a clock type of format. As you will see, it is now about $38.6 trillion, another $4 trillion in the last 2+ fiscal budgets. (The fiscal year starts in October, so fiscal year 2026 is only 3 months old). 

https://www.us-debt-clock.com/ 

OK, so let's talk numbers.

Here is a current breakdown of who owns our debt. I am not sure where I got this data as I found it a few weeks ago, but I do remember thinking that it was relatively current as of fiscal year 2025. It appears that even more of the debt is held by America, less by foreign entities, and that Japan is the foreign country holder of the most debt, not China as some people might think. 

Breaking Down US Debt Ownership:

• 40% - US investors and institutions

• 20% - Social Security, Medicare, and other US agencies

• 13% - The Federal Reserve

• 25% - Foreign investors (only!)

• 3-4% - China (much less than most people think!)

 

Returning to that year by year debt chart, I especially focused on the debt to GDP ratio. As you see, this number doubled during WW2, surpassing the 100% mark in 1945 through 1947. At that point, even though the debt continues to increase, it does so very slowly. It stays below $300 billion, that is B for billion, from the mid 1940's all the way until 1963, then takes another 9 years, until 1972, to get to $400 billion. And, even though the debt does start to rise more quickly, reaching just short of $1 trillion by 1981, the debt to GDP ratio continued to drop. Remember, it was over 100% in 1947, but fell steadily through the 50's, 60's, and 70's to a low of 31% in that same 1981.

We wouldn't sniff such a low ratio ever again.

I have often commented that supply side economics was the beginning of the end for middle class buying power. While cause and effect are certainly hard to prove, it was during the Reagan presidency that this economic philosophy took hold. Remember, until the tax cuts that went along with supply side economics, the idea being to give the rich more money which would "trickle down" to the income classes below, tax rates for the rich were 50, 60, even 70%. 

In other words, the monies paid in taxes by the wealthy all during the 50's, 60's and 70's, trickled down much more efficiently through massive public work projects like the interstate highway system, and by keeping taxes for the not so rich reasonable, not to mention that the corporate structure did not exist yet, a system that has encouraged large amounts of money to be hidden in offshore accounts, untaxable. 

By the time Reagan left office in 1988, our national debt had doubled plus, from just under $1 trillion to over $2.6 trillion, but worse, the debt to GDP ratio had risen from that low of 31% to 50%.

Four years of Bush 1 added another $1.5 trillion to the debt while the ratio hit 61%.

Clinton's terms were better, adding another $1.5 trillion but over 8 years, while that ever important ratio dropped back into the mid 50% range.

Under Bush 2, the debt soared due to the War on Terror after the horrific attacks on 9/11. This is when we began our debt increase average of over $1 trillion per year. Remember, it took until 1981, over 200 years, to get to that first trillion dollar debt mark.

Bush 2 added $4.5 trillion in 8 years, ratio climbed to 68%. Then came the economic meltdown of 2008 which caused Obama's numbers to be even worse.

During Obama's 8 years, the national debt increased another $9 trillion and the debt to GDP ratio broke the 100% mark in 2014, staying over 100% ever since.

Trump's first term added another $8 trillion to the debt, COVID being the leading cause, then almost $7 trillion more in the first 3 years of Biden's term, also partly due to COVID. There were also stimulus packages under Trump and Biden that contributed to the now over $2 trillion, per year increase in the debt, with the debt to GDP ratio now over 120%.

So, what is the solution.

Well, first, we have to stop blaming our elected officials. We elected them, so if we really wanted national debt reduction, we would not reelect people who do not deliver. 

But, it is also possible that electing people who were serious about reducing the debt, won't work either. In the case of the current administration that has talked about a balanced budget, and has slowed the pace of debt increase a bit through the chaotic tariff policies (never mind if you think the American businesses and citizens shouldn't be paying more money as tariffs are a tax). Although, slowed is defined as only $500 billion dollar deficit in the first quarter of the new fiscal year, down from $600 billion for the same quarter last year. 

That still equates to over $2 trillion in new debt if we match that number, and may well be worse if Trump actually sends checks to 50 or 100 million Americans this summer, thereby negating the increase in tariff revenue. Again, in this isn't just a knock on Trump, but give the people money in an election year seems a far more compelling strategy for politicians of all stripes.

I have said repeatedly that income inequality, the fact that the richest in America own a disproportionate percentage of the wealth, while the bottom 50% own very little is a serious threat to America. And, while it is clear that the GOP advocates for policies that do nothing to reduce this situation, the fact remains that the rich have gotten richer under every administration, Democratic or Republican, since supply side economics has become our guiding principle.

So, yes, while many trillions of dollars of our national debt were the result of the economic meltdown of 2008 and the COVID pandemic, both of which resulted in massive amounts of money distributed to both save our large financial institutions, and to assist everyday people to pay their bills, the simple fact is that far too many people live on the edge, financially, so any disruption pushes millions of Americans towards food insecurity, bankruptcy, etc. 

Add to that the fact that we still, nationally speaking, have our heads up our communal asses in our resistance to create a universal health care program, which would provide basic health care to all Americans while also eliminating the really grotesque fact that each year far too many Americans find themselves claiming bankruptcy for medical bills, and it is clear that we choose to tolerate the causes of our soaring national debt by not addressing them.

One of the truly paradoxical features of the rise of Trumpism is that it is a populist movement. The very problems that I detail above resulted in millions of middle class, working people to reject Hillary who was effectively linked to the elite, a group who have been so effective in diverting resources upwards to the higher income brackets. The angst was real and Trump took advantage of it while the Dems ignored it, and/or were ineffective when they were in power to stop it.

Take the recent proposal to cap credit card debt at 10%. That is something that the left has been pushing for years, hence Elizabeth Warren's enthusiastic endorsement of the proposal. Of course, the powers in charge, the large financial institutions and the legislators that they own, have pushed back, claiming with straight faces that such a low rate would result in some people not having access to credit.

While this may be true, it is also true that the 25, 28 even 30% interest rates that are being charged to consumers with low credit scores or limited credit history, would make the loan sharks of the past quiver in ecstasy, and perhaps jealousy, that such usury rates are legal.

The simple fact is that interest rates that high only create debt that makes it very difficult to be free from. 

But again, we all must look in our collective mirrors and take some blame for this as well. Not being able to afford something should be a reason not to buy it. But since we all must have what we want, now, there are plenty of unsavory financial institutions that will loan us the money, turning a $2000 purchase into a $4000 payment over time.

Which circles us back to the fact that too many Americans live on the edge, financially, because we allow the rich to drive the narrative about all things income related.

Higher minimum wages? Can't have that, it would cause inflation, so they say, even though CEO pay has skyrocketed in the last 30 years, as has the pay for athletes, Wall street executives, movie stars, hedge fund managers, health insurance brokers and executives, the list goes on and on. 

But never retail workers, bus drivers, day care workers, sanitation workers, even police and firemen. Real income for the people who do the real work in our country has not kept pace so we feel it necessary to charge our way to comfort, a situation which big banks are all too eager to take advantage of.

But I digress.

The deficit will eventually lead to a financial reckoning. We can't continue to spend a trillion, even 2 trillion dollars a year more than we collect in revenue and taxes. It is unsustainable as any family who has faced unending escalation of their debt knows.

The rich must pay higher taxes, the working poor must receive livable wages, the middle class must prioritize where they spend their resources while avoiding the pitfalls of wanting everything new. Remember, supply and demand has two portions, so, while Trump's call for austerity by buying less pencils (who buys pencils?) seems to put all the blame on the working classes, he is right that we can be more discerning, more aware of wants as opposed to needs.

I called this post Our Shared Deficit because there are some Americans who choose to blame our elected officials or the Washington bureaucracies or, of course, immigrants. 

And that is the main problem. We, the people, are the problem and the fact that we can't or won't acknowledge that is what will doom our country more than anything else.