What If the National Debt Were Your Debt?

The U.S. federal government collected $2.2 trillion and spent $3.8 trillion in 2011. At the same time, it was $14.6 trillion in debt. These numbers are too big to comprehend, so what if we scale it down to an average household's income level? If you spent the way the government does, you might be contemplating bankruptcy. What should be done to ensure the government gets its fiscal house in order before it becomes impossible to pay the bills?

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[Antony Davies]

Normally, the question doesn't have an answer because borrowed money is all pooled together into the same pot. When you pay down the debt, you can't say that a particular dollar's worth of payment is going toward a particular dollar's worth of debt. However, the government's debt fell almost to zero around 1915, so we can say that almost none of the debt that exists today is due to the Civil War.

[firehand1011]

I guess the house needs to find a better paying job...

[William Ehrhardt]

Stopped watching at "That's like the family buying a new SUV"

Yeah, the only issue is that IT ISN'T. Government isn't buying everybody shiny frivilous things with the extra money. It's being spent on defense, medical bills, previously promised obligations, and a lot of other things. This is a horribly skewed analogy.

[Koroistro]

Well if you look it up germany's interest rate on debt is arround 1% lower than inflation , so it's a possible thing.

[707hoser]

This video is complete nonsense. You can never compare a household with the federal government. The household is a currency user and the federal government is the sole issuer of the currency.

[bindelow]

It's because you Americans are great at growing AGAINST bad government effects, such as deficits. Deficits can have ok effects in short term, but long term.. uh-uh.

Second, your inflation will hit in the coming years, it hasn't hit yet. There's a significant time-lag. Either that, or it's not measured properly.

[bindelow]

You're not wrong, with your figures the actual interest rate is 1.6%. Of course, I suspect that both inflation is going to rise, but also interest rates will rise rather sharply too. Historically, 3% is a very low interest rate. :)

[Zachary Laborde]

You cannot compare a macroeconomic entity to a microeconomic entity. It's like financing a family the same as you would for a single kid. The economics may be similar but the factors are much more complex. For example, our debt is NOT owned mostly by foreign countries; it's owned by us. Citizens & the government itself owns most of the debt. Also, debt is common for most nations & it's paid off over a large amount of time, much larger than a bank loan is.

[Bruce Wayne]

What he said is not true, deficits destroy savings. Savings and capital accumulation cause economic growth. China saves money within its economy with low taxes and low deficits, this gets people there to have more spending power and many individuals make better decisions with money than governments, so the economy has a 10% growth rate. In the US however, we have a sad thing called "welfare" and "defence" where the government redistributes money and spends more than it can redistribute.

[Bruce Wayne]

But this same government will have to keep paying this back through interest and it will take money away from the economy doing so. If the government did not do anything except keep order, we would have a much better economy. Our problems stem from things like welfare, and healthcare.

[Hoschi0913]

makes sence ,kinda, some dept is ok and benificial i guess,but do you think those $16trillion dept we now have and a deficit of $1trillion and those $2.9trillion interest we have to pay ,would give any borrower confidence to loan us more money ?

i think we are about to hit the limit on who will borrow/loan us money,what happen then ? idk

[Naudious]

We should pay off our debt to China, and then tell them "So long, and thanks for all the fish"