What’s the big deal with Federal Debt?
According to President Obama’s projected budget plan looking forward to the year 2022 every man, woman and child in the US will be on the hook for $73,000 because of our country’s insatiable thirst for borrowing money. No other country in the history of man as we know it has ever been able to sustain a debt load as high as the United States. It’s hard to tell if or when the advantages of this country will run dry and maybe we will one day be debt free. History has shown that in the end it is always better to be the creditor vs. the borrower.
When will this become a problem?
As everyday goes by our debt keeps increasing. We are only paying off interest at this point. We will most likely continue to borrow more money until interest rates start going up. In an interest rate environment where the rates continue to go down it is easier to handle a larger principle debt load. They continue to bring on more debt but at a lower interest rate which keeps the monthly payment on that debt the same. When interest rates go up it will be impossible to refinance any outstanding debt and our payments will never be lower so any new debt that we bring on we be at a higher interest rate and our monthly payment will then beginning to increase. That’s when it gets a lot more challengeing to conscientiosly add more to the debt load. Especially if we have no increase in income to the federal government. That would most likely mean higher taxes.