Federal government officials recently released new federal deficit figures and it should come as no surprise that they are big, scary numbers which are fitting for the Halloween season.
Some people, however, say that when we lift the mask on those numbers it really is not as bad as others portray it.
Americans for Limited Government released a statement in the past week which says rising interest rates are significantly increasing the federal government’s debt interest payments, which spiked by $65 billion. More than half of the 2018 deficit increase is attributable to interest payments on the debt. The current national debt is somewhere around $21.6 trillion.
Michael Foster, lead research analyst for Contrarian Outlook, wrote a column last year saying all those big numbers are not as scary as one might think, and he used an example to explain it. Foster wrote that if someone said they just took out a loan for $6 million, a person’s natural reaction might be one of concern. If that borrower is Mark Zuckerberg, however, the view quickly changes. Indeed, Zuckerberg took out a $6 million loan in 2012 at 1 percent interest and actually made a profit on his mortgage when adjusted for inflation, Foster said.
At the time Foster wrote his column, the national debt amounted to about $60,890 per American. He admits that sounds bad, but adds, “You hear a lot about the federal debt number, but you almost never hear about the U.S. asset number. Just how much is the entire USA worth? If we sold every asset in the country, how much cash could we raise? Fortunately, the Federal Reserve keeps track. They do it by estimating the total balance sheet of households and nonprofit organizations, as well as the total assets of U.S. banks. Combine those two and you get $128.18 trillion. All of a sudden that $60,890 per person sounds laughable, because the average American also owns $393,391 in assets.”
Foster further states that the U.S. could pay off all its debts with about one year of its current economic production, or in six years if it focused all its income on debt retirement.
While the deficit might not be as scary as some people thought, Americans might have fewer nightmares if it were going down. —Mark Sherry