GETTING REAL ABOUT THE FISCAL CHALLENGES AHEAD
The source for this is a website called U.S. Debtclock.org. It allows you to look at the picture of America’s economy in 1980 and today. To add drama, it does it much as the other debt clocks you can find on line where the debt we owe as a nation expands by millions every hour. I can’t vouch for the accuracy of the data but as I analyzed it with other statistics I have seen it “feels” accurate.
We take this topic on because the stock market is sending signals of concern. Everyone seems to agree we have far too much debt at $ 36 trillion. It now exceeds our Gross Domestic Product, which many economists suggest is a kind of tipping point. We are told that Social Security is in trouble and Medicare is an expense which certainly seems unmanaged. The current administration suggests that it can manage the debt, eliminate the deficit and move in the direction of substituting tariffs for income taxes. That has prompted a lot of skepticism in a world where a higb priority in making the 2018 tax cuts permanent, including elimination of the estate tax for just about all Americans.
So, we compiled the data from the “Debtclock” and measured what has come of the U.S. economy since 1980 when Ronald Reagan was first elected. Since that time we have had 20 years of Republican presidential leadership and 20 of Democratic. We point this out because there is limitless finger pointing over who is responsible for the fiscal issues we now face. Meanwhile, we had a federal surplus (taxes exceeded expenses in only 4 of those years 1998-2001. If you want to see a scary chart here it is courtesy of the St. Louis Federal Reserve. Federal Surplus or Deficit [-] (FYFSD) | FRED | St. Louis Fed
Now here is the data we pulled from the charts.
The 1980 chart U.S. National Debt Clock 1980
Today U.S. National Debt Clock : Real Time
The good news first. Our gross domestic product has grown by a factor of 12 even though our population has grown by 1.5 to 1.8 depending on whether you look at raw numbers or workforce. Realize that on the economic data, inflation is part of the story and the CPI has multiplied by a factor of 4 since 1980.
Now the harrowing part. The national debt was less than a trillion dollars in 1980. Today it is north of $ 36 trillion. Our social security and medicare expenses have increased by a factor of 19.5, which helps to explain why reports of potential cuts to the payments is circulating while our politicians tell us this is a contract that will never be reduced. I marked the consumer debt data with an asterisk because the data between 1980 and 2025 does not seem comparable. I omitted mortgage debt because for many Americans we are really renting our houses when we buy them at age 50 with a 30 year mortgage.
The point of this is that our debt is starting to stagger us. Realize as well that our population is growing by less than 1% per year so that this is not easy debt to pass along to the next generations. This is actually a world-wide trend that may stagnate economic growth worldwide unless artificial intelligence finds a way to help bail the next generations out of this indebtedness.
We are in a national debate over fiscal policy. Whichever side of the political spectrum you reside in, we all need to come to grips with the concept that the forest of worldwide debt including that of the United State is growing darker by the minute and that both political parties need to grasp that to emerge from that darkness we probably need both spending cuts and, yes, higher taxes of some kind. Earlier this month Congress voted to continue spending at 2024 levels for the next seven months. Whatever your views on that, the Congressional Budget Office says we will run out of money to fund the government in August.
We write about this because all Americans, whether happily married or divorced rely upon Social Security as part of their financial plan in retirement. Many of those who are retired also depend on government issued securities to buttress the monthly payments they otherwise receive from Social Security and any pensions they might receive.