The National Debt – Why Does It Matter?

We’re hearing a lot about The National Debt in the news these days, and you may wonder why you should even care about the National Debt.  Like many other people, you may see this as a government problem, but not one that can affect you in your personal life.  So why should the National Debt matter to you?  I’d like to try to address that question in this article.

The fact that our federal government has a National Debt isn’t really a problem.  We’ve had one since the days of the Revolutionary War, and quite honestly, we wouldn’t be the great nation we are today if we hadn’t been willing to borrow money when necessary over the years.

The problem with our National Debt is that it’s growing too big for our federal government to handle.  The interest on the National Debt has become one of the largest components of our federal budget, and it continues to grow.  Plus, our federal budget is now so out of balance that we are unable to meet our government obligations without borrowing more money each year.  This, in turn, creates even more interest expense on the National Debt, which in turn, necessitates even more borrowing, and on and on it goes.  It’s a vicious cycle.

The day is coming (and it’s not too far away) when the National Debt will be so large that we will simply be unable to borrow enough money to meet the obligations of the federal government.  Once we reach this point, the federal government will have no choice but to “print money” to meet its obligations. 

The term “print money” doesn’t necessarily mean to literally print more money.  More often, it refers to a trick the Fed uses, which is known as “increasing the money supply”.  It basically means creating money out of thin air.  It would be kind of like you being able to call your bank and instructing them to increase your balance by a million dollars even though you didn’t deposit a million dollars into your account.

Increasing the money supply may sound like a great solution to the National Debt, but this is where it becomes a problem for you.  The end result of increasing the money supply is that it also increases the inflation rate, so that your paycheck and the money you have in the bank become worth less and less.  In a worst case scenario, it can create what’s known as hyper-inflation, which is a rapidly increasing inflation rate spiraling out of control, often resulting in an economic collapse.

The only realistic way to avoid this looming disaster is to get our National Debt under control.  Let your Congressman and Senators know that you support a balanced budget and a reduction in the national debt.