Thursday, August 4, 2022
HomeDebtHow Much Debt Does The Us Have

How Much Debt Does The Us Have

How Much Credit Card Debt Does The Average American Have

Does U.S. debt matter? | CNBC Explains

Lets continue:

11. American people aged 45-54 have an average credit card debt of $7,670, with 51.7% of those indebted, which is the highest proportion of the age groups.

Median credit card debt is the highest for Americans aged 45-54 at $3,200. Americans younger than 35, on the other hand, have the lowest median credit card debt at $1,900.

In the table below, you can find the median and average debt by age in the US:

Age
$8,08028%

12. Americans aged 75 or older have the highest average credit card debt of $8,080, but only 28% of them are charged with credit card debt.

The credit card debt of Americans aged 75 or older rose to 28% in 2019 from 10% in 1989. Over the same period, the median amount owed escalated from $400 to $2,700.

13. Around 34% of people aged 1829 have student loans. Borrowers under 24 owe an average of $16,500.

People aged 35 have the highest average American student loan debt at $42,600 per borrower. The end balance is 287%, which is higher than the value of their original loan.

Student borrowers aged 30-44 owe 49% of the national student loan debt balance, which means $823.2 billion.

14. Even though women have a lower income, they have higher student loan payments than men .

This also shows that men have a lower percentage of the average American student loan debt per person than women. Out of the total national student loan debt, $929 billion belongs to women. The most common reason for this debt is the persistent gender wage gap.

How Does The Federal Government Borrow

To finance the federal debt, the U.S. Treasury sells bonds and other types of securities. Anyone can buy a bond or other Treasury security. When a person buys a Treasury bond, they effectively loan money to the federal government in exchange for repayment with interest at a later date.

Most Treasury bonds give the investor – the person who buys the bond – a pre-determined return on their investment. For example, you may pay $90 for a five-year, $100 bond. At the end of five years, you can trade it in for $100.

There are many different kinds of Treasury bonds, but the common thread between them is that they represent a loan to the U.S. Treasury, and therefore to the U.S. government.

What Are The Policy Options For Dealing With The Debt

Politicians and policy experts have put forward countless plans over the years to balance the federal budget and reduce the debt. Most include a combination of deep spending cuts and tax increases to bend the debt curve.

Cut spending. Most comprehensive proposals to rein in the debt include major spending cuts, especially for growing entitlement programs, which are the main drivers of future spending increases. For instance, the 2010 Simpson-Bowles plan, a major bipartisan deficit-reduction plan that failed to win support in Congress, would have put debt on a downward path and reduced overall spending, including military spending. It also would have reduced Medicare and Medicaid payments and put Social Security on a sustainable footing by reducing some benefits and raising the retirement age. However, Biden plans to address gaps in the U.S. social safety net, which could increase demand for more long-term funding.

Some optimists believe that the federal government could continue expanding the debt many years into the future with few consequences, thanks to the deep reservoirs of trust the U.S. economy has accumulated in the eyes of investors. But many economists say this is simply too risky. The debt doesnt matter until it does, says Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. By taking advantage of our privileged position in the global economy, we may well lose it.

Also Check: Can You File Bankruptcy On Your Car And Keep It

How Do Current Debt Levels Compare Historically

Both gross and public debt are at all-time highs in nominal dollars, which is perhaps not surprising since the federal government has been running deficits for each of the past 20 fiscal years. As a percent of GDP, both are high by historical standards. Debt held by the public is currently around 98 percent of GDP, which is higher than any time in history other than in fiscal years 1945, 1946, and 2020, when unprecedented borrowing occurred to finance the World War II effort and to fight COVID-19. Even during those two periods, the record for debt was 106 percent of GDP in 1946 and 100 percent in 2020, both of which the federal government will surpass by 2031.

Gross debt currently amounts to 125 percent of GDP, which is the second-highest total in history, just short of the all-time record of 128 percent of GDP in 2020. By 2031, public debt will be at its highest level in history as a share of GDP, while gross debt will be slightly below todays level.

How The Large Us Debt Affects The Economy

Heres How Much Debt Americans REALLY Have

In the short run, the economy and voters benefit from deficit spending because it drives economic growth and stability. The federal government pays for defense equipment, health care, building construction, and contracts with private businesses. New employees are then hired and they spend their salaries on necessities and wants, like gas, groceries, new clothes, and more. This consumer spending boosts the economy. As part of the components of GDP, federal government spending contributes around 7%.

Over the long term, debt holders could demand larger interest payments, because the debt-to-GDP ratio increases, and this high ratio of debt to gross domestic product tells investors that the country might have problems repaying them. That’s a newerand worryingoccurrence for the U.S. Back in 1988, the national debt was only half of what the U.S. produced that year.

Weakened demand for U.S. Treasurys could increase interest rates and that would slow the economy.

Lower demand for Treasurys also puts downward pressure on the dollar because its value is tied to the value of Treasury securities. As the dollar value declines, foreign holders get paid back in a currency that is worth less than when they invested, which further decreases demand. Many of these foreign holders would become more likely to invest in their own countries. At that point, the U.S. would have to pay higher interest payments.

Also Check: What Is Chapter 7 Bankruptcy Definition

How Much Do Other Countries Owe The Us

Public debt makes up three-quarters of the national debt, and foreign governments and investors make up one-third of public debt. As of , the countries with the most debt owed to the U.S. are Japan, China, the United Kingdom, Luxembourg, and Ireland.

Though China had been the long-standing top placeholder for the country with the most debt owed to the United States, Japan currently holds $1.3 trillion worth of U.S. debt. The second place holder, China, currently holds $1.1 trillion in Treasury holdings. Together, they hold 31% of all foreign-owned U.S. debt.

Raising Reserve Requirements And Full Reserve Banking

Two economists, Jaromir Benes and Michael Kumhof, working for the International Monetary Fund, published a working paper called The Chicago Plan Revisited suggesting that the debt could be eliminated by raising bank reserve requirements and converting from fractional-reserve banking to full-reserve banking. Economists at the Paris School of Economics have commented on the plan, stating that it is already the status quo for coinage currency, and a Norges Bank economist has examined the proposal in the context of considering the finance industry as part of the real economy. A Centre for Economic Policy Research paper agrees with the conclusion that “no real liability is created by new fiat money creation and therefore public debt does not rise as a result.”

The debt ceiling is a legislative mechanism to limit the amount of national debt that can be issued by the Treasury. In effect, it restrains the Treasury from paying for expenditures after the limit has been reached, even if the expenditures have already been approved and have been appropriated. If this situation were to occur, it is unclear whether Treasury would be able to prioritize payments on debt to avoid a default on its debt obligations, but it would have to default on some of its non-debt obligations.

Don’t Miss: Does Filing Bankruptcy Clear Your Credit

Concerns Over Chinese Holdings Of Us Debt

According to a 2013 Forbes article, many American and other economic analysts have expressed concerns on account of the People’s Republic of China’s “extensive” holdings of United States government debt as part of their reserves. The National Defense Authorization Act of FY2012 included a provision requiring the Secretary of Defense to conduct a “national security risk assessment of U.S. federal debt held by China.” The department issued its report in July 2012, stating that “attempting to use U.S. Treasury securities as a coercive tool would have limited effect and likely would do more harm to China than to the United States. An August 19, 2013 Congressional Research Service report said that the threat is not credible and the effect would be limited even if carried out. The report said that the threat would not offer “China deterrence options, whether in the diplomatic, military, or economic realms, and this would remain true both in peacetime and in scenarios of crisis or war.”

Less To Spend On Other Government Initiatives

The U.S. National Debt Is Enormous. Is That Bad?

The more money the U.S. has to spend on meeting its debt obligations as interest rates increase, the less financial capacity it could have to fund programs focused on education, veterans benefits and transportation.

This breakdown of the 2019 Federal Budget from the Council on Foreign Relations shows how the budget pie is only so big, so when one area increases , another must decrease.

Don’t Miss: What Happens When You Declare Bankruptcy In Monopoly

Calculating The Annual Change In Debt

Conceptually, an annual deficit should represent the change in the national debt, with a deficit adding to the national debt and a surplus reducing it. However, there is complexity in the budgetary computations that can make the deficit figure commonly reported in the media considerably different from the annual increase in the debt. The major categories of differences are the treatment of the Social Security program, Treasury borrowing, and supplemental appropriations outside the budget process.

Social Security payroll taxes and benefit payments, along with the net balance of the U.S. Postal Service, are considered “off-budget”, while most other expenditure and receipt categories are considered “on-budget”. The total federal deficit is the sum of the on-budget deficit and the off-budget deficit . Since FY1960, the federal government has run on-budget deficits except for FY1999 and FY2000, and total federal deficits except in FY1969 and FY1998FY2001.

% Of Americans Say Theyll Never Get Out Of Debt

The good news is that a majority of respondents 71 percent are hopeful that they will get out of debt. Men are more confident than women with 76 percent saying they think theyll get out of debt compared with 67 percent. And millennials ages 18 to 24 are the most optimistic of any generation, with 86 percent of this age group saying they expect to get out of debt.

However, 29 percent of respondents overall think theyll be in debt forever. Baby boomers and adults 65 and older are even more pessimistic, with 34 percent of respondents in both age groups saying they dont think theyll ever get out of debt.

Unfortunately, this sort of mindset might play a big role in why some people get stuck in debt forever. If you believe that debt is an essential part of life, it can be hard to find motivation to pay it off.

Of course, not all debt is necessarily bad debt. Mortgages and student loans can be good debt because a home can grow in value and an education can pay off over time through higher earnings. But high-interest debt such as credit card debt should be tackled quickly to reduce the total amount owed and to free up more cash for other financial goals.

If youre willing to cut costs, find ways to make extra cash and budget carefully, you can dig yourself out of debt.

More on Debt

We make money easy. Get weekly email updates, including expert advice to help you Live Richer.

Read Also: Can You File Bankruptcy On Government Debt

Is The National Debt A Problem

Economists and lawmakers frequently debate how much national debt is appropriate. Most agree that some level of debt is necessary to stimulate economic growth and that there is a point at which the debt can become a problem, but they disagree about where that point is. If the debt does get too big, it can result in cuts to government programs, tax hikes, and economic turmoil.

Does The Size Of The Federal Budget Deficit Matter

How Much Debt Does the US Have

While public debt remains a concern for countries that borrow US dollars, it is less of an issue for the US itself. The dollar is the worlds reserve currency and more debt doesnt decrease outside investors demand for it.

Economists sometimes believe that increasing the federal debt weakens the dollar during crises. But usually investors end up running to the dollar as a safe haven asset instead of shying away from it, Mason said.

This time around, policymakers decided to take on more debt to blunt the damage from the pandemic by sending out direct checks, granting a childcare tax credit, and creating a paycheck protection program. All of these programs have left households with stronger balance sheets than before the crisis.

So if you think government debt is too high, ask yourself if you think it would be better for families to hold that debt, Mason said.

Read Also: Do You Need A Lawyer To File Bankruptcy

The National Debt Is Now More Than $30 Trillion What Does That Mean

The gross federal debt of the United States has surpassed $30,000,000,000,000. Although the debt affects each of us, it may be difficult to put such a large number into perspective and fully understand its implications. The infographic below offers different ways of looking at the debt and its relationship to the economy, the budget, and American families.

The $30 trillion gross federal debt includes debt held by the public as well as debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself.

Americas high and rising debt matters because it threatens our economic future. The coronavirus pandemic rapidly accelerated our fiscal challenges, but we were already on an unsustainable path, with structural drivers that existed long before COVID. Putting our nation on a better fiscal path will help ensure a stronger and more resilient economy for the future.

National Debt By President

The National Debt has always been an area of interest for the United States President George Washington appointed future President Alexander Hamilton to understand and solve the $80 million debtthat had accrued due to the Revolutionary War. Hamilton came up with the plan to pay off the debt through taxes and the creation of the national bank. Since then the United States has steadily increased its budget deficit, and the national debt has continued to rise.The first time that the national debt hit the $1 billion mark was in 1863 while the Civil War was occurring it hit the $2 billion was two years later when the civil war ended in 1865. As the country went to battle during World War I and World War II, the national debt hit the $10 billion mark and $100 billion marks respectively. By 1982 after the Vietnam War and the Cold War, the national debt hit the $1 trillion mark for the first time in history. By the 21st Century, the national debt got to $20 trillion after major events such as the War on Terror and the Great Recession. Today , the national debt stands at $30.2 trillion and public debt is roughly 100% of the country’s GDP.

You May Like: What Types Of Bankruptcies Are There

Whos Responsible For The Current National Debt

In short? Pretty much every administration.

Regardless of political affiliation, parties in power have run up the deficit through higher spending and lower revenue collection, says Brian Rehling, head of Global Fixed Income Strategy at Wells Fargo Investment Institute.

While its easy to say a particular president or presidents administration caused the federal deficit and national debt to move a certain direction, its important to note that only Congress can authorize the type of legislation with the most impact on both figures.

Heres a look at how Congress acted during four notable presidential administrations and how their actions impacted both the deficit and national debt.

The Politics Of National Debt

Why the US is always hitting a “debt ceiling”

Disagreements about national debt have repeatedly preoccupied U.S. Congress. Whenever the national debt approaches the limit periodically reset by Congress, lawmakers are faced with a choice of raising the ceiling once again or letting the U.S. government default on its obligations, risking dire economic consequences. The U.S. government briefly shut down before Congress raised the limit in 2013. A similar standoff two years earlier led Standard & Poor’s to downgrade its U.S. credit rating.

In 2021, Congress narrowly averted a scheduled Oct. 1 government shutdown by passing a short-term funding bill, then raised the U.S. debt ceiling by $2.5 trillion to $31.4 trillion in December. That limit was expected to be reached in early 2023.

Americans profess to be concerned about the national debt in poll after poll, while also overwhelmingly supporting defense spending and outlays for Social Security and Medicare, and opposing tax increases.

As a result, elected officials too have been eager to be seen to be addressing the national debt, usually without linking it to the spending the debt enables or to the tax increases that a balanced budget would require.

Recommended Reading: Why Is My Bankruptcy Still On My Credit

RELATED ARTICLES

Popular Articles