Issue #166: Don’t borrow trouble — or money, if you’re the government

plus a CDMX soundscape + Timmy
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Money
October 26, 2022 • Issue #166
Dollar Scholar
Hi y’all —

You know that idiom “don’t borrow trouble”? Yeeeah, I don’t live that way.

At any given moment, I am worrying about 1 million things: my family, my job, the midterms, the recipe I’m making for dinner, whether I should capitalize my Instagram captions, whether I’m saving enough for retirement, how Pete Davidson is doing, how to make my teeth whiter, if I talk too much, if I talk too little, what people from high school think of me, what I’m going to wear for Halloween, etc. 

I borrow trouble all over the place, and lately, I’ve added the national debt to the list. It seems like every time I read a headline about how President Joe Biden is touting the largest one-year drop in the federal deficit in American history, I immediately see another story about the “grim financial milestone” of the national debt crossing $31 trillion. 

That doesn’t seem ideal — but I can’t figure out just how stressed I should be about it. Like, should the national debt rank above or below “the possibility that Nick Jonas is going to break up the band again” on Julia’s Infinite List of Anxieties?

Do I need to worry about the national debt? Is it even a problem that affects me?

Howard Yaruss, author of Understandable Economics, says the reason we have a national debt is because the federal government needs to spend money to achieve its goals, like providing unemployment or building bridges. But there’s not enough revenue from sources like taxes coming in.

Revenue minus expenses equals the deficit.

To deal with the deficit, the government needs to constantly be borrowing funds. The primary way it does that is by selling securities like Treasury bonds, bills and notes — which basically amount to “an IOU: Someone gives the government money, and the government promises to pay them back back down the road,” Yaruss says.

Kinda like my credit card bill, but on a bigger scale.

People usually talk about the deficit in annual terms; that’s what all those recent headlines are about. The Treasury Department is saying that the deficit for the 2022 fiscal year (which ended on Sept. 30) was $1.38 trillion. That’s a victory in the White House’s eyes, because the deficit was $2.8 trillion the year before.

When we add up all those annual deficits, or IOUs, we get a truly eye-popping figure: the figure that, on Oct. 4, surpassed $31 trillion. As I write this, the national debt is $31,228,974,295,249. 

The deficits — and, in turn, the national debt — are impacted by what’s happening with the American population and how the government chooses to respond to it.

if i were a politician i would record my own audio every week and sell it on dark web to pay off national debt
 

Take the pandemic, for example. When Congress passed laws like the CARES Act to help people through the early days of the COVID-19 crisis, it racked up huge bills. According to the Washington Post, the three rounds of stimulus checks alone piled $800 billion on the national debt.

Different parts of that $31 trillion are owed to different entities. About 78% of the debt is held by the public, says Tori Gorman, policy director for The Concord Coalition, a nonpartisan organization focused on budget issues. The rest of it is, “believe it or not, [money] the federal government actually owes itself,” she says, adding that a big part of that is linked to Social Security.

And that’s to say nothing of the interest we owe.

“$31 trillion is about the size of our economy,” Gorman says. “We’re in debt up to our eyeballs … we've got to service this debt, we need to pay the interest on the debt that we have issued, and we need to pay back that principal at some point.”

That’s important, Gorman says, because it’s an opportunity cost: When we send our tax dollars to the government, and the government uses them to pay off bonds, it’s redirecting money that could be used for building roads and bridges, increasing Pell Grants, rolling out universal Pre-K or “putting astronauts on the moon.” 

She says it also can reduce the flexibility we have to respond to crises and make us beholden to foreign investors. 

In addition, according to a 2020 report from the Congressional Budget Office, it “makes the economy more vulnerable to rising interest rates and, depending on how that debt is financed, rising inflation.” It also “raises borrowing costs, slowing the growth of the economy and national income.” 

So, um, it’s a problem.

The thing nobody agrees on is just how big of a problem it is. Yaruss says he likes to think about how much debt per person the $31 trillion is because it’s such a big number to comprehend. Divided by 332 billion Americans, the debt is roughly $90,000 per person.

In his view, that’s not a “the-sky-is-falling” type situation. In others’, it is: That’s partially why politicians like Rep. Kevin McCarthy, R-Calif., has begun talking about using the debt limit to rein in government spending if the GOP takes the House.

THE BOTTOM LINE
(but please don't tell me you scrolled past all of my hard work)
The national debt is huge. But the degree to which I should totally freak out depends on my political views and priorities. 

If I feel compelled to take action, Gorman recommends voting (of course) and pressing candidates on how they plan to pay for their policies.

“The government isn't some entity that we’re not part of — it’s us,” Yaruss says. “That’s why we should care.”

The more you owe
VIA GIPHY

 

RECEIPT OF THE WEEK
check out this wild celebrity purchase
Chalamet
 
VIA INSTAGRAM
Timothée Chalamet recently bought an $11 million mansion in Beverly Hills from model Kate Upton and baseball player Justin Verlander. The 5,500-square-foot house has a rose garden, tennis court and climate-controlled wine cellar; nearby is Vin Diesel’s house. I have a hard time believing Timmy would ever actually leave NYC’s Tompkins Square Bagels long-term, but that’s a real peach of a house if you ask me.

 

INTERNET GOLD
five things I'm loving online right now
1 Am I just hungry, or is this history of macaroni and cheese fascinating? Possibly both, but I learned a lot, including the fact that chefs used to put cinnamon and sugar in the dish Medieval chefs called “makerouns.”
2 Click through for cats.
3 Put in your earbuds and listen to this project from The Pudding documenting the sounds of Mexico City. The story, which is accompanied by stellar background audio, explains the central role CDMX’s merchants play. “The soundscape of the city is not fixed. It changes as the city does,” the text reads. “As services become outdated — needs and preferences evolve, residents are displaced by new waves of gentrification and development, regulations shift — sounds inevitably disappear. For example, as physical mail is used less, the sound of the postal worker’s whistle is quietly becoming a distant memory.” Wow.
4 Nerd alert: Someone made a fully playable version of Settlers of Catan out of LEGO, and now it’s all I can think about.
5 THREAD OF “FOLKLORIAN” LYRICS ON MIDNIGHTS SO PEOPLE CAN SHUT UP.
 

 

401(K)9 CONTRIBUTION
send me cute pictures of your pets, please
Riggins
 
VIA Mallika Mitra
Meet Riggins, a pup who’s accumulating toys like the nation is accumulating debt. Riggins is not worried about his awwbligations.

 

I am absolutely begging you to send me pictures of your pets dressed in Halloween costumes. Please and thank you.

See you next week.
 
Julia
 
P.S. Do you care about the national debt? What do you think about Midnights? Would you ever put cinnamon in your mac and cheese? HMU at julia@money.com or @SuperJulia on Twitter, please and thank you.
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