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What Does the $16 Trillion US Debt Really Mean?

A lot of Americans are wanting to know the answers to some basic questions related to the USA debt. What is the US debt and how much is it? From the point of view of an actual number, the total amount of US debt, as of October 1, 2012,is in excess of $16 trillion, ($16,073,600,000,000). This number is defined as the US National Debt. What this means is that the US Government has spent $16 trillion more money than it is has received in income. The US Government revenue is mainly composed of federal income tax revenue, both from individuals that pay their federal income tax as well as from corporations and companies, that pay federal corporate income taxes.

What does the $16 trillion of US debt mean to the average man in the street? It should be of grave concern to all US citizens that the USA debt is over $16 trillion. Just like any debt that an individual has, the US debt has to be repaid at some point in time. How would this debt be repaid? It is only possible to repay this debt, is firstly to not increase the debt any further to start with, by ensuring that government expenses do not exceed the federal revenue. Secondly to start ensuring that a surplus of income over expenses occurs (known as a budget surplus) and continues year after year. For each year that there is a budget surplus, the surplus is used to pay off the US debt.

There are two ways of creating this scenario, the first is to reduce expenditures and secondly is to increase revenues. Easier said than done. Reducing expenses seems straight forward enough. Increasing revenues is not that obvious. The key to increase federal income is to grow the economy, resulting in increased revenues for businesses and therefore greater levels of employment by businesses, thereby increasing the amount of taxes paid by both individuals and corporations.

How much surplus and for how long are those surpluses required in order to eradicate the US debt of $16 trillion? Historically, the largest US government budget surplus ever was a touch less than $250 billion (a quarter of $1 trillion). Therefore, if you assume it is possible to repeat the very best over and over, year after year, then the soonest one could expect the $16 trillion of US debt to be repaid would be 4 (4 times $250 billion equaling $1 trillion) times 16 years, which makes 64 years. No, that's not an arithmetic error, it is a fact that unfortunately, at the very best it would require a minimum of 64 years of continuous record surplus, to pay of the $16 trillion of US debt. Are you still unsure of the answer to the question, what is the US debt and what does it mean to you?

It means the challenge facing the US and the citizens of America is unprecedented and is going to require drastic cuts in government expenditure, but more importantly, somehow the economy has to grow at previous record levels relentlessly for 64 years without any dips. Alternatively, the economy somehow has to grow at rates never ever before seen in history and needs to grow at those rates for an unprecedented length of time. All of which is unrealistic to expect, so the reality is more likely that the US will slowly but surely head towards bankruptcy over the next 50 years or so.

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What does the $16 trillion us debt really mean