Opportunities to Eliminate the National Debt of the United States
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Opportunities to Eliminate the National Debt of the United States

The U.S. national debt has been paid off before and can be apid off again, but it will take a strong president with a committed fiscal policy.

In a previous article, I illustrated the gargantuan size of our current national debt (as of 2011) with several figures; one of these included a calculation of the yearly interest cost at a rate of three percent of the current 14.57 trillion principal. This yielded a yearly interest cost of $437,238,238,201.87 or $3,210.27 for every working American. Such an illustration suggests that Americans need to ignore party doctrines of appropriate spending and find common ground in the idea that we need to pay our bills. This article will follow the same non-partisan approach as the previous.

What sort of a country would the United States be without a national debt? If you want to know, then you should consider asking Andrew Jackson. During his second term, in January of 1835, the debt was entirely paid off.  

Massive land speculation shortly plunged the United States into a depression after that point, but there is no proof that it was caused by paying off the debt. Some political scientists suggest that a national debt is necessary, oddly enough. Others suggest it is not necessary. Although there is no absolute proven result of a nation being free of debt, logic suggests that it would inherently introduce an unprecedented level of prosperity since large amounts of money would not be flowing out of the United States in the form interest payments. The question remains, though: can we still pay it off?

Here’s an example of a slow payment plan with the three percent interest figure used in the previous article. Just paying the interest results in a ten year total interest payment of $4,372,382,382,018.70 or $4.37 trillion dollars. If we instead paid the interest plus an extra tenth of a percent on the principal (equaling 3.1%), our total first year interest payment would be $451,812,846,141.93. This payment is greater than the pure interest payment by 14.57 billion dollars (total amount paid on principal for the first year). Watch the math as it progresses:

 

YEAR 3% Payments 3.1% Payments Total Principal After 3.1%
1 $437,238,238,201.87 $451,812,846,141.93. $14,560,033,332,122.19
2 $437,238,238,201.87 $451,361,033,295.79 $14,545,473,298,790.07
3 $437,238,238,201.87 $450,909,672,262.51 $14,530,927,825,491.28
4 $437,238,238,201.87 $450,008,303,827.64 $14,516,396,897,665.79
5 $437,238,238,201.87 $449,558,295,523.81 $14,501,880,500,768.12
6 $437,238,238,201.87 $449,108,737,228.29 $14,487,378,620,267.35
7 $437,238,238,201.87 $448,659,628,491.06 $14,472,891,241,647.08
8 $437,238,238,201.87 $448,210,968,862.57 $14,458,418,350,405.44
9 $437,238,238,201.87 $447,762,757,893.71 $14,443,959,932,055.03
10 $437,238,238,201.87 $447,314,995,135.81 $14,429,515,972,122.98
TOTAL $4,372,382,382,018.70 $4,494,707,238,663.12 $130,517,359,999.21

Astute observers will note that I am subtracting a tenth of a percent of the principal from the total before calculating the next year’s payment. Another way to express this is that I am multiplying the total principal by .999 to figure out the value for the next year. I can do the same with the aggregate sum remaining of the debt (note that this means it is regressing). The final bottom right cell is the total amount paid off of the debt’s principle at the end of the ten year cycle.

The results of such a payment plan are thus: the total principle is reduced by $120,517,359,999.21 over the ten year period. This takes a very small dent out of the total principle (.89% for the curious). To do this, government spending would have to be reduced, or the tax burden would have to be increased. It is certainly possible, however, to commit to a flat reduction rate of, say, $20 billion a year and slowly pay off the debt. Balancing the budget would be painful in the short term, but the long term benefits would enrich the lives of every future generation.

 

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