Only 000’s

I have mentioned in the past that my seven year old grandson Hank has strong math skills. We were talking about the national debt and I asked him how many 000’s in a trillion. “Too easy Boompa, it has 12 zeros”. He went on to refresh my memory, six zeros is a million, nine is a billion, fifteen in a quadrillion, eighteen in a quintillion, and twenty-one is a sextillion. So what is a gazillion besides a very big number? I finally had him, after I looked it up I discussed the base word is a Latin word meaning “earthly edge or end of earth.” For you math folks there are 28,819 sets of 3 zeroes in the very large number. Our total U S national debt is $28.8 trillion and counting as I watch the national debt clock. There actually is a clock that will keep you up to the minute on most topics related to our debt. To level set, this years budget deficit closed out the fiscal year at an additional $2.3 trillion after nearly $3 trillion last year. Next year, administrative budget request is $6 trillion and projects a $1.8 trillion deficit. The numbers must be put in an historical and global perspective.

As a student of economics, I have always been comfortable with the US Debt levels versus our Gross Domestic Product. This year our countries output, GDP, will approach $23 billion. Until the past two years the ratio of national debt to GDP was less than 100%, today it is 125.94% and headed to over 140%.  An American Banker study suggest the US will continue to produce deficits with the debt to GDP ratio rising to near 180% by 2050. So does it really matter? If you have watched the lunacy going on around not raising the nations debt ceiling you likely know it matters.

The United States dollar is the currency for the world. The possibility that we would default on our promise to pay back bonds which promise the full faith and credit of our country is potentially devastating. I would argue the debt levels do make a difference as leverage should be appropriately utilized. Higher risk, would demand higher interest rates and lower credit rating. Higher rates would drive deficits higher. The offset is a flourishing economy and growing GDP.

So why support increased debt levels. First and foremost, we must as a country honor our commitments. When debt is used appropriately, it can foster long term growth and prosperity. Rebuilding infrastructure, assuring a highly educated citizenry, combating the obvious costs of global warming, assuring economic opportunity for every American, encourage innovation and competitiveness and protect our democracy.

So Hank is right, it is just a bunch of 000’s, unless we all understand the facts and get involved as informed voters.  

Thanks for wearing your masks.   Mike