Annual Debt in the United States

Chart of the Week for March 4-10, 2005

When the federal government uses debt rather than taxes and user charges to pay for its expenditures, the US Treasury fills the gap by borrowing money. The US Treasury typically borrows money by issuing interest-bearing bonds. These bonds compose the US debt.

The US debt is the direct result of annual budget deficits. A budget deficit is the fiscal year difference between what the Government takes in from taxes and other revenues, called receipts, and the amount of money the Government spends, called outlays. As of September 30, 2004, the US debt stood at $7.7 trillion. Based on an estimated population of 295 million, every individual in the US would have to pay slightly more than $26,000 in order to pay off the national debt.

This is a scary thought, especially for those that have been living a buy-now, pay-later lifestyle. With personal debt at high levels and personal savings at low levels by historical standards, the markets have actually benefited from the high consumption environment. However, as we all know, there is no free lunch. When and how the markets will feel the pinch is anyone’s guess. So in an unsure environment, it is always best to keep a long-term perspective, stay diversified with your investments and attempt whenever possible to save more for a happy retirement.

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