Liberty on Tap since 1984
The Principal of our US Government Debt
On a daily basis, I hear many talking about the Interest we pay on our US Government Debt. However, there is one thought that always occurs to me. What about paying the Principal?
In Banking, there is on old adage, "a rolling loan has no loss". This has been used to describe a single payment loan (borrow money for a term of one-year) and when the loan matures, just "roll" the interest that is due on the loan into a new loan. With this strategy, one can never pay off their debt because it continues to compound (what I call the Snowball Affect).
Our Outstanding Debt reached a milestone today, $13 Trillion Dollars! For this to make any sense to me, I have to see the numbers, so here is what $13 Trillion looks like, ($13,000,000,000,000.00). For the principal of the matter, I assumed the following assumptions to pay out our debt:
- Monthly Payments
- 30 Year Amortization (Length of the Loan)
- 3% Interest Rate (Very Cheap Historically, but any higher rate is more Astounding)
Given the above criteria, the US would have a Monthly Payment of $54.8 Billion Dollars ($54,808,524,384.33) for the next thirty years. The Total Payments made would be $19.7 Trillion Dollars ($19,731,068,778,538.50) with the original $13 Trllion in Principal Payments and $6.7 Trillion in Interest Payments.
The above assumes there are no additional borrowings (no future debt) and that all unfunded liabilities (Social Security, Medicare, etc.) are paid for by other means.
I am attaching a PDF File if you have any Interest in seeing what it looks like to pay off the Principal.
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Tags: Finance, Government, Policy, Taxes, Us_Debt
Comment
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Comment by Ronald A. Lau on May 27, 2010 at 7:36am -
The US will just have to default.
No wait, can't do that. Liberals will take up arms before they let the Federal Gov stop entitlement spending.
Then I guess the US will have to cut spending in 1/2. No wait, can't do that for the same reason.
Hmmmm.....
Looks like the the only realistic solution is to print money.
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Comment by Jim Lakely on May 26, 2010 at 6:44pm
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Wow. I'm glad someone is trying to quantify and explain the enormous hole we're in. But it sure is depressing. Paying out $58 billion a month for thirty years ... it's nearly impossible to imagine that. And it is certain that we cannot pay at that rate. The federal government collects about $2 trillion a year in taxes, right? And we'd dedicate some $660 billion every year just for debt reduction? I don't think so.
Like I said. Depressing.
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Comment by Ben Boychuk on May 26, 2010 at 4:52pm -
Thank you for posting the PDF. It's a staggering, mind-blowing sum of money.
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