.GIF){kind=small}
|
| | |
| |
See also:
The Truth about the National DebtThe daily headlines and the TV news have been filled with reports of the Herculean struggles between the Congress and President George W. Bush over the Federal budgets for FY-2009 through FY-2011. This to-the-mat confrontation has often threatened the unthinkable curtailment of "non-essential" Federal services.
For example, in the past few years, only the financial sleight-of-hand of the US Treasury Secretary in disinvesting from Federal civil service retirement funds and withholding receipts and interest payable on Treasury securities held by these trust funds has forestalled the international debacle of defaulting on maturing Federal debts. This bitter contest over the Federal budget is triggered by deepening concern over unprecedented deficits propelling the out-of-control growth of our astronomical national debt.
While the enormity of the national debt has been a popular whipping boy for as long as any of us can remember, can the owner/manager of the emerging business do much about this problem? How does the national debt really affect the owner/ manager of the emerging business? Isn't it much like worrying about the hole in the ozone layer — obviously immensely important, but a very remote phenomena from my day-to-day concerns?
To understand how the national debt does affect the owner/manager of the emerging business, let's look at the numbers.
The national debt has now passed $10.15 trillion. To understand how quickly this number has been increasing, the national debt first passed $7.0 trillion January 15, 2004, and then passed the $8.0 trillion mark October 18, 2005. Thus, raising the ceiling imposed on the national debt has now become a yawn-producing vote in the Congress. Because of the Treasury's financial legerdemain, the real number is frequently slightly above this ceiling.
Foreign governments and investors hold $2.67 trillion of this debt — approximately 20 percent of our GDP. The major creditors are Japan ($585.9 billion), China ($541.0 billion), the United Kingdom ($307.4 billion), OPEC nations ($179.8 billion), and Caribbean banking centers ($147.7 billion); even Russia currently holds $74.4 billion of the US national debt.
Per capita, this is more than $33,700 for every man, woman and child in the United States. The interest costs to service this debt is in excess of $320 billion a year — approximately 17 percent of our total tax revenues. The interest costs are now more than the Federal government spends on homeland security, education, environment, housing, veterans programs, transportation and agriculture combined. Our annual appropriations for virtually all other Federal activities pale in contrast with the line item for Federal debt service.
So, how does this affect the owner/manager of the emerging business? In many ways!
First, approximately 17 cents out of every dollar of total tax revenue collected is immediately used merely to pay the burgeoning interest on the Federal debt. This is now surpassing the costs for our entire defense establishment, and it is exceeded only by the revenues needed to fund the total Medicare and Medicaid programs. (Ostensibly, Social Security is funded independently.) We are held hostage by this horrendous debt; 17 cents is the ransom to be paid out of every dollar we must deliver in taxes.
Thus, absolutely no governmental services or benefits are delivered in return for 17 percent of our total Federal tax bill. These are substantial funds that could most prudently be re-invested in the growth of our own business, but must be shoveled out instead simply to service the interest on the Federal debt. These substantial funds are diverted by Government fiat from potentially constructive economic investments in one's own enterprise into barren interest payments to the world of strangers who hold these obligations of the Treasury of the United States.
And secondly, the spending power of our present and potential customers would be increased dramatically if this sterile 17 percent of our total tax bill that is immediately swallowed by interest payments could only be freed for the purchase of goods and services. [Approximately half of all individual income taxes are required to pay the interest on the Federal debt.] While some of the recipients of these interest payments may recycle these funds into the purchase of domestic goods and services from emerging businesses, much of the Federal debt is held by foreigners. A substantial portion of the income of the average family of four is being devoured to pay the interest on this "family debt" equivalent to $86,000. Thus, the Federal debt is a heavy drag on the economy, impeding job creation and entrepreneurial expansion as well as consumer spending on goods and services.
How does the national debt affect the owner/manager of the emerging business? It drains substantial funds out of the business that could otherwise be invested in job creation and entrepreneurial expansion. And it drains substantial funds out of consumers' pockets that could otherwise be available for the acquisition of goods and services. While it may not be observable, the national debt casts an oppressive pall upon the whole economy. And this burden inevitably impedes the growth and prosperity of the emerging business.
.JPEG)
Your comments and suggestions for these pages are most welcomed!
|
Email: editor@businessforum.com
227 Fuller Street |  |
URL: http://www.businessforum.com/debt01.html
Revised: November 7, 2008 TAF
© Copyright 1996, 1997, 2001, 2004, 2008 Thomas A. Faulhaber / The Business Forum Online®, All Rights Reserved
