News & Opinions About Gold & Silver

February 25, 2024

You Can’t Borrow Your Way Out of Debt

You Can’t Borrow Your Way Out of Debt
U.S. National Debt as a Percentage of GDP

America is going through a period of unlimited explosion of our national debt. During Trump’s four years in office, the national debt has increased by $7.8 Trillion Dollars. That computes to you and I and every other person in America owing another $23,500 in new federal debt.

The increase in the national debt is nearly twice what we owe on student loans, car loans, credit cards and every other type of debt combined— excluding mortgages.

We Have No Rich Uncle in Washington

Washington is pretending to be our rich uncle sending us $600 checks last year, another $600 early this year. Of course, it’s all borrowed money— fake money, new printed money. But, it’s never enough. President-elect Biden just announced a $1.9 Trillion Dollar giveaway program to stimulate the economy and sending along another $1,400 check, free money coming to most of us so we will go along with the spending.

It’s hard to say if the Democrats can rush another bill through Congress that no one is given the time to even read. We hope they read the bill before we borrow and spend yet another $1.9 Trillion Dollars.

Free-Checks-for-All is a Dumb Idea

We took a look at the math on stimulus spending already and what it really costs long-term. It looks like getting a $600 check last year increased our share of the national debt by $23,500. That’s seems like a dumb idea. So does doubling down with another $600 check and another $23,500 of debt to hand down to my children and grandchildren.

It’s great that Interest rates today are at historic lows. The Federal Reserve has forced rates to the 1% range on a 10-year Treasury. While interest rates are cheap these days, bigger debt ultimately means we all have bigger interest costs too. Why? Because once the Federal Government creates debt, it never attempts to pay down the debt.

Add in the State and Local Debt

Mu­nic­i­pal-bond is­suance in 2020 was the high­est seen in the last 10 years. City and state governments borrowed heavily due to both unexpected Covid-19 costs and reduced tax income during shutdowns. Thanks I. Part to lower interest rates, new borrow­ing last year drove to­tal out­stand­ing muni debt over $3.9 Trillion Dollars.


If the past year was dominated by the huge human costs of COVID-19, the next few years will be about its economic aftermath, including the alarming rise of US debt.  — TheStreet.Com

Here’s another look provided by at how much the Federal Government really owes total just through FY 2020. This taxes taken in and spent but owed to Social Security, Medicare, and Federal Government employees retirements etc.

Obviously, the real national debt is far beyond the $27.8 Trillion Dollars. It hard to believe that we’ve into paid Social Security all our lives and the government spent our retirement and left us with IOUs.

How can this happen? Well, then government spending (or future promises of benefits) exceeds income, debt results. Borrowing money to pay the interest on borrowed money and never paying down the debt compounds the economic cost. You simply can’t borrow and spend your way out of debt.

The latest $1.9 Trillion Dollar stimulus plan appears to necessary, but in reality it is yet another attempt to spend us into the poorhouse.

10 Year Treasury Rate

Today Money is Cheap 1.1%

This chart from Macrotrends.Com shows the daily 10 year treasury yield back to  1962. The 10 year treasury is the benchmark used to decide mortgage rates across the U.S. and is the most liquid and widely traded bond in the world. The current 10 year treasury yield as of January 13, 2021 is 1.10%. That’s cheap, far below the cost of inflation.

While borrowing money today is cheap, one day interest rates will return to historical norms of 4% to 6% levels. By then the national debt will have soared well beyond today’s $27.8 Trillion level.

As the interest on the national debt rises, we will ultimately face a debt crisis forcing politicians to make harsh budget cuts into military, social programs, perhaps even into Social Security and Medicare. Sadly, the rising interest costs on the nation’s debt will consume more and more of the federal budget, require higher taxes, and lower the standard of living for future generations.

Sorry Washington, you just can’t borrow and spend your way out of debt!