Your Brand New Baby Owes $62,000


This past year, my wife and I have been fortunate enough welcome two new grand babies, our first, into our family. This is a happy occasion as we get to see them, even from afar in Boston, mature day-by-day on Skype.

It is my fervent wish that they will grow in a world that has abandoned war, embraced the power of the universe rather than the power of dead plants, and gives every human being the chance to truly pursue their heart's dreams.

The promise Artificial Intelligence, if you view only its positive side, could play a positive role in creating that world. Yet, there's one challenge that every single American baby takes on through no fault of their own with their very first breath. They inherit the personal equivalent of about $62,000 of debt.

"What," you ask? "How can that be?" The U.S. Federal deficit recently hit $20 trillion versus as U.S. population of about 326 million. The recent tax cuts and our endless desire for military adventurism are likely to push that number to $30 trillion before these newborns reach middle school. That's just the money on the books. If you count unfunded mandates like future Social Security and medicare and paying interest (not even principle) on the debt the total is about $62 billion or about $185,000 for that newborn.

The "hockey stick" graph nobody talks about

The "hockey stick" graph nobody talks about

Now many "expert" economists claim this is all good. A little debt never hurt anyone. They argue that the debt is low versus Gross Domestic Product. The debt now easily outstrips a single year's GDP which was $18.57 trillion in 2016. Essentially, though, Congress has a credit card with a principle balance of $20 trillion and is making interest-only payments on that balance. The government budgeted $303 billion (7 percent of all federal spending) to make that interest payment in fiscal year 2017. That made it the fourth largest expenditure after Social Security, Medicare and Health, and Defense spending.

Currently, historically low interest rates of around two percent have kept this payment down in the last 15 years. However, as recently as 1988 the federal government was paying 8.8 percent interest on a much smaller debt. If rates like that were to return, interest on the federal debt would skyrocket to the largest single expenditure.

You often hear people say, "Well, we just owe it to ourselves. Why don't we just declare it null and void." According, the debt is held by three groups.

  1. Intra-governmental Debt- other federal agencies, mostly retirement and health trust funds hold about $5.6 trillion in debt. These governmental agencies have allowed their funds to be used for general spending and in return are given government IOUs in the form of Federal Treasury notes. Here are the top debt holders.
    1. Social Security Trust Fund $2.8 trillion (Your retirement money)
    2. Office of Personnel Management and Retirement $888 billion (federal employees retirement money)
    3. Military Retirement Fund $670 billion (military retirement money)
    4. Medicare Trust Fund $294 billion
  2. Debt Held by the "Public" - these include:
    1. The Federal Reserve Bank $2.4 trillion,
    2. Mutual funds $1.7 trillion
    3. State and local government pensions $905 billion.
    4. Private pensions $553 billion
    5. Banks $663 billion
    6. Insurance companies $347 billion
    7. US Savings Bonds $166 billion
  3. Foreign Debt - This piece accounts for just over $6 trillion. Top holders are:
    1. China $1.2 trillion
    2. Japan $1.1 trillion
    3. Ireland $329 billion
    4. And a long list of other nations.

Essentially, you, me, the newborn baby, and every man, woman, and child we know in this country owe just about everyone a whole lot of money. We're like that family member that borrows money from everyone and never pays it back. When Senator Rand Paul got up to point this out in the senate this week, he was roundly mocked for worrying so much about it.

Yet, we still act as though we are the wealthiest country on the planet. We certainly continue to spend as if we are and there appears no end to it in sight.

So far our illegal central bank and the political class have managed, somehow, to keep all these balls in the air. Common sense says we cannot continue like this for much longer. Countries are starting to want more than our IOUs. This is why we've made foreign investment in the United States so much easier and why land and other resources are being bought up.

I don't pretend to know what the eventual outcome of this will be. Common sense says it can't be good. I would argue we are already paying the prices in our freedoms, even if we are not yet paying it financially. Thomas Jefferson, in an 1816 letter to John Taylor, stated the following, "And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."

Many have thrown their hands up and said we should just scrap the entire monetary system that has so enslaved humanity. Yet, concrete answers on how to do that without utter breakdown are not forthcoming. More extreme views take a view that says this system must come down, so why not now? Others, wrongly assume, that socialism can save us from these capitalistic ills. Socialism, like capitalism, still revolves a centralization of financial control in few hands and can scarcely be seen as the antidote.

I don't have an answer for you or for my grandkids. I know this, though, the longer we ignore this and pretend it's not a huge problem looming on our horizon, the more precipitous will be the fall when it comes. The moment to begin having serious dialogue about this, the complete 180 of what's happening in Washington DC, is now.

Otherwise, how can we look our grandchildren or children in the eyes when we pass them off to a life of perpetual personal and societal debt slavery.

Ray Davis
for 6 Sense Media