MONEY THOUGHT:

How are We Going to Pay for This?

President Biden announced his proposal to update the US’s infrastructure in what he is calling a “once in a generation” plan to spend approximately $2 trillion over the next 8 years (although I think it is worth noting the American Society of Engineers estimates we’ll need $2.6 trillion just to maintain current trends). This infrastructure bill of course comes on top of the $1.9 trillion American Relief Act, the $2.2 trillion CARES Act, the $900 million COVID carve-out in the Consolidated Appropriations Act passed at the end of 2020 and the $1.4 trillion omnibus spending portion of that bill. On top of what it takes to just keep the gov running.

For anyone doing the math, that’s 8.4 trillion dollars ($8,400,000,000,000) in “extra” spending that have been passed in the past 12-ish months (assuming the infrastructure bill goes through as proposed (I know, it’s a really big assumption)). That’s one hell of a credit card bill.

It’s got some people worried about the state of our nation and the burden this may place on future generations. The question becomes: “how are we going to pay for this??” The thing is, government debt never really does get paid off.

Wrapping your mind around the concept of national debt can be difficult. We like to think about a government’s budget like we do a household budget; if you consistently go over your budget, you’re in trouble. If you borrow money, you have to pay it off within a certain time frame.

But a country isn’t a person. A country is a different animal entirely. Whereas humans have a lifespan that a lender wants their loan repaid by, countries don’t. Countries also don’t receive an income, they literally make money up as they go. The rules we mere citizens have to follow do not apply.

Excerpt from an Illinois newspaper in June, 1944 (one week after D-Day) commenting on the mounting government debt.

Worrying about the national debt isn’t a new trend, either. Take a look at this newspaper clip from 1944. Post WWII, $1,486 of national debt per capita was a worrisome figure. As of April 8th, 2021 at 3:49p CST, the national debt per person was $85,194. Just a tiny bit of a jump in 77 years. And yet our country hasn’t fallen into ruins because of it.

It’s because as the American debt grew, so did the nation. That’s how it works around the globe. Nations just grow their way out of it. And a growing chorus of economists agree that improved infrastructure (roads, bridges, internet connections) is an overdue upgrade to our nation’s efficiency. More efficiency = more growth.

Economists will be keeping an eye on several factors that could affect this – like interest rates, GDP rates of expansion, and production – but for now, let us leave the worrying to the specialists and work on getting America roaring again.

Sources:

  • American Society for Engineers, https://infrastructurereportcard.org/wp-content/uploads/2021/03/FTA_Econ_Impacts_Status_Quo.pdf
  • US National Debt Clock, https://www.usdebtclock.org

Continue reading

You’ll like these ramblings on money too:

Search blog posts:

Wisconsin CERTIFIED FINANCIAL PLANNER™ professional and educator Sarah Paulson

THE AUTHOR

Meet Sarah Paulson, your
CERTIFIED FINANCIAL PLANNER

Although I’m a born-and-raised Wisconsinite – living in Appleton, Wisconsin –

I consider myself more of a world citizen.

True story: once when going through international customs in Amsterdam, the officers asked why they couldn’t find a Dutch residency permit in my American passport.

I bring a big world picture to my money management advice so you can view the wider world, too.

All written content on this site is for information purposes only.
Opinions expressed herein are solely those of Valkyrie Financial, unless otherwise specifically cited.

Read full disclaimer →

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Pin It on Pinterest

Share This