Is The United States Bankrupt?

The world of economics is incredibly complex when you start rolling the numbers this way and that. The last five years, however, has raised a simple question that many thought impossible not long ago. Is the United States bankrupt?

Bankrupt may seem an alarmist term, but I am speaking of it here as an objective assessment. We find ourselves in interesting times. We are perhaps the richest country in the world, but for all the world appear to be bankrupt when you look at our finances.

What is bankruptcy? Is it carrying more debt than your total assets? If so, then we are in trouble. Our total assets when you include assets held by the government, businesses and individuals totals out to roughly $72 trillion. Our total liabilities when including unfunded liabilities [you know – social security, medicare!] are roughly $112 trillion. This would appear to put us sufficiently upside down to be bankrupt, but we Americans are certainly used to carrying debt so this really isn’t that alarming.

There is another area, however, that is very troubling. Any person or business owner knows the money you bring in needs to equal or exceed the money you pay out. Oh, you can get away with a deficit for a bit, but sooner or later the bill comes due.

In 2009, the federal government brought in about 2.3 trillion dollars a year in tax revenues. Depending on what figures you look at, the budget deficit for that year was in the $1.2 trillion range. This means we spend nearly a third more than we brought in. Admittedly, the government was spending like crazy to try to counter the Great Recession, but the government has run annual deficits every year of the last 30 with a few exceptions during the Clinton presidency.

Then there is the canary in the coal mine. Debt comes with what? Interest. We are paying more and more in interest on the debt we owe on our obligations. In 2010, the federal government paid a rather staggering $400 billion in interest alone on our debt. That figure is only going to be going up, particularly if bond holders start demanding that we pay higher interest rates. Now that is very scary.

Is the United States bankrupt? If we aren’t, we are mighty close to being so. I’m the first to admit that economics is not exactly the most interesting of subjects, but the total debt carried by this country is something Americans need to seriously pay attention to and speak their minds about. Perhaps only then will we get government spending under control. Hopefully, it will not be too late.

Barry Milton writes for UFCAmerica.com - where you can find information on subjects like the equity indexed life insurance.