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Proverbs 27:23-27 (ESV) says,

“Know well the condition of your flocks, and give attention to your herds, for riches do not last forever; and does a crown endure to all generations? When the grass is gone and the new growth appears and the vegetation of the mountains is gathered, the lambs will provide your clothing, and the goats the price of a field. There will be enough goats’ milk for your food, for the food of your household and maintenance for your girls.”

These are WISDOM verses, guidelines that can propel us into right thinking and action. Assessing where you are with your income and assets (flocks and herds) helps you to meter out your expenses so that you do not diminish what you have. So in processing these verses, we realize that we must live within our means, to not overextend ourselves financially, and be prudent so that there is not just enough income/resources for today, but for the future.

Debt decreases your standard of living in the future for your gratification today

We say in our Stewardship Lifestyle Seminar that “debt always mortgages the future to pay for the present.”  Debt decreases your standard of living in the future for your gratification today. Knowing that today we will be talking about government debt, do the same principles apply to a government or nation as it does to an individual?

Let’s start this discussion and learn about what government debt is, how it accrues, and how it impacts all of us.

 

The U.S. National “Government” Debt

  • US Debt Clock
    • Total – $30.368 Trillion
    • Per Tax Payer – $242.5k 

The U.S. National Debt

  • Debt as percent of GDP
    • Prior to 2008 crash it was about 64.2%
    • Prior to Covid crisis it was 108%
    • Peaked after Covid at 136%
    • Currently at 123.4%

 

Who Owns U.S. Government Debt?

  • Most is owned by United States 
    • Fed & Government Accounts – 40%
    • Foreign – 25%
    • Mutual Funds – 12%
    • Banks – 5%
    • Pensions – 4%
    • Insurance Companies – 1%
  • Of the 26% owned by foreign, Japan owns most ($1.3T), then China ($1.1T). 

 

Who owns U.S. Debt?

 

Which countries hold the most U.S. debt?

 

What Causes Government Debt?

  • Debt is accrued when you spend more than you earn. Not all government debt is bad, but habitually spending more that you earn causes big problems down the road.
  • U.S. Budget:
    • Income – $4.35 Trillion
    • Expenses – $5.5 Trillion
    • Deficit – $1.15 Trillion (Borrowed in Treasury Bonds/bills/notes)

 

Federal Finances

 

How Government Debt Impacts You

  • As Taxpayers:
    • Taxes go up. 
    • Interest expense is high. 
    • Interest payments are a costly part of the federal budget. Even with exceptionally low interest rates, the United States is projected to spend over $300 billion on interest payments this fiscal year. That’s the equivalent of 9 percent of all federal revenue collections and roughly $2,400 per household. 
    • As a share of the economy, net interest costs will decline to a low of 1.2 percent of Gross Domestic Product (GDP) in Fiscal Year 2022 and remain at that level through 2025 before rising to 2.6 percent of GDP by 2031. Over the long term, interest payments will grow to 5.3 percent of GDP by 2041 and 8.7 percent of GDP by 2051. (Committee for Responsible Fed. Budget)
    • As bond holders start demanding high yields (interest) the amount of money that the US Government spends to service its debt will increase. 
  • As Parents:
    • Deficit Spending saddles the future generations in potentially crippling debt. 
    • Taxes will have to increase to cover the costs.
    • What we can hope for: 
      • Inflation – pay back old debt with newly inflated dollars.
      • Robust economy with High GDP – means higher revenues to pay back debt. 
  • As Investors:
    • Bonds are often used as a way to reduce volatility. Government bonds are considered the “safest” of the bonds as they are backed by the full faith and credit of the US Government.  
    • Bonds struggle as interest rates go up. 
    • Bond based investment can drop in price because of increased interest rates. 
  • As American Citizens:
    • US Debt is still the “safest” place to park money according to many. We have a stable government, strong economy, and stable currency. 
    • Increased debt load could cause the US credit rating to be cut from AAA to AA or lower. This could cause much instability and chip away at US dominance.

 

Stewardship Application

Matthew 6:34 says, “Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.”

May I encourage our listening audience to:

  1. Be prayerful…
  2. Be prudent…with today’s money so you can make it last into potentially even more difficult times…
  3. Trust…the LORD!  This is a good time to trust that God will be your great provider!

Matthew 6:11 says, ”give us this day our daily bread…”

Let’s be a people that are trusting in God to be our provider of our needs.

 

Next Steps

 

 

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