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The national debt that is growing and is finally getting attention from Congress, the White House much like Forex trading statistics. The subject is far from new and has been a source of concern and contention for many years. While the nation’s debt is talked about, there has been little in the way of action taken to bring the debt under control.
People confuse the terms debt and deficit. The budget deficit is amount of spending that exceeds revenue available in a budget. A family that spends $300 over the amount available and budgeted for the month has a budget deficit of $300. Deficit spending can be a factor in debt. A family borrows $300 to make up the difference between income and expenditures has a $300 debt. In simplest terms, that is how the federal budget works.
The national debt was at it’s lowest in 1835 at $33,733. As of April 19, 2011, the national debt stood at $14.32 trillion and is projected by some to exceed $15 trillion by the end of the fiscal year. Viewed another way, the national debt is growing at a rate of $58,000 per second and makes up almost 10 percent of GDP.
Within the economy, 25 percent of spending is done by the government with Congress’s approval. Much of the spending is to bolster the recovering economy. On the face of it, as long as interest rates remain low, a national debt is a manageable concern. However, treasury bond rates drive consumer interest rates. If rates go up, spending goes down and the economy slows down. Therein lies the danger.
