It has been reported that the US federal debt is increasing at a rate of $4 billion per day, or about $11.50 each.
Questions are being posed as to whether the debt ceiling should be raised, or whether the government could actually be in default this August.
But does debt really matter?
Many of us have found out the hard way in personal situations, but are governments exempt from the trauma of default or bankruptcy?
Federal debt service is reported as about 10 percent of revenue. By contrast, as consumers, we are `allowed', typically to have debt service somewhere between 28 percent and 40 percent if we expect to borrow more money. We are most likely familiar with our credit score.
So, some of the debate is focused on the annual interest payment ($200 billion) rather than the debt itself ($14.3 trillion) . The problem seems to be that since the federal government borrows about 40 cents for every dollar it spends, it would have to `borrow' the $200 billion..it can't do that without either reducing spending or raising the ceiling.
In the June issue of ARRP magazine, the editor refers to comments by Alexander Hamilton (the guy on our $10 bill) that public debt is not a bad thing -"the price of liberty" - but the accumulation of debt is "perhaps the natural disease of all governments."
The editor goes on to say that Hamilton insisted the government should repay its debts:"The creation of debt should always be accompanied by the means of extinguishment," Hamilton wrote in 1790.
Our city has a significant public debt. I encourage you to learn more about this. We know that services have been reduced to balance the budget. The budget includes provision for debt service, and for principal repayment. You may know the the city exceeded its legal debt ceiling in 2009. Loans and bonds are coming due. I encourage you to attend June 6 City Council meeting, during which there will be an update of the long term debt reduction plan, and a discussion ofa proposal for a Local Revitalization Financing (LRF) bond issuance. There will also be a report from the Neil Walter Co.
For more details, go to the City's web site, and search for council packets www.cityofup.com Then make your own decision if Hamilton was right in convincing our nation to take out `its first loan..a grand total of $19,608.81 in February 1790 (ARRP magazine).