Debt of Gregg Motley | Fort Scott Biz

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Debt

I’m optimistic about the future of our nation, but I don’t see how we can achieve the next level of prosperity without suffering significant economic hardship. The actions taken by national, state and local governments to emerge from the Great Recession of 2008 and the recent pandemic have been unprecedented in our nation’s history and no one has a playbook to lead us back to sanity. Consider these three facts: In June, the national debt soared to $30.5 trillion, the Federal Reserve, under the name of “quantitative easing,” bought $8.97 trillion in Treasury securities by printing new currency, and interest rates have been kept below the rate of inflation for years, which has contributed to the recent price spike.

What does all this mean? Considering the national debt, the annual interest on the $30.5 trillion debt paid in 2021 was 1.50%, totaling approximately $459 billion. We know that in 2022 rates have increased significantly, with more rate increases promised to come. If the 2022 average rate is 3.00% and the debt does not increase, the public will pay $918 billion in interest. For context, United States (“US”) tax revenue was $4.05 trillion in 2021, which means interest on the national debt would consume about 22.7% of every tax dollar. that we pay.

At what average interest rate on US debt does debt service equal tax revenue? The answer is 13.2%, which does not seem out of the question for a banker who started his career in 1979. On January 1, 1981, the national prime rate reached an all-time high of 21.5%; at this rate, interest on the debt is $6.6 trillion, well above annual revenues.

If all those numbers weren’t depressing enough, we know that the country’s Social Security and pension funds are woefully underfunded; that number adds up to about $6 trillion in all 50 states. Is Bourbon County behind in infrastructure repair and investment? We all know the answer to that question, but we don’t know the nationwide cumulative number of all local jurisdictions. The number must be impressive.

It’s not enough to curse the darkness, so what can we do? Start with your own home and business and get your financial affairs in order, starting with getting out of debt. Second, get involved in your local governments and be a positive voice for fiscal responsibility. We must prepare our own jurisdictions for what is to come. Third, elect politicians committed to fiscal discipline. Responsible debt reduction is a long-term process. I’m not saying that you should give up on any current investment; rather, we need to look for ways to shore up administrative costs so that more dollars can be spent on debt reduction and investments that are important to our future.

It seems incongruous for a banker to advocate debt-free businesses and personal financial statements, but banks do better when their customers do better. Talk to your banker or accountant to help you design and execute a plan for debt reduction and economic prosperity in the future. Our county depends on it.

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