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US Government Debt and Deficits Explained
- 2025/02/27
- 再生時間： 24 分
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あらすじ・解説
After sending congratulations to the Super Bowl champion Eagles, today we dive into a dense and important topic: the U.S. federal debt. There's a lot of fear and misinformation around this issue, so we break down what the numbers really mean and how they compare to history.Alex kicks things off by clarifying key terms. A deficit occurs when the government spends more than it brings in during a given year. The debt is the accumulation of all past deficits, minus any surpluses. The U.S. has run a deficit in 46 of the last 50 years, meaning it consistently spends more than it collects in revenue. To cover these shortfalls, the government borrows money by selling treasury securities to investors, institutions, and foreign governments. The debt’s significance is often measured against the country’s total economic output—its debt-to-GDP ratio—which has averaged about 64% since 1939 but has spiked dramatically at key moments in history.We’ve seen two major surges in debt-to-GDP: during World War II, when it reached 120%, and during COVID-19, when emergency spending pushed it to 125%. While this ratio has come down slightly since the pandemic, it remains historically high. Similarly, the deficit-to-GDP ratio, which measures the size of the annual shortfall relative to economic output, has averaged 3.4% over time but ballooned to around 6.4% in recent years.Ed walks us through the current numbers. As of 2025, the U.S. total debt stands at $36.2 trillion, with about $28.9 trillion held by the public and $7.3 trillion held by government programs like Social Security. Given that GDP is around $29 trillion, our debt-to-GDP ratio sits at 120%, nearly double its long-term average. The U.S. ran a $1.8 trillion deficit in 2024 and is on track for a similar shortfall in 2025. Experts believe a sustainable deficit level should be closer to 3% of GDP, meaning we’d need to close a $1 trillion annual gap through tax increases, spending cuts, or a mix of both.A common concern we address is the idea that foreign nations “own” the U.S. through debt holdings. In reality, only about 23% of U.S. debt is held by foreign countries, with Japan and China being the largest holders. However, they invest in U.S. debt not to control us but because U.S. treasuries are among the safest assets in the world.So, should we be panicking? Not necessarily. As Ed reminds us, people have been warning about a debt crisis for decades. Ross Perot famously made it a central issue of his 1992 presidential campaign when the debt was just $4 trillion. And yes, we may have detoured for a moment into Ross Perot and "Dana Carvey doing Ross Perot" impressions.Today’s debt and deficit numbers are bigger, but so is the U.S. economy. While the current trajectory isn’t sustainable forever, it’s not an immediate crisis either—more of an issue that will need to be addressed over time.If you’re wondering how these macroeconomic trends impact your personal financial planning, feel free to reach out. Visit Birch Run Financial, email info@birchrunfinancial.com, or call 484-395-2190. You can always email Alex and Ed at info@birchrunfinancial.com or give them a call at 484-395-2190.Or visit them on the web at https://www.birchrunfinancial.com/Alex and Ed's Book: Mastering The Money Mind: https://www.amazon.com/Mastering-Money-Mind-Thinking-Personal/dp/1544530536 Any opinions are those of Ed Lambert Alex Cabot, and Jon Gay and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The examples throughout this material are for illustrative purposes only. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Diversification and asset allocation do not ensure a profit or protect against a loss. Past performance is not indicative of future returns. CDs are insured by the FDIC and offer a fixed rate of return, whereas the return and principal value of investment securities fluctuate with changes in market conditions. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. Stock Market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. This information is not intended as a solicitation or an ...