Time magazine for April 25th has a cover story about the national debt written by James Grant. The cover of the magazine itself says much about what Grant is saying. It says each man, women, and child owes $44,998.12 (or per capita). That is about $13.9 Trillion divided among about 320 million people. Scary, isn't it.
How are we ever going to pay off this debt. Many people like Grant believe that this will ruin our economy eventually. However, we can put a little common sense into this.
Consider the typical person, they earn an income and have debts. Many people own homes with mortgages that far exceed their annual incomes. Say for example, you own a home with a $250,000 mortgage and make $50,000. At a 4% interest rate, a 20 year mortgage means you pay $1,515 per month. That is not a big burden for someone with a mortgage 5 times (500%) their annual income.
Nationally, personal income per capita for 2015 was about $48,600. That means the debt per capita is only 93% of personal income per capita. If people can afford mortgages 5 time income, how id this national debt so scary? The truth is, it is not.
That does not mean we should ignore responsible financial management, at the personal level OR at the national level. But let's not get wacky.
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