America's Debt Problem
Floor Speech
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Mr. KELLY of Pennsylvania. Mr. Speaker, I rise to include in the Record the following essay on behalf of Mr. Dave Jervis:
If a family making $60,000 a year spends $70,000 a year, they will first use up their savings, then max out their credit cards, and finally declare bankruptcy. Why should it be any different with nations? Our Official U.S. Debt is currently over $40 trillion and our actual U.S. Debt, which includes Unfunded Mandates like Social Security, Medicare, Medicaid, etc.--is variously estimated at $100-$200 trillion. (Incidentally, $4.6 to $7 trillion of that $40T is reportedly linked to Covid-related expenses like the stimulus payments, lost production, compliance costs, vaccine costs, etc.)
So--How to judge the effect of even that lower number ($40T) on the Nation's economic health? Let's start by asking--how much or how big is a trillion dollars? Well, we can compare it to a million dollars, which is a thousand dollars a thousand times over. Let's assume that you have unlimited access to fresh, crispy new U.S. One-Hundred-dollar bills (Benjamins). How high a stack of fresh, crispy new U.S. Hundred-dollar bills does it take to make a million dollars? The answer is 43 inches, about the height of your kitchen countertop. OK--You continue to have access to unlimited fresh, crispy new US Hundred-dollar bills--How high a stack of fresh, crispy new US Hundred-dollar bills does it take to make a Trillion Dollars? Well, a billion is a thousand million and a trillion is a thousand billion, so a trillion is a million millions. That means our 43-inch stack of Hundred-dollar bills becomes 43 million inches high, which converts to 678.66 MILES high for a trillion US dollars! That's an inconceivable amount of money, so let me give you three ways to help wrap your head around that:
(1) If you take a cross-country commercial airline flight, you're flying about 6 or 7 miles up--so our trillion-dollar stack is 100 times higher than your airplane is flying! Inconceivable!
(2) Let's say you could hitch a ride with Elon, up to the International Space Station, which orbits the earth at an altitude of about 250 miles--that would still be only 37% of the way up our trillion-dollar stack! A little over a third of the way up . . . . Still inconceivable!
(3) Let's make one more try by going on up to the Hubble Space Telescope, which orbits the earth at an altitude of 340 miles. That's still only half the way up our stack of US hundred-dollar bills! So, there you have it, 43 inches versus nearly 379 miles high! A trillion dollars is an inconceivable amount of money--and hardly anyone understands that! It's an insane amount of debt to incur.
Let's next talk about what $39T in debt means in terms of the size of our US economy. The universally accepted way of measuring that is to express a nation's debt as a percentage of its Gross Domestic Product (GDP), which is the total dollar value of all goods and services exchanged in a year's time in that economy--a fraction/ratio with Debt over GDP. It's currently 120%-124% in the US.
120% is also generally considered to be the level of national debt that, if exceeded over time, will lead to major problems like inflation and the failure of the currency. So, we here in the US are at an inflection point, where we're now consciously risking the future of the American Dollar. And one recent increase in our debt by $1 Trillion--I think it was from $37T to 38T--took only 71 days. Even the Congressional Budget Office (CBO) anticipates US National Debt growing by $2T/year. We are now the family making $60,000 and spending $70.000 a year; and neither Republicans nor Democrats seem interested in cutting spending to address the problem, with one exception--that President Trump and Treasury Secretary Scott Bessent are seeking to stave off inflationary decline by expanding the denominator in that ratio of National Debt over GDP, by reshoring and revitalizing industry in America--they deserve credit for that much.
America has been at or close to 120% in debt once before in my lifetime--At the end of World War II, the U.S. national debt-to-GDP ratio peaked at approximately 106% to 120% (depending on who's holding the yardstick) in 1946, up from 42% in 1941. That massive debt, resulting from over $4 trillion in war spending (in 2026 dollars), was ameliorated/ resolved through a combination of high economic growth and inflation, which reduced the Debt-over-GDP ratio to 23% by 1974. President Johnson had created much or most of that 23% when confronted with a spending decision whether to pursue the Vietnam War or to fund his Great Society domestic spending programs--he chose Option 3, Doing Both, and federal spending got out of control again, so that by 1980 Federal Reserve Chairman Paul Volcker (who is a genuine national hero), had to raise interest rates to 20% to break the back of inflation by inducing recession. But unlike today, Volker was able to do that (with President Reagan's support), in part because the Debt-to-GDP ratio he needed to address was relatively low--similar to the 1941 pre-war number of 42%. Here are some results of that--Mrs. J. and I got a just- under-12% mortgage in 1979. Local friends got a 15% mortgage in 1980; and our Ophthalmologist got an 18% mortgage that same year. And a local car dealer was paying 21.5% in interest, just to keep vehicles in inventory on his lot. We sure hated Paul Volcker at the time, but he gave the US 40 years of prosperity with his brave patriotic action.
So how have we gotten back up to a 120% debt level again, without an existential threat like WWII? The short answer is--again--government deficit-spending; but what facilitated that overspending? Let's look more closely at our currency itself, the US Dollar and its history. After the Revolutionary War, upon gaining our freedom from Great Britain, we certainly did NOT want to copy the British Pound as our currency, so we copied the Spanish Milled Dollar--a silver coin that was perforated (in slices like a pie) so as to be divisible into eight bits worth 12 cents each--the famous Pirate money Apieces of eight. (In fact, up through my childhood, a US quarter was still called two bits.) And the BIG thing was that our dollar was to be either composed of, or completely backed by, precious metals, specifically gold and silver.
Our US Founding Fathers understood the historically proven need for a national currency backed by something of Tangible Value, specifically precious metals; and in the US Constitution, as part of prohibiting State currencies and assuring a viable National currency, they specifically provided in Article 1, Section 10, that, No State shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debts; . . . Then over time, an unfortunate series of court decisions that I don't pretend to understand, allowed President Richard Nixon to take the US Dollar off of what's called the Gold Standard, such that a paper dollar could no longer be taken to any bank and exchanged for gold or silver specie, meaning coins. So how did that happen?
My understanding (and again, I have only a partial understanding) is that our European WWII Allies had shipped much or most of their gold holdings (backing their currencies) to the US for safekeeping during the war, and that they were over time repatriating that gold to their custody after the war. But as that gold kept being withdrawn from our custody, we (the US) apparently became increasingly concerned (and this is what I don't understand), so that when French President Charles DeGaulle made a request/demand for repatriation of French gold, President Richard Nixon closed the gold window, declining the French request/demand, and in the process, taking the US Dollar off of the Gold Standard. Again, that meant that people could no longer take their US Dollar bills to a bank and redeem them for physical gold. Maybe it would have drawn down our reserves too much--I simply don't know. But I DO know what has happened since that time.
Up until the aftermath of WWII, our US Dollar had always been exchangeable for precious metals--and that tie to gold and silver had prevented the US from incurring debt that could not be repaid, because there had to be enough gold and/ or silver in storage to back that amount of debt. Then on a Sunday evening, August 15, 1971, spurred by that French demand, President Nixon, in a televised speech, suspended the convertibility of the US Dollar for gold. At the time, it was called the Nixon Shock, and like many government edicts, it was said to be a temporary thing. But it still stands today, and August 15, 1971, is now correctly called the day the US Dollar died. The Dollar died because our government could then print and spend as many dollars as it wanted, with no need for it to be backed up by gold and/or silver. A greater number of dollars chasing the same or similar basket of goods and services is called inflation; and a national currency with no tangible backing is called a fiat currency. (As an aside--fiat dollars are also a major reason the family unit is struggling in the US, because two incomes were then needed, such that neither spouse could focus primarily on household matters and rearing children.)
Since 1850, 52 other nations have attempted to operate with an unbacked fiat currency, and 51 of the 52 have failed, thus throwing their populations into poverty. (The 52nd is Japan, which is a producer nation more than a consumer nation like the US; but it's just on a slower path to poverty--and we're even involved now in propping up the unbacked yen with our unbacked dollars.) The reason for all those currency failures is that the populace learns that it can vote for itself largesse (benefits) from the public treasury by simply pressuring their legislators, who find that their election or re-election can depend on promising more freebies than their opponent. That has been the case in the US, to the point where there is now little to no realistic chance of repaying our national debt in a normal way--or even a political appetite for doing so.
I mentioned earlier that the US inflation rate was greatly accelerated by the Covid debacle. And the US Government's Consumer Price Index (CPI) is now so completely corrupted and compromised, as to have no relation to the prices people actually pay. Up until 1986, the CPI did a reasonably good job of gauging inflation. But beginning that year, eight (8) significant changes have been made to the calculation formula, such that it now greatly understates the actual inflation rate; and in the last 6 years, especially, it has wildly underestimated inflation. Several others have developed alternative CPI indexes that are more accurate, with the latest being a website called realityindex.co. Using realityindex.co as a base, Jeffrey Tucker of the Brownstone Institute has found that we have experienced a 65% overall increase of consumer prices from 2019 to 2026 (with groceries at this writing [June 2026] running at an astounding 8.2% inflation rate). That 65% number is an incredible loss in purchasing power, compared to the government CPI, which shows only a 26% loss in purchasing power over the same time period. And other competent economic authorities have confirmed the validity of Tucker's work.
Dean Clancy of Americans for Prosperity reportedly posits that when we read the Ninth and Tenth Amendments plus the Obligation-of-Contracts clause (Article 1, sec. 10, cl. 1) of our US Constitution, we can identify five monetary policies that are constitutionally requisite in the US, two of which are pertinent to this discussion:
(1) Only gold and silver coins and currency (banknotes fully backed by and readily redeemable in specie [gold or silver coins]) may serve as legal tender; and
(2) Neither the states nor Congress may issue fiat money notes (bills of credit . . .). One can only hope that his position on the first item above would be tried in the courts and found to have merit--and to start the process of reclaiming our national economic sanity.
So--Back to consumer inflation to close this out--Other than cutting back on non-essential purchases and being a so- called smart shopper, what might you do with all this? What can help your family in a wider framework or sense? Further inflation/shrinking of the US Dollar is now baked-in (thanks to government deficit spending), and the result will be the continued hollowing out of our Middle Class. It's not trite to say that we must PRAY for America, for our politicians, and for our upcoming generations. And of course, to impress upon our elected officials the need for major cost-cutting action on their part--for openers, how about a Federal Balanced Budget? I believe that we must walk a deep valley of stagflation or recession/depression if we are to hand over this land, as we have known it, to our children and grandchildren.
And in a narrower financial sense, one other answer is to own Hard Assets--tangible things you can touch, like land, buildings, gold, silver, classic cars, some fine art, and some collectibles or other physical items that would hold their value through inflationary times. If you can swing the cost of buying and owning a house or apartment, don't rent one--a house or a condo is the most common and most-sought- after Hard Asset owned by Middle Class folks. I've also read that a top-gun financial expert recently recommended that we need to scale down from building 2200-to-2400-square-foot houses and go back to 1200-1400-square-foot houses. And there are people out there who are researching cheaper-per-square- foot (modular) housing that would be delivered in pieces by truck, to reduce the amount of required on-site labor. (Some of that is already happening.) So that's some of what I'm seeing and hearing lately, and I hope this has helped you with some of the background that produced the inflation we're seeing.
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