The $20 Trillion – Where is it now? Part 1

The $20 Trillion – Where is it now?  Following The Money Trail…                                    

By Steven Phillips   (Part 1)

There are a lot of people speaking about and arguing about the current United States National Debt of $20 trillion. While that is a pile of money, to be honest, I’d like to suggest that what we really should be focusing on is a question that no one seems to be talking about – “If all that money was spent, where is that money now?”

To understand why that is an extremely important question, let’s take a look at a basic law of physics which will illustrates this issue. The first law of physics states, “Energy cannot be created or destroyed. It can only be transferred.”  In a very real way, that same principle applies to money. This is especially important to consider when looking at government spending. Contrary to what some people seem to believe, when the government spends money, it does not mean that they burn it up in dumpster behind the Capitol Building in Washington. Instead, IT TRANSFERS TO SOMEONE ELSE!

If $20 trillion was spent, then, rest assured… ALL OF THAT MONEY IS STILL SOMEWHERE. That unquestionably true statement means we should be able to follow the money trail and determine who has it now…and that, my friends… that… is now the real issue that no one is talking about. Because, within the answer to that question, are hidden issues which directly affect our economic future, even more than the fact that we have a monumental national debt. The discovery of that single issue will unravel the mystery of how we got here. So let’s do what my father always use to advise… let’s follow the money trail.

Let’s begin by looking at who that money is owed to first of all. According to recent polls, the majority of  Americans believe that most of our National Debt is owed to China. That simply isn’t true. Official Treasury Department figures reveal the total amount of the national debt owed to all Chinese investors is approximately $1.223 trillion. That means only about 6.5% of our total national debt is held by Chinese investors. But that figure includes the investments made by the Chinese government as well as private and corporate Chinese investors combined. In point of fact, investments made by United States investors is over twice that amount at $2.6 trillion invested. I am making that distinction for a reason. So, let me just say that statement another way – American investors invested over twice as much in the future of America compared to Chinese investors – and the total amount of both of those figures now equals only slightly over a 5% of our National Debt.

Even more importantly, none of those investors, regardless of who they are or where they are from, made those investments because they believed the American economy was a bad investment. In point of fact, at 100.5%, the total national debt to GNP (Gross National Product) ratio is actually down by nearly 3% from what it was in 2014 and far lower than it was at it’s all time high in 1046 when it was over 20% more at 121.6% compared to GNP!. To put that another way, our total national debt accumulated over the entire history of our nation amounts to just over our economic production, as a nation, IN A SINGLE YEAR!

So how bad is that economic picture? I mean, is America still a good investment? Maybe we should ask what some of the investors think.

At one time I helped pastor a Chinese church in Canada. Believe me, Chinese people are, if anything, MUCH MORE CAREFUL WITH THEIR INVESTMENTS THAN AMERICANS! They know how to pick a value. So why are they still investing in us? They wouldn’t be if they felt it was a bad investment. In point of fact, nearly 34% of our total national debt is held by foreign investors – BECAUSE THE REST OF THE WORLD STILL CONSIDERS US TO BE A GOOD INVESTMENT!

Beyond the investments from foreign sources, the rest of the debt is basically OWED TO US, in the form of money owed to private and corporate domestic investors, and money we use to run the government which the Treasury Department borrowed from other areas of government – basically from state governments, the Federal Reserve Bank, AND FROM PROGRAMS LIKE SOCIAL SECURITY – all of which must be paid back someday – OR THOSE PROGRAMS WILL EVENTUALLY RUN OUT OF MONEY.

And now, if you didn’t know before, we can begin to understand the “hidden side” of why Social Security is something some politicians want to eliminate from the our budget and “privatize” – because they are hoping to continue to conceal the fact that the program was not under funded – IT WAS SOMETHING THEY RAIDED TO USE FOR OTHER PROGRAMS THAT THEY DETERMINED HAD GREATER PRIORITY.

We should also consider at the same time, that Defense is ALWAYS the highest spending item on the Federal Budget. I say that because one party seems to love to talk about how much Social Security is costing us, but they fail to tell us that they essentially raided Social Security to pay for their Defence Budget. If you doubt that is true, you need to realize that President Obama was NOT the first President to double the National Debt in his two term tenure as President. George Bush did the exact same thing in his eight years just prior to Obama. And, the lion’s share of that new indebtedness went to Defense, as did the additional expenses of more than $1.5 trillion that was eventually spent on the new Homeland Defense programs which is separate from the general Defense budget expenditures.

All of these items were added to the National Debt before President Obama took office. In fact, Defence spending was exponentially increased in President Reagan’s administration as he used his huge defense build up to bring about the fall of the Soviet Union, who simply were not able to compete with the amount we were spending on expanding our defenses during that time. We have to keep in mind that these expenditures were also additional parts of our National Debt before 1992, which were passed on to subsequent administrations. It wasn’t until President Clinton started to reign in those defense expenditures that we were finally able to achieve a balanced budget again before he left office. If you will remember, at that time, the big fight in Congress was against reducing Defense spending – even though the Soviet Union (which was by far the primary advisory we had faced for the prior sixty years) had essentially ceased to exist.  

And lastly, we need to consider that President Obama came into office at the start of the Great Recession – the worst global financial meltdown since the Great Depression. We must include that problem in our consideration about national debt issue because, if you compare the expenditures that we had to make to end the Great Depression, then you can more easily account for expenditures that were needed to bring us out of the 2008 Recession before we faced a “Great Depression II” which we were facing, at that time. Keep in mind that it took almost a decade for President Franklin D.Roosevelt to turn around the effects of the Great Depression, and that financial crisis was brought on by the same types of problems that we narrowly averted in 2008 – which was the unbridled over reach of Wall Street.

All of that together is an admittedly simplified, broad picture of how we came to have the $20 trillion of US National Debt. But it is, nonetheless, an honest picture of that reality. You can fairly easily trace the expenditure of all of the money we owe. It is considerably more difficult to trace who we owe all of that indebtedness to, since most Americans do not know that we raided programs like Social Security and others to do “other things” (which means we now owe the people that were depending on those funds for retirement, disability needs, and other necessities which we promised to fulfill.) But you can account for most of that indebtedness fairly easily through public records. What is much harder to do is to trace is WHO NOW HAS MOST OF THAT MONEY NOW THAT IT HAS BEEN SPENT – because remember… if it has been spent, it hasn’t simply been burned up in a dumpster behind the Capitol Building – IT HAS TRANSFERRED TO SOMEONE.

Coming Soon – $20 Trillion Part 2