US fiscal realities are well known. Total federal debt outstanding has now reached $34 trillion, up from $98 billion in 1981, $5.67 trillion in 2000, $13.56 trillion in 2010, and $26.95 trillion in 2020. And at 120 percent of the US economy’s productive capacity (gross domestic product), the federal debt matches that at the end of World War II.

That $34 trillion, when spelled out, is the number thirty-four followed by twelve (count ’em) zeros separated by four commas. So it looks like this, a lot of digits and commas for the human brain to comprehend: $34,000,000,000,000.

These official debt figures do not even include the large unfunded liabilities inherent in the largest federal entitlement programs, Social Security and Medicare, Medicaid, and several others that comprise about two-thirds of federal spending. We can, however, accurately forecast those liabilities over the next seventy-five years—the time horizon used by the trustees of the two funds that finance the programs—because the future beneficiaries have already been born and will expect their benefits when they become eligible. Unfunded liabilities are currently estimated at $212 trillion.

The two programs, Social Security and Medicare, are structured so that future workers will be paying sufficient payroll taxes to pay future benefits as the population ages. But the trustees of the two programs project that the trust funds do not currently contain sufficient resources to fully cover these future benefits past the middle of the next decade without congressional changes.

Outstanding Debt versus Federal Budget Deficits

Where did all this debt come from? In the simplest sense, it came from too much spending. There tends to be confusion between annual federal budget deficits and the total outstanding federal debt. We’re referring here to the debt, not simply to the annual budget deficits that continue to increase the debt every time the federal government spends more than it receives in tax revenue.

This deficit spending results every year that the legislative and executive branches of our federal government can’t seem to control their spending habits, which has been the case every year since the late 1990s when the federal government last ran a small surplus. Annual federal budget deficits currently run at the $1.7 trillion level, compared to the $34 trillion debt.

Motivation to Pay Off the Federal Debt

Is there any motivation to attempt a debt payoff? Many Americans appear to have been lulled into accepting some variant of modern monetary theory, which has infected the populace like a virus, and which a small fringe group of economists believe allows a sovereign nation with its own sovereign currency to spend without limit, being able simply to issue more of its own currency to pay off any debt with impunity. Though these believers do not outright state that there is no limit to the amount of debt that sovereign countries can take on with no concern about ever repaying, reading between the lines and watching their behavior certainly indicates this conclusion.

What Debt Payoff Might Look Like

If there is any motivation to pay off the federal debt, what would this payoff actually entail? In the simplest terms, dividing the current outstanding $34 trillion debt by the current US population of 334,233,854 (as of January 1, 2023) yields a one-time per capita payoff figure of $101,725.18 for every man, woman, and child in the US.

While this undoubtedly exceeds the average savings account owned by most Americans, it doesn’t look like an outrageously high figure. But, of course, we’re assuming no more annual federal budget deficits that increase the debt, which would be a difficult promise for Congress and any president to keep. But if such a payoff were possible, it would obviate the need to continue paying interest on the debt, an outlay that now runs about $1 trillion annually.

Another approach to pay off the federal debt over time might be to structure the debt payoff similarly to an amortized mortgage. As a hypothetical thought exercise, picture that you’ve taken on a $34 trillion mortgage to buy your ultimate dream house.

The interest rate on this hypothetical mortgage is the current average rate being paid to lenders who own the Treasury bonds that comprise the debt. After all, these lenders, which include both Americans and those in foreign countries such as China, Japan, the United Kingdom, and others, would expect to receive their interest payments during the next thirty years that you will be paying your hypothetical mortgage.

The average annual interest rate on the US debt, as of December 2023, is 3.11 percent, which is expected to increase over time. But if you can lock in this interest rate on your hypothetical thirty-year $34 trillion mortgage, 3.11 percent sounds like a pretty good deal, below current conventional mortgage rates.

Using an Excel spreadsheet for the calculations, the formula for the monthly mortgage payment is PMT (1,2,3), where three arguments are as follows:

Monthly interest rate expressed as a decimal (0.0311), divided by 12.The number of mortgage payments, 360 in this example (thirty years times 12).The mortgage loan amount ($34,000,000,000,000 here).

For readers who may want to try this at home, inserting these three arguments into the Excel PMT calculation, the monthly payment for 360 payments over thirty years at a monthly mortgage interest rate of 0.00259 (i.e., 0.259 percent, about one-quarter of 1 percent) would be $145,370,309,731.07 total, or $434.94 per capita.

That’s $145 billion and change every month for thirty years, or $434.94 per every American man, woman, and child. This is most likely more than every American could ever afford to contribute every month for thirty years to repay the federal debt. And again, this assumes no more continuing federal budget deficits that would increase the existing debt. Remember, we’re only trying to pay off the current outstanding debt of $34 trillion.

Yet these figures are worth contemplating for their astounding magnitude, just as the total outstanding federal debt is worth contemplating for its astounding magnitude. These figures are very difficult for the human brain to grasp.

Anyone reading this far must conclude that this is a fatuous exercise, that there is no achievable way to pay off the current federal debt within the lifetimes of Americans currently alive, and that the only possible remedy is to begin curtailing federal spending to avoid taking on additional debt. That’s why we occasionally hear a few politicians speaking of (or paying lip service to) “deficit reduction,” which in the current political environment is the only humanly possible pursuit. And accomplishing that is easier said than done, for political as much as for financial reasons.

And on a final note, when contemplating the US fiscal predicament, keep in mind that there are only four means by which government can capture resources for its own use:

Outright confiscation of property for public use, which is prevented by the US Constitution’s “taking clause” without just compensation of the property owner.Taxation.Debt issuance.Inflation that erodes the nominal amount of the debt over time, harming lenders.

Some observers would argue that this fourth strategy is perhaps what we are beginning to observe in the US and some other countries around the world, but that is a topic for another day.