$25 trillion of debt? It’s a massive number. Karl Eggerss joined Sharon Ko on CBS to discuss how the government pays for this debt.
Sharon Ko: America is $25 trillion in debt. In the latest move, the U.S. Treasury is borrowing three trillion to pay for the Federal’s response to the pandemic. It’s hard to wrap your head around what a trillion dollars looks like. So here’s what one trillion will get you. If you’re into aircraft, how about one of Boeing’s 787 Dreamliners? You could buy about 4000 of those. Do you like fast cars? How about 172,000 Bugatti DeVos? If you’re feeling kind, you could buy every person in San Antonio a four bedroom home and a new Ferrari. Now, here is an explainer on how the government finances the trillions of dollars of debt. First option, the Federal Reserve could print money.
Karl Eggerss: The Federal Reserve can actually print dollars, so to speak. So if they print more dollars, your dollars in your wallet actually become worth less, which means things cost more. That’s inflation.
Sharon Ko: The second option, which is what the U.S. Treasury is doing, is to borrow money.
Karl Eggerss: And they’ve elected to issue debt, so that’s really what we’re talking about. And what that means is other countries primarily, and citizens, but other countries, are lending us money. That’s what government bonds are. And the government, our government’s getting a pretty good deal right now because interest rates are so low that the government’s borrowing all these trillions of dollars at very, very low interest rates.
Sharon Ko: Long term, what does that mean for your money and the economy?
Karl Eggerss: Yes, we might have higher taxes, yes, we might have higher inflation down the road, but that’s a smaller price to pay than to go into a Great Depression. It’s pick your poison. One or the other.