Mr. Smith Goes to Washington

As the US National Debt crosses the $31 trillion mark

(The United States Treasury Department at 1500 Pennsylvania Avenue in Washington D.C. Source: Getty Images)

Joel Bowman, appraising the situation from the peace and quietude of the Argentine countryside...

Welcome to another Sunday Session, dear reader, that time of the week when we loosen the tie for a moment, take off our serious hats and imagine we can solve the world’s diabolical dilemmas, one sip of mate at a time...

A question to kick things off today: What’s in a trillion?

This is not a trick question, mind you. It’s just that, as human beings, we are (most of us) poorly-equipped to deal with orders of magnitude. Anything up to a couple of zeros is simple enough. Change from a hundred? Speed limits? Fahrenheit? Ok, your antipodean editor begins to get fuzzy on that last one... but in general, the “hundreds” range is fairly comfortable. 

Then come the thousands. This is where living in a country like Argentina, where the “official” inflation rate is north of 80% and the largest bill is a 1,000-peso note (worth about US$3) comes in handy. We can multiply and divide by 300 (the unofficial “blue market” exchange rate) without too much trouble. Our steak lunch today – wifey, daughter and yours truly – came to about 5,500 pesos, for example. (~US$18 and change.)

But what about when we get into the realm of millions... billions... (not to mention tens and hundreds thereof)... or even... trillions?

A Long, Long Time Ago

You might like to think of it in terms of time. A million seconds ago is already 11 and a half days behind us. A billion seconds? That takes us back 31 and a half years. 

Any guesses how far back you’d have to count to go back in time one trillion seconds? 

A couple of centuries? A millennium? More? 

Try 31,688 years. That would take us back to the year 29,666 BC (or BCE, if you prefer). This lands us somewhere in the middle of the Upper Paleolithic era. Think hunter gatherers, stone tools and cave paintings, like this one from the Chauvet Cave in the south of France, (circa 29,000-30,000 BC).

(Source: Getty Images)

For context, the first pottery use was still about 10,000 years away... the agricultural revolution would not come along for another ~20,000 years... and it would be ~30,000 years before the Nazarene set foot on water. 

As for 31 trillion seconds, that would take us back almost a million (982,328) years. It’s a big number, in other words. No wonder Mr. Smith was so excited. Read on below...

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Neither a Borrower

By Joel Bowman

“The rich rule over the poor, and the borrower is slave to the lender.”
~ Proverbs 22:7

“The ultimate result of shielding men from the effects of folly, is to fill the world with fools.”
~ Herbert Spencer

On an otherwise unimportant Monday, in October of 2022, an unremarkable man by the name of Mr. Smith (or Mr. Johnson... or perhaps it was Mr. Williams) hit “send” on his work spreadsheet, and in doing so filed the Daily Treasury Statement itemizing all Cash and Debt Operations of the United States Treasury. 

It was a doozy. 

“All in a day’s work,” the chipper fellow remarked to himself, before he placed a call to the wife to let her know he’d pick up Chinese from her favorite takeout joint on the way home. The happy couple were looking forward to the season four finale of Stranger Things on Netflix. (Mr. Smith secretly hoped they might watch DAHMER - Monster next, but he couldn’t figure out how to broach the subject with Mrs. Smith. She was hoping to resume The Crown... “what with poor old Elizabeth dead and all the royal goings on and so forth.”)

Later that same evening, sometime between the Kung Pao Chicken and the Ben and Jerry’s Cherry Garcia surprise (Mrs. Smith’s favorite), Mr. Smith recalled something of an exciting detail from work...

“Oh, I almost forgot to mention,” he began, a tad embarrassed at the seemingly trivial nature of his mundane, workaday minutiae, “remember that Table IIIC line item I was telling you about... from work? The one at the bottom?” 

Mrs. Smith searched her brain. She had always been so supportive of her husband’s career, but there were just so many darned numbers! “The Debt Held by the Public one, dear?” 

Mr. Smith smiled. I sure am a lucky fella, he said to himself, watching his wife’s earnest face bathed in the television’s soft glow. “Almost,” he said, encouragingly. “But this one’s the Total Public Debt Subject to Limit.”

“Ahh.” Mr and Mrs. Smith smiled and nodded together. 

“Well, it ticked over today,” he went on.

“Thirty one trillion?”

“You got it!”

“Wow!” Mrs. Smith exclaimed. “That sure is a big number. What do you suppose it means?”

Mr. Smith smiled uneasily. These kinds of questions always made him feel slightly uncomfortable. After all, why did it have to mean anything? It was just a number, wasn’t it? And he was there to see it change, that once-in-a-trillion moment. Surely that was exciting enough? Did he have to understand what was behind it, the inner workings of his state, his government, the nation’s finances? It was all so... complicated. Couldn’t he just eat his takeout and watch his shows? 

Mr. Smith looked again at his dear wife, at her calm and familiar expression. He thought of the years they’d been together, the times they’d shared. He remembered when the number had passed 10 trillion, back in ... hmm, what was it now?... 2008? 2009? Well, whatever the year, it didn’t matter. That was all in the past now. “I sure am a lucky fella,” he said to himself again.

“You know,” Mr. Smith replied, patting Mrs. Smith’s knees in her flannel pajamas, “I’m not exactly sure what it means.” 

She smiled and nodded in the flickering glow. 

“I was thinking,” Mrs. Smith said after a long pause. “Maybe we could watch The Crown after this? You know, if you want to...”

Mr. Smith smiled. “I think that’s a splendid idea. What, with all the royal goings on, as you like to say. Yes, a splendid idea. Now, are you going to finish that ice-cream?”

What’s in a Trillion?

Meanwhile, back at Bonner Private Research’s Buenos Aires bureau, your weekend correspondent has, through a series of inside connections and confidential informants (read: google searches) obtained a copy of Mr. Smith’s worksheet from that very Monday (October 3, 2022). See here...

(Source: US treasury Department.)

It’s no wonder Mr. Smith was in such an excitable state. As you can see, right there in the “Closing balance today” column, stands the grand sum of $31,064,646. (Counted and rounded to millions.)

Now, your comparatively innumerate editor is certainly no Mr. Smith... but some back of the envelope math leads us to a few startling conclusions. At $31 trillion (and counting...), the United States of America’s National Debt comes to more than that of the United Kingdom, Germany, Japan and China... combined!

Shared among the country’s Smiths, Johnsons and Williams... not to mention the Garcias, Patels, Lees, et al. – which is to say, divided by every man, woman, child and non-binary two-spirit soul in the Union –  that comes to a hefty $93,500 per beating heart. Of course, the burden will not fall on every shoulder alike. Divided per taxpayer, the total debt load comes in at $247,000 per working Smith.

According to the Peter G. Peterson Foundation, a non-partisan group whose mission it is to (please don’t laugh... or cry), “increase public awareness of the nature and urgency of the key fiscal challenges threatening America's future and to accelerate action on them,” $31 trillion would be enough to pay for a four year degree for every graduating high school student in the country... for the next three quarters of a century. 

As for the (rapidly rising) cost of servicing that debt, the Foundation forecasts that, within the next decade, interest payments alone will account for more than has traditionally been spent on research and development, infrastructructure and education combined. Currently at $447 billion annually, interest on the debt (which, according to the Treasury Dept., includes, “US Treasury notes and bonds, Government Account Series (GAS), (SLGs) and other special purpose securities”) weighs in as the fourth largest budget line item, behind Medicare/Medicaid, Social Security and Defense/War, respectively. 

Again, not being a trained government economist, it’s tough to wrap our mere, mammalian brains around such gargantuan numbers. And they are only set to rise from here. Up and to the right. According to data from the Federal Reserve, back in 1960, the federal debt to GDP ratio stood at roughly 52%. Twenty years later, in 1980, that ratio had fallen to 34%. But by the turn of the century, it was back up again, sitting around the 56% mark. 

Today, the federal debt to GDP ratio stands at 125%. That is to say, the national debt is 25% larger than the “total market value of all the final goods and services produced and sold” from sea to shining sea in a given fiscal year. Every hamburger slung, every rivet popped, every ounce mined... every lawn mowed, hair trimmed, contract inked, lap danced, table bussed, arm jabbed, cow slaughtered, seed planted, room serviced, plane landed, hole dug, book bound, cord cut, horse shod, martini shaken, panel pressed, ticket punched, boil lanced, light fitted, suit tailored, coupon clipped and essay graded... every good and service that goes into making up the entirety of “economic life” in America. All that. Plus 25%. 

And still, the Congressional Budget Office estimates that number, Mr. Smith’s big $31T, will hit $35.6 trillion by 2026. The Office of Management and Budget reckons $36.7 trillion. Meanwhile, the US Debt Clock, ticking over at current rates – neither speeding up or slowing down – projects total US national debt to hit $40.5 trillion in the next four years. That would be $116,000 per citizen... and just shy of $300,000 per taxpayer. 

We can almost see it now... a $40 trillion print. And boy oh boy, won’t that be a big day in the Smith Household.

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And now for some more Fatal Conceits…

You might have caught this one yesterday, but just in case... we recently caught up with energy and resource expert, Byron King, to get his take on all things Russia-Ukraine/Nord Stream/European energy-related.

As usually, Byron was more than generous with both his insights and his time. Listen to the hour-long conversation (and share it!) right here...

Byron King on Europe's Energy Nightmare

And that will just about do it for another Sunday Sesh. We’re off to La Familia, a little family run restaurant out here in the campo, for lunch. It’s a four day weekend here in Argentina. We’re not exactly sure why (Argentina has the most public holidays of any country on the planet, so it’s kind of hard to keep track)... but that won’t stop us from raising a glass just the same. We hope you’re doing likewise.

Until next time...

Saludos,

Joel Bowman