Stimulus Money and Future Taxes: What Will Happen?

With the recent round of stimulus money and rumors about more to come from the Biden Administration, the question arises: will we have to pay this back through increased taxes? The answer is complex, but there are several key points to consider.

Understanding the Current National Debt

First, it's crucial to understand the current state of our national debt. As a citizen, you contribute to this total through your share of the debt. According to the U.S. National Debt Clock, the liability per citizen is around $479,000. This staggering number represents the portion of the national debt each individual must pay off over time.

Many people, including myself, find it hard to fathom having to pay such a significant amount. For example, my family consists of four individuals: my wife, two adult children, and a handful of grandchildren. Our combined debt share is over $2,000,000, which is unsustainable. Even my five-year-old and six-month-old grandchildren have their own shares of $500,000 each. This stark reality raises the question of how we will manage to pay back such a substantial amount.

Government as a Debtor

The government doesn't generate revenue; it relies entirely on citizens to fund its operations. Taxes are the primary source of income for the government, and this money will continue to be a part of your tax burden for decades to come.

Considering this, it's clear that any additional stimulus money will have long-term implications on your tax obligations. The government is unlikely to find immediate ways to offset this debt through cuts or other means, as historical data from the Clinton administration to the current state shows ongoing deficits. The last time the government had a surplus, it occurred due to a significant military budget reduction, which may not happen again.

Potential Ways to Offset the Debt

There are several potential ways to offset the increased debt:

1. Cuts in Federal Budget

The government could reduce federal spending. However, it's important to note that over the past 20 years, there has been a reluctance to make tough budgetary decisions. A cut in the bloated military budget is a plausible option but might not be enough to entirely offset the debt.

2. Increased Taxes

Another approach could be to raise taxes. While this is a likely scenario, the current unwillingness to make hard decisions suggests that it may not be as immediate or drastic as one might think. Increasing corporate taxes by 10% over 20 years might not be enough to fully cover the costs.

3. Economic Growth

A period of high sustained economic growth could increase tax revenues without additional tax hikes. Such growth could lead to a significant increase in tax receipts. This option could help in reducing the debt, although it comes with its own set of risks such as potential recessions in the future.

4. Interest on the Debt

The decreasing interest rates on government debt have also led to net savings. Currently, the interest on nearly $24 trillion in debt is around $450 billion, which translates to a net saving of more than $200 billion annually.

Conclusion

While the idea of paying back stimulus money through increased taxes is troubling, it's important to remember that it is the natural outcome of borrowing. The debt will be paid back over time, likely through a combination of these methods rather than a single solution.

Achieving a balanced budget will require a concerted effort and strategic planning. The national debt will remain at around $30 trillion to $35 trillion for the next decade, which means additional stimulus money will likely push it even higher.

It's important to stay informed about these issues and engage in discussions with your representatives to influence policy decisions that affect your financial future.