Paying off/saving against US debt individually

Disclaimer - I am not an economist, so this is probably going to sound like a stupid idea.

I read somewhere that the per capita US debt is now something like $27,000. Is there any way I can “pay off” my portion?

I know that the public debt isn’t set up like a credit card with individual accounts, so “my” debt isn’t really a real concept. The government will keep ringing up charges and interest on my behalf. Still, I’m just wondering if there is any instrument I can buy or save that I can store against whatever reckoning is coming in the future.

I was thinking maybe buying US bonds, but those would actually be increasing the US debt. Or maybe buy government bonds of our creditors, and just cash those in if they demand payment of their US holdings. Like I said I don’t really understand macro finance, so I’m just throwing out ideas.

Maybe I just need to make sure that my cash savings in dollars are equal or greater than the US per capita debt at all times?

I believe precious metals are the traditional answer, though I’m not totally sure I get what you’re asking. Throughout history, when people want to have something they know always will have value gold, silver, platinum and such are bought and stored. (Not just a certificate saying you own the metal, but the actual metal)

I read the OP as saying: “The U.S. gov’t debt amounts to roughly $27 K / person. I have $27 K in cash lying around; what is the mechanism by which I can reduce my ‘share’ of the debt, even though I know it’s not apportioned like that?”

Buying bonds doesn’t increase the debt, since the government decides how many bonds to issue and then has to sell them at whatever price the market will accept. By buying them, you’d at least make sure the interest on the debt was going to someone in the US. (A large amount of that interest is going to foreign investors like China’s government).

If you want to, you can send the money as a sort of donation to the government. It’s even tax-deductible like a charitable contribution. The money will be used to pay off the debt, if I understand correctly. I don’t know where you’d send money, but I do know it’s an option to let the government keep your refund for that purpose.

I’m going to show my faith in capitalism here, but I really think the best thing you can do with the money is to do the following:

  1. Invest the money so that you can be secure and self-sufficient. Nothing costs the government more than welfare, social security and medicare (these represent about 65% of all spending). By supporting yourself, you reduce the government’s costs.
  2. Make investments that can help your community and the world. This could be charitable giving, or it could be helping a local small business get start up capital (usually referred to as “angel investing” here in the US and “microloans” in terms of world investment). And if you think small businesses are just about helping the owners, think everything a business provides in terms of tax revenues, medical benefits, employee training, property values and more.

It’s the old “Give a man a fish and he’ll eat for a day; teach a man to fish and he’ll eat for life” principle.

I’ll go one step further and say that if you owe bonds equal to your ‘share’ of the debt, then that means that the government owes that much of the national debt to you. That definitely sounds as close as you’re going to get to being able to pay off your share of the debt - you’re “buying up” your share of the debt, since it’s owed by a collective, (the government) and you don’t have that big a say in their decision making process.

If the government later raises taxes to pay off the debt, you can sell your bonds to pay the tax. :smiley: (Assuming that you’re not being taxed a higher amount than ‘the average citizen’, but that’s another story…)

Feel free to send your money to the Bureau of the Public Debt.

Not a great investment, IMHO.

The problem as I see it with this, and other ‘donation’ schemes, is that it isn’t paying off YOUR share of the debt. It’s paying off a little bit of everybody’s share of the debt. :wink:

That’s probably true. But I didn’t want and didn’t particularly need either of the Bush tax cuts, given how huge the Federal debt had grown (and it’s only gotten worse since then), so I sent checks for the same amount to the Bureau of the Public Debt.

What’s the difference? You are not held accountable in any way for “your” share of the national debt.

The debt is financed through treasury securities. When these securities come due they will have to be paid off by taxes (or rolled over into new debts which will themselves someday have to be paid off by taxes). So the only way you could meaningfully pay off your share of the national debt now would be if there was some procedure for you to pay money to the treasury now with the understanding that this money would reduce your future tax burden. And I don’t think there’s any real way to do that. There certainly is not a way to do so that will take into account the continued growth of the debt and your share of it.

The difference is quite significant. The current national debt is $11,535,360,437,832.69. The current population of the United States is 306,892,403. So each American’s share of the national debt is $37,587.64.

Now suppose you decide to pay off your “share” and mail in a check for $37,587.64. If that amount is somehow credited to your share alone, you now owe nothing. But if it’s just applied the general debt, all you’ve done is reduce the total debt to $11,535,360,400,245.05. And each American’s share of that debt, including yours, is still $37,587.64. That’s right, your contribution didn’t even round up to a single cent in the average debt.

The question really much more difficult than it appears at first glance.

Let’s start with “your share.” I can see several definitions for that;

1: Your share is whatever the government says it is.
2: Your share is the net between the “services” the government renders on your behalf minus your payments over the course of your lifetime.
3: Your share is the cost of the services you actually consume minus your payments.
4: Your share is the cost of the services you would actually consume given a choice minus what you are forced to pay. After all, you would not ask me what “your share” of the purple pig that I put on your lawn is if you didn’t — you know — actually want a purple pig. Whether all of your neighbors agreed that you needed one or not would be irrelevant.
5: Does your share take into account the debt run up by previous generations that you had absolutely no part in and were never given the chance to vote upon when they were incurred? Or is your share the unfunded obligations the government commits to in your lifetime even if you don’t survive long enough to see them paid?
6: Is your share the current debt divided by the number of citizens? Or by the number of heads of household? Or by the number of people employed? Are the number of citizens counted when the debt is incurred or when it is paid? Do you count illegal aliens? The indigent? Handicapped? Do you do your accounting honestly or by the current method? Do your dependents count on your bill or someone else’s?

I am sure there are many more definitions that you can come up with but it is fair to say it is far from a simple issue.

But aside from all of that, the OP seems to ask a second question in that he states he wants something to store up against “the future reckoning” as if there is some safe haven where the government cannot reach — some chit that he can wave and say, “See, I did my part” and they will then pat him on the back and leave him alone. Or perhaps he is implying that he is concerned about protecting his personal wealth which is entirely different than worrying about the government’s ability to pay its debts.

I could see that being the case since one of the chief ways government pays for its debts is to devalue the currency — normally through inflation — and this would seem to underpin the rationale behind the word “reckoning.” With the treasury currently printing money to buy the government’s own notes this may be what the OP is driving at. The effect of inflation is that it makes each dollar of debt worth less. Unfortunately, it also does the same for savings so that the effect is that saving is punished and indebtedness is rewarded. It is a way the government can sneak in the backdoor and confiscate huge amounts of wealth without actually having to bother sending anyone out to collect it. All they need is a printing press and a monopoly on force.

Typically what happens is that the government then has to pay a higher interest rate on any future debt it issues to make up for the fact that everyone catches on to what they are doing. That is, no one will lend them money at 5% when inflation is running at 10%. The value of previous 5% bonds falls until the interest they are paying in fixed dollars is equal to 10% or better on the open market.

That is one of the reasons the Treasury is buying bonds now — to artificially keep the interest rates low because there aren’t enough private or foreign buyers — and to pump up the debt bubble that is our economy. Eventually it will pop again because it is all artificial… just like all of those mortgages the government guaranteed were artificial They only existed because the government was willing to underwrite people who could not pay for an actual mortgage that a bank would issue sans the guarantee. It is not a situation that could have existed to any extent in an actual marketplace. Inevitably the bill came due.

So if this is what the OP meant then how does he protect himself? Usually people convert their assets to things that are tangible and will have value in the widest array of circumstances. Gold is traditional but there are other commodities and precious metals. The government also issues what are called TIPS, which are inflation protected securities. The interest rate on these is tied to the CPI so it rises with inflation and even if we experience deflation there is a minimum rate that they will pay so theoretically your investment will not be worth less short of a default (another alternative to the government paying its debt). The downside to these is that after taxes and inflation you are guaranteed a loss. This doesn’t account for the undercounting of inflation that the government arguably engages in.

So in short, there is no sure place to hide. The game is rigged — and you can’t refuse to play.

On the bright side, you did very well if you invested in bullet manufacturers after the crash. Which is hard to understand since we are each only going to need — one.:smack:

If it worked that way, sure. My point was it doesn’t matter whether you are paying off “your” share or “a little bit of everybody’s share” because you don’t have a share. It’s just an artificial concept some people like to spout off to put the behemoth of a figure into perspective.

You don’t have an even share - you might not know how much of a share you have to pay, because the tax system (for all the right reasons) treats citizens differently, and it will change in the future before the debt is paid off

But since the national debt can be thought of as a tax liability on the country, I would argue that every taxpayer does have a ‘share’.

That was something we learned back in econ, I think, that there’s not a huge difference overall in the government raising funds through taxes and by borrowing from its own citizens. When it has to pay back the debt, it can only do that by borrowing again or taxing. :wink:

Initially this is what I was trying to work out, though I quickly realized that this isn’t possible. For one thing, the per-capita debt number is bogus, because there are some capitas in this country whose contribution in reducing the debt will forever be zero or negative dollars. Some of us will give, some will receive, some will be neutral.

But I started nonethless thinking… there must be some way to guard against this. If I set aside that $30,000 right now, how could I invest it in a way that would increase in value at the same pace at the national debt, so that if they keep jacking it up, I’d have proportionally the same amount of money, and have a decent shot at paying whatever tax they levy to pay the piper?

That’s my question, hopefully it’s a little more well-formed now, though still imperfect no doubt.

As stated, I think that this is impossible. If the government ‘jacks up’ the debt, that suggests that they are incurring new debt to pay for new spending/budget shortfalls. There’s no way that your investment could keep pace with that. You’d have to save and add to your own ‘national debt fund.’

I still think that buying US bonds would be a good way to invest to match the interest that the government has to pay on the national debt. It won’t match precisely, because not all of the debt is owed on bonds, some of it is to other countries and you might not be able to get the same rates that those loans are at. But it’s in the area at least.

When you retire, you will have a number of expenses, one of them being taxes. So basically you are asking for investment advice - in practice there is little reason to earmark different types of investment for different expenditures.

Investment advice:
Diversify. Choose index funds with low expense ratios. Get thee to Vanguard or perhaps TIAA Cref.

This isn’t accurate. Most estimates put the spending for those things between 35-52% of spending.

I’d guess dracoi’s “65%” figure comes from a breakdown like this one (PDF) (table 3.1, p.54) which accumulates Social Security, Medicare, welfare, and several other smaller outlays (including education and veterans’ programs) to get numbers in the 62-67% range over the last decade. Your first link, which I guess is where you get the 35%, ignores the huge Social Security outlay, so it’s not relevant to his statement. The 52% from the second link is probably pretty close. Note that this is still a majority of outlays, supporting his qualitative statement (“Nothing costs the government more”) although not the exact numbers.

Another way to help “pay off” US debt is to buy Treasury securities. Not only will this ensure that the money remains in the country, it will (slightly) decrease the interest rate that the government has to pay in the future, making the tax burden lighter.

Of course there is no guarantee that future governments won’t look at this cheap debt and say “hmm, maybe we should borrow more!”