Dave Ramsey Explains the National Debt 

These are three of the best questions I've ever heard on this channel. Most people have NO CLUE about this subject.

The belief that the Federal Reserve would stop raising interest rates was the driving force behind the entire economic chaos. What should we do now that we have a situation where interest rates are crashing? At this point, how would you suggest that I safely allocate $300k?

Just a reminder: around 75% of the national debt is held by US firms and citizens. Also, fun fact, Japan is the largest foreign owners by a huge margin (not China).

$1 trillion a year in servicing the debt, 20% of the $5 trillion the government receive annually. The scary thing is how financially powerless the Government will be the next time we face a major recession

I knew Dave Ramsey was starting to influence me when I check my credit score and it tanked 50 points and I just smiled 😎

Dave Ramsey is one of the few people on the internet who could talk about the debt crisis in an easy to understand, non-biased way. Basically, in order for this country to truly tackle its debt, there’s going to have to be sacrifice from everyone. It doesn’t matter if you’re Democrats or Republican, young or old, you will feel it in one way or another. No politician has the ability to run on that message because they would never get elected.

Phenomenal explanation of the US debt! The best I have heard.

After serving in the military and being a federal employee I can see why the country is in debt.

1992 election Ross Perot said that the national debt was the biggest threat to the security of the US so I voted for him. Now it's 10X what it was in 1992.

What surprises me is that I don't see government intentions of paying the national debt, they just keep lifting the debt ceiling

Great question. I learned a lot. Thank you!

Excellent questions and excellent answers and discussions!

I axtually really appreciate both this man's questions and Daves answer. He gave a very honest, unbias answer that avoided taking any political stances

This is the first time I could totally understand this topic & it was clearly explained. Thank you!

The problem with any politician is that they're unlikely to make any positive long term changes unless the effects from that change can be felt during their term. If you proposed a plan that would hurt a bit for four years but have massive positive effect in the fifth, they probably wont do it, because they dont want to risk their opponent getting the praise.

That was a great answer! thank you so much!

very accurate answer. No one wants to say no.

Fantastic Questions with Perfect Answers!

Good discussion.

This is the best explanation of the national debt, and why it will likely never be fixed.

The real problem is politicians always craft bills that have things we need to pass, with stuff they want to pass tacked on. Like they put out a bill to fix roads or fund schools, and then put a million dollar pay raise for themself on it. It might slow down the process, but we need each bill to only include one thing at a time. No more free rides for garbage taxes and laws on other bills.

This was a great podcast!!! 👏

I live in Connecticut. We have a yearly motor vehicle tax to "maintain roads and bridges". Every new paving project needs federal funding because local and state are broke. We need Dave Ramsey for Governor up here

Great question, great answer!!!

I like Dave Ramsey, he knows a lot about financial management, but I'm not sure that this was a great explanation about government spending at a macro-level.

Thank you very much Dave for the Video, Most people can deal with debit (people who have backup for their debt)while most people can't deal with it. The country is built on debt for herself and citizens, making its citizens' essential needs expensive and can only be afforded by debt (For example, Medical and College). This is why every citizen must go into investment as a support income, all to be debt-free

The more you give people the more they ask for and expect.

I read back when our national debt was $18 trillion it would take 2,000 years to pay off paying $24 million a day if there was no interest on it. So I can’t imagine what those numbers are now. Thousands of percents increased.

Explained very well. Smart guy

As a lifelong Kentuckian, I say- Let 'em TRY to repo Kentucky!

Great contributions by George during this call.

Debt crisis could unleash carnage on the stock market leading to economic downturns. We need to be prepared for potential market volatility. how can I secure my $600K stock portfolio against declining?

That was a great question

So tired of the irresponsible behavior of the government.

I'm glad they actually had this caller. I have been asked many times this exact question while being in conversations. The avg person seems to not know this information how the US debt works and who the government is in debt to. It blows some peoples minds to know you can buy the T bills and have the US government have to pay you interest instead of just having money in a cd or hysa

There are PhDs who spent many hours with fancy theories to justify endless debt. i.e. Modern Monetary Theory (MMT) At the end of the day it's still a mess with a fancy name.

The M2 money supply was under 5 trillion in 2000. Today its over 20. And they expect us to believe there isn't much inflation?

Thanks

I was in the DOD and there can be cuts made everywhere! There needs/must be an audit on government spending!!!!!!!!!!!!!!!!!

A lot of this debt is owed to the Fed. The treasury issues t-bills, bought by member banks (cartel) at the discount rate and then turn around and sell those to the fed who purchases them with money created out of thin air. Not only is the population taxed for interest in the bill but they also get hit with the inflation when the fed creates the money to buy it in the first place, expanding the money supply. Look at your printed money, it’s a “Federal Reserve Note,” essentially a Note is an IOU. The bankers make out in this scheme and it’s all a scam.

The US Federal government's extravagant spending is no wonder why many Americans also live beyond their means.

So glad someone could think to ask this. Cause who ever knows what is happening.

What makes it worse is this only counts normal debt. If you look at unfunded obligations, the national debt is over 100 Trillion.

"I like saying 'no.' It lowers their enthusiasm." - Ron Swanson

The house of cards has to fall someday lol

How does the federal reserve play into this debt?

I heard something along the lines of debt on a national scale is not the same as debt on the personal level. It operates wildly differently - where in some cases a national debt is *beneficial* - something I haven't heard of. I wonder how that correlates.

Such simple truth.

The one thing that not many people talk about (in regards to this topic) is that a lot of “power house” countries are ALSO IN DEBT. The entire situation is a mess

bump for the algo !!! wish this would happen in the USA

It’s like Caesar in Planet of The Apes when he screamed, NO!!! And the whole room went quiet. You need to say it sometimes.

In the European Union countries are obliged to keep the budget deficit under 3% of their GDP. Most countries so this. Assuming a reasonable economic growth, this allows you to keep the total deficit as percentage of GDP relatively stable. Actually in my country (the Netherlands) they managed to cut the total debt slightly in the few years after the debt crisis and prior to COVID. Mostly because the interest rate was so low that the government could borrow at a negative interest rate (sounds crazy I know...)

It seems like Congress is always willing to consider cuts to social programs. There are many other programs where cuts could be made. Too many "agencies" needing money. And 10% of the budget goes to paying interest on debt.

Texas has money in the bank called the rainy day fund. How this happens is we have line item veto. This means if our governor sees a proposed bill that has wasteful expense called pork belly, he can strike the one item from a package of ideas from becoming law. Texas has the 6th largest economic budget of the entire world and operates with fisual responsibility.

Really, the situation has evolved to its current point because so many false promises have been made for so long. The youngest generation today sees that they will be burdened to pay for benefits for the previous generations, which they themselves will never see returned, so they refuse.

I can just see it, that morning talk that Dave gives his wife about how they all arent going on vacation this year because they were too broke 😂

Usa: dave im 20 trillion in debt Dave: okay whats your income

Though China owns a large amount of U.S. debt, it isn't the United States's largest creditor. The greatest amount of U.S. debt is owned by the U.S. government, while the largest foreign creditor is Japan. China owns around 2.6% of U.S. debt, which it buys because the Chinese yuan is pegged to the dollar. It would be impossible for China to call in all its U.S. debt at once, given the different maturity dates of the U.S. securities that China owns.

Treasury bills don't pay interest. Instead, they are auctioned off using a Dutch auction system. The debt notes are sold at a discount until all notes are sold. Thus, when they mature, the government promises to pay the bearer the amount that is written on the note.

These are not stupid questions. I had the same ones!

It's shocking how little Dave knows about the "Debt". $34 Trillion Debt. $1.1 Trillion Japan $0.8 Trillion China $0.7 Trillion UK $1.9 Trillion all other nations. $29.5 Trillion - American Institutional investors, also known as "Insurance". Every month your insurance payment doesn't just go and sit in a bank. It gets invested in the safest, mediocre-performing investment there is, Treasury Bonds.

At this point, I think the only way we can stop spending is if our debt interest payment goes over our tax revenue, and we collapse. It will get incredibly dirty and horrific, but thats what happens in the prisoner's dilemma.

Money to third party contracts?

we can print

There are several countries who are in debt to the US. This is sooo crazy that all these countries, US included, owe each other a ton of money. Thank you Dave for recognizing our military. As a veteran and have lots of family and friends that are veterans or still in the military, i see too much chaos. One reason why i got out at 11 years. Miss the commandeering and my job. Some folks think that those who retire are RICH. (Siblings and a parent, especially.)

He touches on the basics, but It's more complex than that. Like all debt, there is good and bad debt. When there is a recession, the government must take on debt to stimulate the economy because they won't get as much revenue. It also does this on a regular basis in order to grow the economy. Taking on debt is completely fine if it generates more revenue through economic expansion than the interest costs. If they borrow 100 and they raise revenue by 5 while the interest is 3, then it is good debt. That is why the debt to gdp ratio is more important than the actual dollar amount of the debt.

Argentina had this same issue. When inflation reached %50 monthly the people woke up and elected president Milei who was warning us about it last years. Now majority are saying NO. We are suffering but with HOPE that the NO will fix our economic health and be a great country again some day.

The debt is not all T Bills It's also Notes,Bonds, TIPS, Savings bonds etc..

Ten years ago interest payments on the national debt were 6% of the budget. It is growing so rapidly that, at current projections from the CBO, in ten years interest payments on the national debt will be 26% of the budget. This is not sustainable!🤦🏻‍♂️

Allowing people who recieve sustenance from government to vote ensures that we will financially fail as a country. The time to failure is the only unknown.

The Federal Reserve can technically buy a lot of the Treasuries outstanding through open market operation. With money out of thin air, just key strokes on a computer. In this case, the interest paid to the Fed just goes back to the Treasury. So is the national debt really a debt when the Fed can just print the cash out of thin air?

To answer the caller’s questions: 1. Two thirds is owed to the American public in the form of bonds. Less than one third is owned to foreign governments. The rest is intragovernmental debt, meaning government agencies owe each other. 2. How did we get into this hole? Overspending and tax cuts that aren’t paid for. While tax cuts can lead to higher revenues, it’s often short term and there’s a diminishing return on how much tax cuts can boost things. Despite what Dave says about Art Laffer, the Reagan tax cuts and increased spending drove up the debt went from $1 trillion when he took office to $3 trillion eight years later. Reagan also made up a lot of the revenue lost to tax rate cuts by increasing a lot of fees collected across government, so just because income rates when down doesn’t mean they were really weren’t making up the lost revenue elsewhere. 3. Can the debt be paid off? Very likely no, but that’s not a bad thing. The country holding debt shows we can pay it off and are good for our word. The debt needs to be reduced, but not eliminated. Andrew Jackson paid off the debt and the result was a massive depression that fell on Martin van Buren just after Jackson left office. Lower debt is good, no debt would likely have bad side effects.

Read Richard Wolff on the national debt.

Was expecting a rant about entitlement spending, unemployment insurance, or health care. Was pleased to hear farm subsidizes, military spending and foreign aid mentioned instead. Honestly, we spend a lot of money on a lot of things. 😅 The message is perfect - no one wants to say no

I love Dave and he has helped me stay out of trouble. But if you play by your moral rules in a broken system you are not gonna win. I learned that when i didnt get that business loan when covid.

I have watched enough Dave Ramsey to know that when he pushes that button on his desk, he just "hangs up" on the caller. I HOPE that they have a system in place that tells them as much. lol

Everything he said is true… but I will point out typically for nations once you pass debt to gdp of 90% it never ever gets paid down… and more stimulus also doesn’t have the same positive effect as it did when it was say 40-60debt to gdp ratio

truth!

Dave misinterpreted military spending. Don’t you wish our service members got the money? Military waste money on toys that may never be functional or ever used in combat. That’s were military spending goes. Dave does make an excellent point about farming and the subsidies they thrive off of. Especially corporate farming.

2:26 we went into debt because we owe interest on our own currency supply. The budget wont be balance until the dollar is gone.

Correction the debt is over 34 trillion.

In federal government is only supposed to concern itself w/ matters prescribed in the Constitution. Everything else is the state government's job. The reason its not working is not bc of our founding principles, but it's bc we have deviated from them....

As long as you are outpacing the currency debasement you are doing OK. National debt doesn't matter as long as GDP is in line with it

What credit i give to the caller to ask these 3 questions.

Both sides of congress usually must agree to add to the debt. I as a "people" am subject to AMT (alternative minimum tax) why aren't companies (who are people too, so I'm told) also subjected to AMT. Or deal with the silliness that Warren Buffet pays less percentage in taxes than his secretary. When we've killed the debt, we can talk about cuts.

Dave, you know full well that income/revenue is just as important to balancing a budget as controlling spending. Reagan, Bush, and Trump have collectively given huge tax cuts to the wealthy and big corporations on the premise that this money would be re-invested in the economy and all this wealth would trickle down. Instead companies still build plants in China and then do stock buybacks. Reaganomics has been a huge failed experiment. Back when corporations paid some semblance of a fair tax, we did great things. We built the Interstate highway system and put a man on the moon. Yes we need to spend wisely, but we can’t just keep giving tax-breaks to the rich and then try to balance the budget on the backs of the poor either. Please do an episode on what benefits the nation has seen from these tax cuts. Thanks.

6:32 Normal people say “How much down and how much per month?” Weird people say “No.”

Social security is the largest holder of US debt. You and your employer pay 15.3% to fund it and then its immediately leveraged if its not paying out to retirees. This is why the fund is set to not be able to make full payments within 10 years.

No country or civilization in the history of the world has ever survived the kind of debt that we are carrying. I hope I’m wrong be I think we are at the end.

I’m just wondering if this debt will ever mean anything. The stock market keeps surging away.

As long as you maintain control over the printing of your own currency, it's not so bad. The 'debt' can be printed away, but causes inflation. The problem is the ineffective and inefficient public sector. Tax takes are wasted year in, year out, on crap workers doing a crappy job.

You are right I don’t make anything 😂😂 but I’m doin pretty damn good

Money is debt, there’s not enough money in the world to pay off our debt

Same reason we have inflation. Nobody can say no...

The state of TN charge state taxes maybe that’ll fix the road

Dave Ramsey for President 2024.

The debt can never be paid off. Because every dollar printed is at interest, but the interest doesn't exist. They have to keep printing more

Cut the budget, or all of a sudden it’s all gone right?

That state shouldn’t have to wait for the federal government to fix your own road. That is why I don’t vote because all politicians are crooked.

Hard to quantify One Trillion. Time is easier to quantify. For example, 1 million seconds is approximately 11.5 days, 1 trillion seconds is approximately 31,500 years! Remember, that is just 1 trillion. Multiply that by 33.