Date: Thursday, April 05, 2012 The Nonsense of Numbers That Frighten Its tax time and everyone

is faced with frightening numbers. Television news programs, newspapers, and radio shows will be hammering away with really frightening numbers. Lets get some facts out there for you to have some perspective: As of April this year, we have a national debt (meaning money the government has borrowed mostly from Americans like you in the form of treasury bonds) that is hold on to your seat - $15,579,852,946,457. Lets call this 15 trillion dollars to make it easier. Wow! you say. Whos going to pay that back? The answer is that no one person is going to pay it back. It will get paid back (as it was just 12 years ago) by a prosperous economy (and no war). Lets see what that huge figure really means to the man in the street. According to the IRS there are over 135 million personal taxpayers currently covering about 41% of the tax burden. According to the census there are only 116 million households. So some households have more than one person filing tax. This usually means they are making more money than the average wage earner and it pays them to file separately. So, lets assume that the 135 million taxpayers have to repay 41% of this national debt. Each personal taxpayer will have to repay only $47,073. Thats not so bad really, some will pay more, some will pay less. Then there are 27 million businesses in the US that pay around 51% of the budget every year. Each business would have to repay about $293,000. The rest comes from other taxes (banking, import and other revenue). Somehow, it is not so frightening when you consider your household only owes $47,073 in government debt. Thats about a car or so bought over, say, the next 10 years. And when you look at overall debt government, business, household debt and banking debt - compared to some other countries, as compared against our gross domestic product (what we make and sell as a nation is called GDP), it seems we are doing really well, with a ratio of debt to GDP of around 3 to 1. What does that mean? Lets pretend you are going to a bank and getting a mortgage. The bank will loan you money based on your earning capacity less your debt (credit cards, payments, etc.). If you are a normal risk, they will lend you as much money at prevailing interest rates so that your payments do not exceed 33% of your income for the next 20 years. And guess what, spread over 20 years, the US has a debt ratio of 15% for every dollar we owe household, credit cards, government and businesses. For every dollar this nation

earns every year, we collectively adding everything up - owe only three dollars. Spread over, say, the term of a mortgage, we can afford that. The bad news is that in the past 12 years our debt ratio has climbed from a normal 200% to 300% in 2010 and not to 333% of GDP and unless we get a handle on it, we may borrow more than we want to repay. I only say want to because there is no way this nation is going bust as some people pretend. So how does the US stand internationally? Lets take a quick look at the top 14 economic countries polled in 2010: which nation has the largest debt to GDP ratio? Great Britain with 466%. This is followed (in order) by Japan (471%), Spain (366%), South Korea (333%), France (323%), Switzerland (313%), Italy (315%), USA (296%) Germany (285%), Canada (259%), China (159%), Brazil (142%), India (129%) and finally Russia (71%). And when you look at government debt or business debt, the US is the middle of the pack (at 65% and 79% respectively). Our household debt is third highest 97% (with only Switzerland and Great Britain having much more) but that included leveraged mortgages and that figure is dropping as people refinance and housing prices drop. When it comes to banking, were in the bottom third of the highest debtors, which is good news (although puzzling as to why our banks are so incapable of financing a business turnaround). So, how will it all end? When the economy picks up a full head of steam, providing we can stay out of costly wars, the national debt could be repaid by taxpayers and businesses in as little as 10 years. The upward trend has to be slowed or reversed, but some of that will happen as more money comes in. More people and businesses earning means more money in the treasury which lowers that 300% ratio. Part of the problem were facing as a nation is that the numbers are so frightening, and electioneering people can frighten you with them, blind you with words like trillion and generally make the whole thing seem too darned confusing. Just relax, put your head down, work hard and realize that America has had a much worse debt ratio before and we survived that. Heck we didnt just survive the Civil War, WWI, the Depression, WWII, and the Vietnam War... we grew, prospered and won a lifestyle that is still the envy of most people on this planet. Were on that road to recover again. Dont let the scaremongers put you off.