by Mitch Kokai
Senior Political Analyst, John Locke Foundation
As Congress worked in recent days to increase the legal limit on the federal debt, the Treasury kept that debt artificially frozen at approximately $28.9 trillion. …
… In 2018, according to the last complete annual report on individual income tax returns published by the Internal Revenue Service, there were 100,424,240 households in the United States that filed what the IRS calls a “taxable return.” …
… In other words, the 100,424,240 households that filed a “taxable return” in 2018 actually paid income taxes to the federal government.
If you divide the $28,908,004,857,445 in debt that the federal government owed before the debt limit was lifted by the 100,424,240 American households that paid net income taxes in 2018, it works out to approximately $287,859 per income-tax-paying household.
When this observer first saw that figure, it sounded like the amount of money one might borrow for a home mortgage. Plopping that number into a mortgage calculator leads to interesting — maybe frightening is a better word — results.
Using the free mortgage calculator at Better.com, I plugged $287,859 into the slot for the loan amount, then chose no down payment, the default setting of a 3.125% interest rate, a 30-year loan, and my home ZIP code of 27608.
The result: A monthly payment of $1,962. That’s in addition to any bills a household already faces — including rent or mortgage for an existing home.
If you wanted to pay off your portion of the federal debt over 20 years at the same rate, your monthly payment would jump to $2,344. Go for 15 years, and the payment jumps to $2,734.
With all of the current fears about inflation, it’s entirely possible that we’ll be paying higher interest rates in the years ahead. Bump the 3.125% rate up to 4%, and your monthly 30-year payment jumps to $2,103. At 5%, the payment hops up to $2,274. At 7%, the monthly obligation climbs to $2,644. And if interest rates jumped to 10%, the household would owe $3,255 per month for 30 years.
For a little more perspective, let’s go back to the CNS news piece.
Back in 1989, the year that President Ronald Reagan left office, there were 89,178,355 income-tax-paying households in the United States, according to the IRS. At the end of January that year, the federal debt was $2,697,957,000,000.
That means the federal debt then equaled approximately $30,253 per income-tax-paying household.
Paying that bill in a 30-year mortgage at a 3.125% rate would cost $615 per month.