Did you come to this page expecting someone to be railing against the US National debt?
If that's the case, you may be disappointed.
Sure, as a US citizen, I'm concerned about our debt, and I will get into that shortly. I will pose a question that no one anywhere seems to be asking. Not the politicians. Not the press. And most importantly, not the voters. If that's what you a looking for, then skip the next bit and continue reading below the calculator.
If you are still with me, I need to point out a few things about this calculator since it works slightly differently than other amortization schedules. I created this calculator for two reasons. First, I wanted to create a calculator that will handle VERY LARGE DEBT. And what debt is bigger than the current National debt? More below
There have been times in the past when larger municipalities or other government entities have been in the process of issuing debt in excess of a billion dollars, and they needed a coupon payment schedule. Well, the amortization schedule on this site is limited to $999 million. Obviously, this calculator does not have that limit. So fundamentally, this calculator creates an amortization schedule for bond debt. Notice when you preview the schedule or print it, there is no mention of "National Debt." The printed version of the debt schedule looks like the other schedules on this site. This is by design.
Secondly, I wanted to introduce the concept of shared debt. Perhaps a parent agrees to split the payment for a student loan with their child. This calculator handles this scenario. Enter the total loan amount and two for the number of households. The calculator divides the payment amount in half, and the schedule amortizes half the debt.
Our National Debt and the Sources Used
All values are the latest available as of May 2020. (Links will open in a new tab.)
According to the US Treasury Department, the debt stands at nearly 26 trillion dollars. The exact amount is preloaded and clicking the clear button will reset it.
The debt is increasing by the day, if you want to update the figure, use this treasurydirect.gov link The Debt to the Penny and Who Holds It.
The US Census Bureau calculates the number of US households. The most recent number reported is from July 2019. To check for updates, use this Census Bureau link, Families and Living Arrangements.
Finally, the default interest rate is the current coupon rate on the 30 Year US Government Bond as reported by Bloomberg. I used this rate because I wanted to amortize the debt over 30 years.
However, in once sense, this slightly overstates the problem. The term for much of the debt issued is shorter than 30 years, and the rate of interest paid is lower than 1.25%. Currently, five-year bonds, for example, have a 0.25% coupon rate. And even a 1.0% difference in rates makes a very big difference in interest paid on a debt that is fast approaching $26 trillion!
On the other hand, using 3% may understate the problem. If the Government borrows money for five years, at the end of five years, we don't know where rates will be. It is very likely we will not be able to refinance our debt at the current five-year rate. In fact, to roll the debt over (it is almost always never retired), the Government may have to pay a rate that is higher than 1.25%.
Thus, 1.25% seems like a good compromise. Of course, feel free to use any interest rate you want.
Why does the debt have to be refinanced?
A Quick Word About Bonds and Refinancing
Government debt is financed using bonds (or short-term Treasury Notes). Governments sell bonds to raise money. In exchange, buyers of the bonds receive coupon payments that are most frequently (though perhaps not always) paid every six months.
Coupon payments are interest payments. The payment does not include any principal.
Thus, the money borrowed is being financed just like an interest only mortgage. The loan balance is not declining.
You can see how this type of financing works by setting the amortization method to interest only. One huge payment is due at the end! The country refinances this debt if it doesn't have the money to pay the principal when the bond comes due. Never paying off the principal on current debt plus running an annual budget deficit are the reasons why the National debt keeps growing.
A Few Final Words About the National Debt
Conservatives worry that we will "end up like Greece" - short on cash and having austerity forced on us by bond holders.
At least some liberal economists, on the other hand, are not concerned about the current US debt. CNSNEWS.COM quotes Paul Krugman, a Nobel Laureate and New York Times columnist, saying:
“The United States is a country that has its own currency--can’t run out of cash because we print the money. If you even try to think what would happen--suppose that investors get down on the United States. Even so, that would weaken the dollar, not send interest rates soaring, and that would be good. That would help our exports,” Krugman said on C-SPAN’s “Newsmakers.”
I have no idea.
But to me, who's right is not the issue, and the National Debt Calculator makes that clear.
Change the number of households to 1 so the calculator amortizes the entire debt. Set the amortization method to interest only (for the reasons mentioned above). Click on Print Preview and check out the "Total Interest Due" - nearly 10 trillion dollars (9,676,302,716,666.64).
That's Trillion with a capital "T." Or looked at in a different way, the interest amount alone could cover the entire Federal spending at present levels for more than four years. It could cover the cost for all of Defense, for all of Social Security for all of Medicare, for everything - for four years or more. Amazing.
Over the next 30 years, not even a working lifetime, we will have to pay nearly what we currently owe today in coupon interest. And let's be clear what interest is. It is the cost we pay for borrowing money. It is not the cost of what we buy with the money we borrow. Interest makes everything we buy as a nation more expensive.
I live in New Jersey. The area badly needs a new tunnel complex under the Hudson River, and one has been proposed (Gateway Program), and planning has largely been completed. Costs estimates vary, but currently, they are in the neighborhood of $23 billion. A deal between New York, New Jersey, and the Federal Government fell apart in 2010 (when costs were lower), largely due to fighting over who was going to pay for the project. Well, had the Nation's books been better managed during good times, we wouldn't be paying nearly $400 billion a year in interest. This tunnel project and many other projects around the country could have been funded.
Finally, consider this, from the Wall Street Journal:
"But here’s the especially bad omen: Net interest payments rose $7 billion, or 30%, in March (emphasis added) from a year earlier. If that seems small, consider that interest payments rose $28 billion for the six months of fiscal 2017 to $152 billion. That’s a 22.2% increase, among the biggest in any single spending item highlighted by CBO. The increases reflect the growing debt but in particular the Federal Reserve’s decision to raise interest rates after years of near-zero rates."
In other words, the increase alone in the interest payment on our debt for just ONE month could have paid for one-third of the above project.
So, this is what I want to know...
A Question for All Politicians
The next time you see a politician, ask them this:
What are we getting for our money?
If they can't give you a good answer, perhaps it's time to make a change.
If you have an answer, or even if you don't, feel free to leave your thoughts below.
National Debt Help
You can look at debt two ways with this calculator. You can look at debt as shared debt, or you can look at it as individual debt.
When debt is shared, the total debt entered is divided by the "Number of Households". This could just as easily be any number. Sharing a car loan payment with one other person? Enter 2 for number of households and the loan amount for the car in "Total National Debt".
For a normal amortization schedule showing the total payment due, enter 1 for "Number of Households".
Calendar Tip: When using the calendar, click on the month at the top to list the months, then, if needed, click on the year at the top to list years. Click to select a year, select a month and select a day. Naturally you can scroll through the months and days too.