I'm not quite knowledgeable enough to comment on this or any other theory of paying off national debt. (I do have opinions, but they're generally based solely on my experience managing my personal finances.) However I think it's interesting to compare these debt ratios to what they would be if they were an individual's personal debt. Again, I don't know enough about managing a nation's finances to know if this is a valid comparison, but it's interesting so I'm blogging it.
This year's federal deficit is expected to represent just 3.7 per cent of Canada's gross domestic product
So let's assume you're an individual who earns $50,000. (Q: Why $50,000? A: It makes the math easy and is close to Canada's household average.) So suppose in a given year (after several years in the black) and in response to a legitimate and temporary problem, you spend more than you earn to the tune or 3.7% of your salary. 3.7% of $50,000 is $1,850. (Aside: the great advantage of blogging over translating is I don't have to circumlocute starting a sentence with a numeral.) So one year you spend $1,850 more than you earn. Not a huge problem. You do need to pay it off, you probably want it in a credit instrument with a better interest rate than a credit card, but you'll be fine. If you have a Good Job, you'll make it up in raises in the next year or two.
Nor is Canada's total national debt (the sum of past government deficits) dangerously out of whack. At just under 30 per cent[...]
So you make $50,000, and your debt is 30% of that. 30% of $50,000 is $15,000. Again, not a huge deal. You do need to pay it off, you do need a payment plan, but basically all you have to do is stick with your payment plan. If it's good debt, it's barely even a problem - if it's your mortgage, you're golden! If I had a mortgage that was only $15,000, I'd be dancing!
I don't know if there are different issues when we're talking about national debt, but it's an interesting way to put impossibly large numbers in perspective.
2 comments:
30% of my income in debt would be a huge problem for me. I've had debt problems nowhere close to 30% of my income that very negatively impacted my life.
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