As an American citizen, does it make any financial sense to donate money in hopes of helping to reduce the US national debt?
Thanks.
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Sign up to join this communityAs an American citizen, does it make any financial sense to donate money in hopes of helping to reduce the US national debt?
Thanks.
At its heart, I think the best spirit of "donation" is helping others less fortunate than yourself.
But as long as the US remains solvent, the chief benefit of paying down the national debt is - like paying off a credit card - lowering the future interest payments the U.S. taxpayer has to make.
Since the wealthy pay a disproportionately large portion of taxes (per capita), your hard earned money would be disproportionately benefitting the wealthy.
So I'd recommend you do one or both of the following:
instead target your donations to a charity whose average beneficiary is less fortunate than yourself
take political action with an aim towards balancing the federal budget (since the US national debt is principally financed in the form of 30 year treasuries, the U.S. will be completely out of debt if it can maintain a balanced budget for 30 years recanted, see below)
I think it would have the same effect as paying off a compulsive gambler's debts. Until Congress and the people who vote for them can exercise some fiscal responsibility sending more money to Washington is pointless.
In fact, I'd argue that if you were a multi-trillionaire and could pay off the whole thing through a donation, we'd be back to deficits within a decade (or less).
The US national debt isn't the problem. If the Bush-era tax cuts had been allowed to expire then US debt would have been paid off reasonably quickly.
The CBO’s “baseline” budget forecast, which assumes that the cuts do indeed expire as planned, sees the deficit falling from 9.1% of GDP in 2010 to 2.5% in 2014.
These are just the debts the US has already incurred. The problem is the future entitlements the US is promising to its soon-to-be-retired generation of Baby Boomers. Medicare, health insurance, and so on are all future costs that can be calculated fairly accurately when considering the size and earnings of the work-force relative to the size, longevity and health of the newly-retired.
Governments can "solve" the problems of entitlements simply be reneging on their promises.
The concern that investors have is that either entitlements will be paid by raising taxes (and so cutting profits and investment returns) or countries will simply default on their existing debts as their tax receipts run out.
As Europe has shown (from French workers rioting about having to retire at 62, to British students rioting about paying their tuition fees), breaking promises has consequences for elected politicians too.
Europe is already going rather painfully through this process of economic restructuring. The US will eventually come round as well. Just don't expect it to be painless.
So keep your money and invest it wisely. No doubt that tax collectors will be round in a while to take their cut so you can make your contribution.
No. Unless you are ten Bill Gates rolled into one man, you can not possibly hope to make a dent in the 14 trillion debt. Even if you were and paid off whole debt in one payment, budget deficits would restore it to old glory in a short time. If you have some extra money, I'd advise to either choose a charity and donate to somebody who needs your help directly or if you are so inclined, support a campaign of a financially conservative politician (only if you are sure he is a financial conservative and doesn't just tell this to get elected - I have no idea how you could do it :).
No, it makes no sense. The US national debt is different from other debt on TWO KEY WAYS :
1.) The national debt is not money we owe to our government IT IS MONEY WE OWE TO OURSELVES. 2.) If the GNP of our country can grow at a rate equal to or greater than the national debt interest, then the figure of national debt has no bearing on anything.
So a more philanthropic endeavor would be to help grow the economy.
It doesn't make any financial sense for you personally, because the impact on the debt would be so little it would have no significant benefit to you, and you'd be out the money you donated.