Debt is a powerful and beneficial tool when used appropriately.
Unfortunately, at the state, national, and local levels of government on down to the individual, debt threatens to cripple Coloradans’ economic freedom and prosperity.
Federal debt
The US government’s gross national debt recently reached $38 trillion, this only a short two months after hitting $37 trillion.
Since 2013, the federal government’s debt-to-GDP levels have remained at levels not seen since the Second World War.
Human brains are not made to comprehend numbers in the trillions, so it can be challenging to fully grasp what this level of debt means for everyday Coloradans.
According to a recent Yale Budget Lab report, a 1% increase in debt relative to GDP would mean $60 more paid on annual auto loan interest, $600 more on annual mortgage loan interest, and $1,000 more on annual small business loan interest.
Meanwhile, the gains from US debt are rapidly diminishing.
US debt does not go to productive ends; instead, it flows to the welfare-industrial complex, which continues to incur rising costs and is expanding rapidly.
Coupled with currency debasement, holders of US debt have less trust in the country’s ability to repay; therefore, they demand higher interest rates when the US makes repayment.
Eventually, this will crush Americans with high interest rates, high taxes, and hamstrung economic growth.
State and local debt
Coloradans are fortunate that the state government is constitutionally bound to maintain a balanced budget.
However, that does not prevent state and local governments from accumulating debt, which they have proved adept at doing.
As of 2023, Colorado ranks 16th nationally in aggregate state and local government debt, with a total debt burden of $103.75 billion. In terms of per capita debt burden, Colorado ranks 15th at $17,969 per Coloradan.
Colorado’s state and local governments repeatedly complain about a lack of funds, yet remain silent about how they circumvent voter approval for new debt by issuing Certificates of Participation.
Meanwhile, despite good intentions, much of the recently passed Denver debt package will yield little benefit relative to the costs, exacerbate the city’s fiscal woes, increase taxes, and worsen the city’s cycle of indebtedness.
Individuals
According to recent studies, Coloradans continue to have the highest personal debt in the country, averaging $90,540, with most of this attributable to mortgages and student loans.
If Coloradans are using debt to purchase homes and college degrees, then, on paper, it should be beneficial.
However, partly due to the laws of supply and demand and partly due to artificial intelligence-driven upheaval, college degrees are losing value.
Additionally, due to inflation, individuals’ dollars buy less, while home and car prices continue to rise.
Debt is not inherently bad. It can enable individuals and businesses to pursue opportunities that would otherwise be unattainable and achieve economic freedom.
However, compound interest makes it appear that one’s debt is manageable until the moment before the crisis.
It took over 200 years for the United States to accumulate its first $1 trillion in debt, but now it takes only a few weeks.
Unfortunately, when all levels of government accumulate debt, taxpayers ultimately bear the burden of paying.
