America’s Balance Sheet: A Financial Advisor’s Deep Dive into National Debt

The U.S. Balance Sheet: Assets vs. Liabilities

Andrew explains that, much like a household, the country has a balance sheet. Assets include things like land, gold reserves, and even student loans, while liabilities include treasury securities, Medicare, and Social Security obligations. The concerning reality? Liabilities currently outweigh assets by roughly $33 trillion, resulting in a negative net worth, at least by traditional accounting standards.

Deficits: The Root of Growing Debt

Since 2001, the U.S. has not had a budget surplus. The largest deficits were seen during the Great Financial Crisis and the COVID-19 pandemic. The Congressional Budget Office (CBO) expects the average deficit over the next 30 years to be 6.3% of GDP, which contributes directly to growing national debt. Compounding the issue: higher interest rates increase the cost of borrowing, which diverts money from other national priorities.

Policy Solutions: What’s Being Tried

The administration’s Big Beautiful Bill aims to reduce deficits through spending cuts and potential revenue increases, including tax reforms and programs like the Trump “gold card” for citizenship. However, independent analyses by the CBO are skeptical of the bill’s claims, forecasting lower growth and little impact on reducing the deficit.

What Happens If the Debt Isn’t Managed?

If the U.S. can’t service its debt effectively, there are multiple risks:

• Higher interest rates
• Reduced private investment
• Limited flexibility in emergencies
• Inflation risks
• Loss of confidence in the U.S. dollar as the world’s reserve currency

Can the U.S. Default?

Technically, the U.S. can’t default in the same way a household can because it prints its own money. But political gridlock, such as debt ceiling standoffs, can delay payments and lead to market volatility and credit downgrades.

The Modern Monetary Theory (MMT Argument)

Some economists argue that deficits only matter when inflation becomes an issue. According to MMT, the government should spend to promote growth and only raise taxes to control inflation, not to fund spending. Critics, including former Fed chairs, reject this theory, though recent fiscal behavior hints at its growing influence.

What Should You Do As an Individual?

Rather than panic, focus on what you can control:

• Pay off high-interest debt
• Maintain a strong personal balance sheet
• Don’t rely on government decisions to shape your financial future
• Be prepared, not fearful, opportunities often emerge from economic instability

While the national debt is undeniably a long-term concern, it doesn’t present an immediate threat to most individuals. Still, it underscores the importance of maintaining personal financial stability. Don’t let someone else steal your joy. You can’t control Congress, but you can control your own financial house.