Monday, June 6, 2011

Federal Debt per Employee

This will be the last employment related chart for a while (I think) following recent posts This Time IS Different... Employment Edition and Breaking Down Productivity. This specifically outlines a much broader issue that will affect us over the long-term. Specifically, the level of U.S. debt and the number of workers available to pay down that debt.

The amount of debt per employed person has spiked in recent years to more than $100,000 per employed worker, up from ~$55,000-$60,000 throughout the 1990's.

There are a number of ways this problem can be solved / corrected:

  • Economic growth (good)
  • Higher taxes (not bad depending on your point of view, but not good for underlying growth expectations of the U.S. economy)
  • Decrease government spending (good IMO, but also not good for underlying growth expectations of the U.S. economy)
  • Inflation (decrease the "real" value of debt via a "tax" to savers / earners unable to keep up their returns / wages with inflation)
  • Outright default (not feasible)
When evaluating the options, economic growth is the best, but difficult. Default is the worst and least likely. That leaves higher taxes, decreased government spending, and inflation as the most viable and likely (IMO).

All that said, debt deflation is still a major concern of mine due to the levels of debt and political grandstanding currently taking place in D.C. See Steve Keen's epic piece that changed my understanding of the economic collapse here for more on this possibility.

Source: Treasury Direct / BLS