US National Debt Explained: Facts, Myths, and Real Concerns

The U.S. national debt is one of the most talked-about and least understood numbers in the country. In this episode, Ryan explains what the national debt actually is, how it differs from a household's debt, and which common worries are overblown versus genuinely worth watching.

He and Aaron cut through the political noise and stick to the mechanics: who the country owes, what the debt funds, and why the size of the number alone does not tell the whole story. The goal is a clear, balanced understanding so you can read the headlines with perspective instead of alarm.

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If you have suggestions or feedback, please email us at: Podcast@AlchemyWealth.com

And, as always, Stay the Course!

Transcript

Welcome And Quick Setup

SPEAKER_00 0:01

Welcome to the physical physical podcast. Jonathan C2 is Mr. Town with the founder of Alchemy Wealth Management and author of your physical physical, Ryan Nelson. Tune in to gain valuable insights and practical tips as we simplify complex financial concepts into digestible lessons. From budgeting to retirement planning, this podcast is your go-to resource for mastering financial literacy.

Aaron Hoisington 0:33

Welcome everybody to this week's episode of the Fiscal Physical Podcast. My name is Aaron. I am here with uh Ryan Nelson, my good pal, my uh financial advisor as well and uh founder of Alchemy Wealth Management here. And uh Ryan, what's the what's what's what's the good word, my man? Yeah, not too much. Doing well on my end. How are you doing? I'm doing pretty good. I did uh did recently see, I mean, actually at the point of uh recording this, you've probably won several more awards, but I did want to shout out you keep uh stacking those those awards for Alchemy Wealth Management and such too. So I just wanted to give you a give you a moment in the in the in the spotlight there to maybe maybe thank everybody who was in there. I mean, I'm just I'm just super impressed by what you've been able to accomplish, man. So really good job.

Ryan Nelson 1:16

Oh, thank you so much. Appreciate it.

Aaron Hoisington 1:17

Yep, for sure. So with that, that those pleasantries

Why National Debt Feels Abstract

Aaron Hoisington 1:20

out of the way, let's talk about something, everybody. This is the reason why you guys came here. Let's talk about the national debt. I know it's a a thrilling topic. Um I can't remember if it's in New York or or somewhere, but there's like a big like clock. It's not a clock, but it's like a a reader board or something like that. That like like people once again watching the news, maybe I should stop doing that. But uh it it talks about the national debt. That's a topic I swear comes up daily, if not weekly, about like where we sit with the national debt. You're throwing around words like trillions in there, and anytime you get to that number, my brain just kind of shuts off because I just don't really know what that means. Right. Um, but there's I think it's in New York, I want to say, or or somebody just set it up somewhere where they were like tracking how much like per minute the national debt was going up, and it was like this like I watched this episode on it, it's kind of cool. But uh well, I guess I don't really know if it was cool or not. So anyway, today we're gonna be talking about what the national debt actually is. Um you know, is it is it a deficit? Is it a debt? Is it bad? Is it good? I mean, kind of get your your financial opinion on this here.

Debt Versus Deficit Explained

Ryan Nelson 2:25

So the national debt is how much the government has borrowed over time. It so it typically, if you think about how the government borrows, is it's typically selling bonds, so government bonds. So so if it says, hey, we want to raise another trillion dollars, it can issue a trillion dollars worth of bonds. Then people like you and me and other governments even go buy up these bonds because we want the returns. And we when we buy the bond, we're giving the money to the US government, that raises the money for them, or yeah, that raises money for them, but it puts them into another trillion dollars of debt effectively, and then they can use that money to go spend however they want, and they have to pay us interest on it, right? So that's effectively what the debt is. It is not the deficit. So you hear a lot of times people will talk about the debt and the deficit, like similarly. Sure. Or I think I feel like some a lot of times you'll almost hear them use interchangeable.

Aaron Hoisington 3:17

I was just gonna say, I I almost would feel like in my mind, I'm like, oh, they're pretty interchangeable when it comes to that.

Ryan Nelson 3:22

And that's not necessarily true. So the defit so that so the debt is how much total the government owns, like in all of his right, that's just how much the government owns at this point in time. The deficit is how much more we're spending than we're bringing in at this point in time. Oh, okay. So like the deficit we're typically looking at over in an annual number. So we'd say, what would be like the 2026 deficit? How much more are we spending in 2026 than we're bringing in in 2026? And that deficit will then add to our total debt, right?

Bonds And The Borrowing Basics

Ryan Nelson 3:50

So if we were you to use like an analogy and put this more in terms of personal finance, that most of us could more relate to, the, you know, if we went and bought a house and we owe $500,000 on the house, that'd be the equivalent of the national debt. That'd be our individual debt we owe $500,000 on the house. That'd be the equivalent of the national debt they owe $500,000 or trillions to the US public and other individuals and other government entities, right? So that's how much total they owe in debt. And then your deficit again would be how are you doing that year? It's like your cash flow that year. So if I if this year I earned $100,000 of income, but I spent $120,000, well, I'd be in a $20,000 deficit. And if I, let's say I did that on credit cards, I would owe a credit card company an extra $20,000 this year. So then my debt would have raised total from $500,000 for just the house to $520,000 with the house and the credit card, right? So my total debt would have grown from $500 to $520,000. My deficit that year would have been $20,000. So the same is true for national debt. The debt is just the total amount you owe, and the deficit is how much sort of more you're going into debt that individual year.

Aaron Hoisington 4:55

No, that that makes sense too. And I think about it, you equated it to like a household specifically. I mean, one of the things that we've, you know, we've my wife and I have talked about, and we've talked about as well, too, being my financial advisors, you know, there's there's good debt you can have, there's you know, debt you want to avoid, but I guess the the main thing is if you can get by without having any debt, like I think that's generally, don't want to speak all the time, that's pretty good. With that, you can you can relatively be in a good spot depending on your situation. But if I was to kind of run, I guess, my life like the US government, I suppose, like we're kind of just racking up this debt. Right. And that's like I feel like counterintuitive to like I guess the advice that I've always like lived by, I suppose. Does that make sense?

Ryan Nelson 5:35

I don't know. Yeah, for sure. Yeah, I mean, there are people who live that way, for sure. You know, it'd be hard to plan for retirement if each year your net worth is continuing to go more negative. Sure.

Why Government Debt Is Different

Ryan Nelson 5:45

You know, so that's an interesting like kind of thought. Yeah, like there there are differences between the US government and the household. There it makes, you know, the we're more familiar with our own household finances. That's why myself, I just did it, and lots of other people use the household relationship as an analogy because then we can start to get a better feel for feel for oh, that's how the I okay, now it makes sense to me what the debt is, and okay, now it makes sense to me what the deficit is. So it's a nice analogy to help connect those dots. But then as you start diving in deeper, yeah, the honest truth is they are different, right? The US government is different than a household entity, the US government's not planning for retirement, right? It doesn't, it doesn't have the lifespan of a single person, right? Like you and I, we have like goals we want to we want to achieve, maybe pay for a kid's college, maybe save up for retirement, go on a vacation, and then eventually we'll pass away. Like the US government doesn't is just inherently different, right? Like it's it's not a single individual that's leaving debt to like heirs, it's not something something that's saving for a retirement, right? So like inherently it having a negative debt is not as detrimental to it as like us. You know, we would not be able to continue to go into debt, have a deficit, keep growing in debt, increase our net worth or decrease our net worth, have a bigger negative net worth year after year after year, and then somehow successfully retire, right? So there is an innate difference between like the US government, how it operates, how it works, what its goals are, and how us as individuals operate, what our you know, what our goals are, etc.

Aaron Hoisington 7:18

Yeah, no, that makes sense. Differ different rules for different uh entities, I suppose. So it's almost one of those things with those analogies. I I love them, I think it's great. One, I love using the round numbers, it makes it 500,000 is a lot easier to like comprehend than like two trillion, because at that point, like, you know, what's a thousand dollars in that kind of a but it is important to kind of realize that like hey, like you're maybe your household, but the government's kind of a different beast when it comes to those kind of areas there. So um I guess that leads me into my next question as far as like you know, the national debt tracker or whatever you want to say with it, is it worth, I guess, paying attention to or seeing like when these

Myths, Inflation, And Trade-Offs

Aaron Hoisington 7:55

things come up with the word trillions of dollars in debt? Like, is that I guess worth exploring, I suppose, or being aware of, even though certainly it's good to be aware of it for sure.

Ryan Nelson 8:05

I think there's certain myths out there about like our country is gonna go bankrupt, and that's just probably not true or very likely to happen. I guess anything's possible, but it's not very likely to happen. So, yes, it's good to be aware of. You don't want to probably fall prey to some of these like egregious like myths, right? That being said, there are some real concerns and potential trade-offs here. So rising interests, uh rising in interest rising over time is is a concern. And as your inflation, we've talked about inflation in the past, as inflation creeps up, it crowds out other spending. So if you start spending more money on gas and groceries, that's less money you can spend traveling. So if you value traveling, well, if the more gas and groceries starts costing you, the less you can travel, right? So it's something you certainly want to be aware of, and the more debt the government goes into, the more likely we are to experience inflationary pressures. It's not a guarantee, but the more likely. So something, yeah, to just be aware of and cognizant of. You know, in episode 120, we talked a little bit about the tax system and how it actually works. And so the reality is when we think about our national debt, and we talked either a week or two ago about the gold standard. We mentioned we moved off the gold standard, now we're backed, the US dollars backed by the faith of the US government. The US government raises its funds through the US tax system, right? Fund circle. Yeah, right. And so when you start thinking about this, it's like, yeah, are we are we really going to go bankrupt or anything? It's like, well, if we understand how the tax system works and the fact that the US government is basically backed by you and I and uh all of our friends and family and co-workers, right? It's like we can start to see that it's pretty unlikely that that will happen. That being said, there are some real risks and and inflation being one major risk. And so, yeah, I'd say it's good to be aware of, good to keep our eyes on, good to be cognizant of. Maybe as we're like electing government officials and stuff, like uh you wouldn't certainly want to turn a blind eye to this. No, that's a good point.

Aaron Hoisington 10:02

And and I think that being being aware of those things and and you know, using your your voting rights, whoever you might vote for, too, to vote for someone who aligns with what your values, your goals are, I mean, you know, the influence that you want to have when it comes to that. I think that's a that's a really good way to put it. It's like, hey, I could watch the news and get scared all I want, but like, you know, what do you what are you what could what impact can you make? And I think it's also like harkens back, we've said it many a time, is like you meeting with your financial advisor. If you're worried about something like talk to that individual, is it a financial worry? Is it a you know a safety worry or something like that? Probably your financial advisor is better with the financial worry than the safety piece of it, but yeah, at least you can at least plan for these different things that might come up and feel

Taxes, Trust, And Why Bankruptcy Is Unlikely

Aaron Hoisington 10:45

feel comfortable of like, okay, this is what's happening maybe with the vast majority of it. Where am I at in my situation? And focus on that a little bit more, I suppose can be a little bit better there.

Ryan Nelson 10:54

No, it makes complete sense. Yeah, in summary, I think that you know the the national debt it's real, it's very large at the time of this recording. It's almost forty trillion dollars. 40 trillion? Almost. Yeah. By the time of this recording, it's probably over 40 trillion. Who knows? Yeah. So yeah, it's such a big number. That's yeah, hard to wrap our brains around, right? And and so yeah, it's real, it's very large, but it's also, I think, oftentimes misunderstood. It's not the same as an individual being in $40 trillion of debt. Right. So something to pay attention to. Certainly, I think a very it is important, but also, you know, to your point earlier, not worth necessarily you know getting worked up over some of the things that you can't control around it. But there are some actions that you might be able to take, and and those are it's important to be aware of and and know the pros and cons. Yep.

Aaron Hoisington 11:43

No, I think uh one of the lines you've used is no, just must just enough to be dangerous. Yeah, right. Yeah. So you're uh you're at a party or something

Takeaways Without Getting Worked Up

Aaron Hoisington 11:50

like that, you're talking about the national debt. You can be like, are you talking about the national debt or deficit? Yeah, yeah, exactly. And see how many people's eyes go. And then you can just walk out of the way. Exactly. I don't have anything else to contribute. I just wanted to ask the question. Yeah. I just dropped the grenade and left, kind of piece of it there. So um awesome, Ryan. Well, appreciate it as always, my man. Appreciate you breaking that down. Hopefully you uh you guys learned a little bit something about the U.S. national debt and got a little bit of an explanation there, and uh, we'll be uh right back on the other side of this with some uh personal stuff.

Would You Lose Taste, Sight, Hearing

SPEAKER_00 12:19

And now to put the personal in personal finance.

Aaron Hoisington 12:26

Welcome back, everybody, to this side of the physical physical podcast. My name is Still Aaron, and I'm still here with Ryan Nelson. And uh today, Ryan, I got a little bit of a uh I don't know if I want to consider it a morbid question, but it's one that's gonna maybe give the listeners pause. You ready to dive in? Let's do it. All right. So my question is if you would you rather lose your sight, your hearing, or your sense of taste? Curious to see what your breakdown is on this one here.

Ryan Nelson 12:52

Yeah, for me, it's like incredibly easy. Easy my sense of taste. It's not even close. Yeah, I mean, we're sight dominant. Like to lose your sight would be so so painful. And then to not be able to hear anything or anybody would be so challenging as well. And I'm not a huge foodie. I mean, I love food as much as the next person, but I love like all food equally. Um, so yeah, I don't have like exquisite taste buds or can't tell the difference between like a fine wine and a cheap wine or anything. So, you know, that maybe that sense isn't as developed for me. So off with that sense. Yeah, yeah. Yeah, true. But yeah, so for me it's no brainer. I would go with taste, I think. Uh you know, like yeah, I'm not a real foodie. I don't really like going, or like I do I do like going to nice restaurants. Sure. But one of but almost what I like more about going to a nice restaurant is the event and the experience and like seeing the ambiance and enjoying it with friends and family and having a conversation and like hearing the conversation. Yeah, exactly. And the event uh like I like the events more than the food itself. Right. And so, yeah, for me, no-brainer taste. For you, I'm curious. I got two questions. Okay. Same question back to you, okay. But also, secondarily, I'm intrigued. There's more than just those three senses. There are. How come, how come like smell and touch aren't on the hair.

Aaron Hoisington 14:05

Yeah, I was gonna say that was actually is funny you mentioned that. That was gonna be my follow-up to you about like what if I threw in smell or touch with those two? But honestly, I still think that that you're right, taste. I I would yeah, I love eating, I think it's great, but I also feel like I'd almost like have the memory of like what I ate too. But I do wonder if you lose your sense of taste, you also lose your sense of smell. Like I know they're related like to the old factory system or something like that, which I I think I'm saying that right, but hard to say with that. So I wonder if you'd like lose that package deal. But the one for me, I was I I don't want to lose my sight like that. I can't that that would be horrific there. You know, hearing, you wouldn't be able to listen to this podcast, so that would that wouldn't be great either. So but I think with sense of taste, I'm like, yeah, I know what things taste like. I know that like I could still get the nutrition I need to live pretty well with that. So I think I'd also I'd also go with taste. So maybe a little bit of a boring answer when it came to that.

Ryan Nelson 14:59

I I just did a case, I I feel like it's a no-brainer. If any of our listeners don't think it's taste, then unsubscribe. Exactly. No, don't do that.

How Much Brain Each Sense Gets

Ryan Nelson 15:07

Uh I just did a quick Google and I feel like this like sums it up perfectly. I just Googled this is just the first like AI, Gemini AI thing that comes up and answers it. So who knows how accurate this is, but I just Googled percentage of brain dedicated to each sense. So for sight, it says uses so sight or vision uses 30 to 50 percent of the visual cortex. So let's just call it 30 to 50 percent. Touch dedicates about 11% of the cortex, hearing about three to eight percent of the cortex, and then taste and smell combined about 0.01%.

Aaron Hoisington 15:39

Really? Okay, wow. So it is a pretty pretty low percentage of that.

Ryan Nelson 15:42

If that's even I mean, that could be off by an order of magnitude, but so if sight is you know somewhere around 40%, touch call it 10%, hearing call it five percent, taste and smell combined for 0.01%, according to Google Gemini. Yeah, it's like yeah, like site we're just so sight dominant, like losing your sight would be crazy, and then touch and then hearing and then taste and smell. Yeah, be gone with them. Absolutely, be gone with them.

Aaron Hoisington 16:05

Who needs them anyway? Exactly. Like it's not like uh I I think it's funny the uh I I I you mentioned like a fine wine or something like that. And as I get older, I keep waiting for these this power to develop. I'm just like, well, I and it was a while ago, like on like a New Year's, I think it was New Year's or something. Like I we did like a wine tasting of like, you know, an $80 bottle of wine versus like an eight dollar bottle of wine, and like, yeah, you can taste the difference, but after I have a glass of wine, most wine kind of starts to taste the same to me, too. I think it's more about like the after effects of like what it does. Like, I'm like, oh man, I got a headache pretty quick after drinking that $8 bottle. But I I I do think I I love those kind of things where you're like, oh, like this is a you know, $70 cut of meat, this is like a $20 cut of meat, and like what can you taste the difference in like a hamburger like that or something like that? I think those are all super fine to kind of do that. I I don't think I could either.

Ryan Nelson 16:59

I'd be like, well, they both have cheese on them. Yeah. Yeah, my my brain, yeah, I get it's it my brain's getting the 0.01% dedicated to it. Somebody else's brain might have like more, more dedicated to it to taste to taste and smell better.

Aaron Hoisington 17:11

I could do without 0.0.1 piece of it. Uh I'm good. So yeah, um, awesome.

Listener Prompt, Subscribe, And Disclaimers

Aaron Hoisington 17:16

Well, thanks, Ryan. Appreciate the conversation as always. Uh uh let us know, listeners, what you uh what you'd lose in that case and your argument behind it there. And uh sure you guys are checking us out wherever you get your podcasts at, Spotify, Apple Podcasts, YouTube, uh, whatever it might be, check us out. We'd love to have you guys uh follow us along on this journey. And uh with that in mind, uh Ryan, any final thoughts? As always, stay the course.

SPEAKER_00 17:40

Thank you for joining us for the Fiscal Physical Podcast. Until next time, happy listening. And as always, stay the course. If you have a question or topic suggestions, please email us at podcast at alchemywealth.com. If you enjoyed today's discussion, subscribe to the podcast to ensure you never miss an episode. And consider leaving us a rating and review on your favorite platform. This helps other listeners like you find the channel. For more resources, you can visit Alchemy Wealth Management's website at www.alchemywealth.com or find your physical physical development on Amazon. We'd be remiss if we didn't mention the personal finances just then. First of all, please don't take anything we say as advised. The presenting content is for informational and entertainment purposes only. It's not an offer or a solicitation, nor should it be construed or relied upon for tax, legal, or investment advice. It doesn't consider your personal financial situation or objectives and may not be suitable for you.