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Applying for a Vessel MMSI Number

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I’m surprised to learn that applying for an MMSI number for my boat with the FCC is a lot quicker and easier than I thought.

I’m currently on the home stretch for adding AIS transmit capabilities to my boat and I thought I’d share what I’ve been going through, along with instructions for getting an MMSI number from the FCC. If all you care about are the instructions for applying for the number, skip ahead to the section titled “Applying for an MMSI with the FCC” below.

AIS on My Boat Explained

My boat’s navigation Garmin navigation and communication components — specifically, it’s VHF radio and chartplotters (with GPS) — are compatible with the AIS system for tracking boats. Here’s what Wikipedia has to say about this system (edited for length):

The automatic identification system (AIS) is an automatic tracking system that uses transceivers on ships and is used by vessel traffic services (VTS). … AIS information supplements marine radar, which continues to be the primary method of collision avoidance for water transport. Although technically and operationally distinct, the ADS-B system is analogous to AIS and performs a similar function for aircraft.

Information provided by AIS equipment, such as unique identification, position, course, and speed, can be displayed on a screen or an electronic chart display and information system (ECDIS). AIS is intended to assist a vessel’s watchstanding officers and allow maritime authorities to track and monitor vessel movements. AIS integrates a standardized VHF transceiver with a positioning system such as a Global Positioning System receiver, with other electronic navigation sensors, such as a gyrocompass or rate of turn indicator. Vessels fitted with AIS transceivers can be tracked by AIS base stations located along coast lines or, when out of range of terrestrial networks, through a growing number of satellites that are fitted with special AIS receivers which are capable of deconflicting a large number of signatures.


The AIS target appears as a triangle pointing in the direction of travel (top). Tapping the target on the chartplotter screen displays the name of the vessel (middle). Tapping other buttons eventually displays info screens for the target that include the vessel name, direction of travel, and speed (bottom). In most cases, there’s a second page screen with more info. Note that most of the statuses say “Sleeping” at the top; I still don’t know why.

What all this means is that AIS enables vessels to be tracked by ground- and vessel-based stations. The way it currently works on my boat is that my VHF radio includes an AIS receiver which gathers the data and sends it to my chartplotters, where those signals are plotted. AIS targets appear as little triangles pointing in the direction of travel. I can tap a triangle to get information about the target, including vessel name, type, speed, direction, and time to intercept (if applicable).

If you’ve been reading my Great Loop blog, you should have an idea of how helpful this has been when traveling among large commercial boats such as tugboats with barges (referred to as tows). I can see them on screen before I see them with my eyes and I can make radio calls to them by name to arrange for passing, etc.

The trouble is, my boat does not transmit my information to the AIS system. That means that my boat remains invisible to others on their chartplotters. I can see tows but they can’t see me.

(I should mention here that this is exactly opposite to the requirements of ADS-B systems on US-based aircraft, which are required to transmit (ADS-B Out) but not receive (ADS-B In). Of course, no part of the AIS system is currently required at all on a boat of my size and type.)

Lots of folks might think it’s a good thing that I’m invisible to the AIS system. Privacy, etc. [Insert eyeroll emoji here.] But I want to be seen by other, especially larger, vessels. I want to appear on their systems just like they appear on mine so they can reach out and talk to me if they need to.

And thus the challenge of adding this feature to my system began.

Getting the Numbers

The one component you must have to set up an AIS transmit feature on a boat is an MMSI number. Here’s another Wikipedia explanation for you:

A Maritime Mobile Service Identity (MMSI) is effectively a maritime object’s international maritime telephone number, a temporarily assigned UID, issued by that object’s current flag state (unlike an IMO, which is a global forever UID).

An MMSI comprises a series of nine digits, consisting of three Maritime Identification Digits (country-codes), concatenated with a specific identifier. Whenever an object is re-flagged, a new MMSI must be assigned.

My boat, Do It Now, is a “maritime object.”

(If you’re interested in a more gov-speak description, here’s more on the FCC website.)

You can get an MMSI number two ways — but wait. I’m getting ahead of myself here.

Before you can get an MMSI number, you need to have a Coast Guard documentation number, referred to by the Coast Guard as the vessel’s Official Number (O/N). It’s a 6 or 7 digit number assigned to the vessel at the time it is first documented with the US Coast Guard. This number remains with the vessel indefinitely and must be permanently affixed to the vessel in accordance with a bunch of rules we don’t need to go into here.

Coast Guard documentation is not required for a boat like mine. The previous owner, in fact, opted to skip documentation and simply register the boat with the state of Washington. That gave the boat a WN number which appeared with a registration sticker on boat sides of the bow. When I bought the boat, it was registered in my name so I believe that as far as the state of Washington is concerned, it’s still registered with that number. But when a boat is documented with the Coast Guard, that number is not used — in fact, it must be removed from the boat. Instead, the name and hailing port of the boat must be affixed to it in accordance with a bunch of rules that, again, we don’t need to go into here.

When a bought the boat, the title company handling the transaction — and yes, when you buy a boat like mine, a title company does get involved — handled my application for documentation. I was warned that it could take several months. Until then, I had my application for the number — in case the Coast Guard or anyone else needed to see it — and I could remove the WN number and put my boat name on the boat. I did that in November in Alton, IL. It seemed like a major step forward.

When I went home for three weeks in November, there was nothing from the Coast Guard waiting for me. Since then, I’ve had my house sitter check my mail regularly. In late January, he found a thick letter from the title company. The Coast Guard documentation was in it. He forwarded my mail and I finally got my hands on the Official Number in early February.

Yes, it had taken the Coast Guard a five full months to process the title company’s request on my behalf.

So that hurdle had been jumped. (I’m now in the process for getting the number affixed on the boat in a way that satisfies Coast Guard requirements.)

Back to the MMSI number… I mentioned that there were two ways to get this number.

One way, which I was told was the “easy way” was to apply through an organization such as Boat US, which had an online form. Everyone I asked told me to do this. But those same people didn’t read the fine print on the page:

BoatUS has been authorized by both the Federal Communications Commission (FCC) and the U.S. Coast Guard to assign MMSI numbers only to vessels that meet the following criteria:

  • Used for recreation only
  • Not required by law to carry a radio
  • Not required by law to have a FCC Ship Station license
  • Vessel is under 65′ in length
  • Do not communicate with or visit foreign ports (i.e. Canada, Bahamas, Mexico, and the Caribbean)

If you do not meet these criteria, you are legally required to obtain a Ship Station License from the FCC. They will issue an MMSI number with a Ship Station License.

It’s that fifth point that makes getting an MMSI through BoatUS impossible for me. You see, I have every intention of taking my boat to foreign ports — Canada and perhaps the Bahamas. So I must go through the FCC to get my boat’s MMSI number. (Also, I have to wonder why anyone would lock their boat to an MMSI number that didn’t allow overseas travel/communication. Getting an MMSI through the FCC obviously increases the market value of the boat; it’s ready for anything.)

Applying for an MMSI with the FCC

And that’s where the trouble began. You see, the FCC’s website is a typical US Government website, obviously designed by the lowest bidder whose job is to make it work — not make it work well or intuitively. It is confusing — far more confusing than it needs to be. And despite my years in tech, I struggled with it.

I knew — from extensive Googling — that I needed to fill out form 605. Specifically, according to the FCC:

In order to obtain a new MMSI number, please indicate that you wish to be assigned a new number in Question 11 of FCC Form 605, Schedule B.

I tracked down Form 605 and was able to download it as a PDF. Trouble is, it must be filed electronically. That means I had to do it online. And when I followed the link for filing forms online, I reached my next hurdle: I had to register with the FCC to obtain an FCC Registration Number (FRN).

I clicked the link to do that. I filled out a form. Eventually, I got a login that included an FRN.


You have to know which service to pick to use the wizard.

I logged into my new FCC account. I clicked a link to Apply for a New License. And that’s when everything went off the rails. You see, the FCC doesn’t just give you a list of forms you can fill in online — even after telling you exactly which form and line on the form you needed to complete! Instead, it displays the first page of an extremely poorly designed “wizard” that begins by asking you to “Select the radio service for the new license.” The pop-up menu includes dozens of options, several of which seem to relate to marine use. There is no guidance telling you which one to pick for an MMSI number. If you choose the wrong one, you don’t know it until you’ve filled out the form and realized that they never asked for the appropriate information. Then you have to start all over again with a different option. (Ask me how I know this.)

I’ll save you the bother of trying to figure it out for yourself (as I had to). The option you want is SA or SB – Ship.

I then worked my way through the “wizard” to answer questions. Eventually, I had to enter that Coast Guard Official Number (the documentation number). I also had to enter my boat’s name and some other information. Finally, I was done and was able to add my application to a sort of cart for payment. The fee was $185.

Even paying the fee wasn’t intuitive. I had to go to a payment system and then provide my FRN and select the item I was paying for. They take credit cards, so it was easy enough to pay. Finally, I submitted the form.

I did all this on a Sunday. I wondered how long it would take to process my application and whether the paperwork would arrive in the mail and how soon I’d have to start asking my house sitter to start looking for a letter from the FCC.


The FCC might have a crappy website, but it does have quick turnaround on applications.

But on Tuesday morning — yes, just yesterday — I got confirmation in the mail that my application had been accepted. The message contained a link and when I clicked it, my computer downloaded a PDF of the paperwork. So yes, once I’d figured it out, I had my MMSI within 48 hours of applying for it.

Next Steps


Garmin’s Blackbox has no interface. I hope it’s small; my electronics cabinet is very full.

If you recall, the whole purpose of getting the MMSI number was so that I could set up my boat for AIS transmit. Unfortunately, that’s also going to require additional equipment, specifically the Garmin AIS 800 Blackbox Transceiver. Although Garmin frustrates the crap out of me and I hate giving them my money, this is the “easy” way to get my boat set up to transmit AIS.

I was told by the General Manager at Pocket Yachts in Jensen Beach, FL — last Monday’s stop — that the best way to get this was to order it from West Marine and have it shipped to wherever I was going to have it installed. West Marine would program my MMSI number into it for me so as long as the installer knew what he was doing, it should work as soon as it’s powered up.

Today I’m in Melbourne, FL and there’s a West Marine a bike ride away. If they can do the programming in the store, I’ll buy it and take it with me. (I have a bunch of credits at West Marine that should bring down the price significantly.) If they can’t program it, I’ll figure out where I’ll have it installed and have it shipped there. I’ll be in Titusville, St. Augustine, and Jacksonville over the coming weeks; one of those places must have a Garmin installer nearby.

That should be the last hurdle to get this done. We’ll see.

Welcoming a Vaccine Mandate

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I share some thoughts about how Washington’s upcoming vaccine mandate may affect my participation in an art show.

Custer's Arts & Crafts
The Christmas Arts & Crafts shows are just two of the shows Jim Custer Enterprises produces.

Yesterday, I got an email from Jim Custer Enterprises, a Spokane-based company that manages arts and crafts and other shows in Washington state. I’m signed up to participate in two of their holiday art shows in November this year. The email was related to a vaccine mandate going into effect on November 15, 2021 for all indoor events to be attended by more than 1,000 people.

My History with Custer Shows

This will be the first time I’m attending any of Custer’s shows. I had originally applied to one of their shows way back in spring of 2019 but my application was late and they were already full. I applied again for the November 2019 shows and was waitlisted. Undaunted, I applied again for their two spring 2020 shows and was accepted. But then Covid came along and both shows were cancelled. The November 2020 shows were also cancelled. So were the spring 2021 shows.

But the November 2021 shows were not cancelled and my previous acceptance got me in without going through the whole reapplication process.

There are two shows — one in Pasco and one in Spokane — and both are indoors. Most of the artists I know in the area are familiar with the shows and several from Leavenworth’s Village Art in the Park, where I sell my jewelry a few times each year, are going to both of them. They say good things. I was slightly concerned when I learned that the shows had an admission fee — it seems to me that less people will attend if they have to pay a fee to get in — but I suspect that if people are willing to pay to attend, they’re also more likely to buy. I’d rather have X number of serious shoppers than X times 5 number of browsers who are coming to waste time (theirs or mine) or look for ideas for their own work.

Because both of the upcoming shows are in November, they are holiday shows full of gift buyers. I’ve been spending the past week making jewelry and, will continue to do so right up until November 3 when I have to pack for the Pasco show. It would be a crying shame if I ran short on inventory and I’ll do everything in my power to prevent that from happening. These two shows are the last two I’ve got scheduled for 2021, so I want them to be successful. As I’ve mentioned elsewhere, 2021 is the year that ML Jewelry Designs will finally turn a profit — after years of investing in equipment, materials, and education and taking a big hit from Covid closures in 2020. These shows will be my last chance to make that profit big.

The Vaccine Mandate

The email message I got from Custer talked about a vaccine mandate that I was not aware of that takes effect on November 15 and how it may affect the Spokane show. It started like this:

We are sending this email today to bring you updated Covid-19 protocol information. Last Friday, Washington State Governor Jay Inslee announced a new Vaccine Mandate that is going into effect on November 15, 2021. If you are an artist in both our Pasco and Spokane Shows, this mandate only applies to the Spokane Show since it will take place four days after the mandate goes into effect.

It then went on to provide exact wording from the mandate:

Everyone over the age of 12 must show proof of Covid-19 vaccination (verified by CDC record cards, photo of the card, printed certificate or screenshot from MyIRMobile.com or other immunization records from health providers) to attend the event OR show proof of a negative Covid-19 test taken within 72 hours of the event.

It then explained how the mandate affected the show and reminded artists that if they have not been vaccinated yet, their only current option is the one-shot Johnson & Johnson vaccine, since there isn’t enough time now to get both shots of either the Pfizer or Moderna vaccines prior to the show. If the artist did not want to get the vaccine at all, he/she would have a very narrow window to get the Covid-19 test and prove negative results prior to the show — and testing is backed up in Spokane right now.

(Honestly, I think that anyone who makes a living participating in art shows who is not vaccinated is a total idiot — how can they risk regular exposure to so many people without protection? But hey, I believe in science and I think the “personal freedom” argument is a lot of bullshit fed to gullible people incapable of their own thought by manipulative “conservatives” in their never-ending efforts to divide Americans into Us vs. Them.)

Expected Trouble

The email includes the following, which also came to my mind:

If you are wondering how this will affect attendance, we are in the same boat. There will be people who will be frustrated and upset by the mandate who will make it political. There will also be people who will feel more comfortable attending because of the mandate. At this point, we are so happy to be having any show that we will take what we can get! Truly, it’s better than last year when there was no show at all. The people that will be there, will be ready to buy! There’s no doubt about that.

First of all, I have to admit that I will feel a lot more comfortable participating in a show with this new mandate in effect. I had the less effective J&J vaccine — which was the only one available when I went to be vaccinated at the end of March — and am not sure if I’ll be able to get a booster prior to the show. I’m terrified of becoming a breakthrough case — two of my vaccinated neighbors got it from a vaccinated employee who tested negative three times before a positive test result. That tells me that I can’t put 100% of my faith in either vaccines or tests. Despite that, I feel a lot safer knowing that everyone attending will either be vaccinated or have gotten a negative test. While this does not eliminate the risk (in my mind, anyway), it does greatly reduce it.

I should also reiterate here that I’m not worried about dying of Covid-19. I’m worried about long-term effects that could possibly reduce my quality of living for the rest of my life.

Unfortunately, both shows — Pasco (to be held pre-mandate) and Spokane — are in the red side of our blue state. That means many folks have bought into the “conservative freedoms” argument for not getting vaccinated. Never mind that vaccines for polio, smallpox, measles, mumps, rubella, shingles, tetanus, and flu have been either required or widely available and used with little or no side effects for decades. These people have been convinced that their personal freedoms are being threatened by Covid-19 vaccine mandates and that it’s their “God-given Constitutional right” to refuse a vaccine that has the potential to save their life or at least help them avoid a serious, contagious virus.

So I suspect there will be a lot of push back including, but not limited to arguments at the gate. Violence would not surprise me. I hope Custer hires a good security outfit.

I also suspect that folks will be using — or trying to use — fake vaccine cards. I sure hope they’re caught. I believe they should be arrested, but I suspect they’ll just be turned away. If they’re caught at all.

Will folks who, like me, are worried about Covid be more likely to attend? I sure hope so. I’d honestly prefer selling my work to like-minded folks. I’m sick and tired of listening to anti-vax whiners moaning about their freedoms while putting my health at risk.

Meanwhile, I have to admit to hoping that a few angry, idiotic artists back out of the show in some sort of protest. First of all, I don’t need two work among people like that. And second, well, less competition.

It’s Business

In the meantime, I have a lot of sympathy and respect for the folks at Jim Custer Enterprises. These people make their living producing shows and everyone I’ve spoken to about them agrees that they are good people. I can imagine how having to cancel shows for a year and a half must have affected their business. No income for that period! It’s a wonder they’ve been able to survive at all.

It’s this closing paragraph that sums up their situation to me (emphasis added):

As we wrote in our cover letter when you first applied, flexibility is the key to your successful show participation this year. We are in a global pandemic and it is not over. Yes, everyone has an opinion about it. However, as business owners of a company who brings together large numbers of people, we will continue to trust the science and comply with whatever mandates will help the shows go on.

No matter how the show turns out, it’s a real pleasure to do business with an organization that not only thinks like this, but isn’t afraid to make their thoughts on the matter public.

How Debt Service Prevents Financial Prosperity

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Understanding what debt costs.

Last night, in the middle of the night, U.S. Senate Republicans voted in a tax bill that would add an estimated $1.4 trillion to the deficit over the next 10 years (per the Congressional Budget Office (CBO) report). The bill was long with many handwritten amendments and no one was given enough time to read and comprehend the entire thing. There was no debate in the Senate; Democrats were not even allowed to ask for enough time to read it all. Despite all this, almost every single Republican voted in favor of the bill.

Democrats did not. I like to think it’s because they want to fully understand something they vote in favor of, which I double many Republicans did. Or perhaps they actually believed the data in the CBO and Joint Tax Commission reports, which both indicated that the middle class would be harmed by the bill for the benefit of the wealthiest of Americans — many of whom just happen to be the biggest donors to Republican candidate campaigns.

All politics aside, however. This blog post isn’t about politics. It’s about the financial impact of living in debt.

My Qualifications

Before I dive into the numbers, let me take a moment to explain what makes me qualified to write about this.

First, my education and early work experience. I graduated from Hofstra University with a BBA with Highest Honors in Accounting. From school, I went right to work with the New York City Comptroller’s Office — and no, that’s not a spelling error — Bureau of Financial Audit. My job was to audit various organizations that had contractual agreements with the City of New York. I started as a Field Auditor and, within two years, became a Field Audit Supervisor responsible for overseeing up to 13 auditors. When it became apparent that the only way to move up in the Bureau was for someone to retire or die, I moved into private industry. I wound up in the corporate headquarters of Automatic Data Processing (ADP) where I was a Senior Auditor and then a Senior Financial Analyst. I audited various divisions of the company all over the country and later crunched numbers for executives who needed numbers to say certain things.

Second, my own experience with debt. It happened right out of college when I got my first credit cards. It was easy to buy things so I did. Trouble is, I had a lot of credit cards and I carried a balance on all of them. After a while, I could only afford the minimum payment on most of those cards. And if there’s one thing you must know about credit card debt is that it will take years to pay off a credit card if you only send in the minimum payment every month. I learned this lesson the hard way. I was able to avoid bankruptcy by simply cutting up the cards, reducing my spending, and putting more money toward my balances until they were all paid off. These days, I only have two credit cards — one for personal use and one for business use — and I pay the entire balance in full every single month before the due date. (More on the amount of money this saves in a moment.)

Third, my second career as a freelance technical writer. Writing 80+ books gave me plenty of experience explaining somewhat complex topics to readers. Among my books are about 10 editions of Quicken: The Official Guide for Osborne/McGraw-Hill. We wanted a book that went beyond simple software how-to and actually provided good financial advice for readers. I wrote sidebars and created downloadable worksheets for readers to use to help them improve their financial situation. A lot of them dealt with debt. (More on this in a moment.)

So yes, I know a little about finance and debt and I have the skills to write about them. If you need to learn, read on and be educated. If you think you already know what I have to say, read on and let’s compare notes in the comments section that follows. Fair enough?

Debt Service

The online Financial Dictionary, has several definitions for debt service. I like the second one because it applied to both businesses and individuals:

The amount of money required to make payments on the principal and interest on outstanding loans, the interest on bonds, or the principal of maturing bonds. An individual or company unable to make such payments is said to be “unable to service one’s debt.” An example of debt service is a monthly student loan payment.

So let’s take that student loan payment as an example — especially since student loans are in the news so much these days.

I was fortunate; I only had to borrow $5,000 and I had 10 years to pay it off. My payments were about $60 per month. (And no, I won’t tell you how long ago this was.)

Let’s do the math on a more realistic modern example. Suppose you graduated from college with $50,000 in student debt. While there are many types of repayment plans, let’s go with a simple one: 12 years at 5% interest. This spiffy loan calculator template in Excel does all the math for you on monthly payments, and interest paid:

Loan Example
Not only does this Excel template calculate the amounts for a loan, but it charts the percentage of interest in your debt service.

In this example, your debt service for this loan would be $462.45 per month for 144 months. Over that time, you’d pay off not only the $50,000 you borrowed, but an additional $16,592.11 in interest.

Now imagine you have a Visa card that you just used to pay for a much needed — in your opinion, anyway — vacation to the Caribbean. You’ve got decent credit and the issuing bank gave you a $10,000 line of credit. But when you called to ask if you could raise that limit, they graciously popped it up to $14,000 — which is a great thing because you managed to charge up $8,459 on top of the balance you were already carrying for that big screen television you bought for the Super Bowl and last year’s trip to Hawaii. Now you’re looking at a balance of about $12,500. But when the bill comes, you’re relieved to see that the monthly minimum payment is only $273.33 per month.

But let’s take a moment to take a closer look at the numbers. As this extremely helpful Minimum Payment Calculator explains, credit card companies calculate your minimum payment based on either a percentage of the balance or your interest plus 1%. (You can get the details for your credit card in the fine print in your bill or credit card agreement. You did read that, didn’t you?) For this example, I used the details for my Chase Amazon Visa card: currently 14.24% interest (tied to prime so it could change at any time) plus 1% of the balance plus any interest, late fees, or unpaid amounts due. If all that adds up to less than $25, then my minimum payment is $25.

Minimum Payment
The minimum payment calculator explains just why it’s so dumb to send in just the minimum payment on your credit cards every month.

Going a step farther with the math on this, you’ll learn that it will take 305 months to pay off the debt if you only pay the minimum payment. Why is that? Simple: each payment you make goes mostly to pay off interest so the debt is reduced at a very slow rate. If you stopped using that credit card and paid just the minimum payment every month for 305 months, you’d pay nearly $14,000 in interest on the original $12,500 debt.

Minimum Payment
The CFPB — yeah, that’s the government agency that Trump says is hurting banks — added what’s in the red box to every credit card bill in an effort to educate consumers about credit card debt.

A side note here. Because so many people don’t understand this, the Consumer Financial Protection Bureau, which was created during the Obama administration in part to help protect consumers from deceptive lending practices, began requiring credit card companies to make it clear how long it will take to pay off your credit card with just the minimum payment each month. Here’s an actual image from one of my Amazon Visa statements.

If you put all this together, you can see why it’s easy to get bogged down in debt when you have a bunch of credit cards and only send in the minimum payment. The debt never goes away unless you pay more than the minimum and stop using the credit cards.

Remember this: The money you spend on debt service is money you can’t spend on anything else. It should be considered mandatory spending, not discretionary. This is an important concept to keep in mind, not only for this discussion but for the way you manage your personal or business finances. The more debt you have, the less choices you have on how to spend your money. And the less money you’ll be able to save to get ahead.

Paying Down Debt

One of the things I recommended in my Quicken books was to pay more than what’s due on a debt — especially a large debt like a mortgage or a high interest debt like a credit card or consumer loan. That spiffy Excel template I showed earlier makes it easy to do the math. Suppose you pay an additional $100 per month toward that loan. Here are the results:

Loan Example 2
By sending in an additional $100 per month in this example loan, you can knock nearly 3 years off the term and save about $4,000.

Of course, it isn’t always easy to send more to pay down a loan. Maybe you can’t do it every month. But sometimes you can. Maybe you’ve sold a motorcycle you never ride for $1000 or got a $1500 holiday bonus. Or maybe this month’s commissions were better than expected. Send the extra money to a debt you want to pay down. It will make a big difference.

True story: When I was married, I was in charge of household finances. Whenever there was extra money in our joint checking account, I put that cash towards our mortgage. The result? We paid off our 15 year mortgage in 11 years, savings thousands of dollars in interest. (Yes, at the age of 50, I actually owned my home. And here’s a secret: I own the home I’m in now, too. Life is very good without a mortgage payment.)

My final piece of advice about personal credit is this: there is no reason to have more than one or two credit cards. Cut up the department store and gas credit cards. Get yourself down to just one or two MasterCard/Visa accounts. These cards can be used anywhere and some of them will earn you nice points or rebates. My Amazon Visa accumulates dollars I can spend on Amazon and, since I buy a lot of stuff there, I use them as they are accumulated. My AOPA MasterCard earns rebate dollars I apply to my account. Neither card comes with an annual fee and I pay balances in full every month so I don’t pay interest. This is free money, folks. It takes a lot of willpower to spend only what you can afford to pay off every month, but it is possible — I’ve been doing it for about 15 years now. Keeping your debt under control is the best way to stay financially secure when weathering unexpected hardships.

The Big Picture

What prompted this particular blog post is the news that the new tax plan will add an estimated $1.4 trillion (with a T) to the budget deficit. To understand what that means, let’s look at what a deficit is.

According to the Financial Dictionary, a deficit is:

A situation in which outflow of money exceeds inflow. That is, a deficit occurs when a government, company, or individual spends more than he/she/it receives in a given period of time, usually a year. One’s deficit adds to one’s debt, and, therefore, many analysts believe that deficits are unsustainable over the long-term.

(Again, I like that second definition because it applies to government, businesses, and individuals.)

Let’s look at an individual first. Supposed your take-home net pay is $3,000 per month. Every month, you pay $1200 for rent, $250 for utilities, $500 for groceries, $462 for your student loan, $100 for gas for your car, $80 for car insurance, $273 for your credit card-funded trip to the Caribbean and other stuff, and a total of $195 in payments toward your other credit cards. That’s a total of $3,060. Without even accounting for small miscellaneous expenses, pocket money, and the countless things I didn’t think to include here, you’re already running a $60 per month deficit. (Good thing your health insurance is a benefit that’s already taken from your paycheck; some of us aren’t so lucky and have to pay that out-of-pocket, too.)

So you increase your debt with cash advances or payday loans to see you through to the next month. Or maybe you’ve got some savings and you’re dipping into that to make up the difference. But eventually you’ll max out your debt and your savings will run out. What happens when it does? What happens when your monthly expenditures exceed income and you simply can’t pay what you owe anymore? Eviction, auto repossession, bankruptcy, homelessness. These are all possible.

This is the little picture — what happens when one person has a deficit. It’s easy to imagine it on a larger scale, like for a business. Think of a local retail business. The owner has to invest a bunch of money up front to set up the store with fixtures and get it properly decorated. He might have gotten a loan for that. Then more money to buy inventory. Rent, utilities, advertising, insurance. Then employees, with or without benefits but certainly with wages and employment taxes. He’s already at a deficit before he opens his doors. The business opens and he slowly builds a customer base. But what happens when/if revenues don’t cover monthly expenses? Or if a Walmart moves into town and half of his customers decide to shop there instead? More loans can help in the short term, but as the definition of deficit that I quoted above says, “many analysts believe that deficits are unsustainable over the long-term.” Of course they aren’t. When you spend more than you take in, you will eventually lose the ability to pay for what you’re spending.

CBO 2017 Budget Numbers
The CBO 2017 Budget numbers.

Now let’s look at the very big picture: the United States economy. The Congressional Budget Office has the numbers for 2017; the U.S. government spent $700 billion more than it took in for 2017. That means that the government added that $700 billion to its debt. And, according to the CBO, the country now has $14.7 trillion (yes, with a T) of debt.

(Suddenly, that $12,500 of credit card debt doesn’t seem so bad, eh?)

It’s hard to imagine $14.7 trillion in debt, but a few infographics show its impacts. First, here’s one from the CBO for 2016:

CBO Income and Expenditures for 2016
The CBO prepared this infographic for 2016. Can’t read it? Click here to download the big picture in PDF format.

I know it’s hard to read here — I had to reduce it to get it to fit in my blog page format. (You can download a PDF that’s easier to read.) What I want to draw your attention to is the number at the top of the chart on the left: Net Interest: $241 billion. So in 2016, the U.S. government spent $241 billion dollars on interest for its debt.

This next chart puts interest paid in perspective to various categories of spending. It’s from the National Priorities Project and is based on Office of Management and Budget (OMB) numbers for 2015. You can find it on the site’s Federal Spending: Where Does the Money Go page. I assume that this data is updated regularly, so if you’re reading this in the future, you may see different numbers. Here’s the spending chart that illustrates my point:

Total Federal Spending 2015
Here’s a breakdown of spending based on actual services provided. I think it’s tragic that the United States spends more money on interest for its absurd debt levels than it does for vital services that really can make America great again: education, energy, science, and food and agriculture, to name a few.

My point is this. Because we’re so deep in debt — and have been for a very long time now — we spend a huge amount of money just paying interest on our debt. That money could be going to education or health care or science. It could be doing so many things that actually benefit the American people — just like the interest on your credit card debt could be paying for a gym membership that might make you healthier or piano lessons that could develop your kid’s talent for music. Or any number of things that could make you or your family’s life better.

Why Are We Making this Worse?

These are the numbers. I know I’ve presented data from three different years, but it really doesn’t matter. We’ve been in this deficit/debt situation for a very long time now. Despite efforts to reduce the debt with a budget surplus as President Clinton managed to do during his term, the situation gets worse every year.

And now the Senate has approved a tax plan that will cut taxes for big businesses and the country’s wealthiest individuals, banking on a disproven “trickle down effect” to bring up the economy as a whole so more taxes can be collected. The CBO has already said that this budget will increase the deficit by $1.4 trillion over the next 10 years. Can we really afford debt service on that? What will we be giving up in order to pay interest on that debt?

Personally, I’m sick of Fox News-brainwashed right wingers complaining about Democrats increasing the deficit and debt. The truth is here for anyone interested in knowing it: the Republicans are even worse about budgeting. Last night’s ill-informed vote on a hastily prepared tax plan proves it.

Americans already pay among the lowest tax rates for individuals in a developed nation. We pay taxes for a reason: to pay for the services we get. When my house catches fire, I want the fire department to show up. When I drive to Seattle or Portland or Arizona, I want to drive on smooth roads and cross bridges that won’t collapse. If I had kids or grandkids, I’d want them to go to a school where the teachers were well paid, happy, and effective. I want the FDA to make sure the food and medications I take are safe. I want the FAA to make sure the planes I fly in are safe and that pilots I share the sky with are properly trained and certificated. I want to be as proud of my country today as my parents were when we put the first man on the moon.

US Taxes Compared to World
Pew Research study of U.S. taxpayer burden in 2015 compared to other developed nations. Get the details here.

None of this is possible without the revenue to cover the expenses of these services. Revenue comes from taxes. I’m willing to pay my fair share and I know that many others are, too. Why is that so hard for Republicans to understand?

As a fiscally responsible individual, I want this deficit budgeting to stop. Don’t you?

How can we ever expect our country to become “great again” if we throw away so much money on debt service?