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« Social Security Reform Thursday: Fifty-Three -- Chinese Pay-As-You-Go Failure. | WILLisms.com | Quotational Therapy: Part 92 -- Socialists. »

Trivia Tidbit Of The Day: Part 316 -- National Debt.

Record Highs, Or Not? Both, Sort Of-


That's our public debt, courtesy of the Bureau of the Public Debt. Yes, a governmental bureau with that name actually exists.

And surely you've seen or heard about the National Debt Clock in New York City. Ticking away, frantically. Retired briefly. Then out of retirement again.

Debt clocks are nice and all, but you might want to check out the Best Debt Clock In The USA, by the Skeptical Optimist.

It shows more than debt. It includes America's GDP for reference. Otherwise, it's just a number. The Skeptical Optimist's version also includes the Debt-to-GDP ratio, which, unsurprisingly, doesn't frantically increase every few seconds.

And you may want to also take a gander at the history of America's public debt as a percentage of our economy (.pdf):


So, public debt isn't exactly at an all time high? Or is it?

That depends whether we are making a political point, or whether we are being intellectual honest. I tend to believe our national debt is too high right now, but I also like to keep things in perspective.

Not that we ought to compare ourselves to the fiscal mess that is Europe, but the U.S. ranks 35th in the world in terms of public indebtedness, which means we have a lower Debt-to-GDP ratio than Italy, France, Germany, Singapore, Israel, Belgium, India, Japan, and a panoply of other countries.

Let's also think about what comprises our debt, who holds our debt, and so on.

I own some of the debt, personally. I have some bonds I could cash whenever I please, in exchange for money. I tend not to be that worried about that particular portion of the National Debt. Public debt isn't that awful when you think about those millions of private individuals out there who own a little piece of it, earning small bits of reliable interest over time.

$4,828,395,378,375.03 of the National Debt is debt held by the public.

$3,520,882,319,879.15, meanwhile, is intragovernmental debt, which includes money for government trust funds, pensions, and Social Security.

Remember those hundreds of billions in IOUs the government owes itself on Social Security? Yeah, that's going into the National Debt.

That Social Security portion (also called the Old-Age and Survivors Insurance Trust Fund) is by far the largest individual portion of intragovernmental debt, as well as the fastest growing individual portion (.pdf) (see page 30, Table FD-3).

In other words, it all goes back to entitlement spending.

This is the same entitlement spending, so gargantuan already, that is also growing so rapidly. An unpleasant thought.

There's also been a lot of attention paid to foreign ownership of the debt, the implication being that China owns the United States now.

Well, here's how foreign ownership of U.S. public debt breaks down:

Of debt held by the public (as opposed to that intragovernmental debt discussed before), roughly 50% is owned by foreign investors, foreign governments.

Governments such as (.pdf):


So China owns what amounts to 3% of America's National Debt. You can be the judge on just how egregious or not egregious that is.

Not all of that is held by foreign governments, either. About 2/5 of foreign-owned debt is held by private foreign investors, rather than central governmental banks (.pdf):


What seems to get overlooked in these discussions is this: people and other entities are buying American debt because they ultimately believe in the strength and stability of America's economy.

Furthermore, the National Debt has increased primarily during a period of ridiculously low interest rates. So, essentially, these foreign investors (including governments) are loaning the U.S. government money at grotesquely cheap rates.

Two things:

1. We're just not hovering near any sort of scary or unprecedented debt breaking point, as many want us to believe.

2. It is not fair to pin responsibility for recent National Debt increases on President Bush or even a pork barrel loving GOP Congress. Look where the largest increases in spending have come over the last few years. It's not from bridges to nowhere; it is overwhelmingly from entitlement programs.

My suggestions:

1. Reform entitlement programs. Drastically.
2. Put a freeze on non-defense discretionary spending, as well, or at least index it to inflation.
3. Major tax reform to supercharge the economy.

Do those things and the Debt-to-GDP ratio will shrink faster than the National Debt Clock can roll the numbers backward.


Previous Trivia Tidbit: Index Of Leading Economic Indicators.

Posted by Will Franklin · 21 April 2006 05:57 PM


It sounds good to me!... Now who do we have to know around here to set this in motion?

Posted by: Zsa Zsa at April 21, 2006 07:01 PM

great more facts, post the alarmist doomsayer media on suicide watch.

Posted by: christian at April 21, 2006 08:23 PM

The national debt as a percentage of GDP is an irrelevant statistic because: at times we have had a larget time debt/GDP to ratio the economy has been booming, taxes have been high, and the spending that created the debt was one time emergency spending. That is not the case today so, the amount of debt that the government can safely hold is much lower as a percentage of GDP. In fact at the rate we are going every cent of tax revenue will go to paying interest on the debt in the 2040. This is the year that, at least in theory, the bonds will lose all value and the economy that is dependant upon them will collapse.
In addition because of questionable accounting practices which include hiding the national debt in the Social Security surplus the actaul debt is over $2 trillion higher than the reported debt and 905 of that $10 trillion debt is held overseas. This is a disaster waiting to happen. Our economy is on steroids and it will eventaully kill is if we don't stop now.

Posted by: young_activist at April 22, 2006 02:49 PM

That is not the case today so, the amount of debt that the government can safely hold is much lower as a percentage of GDP.

The amount of debt the economy can sustain is directly proportional to the growth rate of the economy. And our economy today is growing at a not-too-hot, not-too-cold rate of 4%. It is the alarmist that thinks the answer is to raise taxes to cut down on the debt (the German or French solution), that stagnates the economy and makes the debt problem even worse. That is why the Bush tax cuts are so important. We will eventually grow our way through the debt problems if we can control entitlement spending.

Our problems stem from the 1930's and 1960's respectively when "The New Deal" and "The Great Society" came about. Transferring wealth and money from the rich that are driving economic growth and jobs to the poor does little to help GDP growth or create new jobs. Our entitlement programs and our spending on transfer payments needs to stop.

The point made by young activist about our spending is valid if only applied to our spending. Over 50% of our current budget goes to entitlement programs. So if there is a problem with spending, what do we need to cut? It is either raise taxes or cut entitlement spending and raising taxes will slow the growth rate and necessitate even deeper cuts or larger deficits. Hence why the budget deficit has shrunk considerable from the original estimates--the growth of the economy has raised revenues far more than anticipated.

Posted by: Justin B at April 24, 2006 02:10 PM

We're just not hovering near any sort of scary or unprecedented debt breaking point, as many want us to believe.

Perhaps not...but we are much closer than we were 6 years ago. Ya know, back when we had a SURPLUS.

It is not fair to pin responsibility for recent National Debt increases on President Bush or even a pork barrel loving GOP Congress.

Of course not. Everything is teh Liberals fault. ALWAYS.

Look where the largest increases in spending have come over the last few years. It's not from bridges to nowhere; it is overwhelmingly from entitlement programs.

Would those be the ones added by Bush and the pork barrel lovin' GOP?

Yea, I can't imagine why increasing spending while decreasing tax revenue would push one closer to the brink of financial collapse. The simple fact that we're even talking about it now, instead of the record surpluses we had at the end of the 20th century, tells you how utterly and completely fiscally irresponsible Bush and the GOP are...in practice (Liberals are fiscally irresponsible in theory but the real world, and those charts up there, paint a much different story).

So what's your answer? Same old one from the GOP. Fuck the poor and save the rich. Who's surprised by that?

Strange how our debt is now increasing each year by roughly the same amount of interest we are paying.

If you had a company that was run like that, how quickly would you fire the CEO?

Posted by: wah at April 24, 2006 03:46 PM

Just read some of your archive stuff, and noted how your continued (and increasinlgy strange) defense of neocon leadership has shown cracks in the past.

And where did the bulk of that increased spending come from? Was it all that pork we hear so much about?

No. It was mostly from entitlement growth and increased spending on "national security"(sp)..

You mispelled "Iraq".

I had to fix it for you, but it looks like you needed a reminded, as you forgot to mention this...for some reason.

Posted by: wah at April 24, 2006 04:14 PM

Just wanted to make one thing clear...

When I mention "decreasing tax revenue"...it's as a percentage of GDP.

2000: 20.9
2001: 19.8
2002: 17.9
2003: 16.5
2004: 16.3

Posted by: wah at April 24, 2006 04:22 PM

Awesome. Now if we could only get that down below 10%.

Posted by: Will Franklin at April 24, 2006 04:24 PM

Awesome. Now if we could only get that down below 10%.

Well, that would be good, I guess, as it would finally and totally expose the concept of "cut taxes to increase revenue" as complete bullshit.

I don't know if you recall, but the idea was that lower taxes would increase revenue (a.k.a. "voodoo economics"). It hasn't happened. And won't.

Posted by: wah at April 24, 2006 04:48 PM

Who gains from the Bush tax cuts.
(In billions of dollars)
Economic group 2001 2002 2003 2004 2005
Lowest 20% $1 $2 $2 $2 $2
Second 20% $7 $7 $8 $8 $10
Middle 20% $11 $11 $11 $12 $14
Fourth 20% $15 $16 $17 $19 $22
Next 15% $15 $18 $19 $24 $27
Next 4% $5 $9 $9 $13 $10
Top 1% $4 $15 $15 $26 $25

Posted by: young_activist at April 24, 2006 06:11 PM

It's well established that poorer people gained far more as a percentage of their income than richer people did, under the Bush tax cuts. In fact, many, many millions of low-or-no-income Americans not only do not pay any taxes these days, they are PAID taxes. They earn income from taxes.

When the top ~50% of taxpayers account for ~96% of taxes paid, your young activist numbers are bunk.

Posted by: Will Franklin at April 24, 2006 06:20 PM