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A Day in the Life of the National Debt
You can take a look at it by watching usdebtclock.org for a day. The numbers are climbing up constantly, and have long surpassed this little screenshot clip I took last night.
To be honest, I have no idea where these data come from exactly, which assumptions might go into them, or what arcane methods of calculation are involved. I don’t know why the debt-to-GDP ratio at the Debt Clock (about 128%) is different from the one you get when you Google the “US debt to GDP ratio” (about 107%). Debt Clock claims that it is “updated continuously to the most precise calculations, using complex formulas and exacting standards, and the values displayed are verified from the best sources available.” The debt-to-GDP ratio, if you hover over it, is said to be a “Real-Time Running Total” from the Federal Reserve.
Probably more reliable than the first thing Google turns up.
But what I can say for sure is . . . it’s bad. It’s very, very bad.
The debt per citizen is more than 85,000 dollars; the debt per taxpayer is more than 227,000 dollars. The debt is larger than the entirety of the wealth produced by the US economy in a year. One of the larger budget items is interest on the debt at more than 400 billion dollars.
Defense is around 730 billion, but Social Security/Medicare/Medicaid is about 2.5 trillion combined. Debt is driven by big welfare. We’re not getting out of this till we fix entitlements, not that a nice bout of Trumpy deregulation to boost the GDP wouldn’t do us some real good.
Published in General
It is an irrelevant number.
Why?
The difference between the 128% and the 107% figure is probably because the main site referenced in the OP is misleading you, by using the higher “gross debt” figure that includes debt held by the government itself. The relevant figure is the lower “net debt.”
I can’t link it from my phone, but if you go to the President’s budget at the OMB website, select historical tables, and look at table 7.1, you’ll see the following figures for the latest year (2020):
Gross debt $21.0 trillion, 128.1% of GDP
Net debt $16.6 trillion, 100.1% of GDP
Even the net debt number is bad, but not as bad as the website cited in the OP suggests.
Thanks. I might have guessed!
But debt held by the federal government means bonds that the Federal Reserve bought, right? That’s either sold back to people who invest in bonds and then becomes regular debt, or else it’s never sold in which case it’s a fancy way of printing money to get rid of debt. So very bad in one way or another.
Did I get that right?
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Nobody cares about deficits and debt. Democrats don’t care. GOP used to pretend it cared but once Trump showed he didn’t care, GOP sighed with relief as it realized it no longer needed to pretend. Nobody cares.
And hence we’re doomed.
(But to be fair, Trumpy deregulation to boost the GDP is a part of the long-term solution.)
No. There is a column in table 7.1 for debt held by the Fed, but this is counted as part of debt held by the public (what I called “net debt”). The roughly $4.4 trillion difference between gross debt and net debt is for purely intergovernmental debt, not debt held by the Fed.
Well, well.
I don’t know anything about that. What sort of debt is that exactly?
Oh, I think I get it. This is debt in things like a Social Security trust fund; it’s still government bonds, but held (oddly enough) by the government.
If they sell those, does the Treasury Dept. not have to spend money to buy them?
(Gee, I hope I’m asking the right question.)
This is the issue I worry about the most and which will never get addressed
Too many Americans want their piece of the Federal Gov
It is going to be an ugly crash on the economy for this to be addressed by the Federal Gov
My mother’s great-grandfather had a wholesale dry goods business and a cotton brokerage in Augusta, Georgia. He sold quite a bit to the Confederate Army and Georgia confederate government. (I found copies of some of the invoices and receipts.) My aunt said that it was a running family joke that “Grandpa Mike” had barrels of worthless confederate bills in the basement for years after the war presumably on the off chance that they might again be worth something (the south rising again?). They might have been worth something as historical interest today but they long since rotted away and were otherwise all gone by the 1930s.
When I look at the debt figures and know that inflation will hit hard, I think about Grandpa Mike’s barrels of worthless specie and wonder if my generation is about to do a repeat.
Because the debt only matters if it leads to an increase in inflation, and inflation only matters if it affects output.
The whole West goes broke if the five year treasury goes up two percentage points. The Fed will never let that happen, and then when the public pays attention, that’s when the fun starts.
I was thinking about it. It’s really stupid to have a central bank with as much discretion as we have without a constant informing the public of what interest-rate breaks the government.
How do you have a civilization if you don’t get a 1% real return on savings?
I gave up trying to understand this a long time ago.
Saint Augustine cares, for one.
Irrelevant to what?
The other way to say this is, at some point the public is going to find out what legal tender laws are really for. lol
St. A., I’ll try to give a quick explanation of the intergovernmental debt.
Intergovernmental debt is a bookkeeping issue. One part of the government owes money to another part of the government. If you’re going to count the debt, you also ought to count the asset, so they zero out.
The analogy is to consolidated financial statements of a corporation. I happen to have experience in this, as before I was a lawyer, I worked as an accountant for a couple of companies that had foreign subsidiaries. (It doesn’t matter if the subsidiary is foreign or domestic.)
Here’s a simple example. Imagine that you own a company, and it has $10 million in debt. For some reason — and there are many — you set up a wholly-owned subsidiary of the company, and say it has debt of $1 million to outsiders and $1 million to its parent company.
There are good reasons to keep separate books for the parent company and its subsidiary. But when reporting for the overall operation, it makes no sense to report separately. Instead, the parent company presents “consolidated” financial statements, which include the assets and liabilities of its subsidiaries.
But what is the proper corporate debt in this scenario? Well, you could say $12 million, because the parent has $10 million in debt and the subsidiary had $2 million in debt. But $1 million of the subsidiary’s debt is owed to the parent, so this is deducted. The total corporate debt reported is the amount owed to others, $11 million in this example.
I hope this helps.
Here’s the thing. Depending on the context, it could actually be a misrepresentation to claim that the consolidated corporate debt was $12 million. Using the federal “gross debt” figure is similarly misleading.
Assuming those only-ifs are both true, are those not likely outcomes?
Perhaps in another sense of “gross”?
Anyway, thank you!
But is that debt mostly Treasury bonds in things like Social Security trust funds? If so, another question. The website says this:
When the trust fund sells off its debt, does that mean it sells the bonds and gets cash for it? If so, it seems like the government will still have to pay off those bonds, and that it is a form of debt that really does matter.
The debt itself leading to an increase in inflation is not likely. The rate of spending could lead to an increase in inflation, but at the same time there could be an increase in output. The amount of money that the US is going to spend on infrastructure will cause an increase in inflation and the real GDP growth rate.
Inflation is going to increase and I think the increase in inflation will be sustained, but not for the reasons that people usually think. The pandemic has changed work, both what people are willing to tolerate and the nature of work. I think there is going to be a sustained, large rate of increase in real wages at the same time as there will be much larger real GDP growth than the US has had since the 2007-2009 recession. I do not see why this is a bad thing.
I do not see why, in the choice between, say, an economy growing at a real rate of 6% with 5% inflation and an economy growing at 2% with 1% inflation, the second choice should be desired by policymakers.
This doesn’t seem quite right to me, but I can’t put my finger on why.
(Yeah, that’s not much of an objection. If it’s even an objection at all.)
@markalexander, you probably think I’m missing something here. But what?
Now that I think I know how to answer.
I don’t see the reason either.
What we want is an economy growing at a real rate of 6% with 1% inflation. We can achieve that sort of growth with Trumpy deregulation more effectively than with Keynesian big spending.
Exactly. This is what I was referring to, when I said I didn’t understand it.
https://wallstreetexaminer.com/2017/03/social-security-trust-fund-just-stack-ious-west-virginia-filing-cabinet/
The debt is a result of spending, which is essentially the Fed printing money, which can increase inflation (more dollars chasing the same or fewer amount of goods).
So yes, it’s related. We create the debt through federal spending, 40-50% of which is borrowed. Those dollars are loosed into the economy, chasing the same goods, etc.
What goes unmentioned in the above: The percentage of the budget that’s used to pay down the debt, and it’s increase over the last decade or so. It’s at the point where it’s starting to crowd out the small amount of budget that’s discretionary. As Rufus points out (hah!), a couple more percentage points increase in interest and you could potentially blow up the budget – which would force Congress to choose what it can spend on, instead of just funding everything through borrowing and tough tacos for whoever’s gotta pay for it.
Also unmentioned: Unfunded federal and state liabilities. In the hundreds of trillions. We literally can’t pay for it.
Here is the fun part. When you have so much excess debt, all of the interest payments absorb the money and prevent inflation until it doesn’t anymore. Same thing with any loan on the planet denominated in dollars that goes bad. When you destroy a loan, it reduces the amount of dollars which slows inflation (the Federal Reserve can’t let too many of these loans go bad because a strong dollar would totally wrecked the global economy, so you get more printing that way, too) So excess debt growth, which is a function of central banks screwing up, lowers the output of the economy, which makes everybody except the top 10% run out of money. Then you get social problems, so then the government spends more…yada yada yada.
It’s my opinion that in the 90s, the central bankers simply should have explained to their various political bodies that they have to adapt to the deflation coming from globalized trade and automation. Make everything as libertarian as possible and get every single unfunded liability in much better shape. They didn’t do that, so here we are.
Here’s another one. If they don’t constantly create either CPI inflation or asset inflation, the government runs out of money.