The Problem No One in DC Wants to Talk About

 

While the Beltway class hyperventilates over the latest political gaffe and jockeys for position in the 2018 midterms, there’s one subject they studiously avoid: our nearly $20 trillion debt. I wrote about it for USA Today, but my chart above shows the facts better than any op-ed can.

Because most graphs look like this, I created my own user-friendly debt chart focused on three big numbers: deficit, revenue, and debt.

It’s an imperfect analogy, but imagine the green is your salary, the yellow is the amount you’re spending over your salary, and the red is your credit card statement. Then tell your spouse, “Don’t worry, dear, I just increased our debt ceiling with a new Visa card!”

The chart is brutally bipartisan. Debt increased under Republican presidents and Democratic presidents. It increased under Democratic congresses and Republican congresses. In war and in peace, in boom times and in busts, after tax hikes and tax cuts, the Potomac flowed ever deeper with red ink.

Our leaders like to talk about sustainability. Forget sustainable — how is this sane?

I first created the chart in 2014 and update it every couple of years. And, every time, some on the right criticize it as being too harsh on the GOP while most on the left insist that debt doesn’t matter because … well, it just doesn’t, ok?

If anything, my chart is far too optimistic; I don’t mention future projections due to exploding entitlements. Instead of mocking cruel conservatives for cutting Big Bird’s budget, we should be yelling at them to cut more. Much, much more.

Published in Economics
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  1. Isaac Smith Member
    Isaac Smith
    @

    Ford Penney (View Comment):
    If you don’t like this then everyone will really hate the ‘rest of the story’… unfunded liabilities.

    Federal and state unfunded liabilities, according to Forbes in 2014, were approximately 127 trillion… more than double the world GDP.

    So what actually happens when those chickens come home to roost?

    State liabilities?  unfunded = unpaid

    Federal – since they are all denominated in dollars, you’re just gonna need a bigger printing press.

    • #61
  2. RyanFalcone Member
    RyanFalcone
    @RyanFalcone

    FloppyDisk90 (View Comment):

    Herbert (View Comment):

    FloppyDisk90 (View Comment):
    Just to play devils advocate here, but by some estimates the Fed govt owns over 128T in land/mineral rights. Even if that’s off by an order of magnitude I think it perhaps puts some of the more apocalyptic scenarios in perspective.

    https://motherboard.vice.com/en_us/article/trump-transition-nasa-foia-moon

    Cool. As it stands now it’s just a useless rock. ’bout time it started generating cash flow.

    Relax. He merely wants to put a yuge, gold “TRUMP” sign on it.

    • #62
  3. Judge Mental Member
    Judge Mental
    @JudgeMental

    RyanFalcone (View Comment):

    FloppyDisk90 (View Comment):

    Herbert (View Comment):

    FloppyDisk90 (View Comment):
    Just to play devils advocate here, but by some estimates the Fed govt owns over 128T in land/mineral rights. Even if that’s off by an order of magnitude I think it perhaps puts some of the more apocalyptic scenarios in perspective.

    https://motherboard.vice.com/en_us/article/trump-transition-nasa-foia-moon

    Cool. As it stands now it’s just a useless rock. ’bout time it started generating cash flow.

    Relax. He merely wants to put a yuge, gold “TRUMP” sign on it.

    There’s a short story by Robert Heinlein called, The Man Who Sold the Moon.  Turns out the name thing is totally doable.

    • #63
  4. Joseph Eagar Member
    Joseph Eagar
    @JosephEagar

    I Walton (View Comment):

    Joseph Eagar (View Comment):
    Is there a reason this chart is using nominal dollars, instead of stating debt as a percentage of GDP?

    It’s more accurate. The debt is in nominal dollars. Inflation rates can be fudged as can GDP. What matters is how many dollars are held by foreigners because we can sustain this forever unless foreigners have more dollars than they want for their reserves and for trade.

    True, except usually inflation figures are fudged down.  The true numbers would deflate the debt even more, don’t you think?

    By the way, foreigners aren’t nearly as dependent on the dollar as they once were, mostly because the world doesn’t run the sort of insane current account imbalances it did in the 2000s (aside from Germany, who for obvious reasons doesn’t need dollar reserves).  We’re in something of a calm period; the “global savings glut” hasn’t dissipated yet, but it’s getting there.  It probably won’t disappear completely until either China goes through an economic contraction and then starts recovering, or Germany expands domestic consumption (which, I think, is less likely).

    I’m not arguing for looser fiscal policy, btw (tight fiscal policy could help offset economic drag of the labor shortage we all want to engineer, as it’d free up capital for business investment).

    • #64
  5. iWe Coolidge
    iWe
    @iWe

    There are only 3 ways out:

    1: Inflation.

    2: Default

    3: Growth.

    Inflation will mean savers get hammered. Owners of hard assets (like real estate) with weather it.

    Default, or what Trump called “a haircut”, might endanger the full faith and credit in the most powerful financial institution man has ever known. Who knows what might come from it?

    Growth. The best solution by far. To get there, the government must freeze spending growth, and unshackle the economy by deregulating like crazy. Lots of good sounds from DC since Trump was elected. Not much actual action, as far as I can tell. Oh, and growth requires Free Trade.

    • #65
  6. ModEcon Inactive
    ModEcon
    @ModEcon

    iWe (View Comment):
    There are only 3 ways out:

    1: Inflation.

    2: Default

    3: Growth.

    Inflation will mean savers get hammered. Owners of hard assets (like real estate) with weather it.

    Default, or what Trump called “a haircut”, might endanger the full faith and credit in the most powerful financial institution man has ever known. Who knows what might come from it?

    Growth. The best solution by far. To get there, the government must freeze spending growth, and unshackle the economy by deregulating like crazy.

    I suspect we won’t solve the debt except with at least two of the three options.

    I don’t think we can grow out of the debt, there is too much. I don’t think any country has been able to grow continually for enough years without something like a war interfering and setting back debt repayment.

    Inflation also won’t work on its own since that would just lead to high interest rates making the debt rise faster as well as needing a surplus somewhere down the line in order to start paying back.

    Default is the only one that can work on its own. However, the results of a default are too terrible to imagine. However, I suspect that we may default on some debt like debt held by government regardless.

    Really though, you need all three to make something work.

    • #66
  7. Front Seat Cat Member
    Front Seat Cat
    @FrontSeatCat

    RightAngles (View Comment):

    FloppyDisk90 (View Comment):
    Just to play devils advocate here, but by some estimates the Fed govt owns over 128T in land/mineral rights. Even if that’s off by an order of magnitude I think it perhaps puts some of the more apocalyptic scenarios in perspective.

    We can all be glad Hillary didn’t win and start selling them to the Chinese.

    They and Saudi Arabia own a lot of prime US real estate, especially in NY as well as our port cities – does that make sense to you?

    • #67
  8. RightAngles Member
    RightAngles
    @RightAngles

    Front Seat Cat (View Comment):

    RightAngles (View Comment):

    FloppyDisk90 (View Comment):
    Just to play devils advocate here, but by some estimates the Fed govt owns over 128T in land/mineral rights. Even if that’s off by an order of magnitude I think it perhaps puts some of the more apocalyptic scenarios in perspective.

    We can all be glad Hillary didn’t win and start selling them to the Chinese.

    They and Saudi Arabia own a lot of prime US real estate, especially in NY as well as our port cities – does that make sense to you?

    I don’t like it a bit.

    • #68
  9. Chris Campion Coolidge
    Chris Campion
    @ChrisCampion

    Ford Penney (View Comment):
    If you don’t like this then everyone will really hate the ‘rest of the story’… unfunded liabilities.

    Federal and state unfunded liabilities, according to Forbes in 2014, were approximately 127 trillion… more than double the world GDP.

    So what actually happens when those chickens come home to roost?

    A bunch of state and federal retired workers aren’t going to get their pensions.

    • #69
  10. Chris Campion Coolidge
    Chris Campion
    @ChrisCampion

    Guruforhire (View Comment):
    This chart is inconvenient for the goal of flinging expensive missiles at people who aren’t attacking us.

    Stop it.

    Those missiles are already paid for.  They created jobs.  Unlike, say, a near-trillion-dollar stimulus bill that mostly propped up a bunch of state budgets that were in trouble due to the recession.

    • #70
  11. Fred Cole Inactive
    Fred Cole
    @FredCole

    iWe (View Comment):
    There are only 3 ways out:

    1: Inflation.

    2: Default

    3: Growth.

    I reject this.  We can pay this debt off.

    The first step would be to balance the budget.  Unfortunately, that requires leadership in Washington, and we have none.

    • #71
  12. Mark Camp Member
    Mark Camp
    @MarkCamp

    Isaac Smith (View Comment):

    Mark Camp (View Comment):
    I have a serious proposal that would painlessly reduce the 20 T USD figure (called “debt” by the OP), by about 40%!

    Treasury would retire the “bonds” recorded in the Social Security Account, by reversing the internal accounting procedures that led to, and continue to lead to, their creation.

    The public purpose* of the “bonds” could be fulfilled by new, simpler-to-understand and -administer annual report.

    *Which is to report the net present value of the cumulative excess of SS taxes over outlays.

    I thought the Social Security trust fund debt was excluded from these numbers?

    No, the 20 T$ figure includes that quantity.

    • #72
  13. The Reticulator Member
    The Reticulator
    @TheReticulator

    Fred Cole (View Comment):

    iWe (View Comment):
    There are only 3 ways out:

    1: Inflation.

    2: Default

    3: Growth.

    I reject this. We can pay this debt off.

    The first step would be to balance the budget. Unfortunately, that requires leadership in Washington, and we have none.

    By leadership,  do you mean someone who will rule as a brutal dictator?

    • #73
  14. Fred Cole Inactive
    Fred Cole
    @FredCole

    The Reticulator (View Comment):

    Fred Cole (View Comment):

    iWe (View Comment):
    There are only 3 ways out:

    1: Inflation.

    2: Default

    3: Growth.

    I reject this. We can pay this debt off.

    The first step would be to balance the budget. Unfortunately, that requires leadership in Washington, and we have none.

    By leadership, do you mean someone who will rule as a brutal dictator?

    No. I mean someone willing to set balancing the budget as an agenda item of high importance, sell that notion to the public by treating us as adults, and spending his political capital to make it happen.

    • #74
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