National Debt At $9 Trillion
Kurt Brouwer November 8th, 2007
I’m sure this headline will bring about a spate of stories bemoaning our ‘crushing’ government debt. This is really a non-event, but because $9 trillion is a milestone of sorts, no doubt this will get some attention:
National Debt Hits $9 Trillion For First Time (Associated Press, Martin Crutsinger, November 7, 2007)
‘The national debt has hit $9 trillion for the first time.
The Treasury Department, which issues a daily accounting of the debt, said Wednesday that the debt subject to limit was at $9 trillion on Tuesday. It was $8.996 trillion on Monday…’
In order to carefully consider the level of government debt, it is useful to actually find out how U.S. government debt compares to other industrialized countries. It is also useful to know some of debt details such as what proportion of the debt is owed by one agency of the government to another agency of the government.
To get specific information on this topic, one of my favorite economics blogs it The Skeptical Optimist, run by Steve Conover. He has been able to take somewhat arcane economic issues such as the level of Federal government debt and make them both accessible and interesting. To start, here is his international debt thermometer from earlier this summer. Not much has changed since then and it’s worth a look [emphasis added]:
‘Although the USA’s “total” national debt is 66.3% of GDP (see note 1 on the graphic; it’s based on the “$9 trillion debt” that always appears in the headlines), the more important number is the publicly held debt level of 37.5% GDP (see note 2)…’
As you can see, our government debt is below that of countries such as Japan, Italy, Germany and France, so by that comparison we seem to be in pretty good shape. One additional point is that much of our government debt is owed…
to itself, that is to Social Security or other government agencies. The remainder that is owned by investors is under 40% of GDP. Based on this comparison, our debt seems to be manageable in comparison to the size of our economy.
Another thing to consider is that this discussion of $9 trillion in debt says nothing about what assets the Federal government owns — thousands of buildings, millions of acres of land, cars, trucks, equipment, gold bullion at Fort Knox and so on. If debt really were a significant issue, the government could liquidate it very quickly by selling off assets.
A third way to view government debt is to consider how we are doing ourselves. The government exists to serve us so what is the net worth of Americans? If we measure all financial assets (not including real estate, but including real estate debt) our net worth is $29.1 Trillion. If we just look at what we have in retirement plan assets (401(k) plans, IRAs, pension plans etc., we have $16.4 Trillion in tax-deferred retirement plans. Our total net worth including financial assets, retirement plan assets and real estate equity is $57.9 trillion.
The linked posts goes into these in more detail, but it should be clear our collective net worth dwarfs government debt of $9 trillion even without giving any value to the enormous assets owned by the government.
When commentators and pundits and politicians bemoan the vast debt we are laying on our children just consider how you would feel if you were given $57.9 trillion in assets to offset $9 trillion in debt. Don’t know about you, but I’d take that deal any day.
Update: This piece has been submitted to the Facing Up Blog Carnival for its carnival on the $9 trillion dollar Federal debt.
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But, what about the 400 billion paid just for interest on the debt? That amount is greater than most other pieces of the federal expenditure pie……….
I mean, 400 billion!!!! Out of a projected 3 trillion dollar budget……….If it were, say, 200 billion, the other 200 billion could mean less of a tax increase in the future, or it could be used for domestic policies, which always suffer horribly under Republicans……..
THE ALARMING HEALTH OF THE US ECONOMY
The health of U.S. has been on the rocks ever since the Gramm-Rudmann-Hollings Law was amended/scrapped by President Bush. The Repercussions on the Consumer/Common man on the street will be felt when the Debt Servicing gets to above 3 Percent of GDP. which it already is. That means inflation will follow for the next 5-7 years followed by a Period of Stagflation possibly 3 years i.e. I see Interest rates back above double digits in 7-10 years. with the economy performing poorly. Recession should show its indication from 2009. Outflow of investments should pick up speed 2009 onwards. Bankruptcies to double in the next 5 years. Unemployment to double in next 5 years. The USD to FALL , the Stock market to Fall to 7,000 levels . The banking sector to lead the way as FDIC doesn’t have enough money to bail out a Top 20 US Bank. The Blame (I Feel) goes ALL to US Congress-Senate especially PRESIDENT BUSH for his policies to gain Votes and popularity NOW at the cost of the Future of the US People as the Consumer/Common people in USA will feel the HIT 5-7 years down the road in a Big way. First Recession followed by Stagflation after 3-5 years will and should be hitting the economy in 2009 onwards as the
Sub-Prime Mortgage crises is ONLY the forewarning of worse gloom and doom to follow.
UNLESS AND UNTIL THE TWIN DEFICITS ARE CONTROLLED NAMELY BUDGET AND TRADE DEFICITS THEN IF DEVALUATION OF THE DOLLAR ON A MASSIVE SCALE PLUS SPENDING CUTS ARE CARRIED OUT THE BALOON WILL BURST SOONER RATHER THAN LATER SPELLING GLOOM AND DOOM ON A FAR MASSIVE SCALE THAN 1929 (GREAT DEPRESSION).
Who is going to Bail out the USA ? EU ? World Bank ? IMF ? Japan ? China ? Who ???
Have your forgotten that the Governement has increased TAX on OIL and is earning Billions every year and even then the situation is worsening.
Note what I have written down now as Time will tell you IF I am right or wrong. Today 08 July 2008.
(This is my analysis and my own working)
Regards
Kamal Ahmad Khan
Analyst/Consultant
0092-300-2209309
Kamal,
Please read the original post again. The US is in much better shape than you give it credit for.
Regards,
Aquinas82nd
America has to borrow and tax more, just to pay off the interest on the money we already (over) borrowed. If you cut through the crap, and go back to simple basics, all economists agree that the first thing an individual should do to get their finances back into the black, is to pay off their credit cards, and get out from under paying the interest each month. The U.S. is no different. Instead of solving the problem by borrowing hundreds of Billions more, and assuming Billions more in interest, our first priority should be to pay off our loans, and stop paying all that interest on loans !!!
I like your post. No matter what amount of debt a person has, willingness to retire is the first step
It’s really amazing. Debt can be rescued by reducing expenses not by increase income