National debt of the United States: Difference between revisions
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{{See also|National debt by U.S. presidential terms}} |
{{See also|National debt by U.S. presidential terms}} |
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The United States has had public debt since its inception. Debts incurred during the [[American Revolutionary War]] and under the [[Articles of Confederation]] led to the first yearly reported value of $75,463,476.52 on January 1, 1791. From 1796 to 1811 there were 14 surpluses and only 2 deficits. The first dramatic growth spurt of the debt occurred because of the War of 1812. In the first 20 years following the War of 1812, 18 surpluses were experienced and the US paid off 99.97% of its debt. |
The United States has had public debt since its inception (See: [[Dream]]). Debts incurred during the [[American Revolutionary War]] and under the [[Articles of Confederation]] led to the first yearly reported value of $75,463,476.52 on January 1, 1791. From 1796 to 1811 there were 14 surpluses and only 2 deficits. The first dramatic growth spurt of the debt occurred because of the War of 1812. In the first 20 years following the War of 1812, 18 surpluses were experienced and the US paid off 99.97% of its debt. |
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The second dramatic growth spurt of the debt occurred because of the [[American Civil War|Civil War]]. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war. In the following 47 years America returned to the practice of running surpluses during times of peace experiencing 36 surpluses and only 11 deficits. During this period 55% of the US national debt was paid off. |
The second dramatic growth spurt of the debt occurred because of the [[American Civil War|Civil War]]. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war. In the following 47 years America returned to the practice of running surpluses during times of peace experiencing 36 surpluses and only 11 deficits. During this period 55% of the US national debt was paid off. |
Revision as of 19:57, 3 May 2011
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Budget and debt in the United States of America |
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![](http://upload.wikimedia.org/wikipedia/commons/thumb/3/3b/USDebt.png/375px-USDebt.png)
The United States public debt is a frequently reported measure of the obligations of the United States federal government and is presented by the United States Treasury in two components and one total:
- Debt Held by the Public, representing all federal[1] securities held by institutions or individuals outside the United States Government;
- Intragovernmental Holdings, representing U.S. Treasury securities held in accounts which are administered by the United States Government, such as the OASI Trust fund administered by the Social Security Administration; and
- Total Public Debt Outstanding, which is the sum of the above components.[2]
As of March 25, 2011, the Total Public Debt Outstanding of the United States of America was $14.26 trillion and was 97.3% of calendar year 2010's annual gross domestic product (GDP) of $14.66 trillion.[2][3][4] Using 2010 figures, the total debt (96.3% of GDP) ranked 12th highest against other nations.[citation needed]
The national debt should not be confused with the trade deficit, which is the difference between net imports and net exports. State and Local Government Series securities, issued by state and local governments, are not part of the United States government debt.[5] The deficit is presented on a cash rather than an accruals basis, although the accrual deficit provides more information on the longer-term implications of the government's annual operations.[6]
The annual government deficit or surplus refers to the cash difference between government receipts and spending ignoring intra-governmental transfers. The gross public debt increases or decreases as a result of this unified budget deficit or surplus. However, there is certain spending (supplemental appropriations) that add to the gross debt but are excluded from the deficit. Gross debt has increased over $500 billion each year since fiscal year (FY) 2003, with increases of $1 trillion in FY2008, $1.9 trillion in FY2009, and $1.7 trillion in FY2010.[7] Together with the budget deficit, this debt was one of the reasons given by Standard & Poor's to downgrade the United States' credit outlook to "negative" on April 18, 2011.[8]
History
![](http://upload.wikimedia.org/wikipedia/commons/thumb/d/d5/US_Federal_Debt.png/350px-US_Federal_Debt.png)
![President debt graph](http://upload.wikimedia.org/wikipedia/commons/thumb/b/b8/US_Federal_Debt_as_Percent_of_GDP_by_President.jpg/350px-US_Federal_Debt_as_Percent_of_GDP_by_President.jpg)
The United States has had public debt since its inception (See: Dream). Debts incurred during the American Revolutionary War and under the Articles of Confederation led to the first yearly reported value of $75,463,476.52 on January 1, 1791. From 1796 to 1811 there were 14 surpluses and only 2 deficits. The first dramatic growth spurt of the debt occurred because of the War of 1812. In the first 20 years following the War of 1812, 18 surpluses were experienced and the US paid off 99.97% of its debt.
The second dramatic growth spurt of the debt occurred because of the Civil War. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war. In the following 47 years America returned to the practice of running surpluses during times of peace experiencing 36 surpluses and only 11 deficits. During this period 55% of the US national debt was paid off.
The next period of major growth in debt came during WWI reaching $25.5 billion at its conclusion. It was followed by 11 straight surpluses and saw the debt reduced by 36%. The buildup and involvement in World War II plus social programs during the F.D. Roosevelt (because of the Great Depression) and Truman presidencies in the 1930s and '40s caused a sixteenfold increase in the gross public debt from $16 billion in 1930 to $260 billion in 1950.
After this period, the growth of the gross public debt closely matched the rate of inflation where it tripled in size from $260 billion in 1950 to around $909 billion in 1980. Gross debt in nominal dollars quadrupled during the Reagan and Bush presidencies from 1980 to 1992. The net public debt quintupled in nominal terms.
In nominal dollars the net public debt rose and then fell between 1992 and 2000 from $3T in 1992 to $3.4T in 2000. During the administration of President George W. Bush, the gross public debt increased from $5.7 trillion in January 2001 to $10.7 trillion by December 2008.[3] Under President Barack Obama, the debt increased from $10.7 trillion to $14.2 trillion by February 2011.[9]
Since the U.S. economy has grown nearly every year since World War 2, the size of the national debt relative to the economy (i.e., as a percentage of gross domestic product or GDP) is another key measure. Gross debt relative to GDP rose to over 100% to pay for WW2 and then declined thereafter, rising during the 1980s as part of the Cold War and again due to recessions and policy decisions in the early 21st century. During the 1970s, debt held by the public declined from 28% GDP to 26% GDP. During the 1980s, it rose to 41% GDP. During the 1990s, it rose to 50% and then was reduced to 39% by the end of the decade. From 2000-2008, it rose from 35% to 40% and to 62% by the end of fiscal year 2010.[10]
Valuation and measurement
Public and government accounts
![](http://upload.wikimedia.org/wikipedia/commons/thumb/e/ec/Holders_of_the_National_Debt_of_the_United_States.gif/300px-Holders_of_the_National_Debt_of_the_United_States.gif)
The total or gross national debt is the sum of the "debt held by the public" and "intragovernmental" debt. As of February 2011, the "debt held by the public" was $9.6 trillion and the "intragovernmental debt" was $4.6 trillion, for a total of $14.2 trillion.[11]
The national debt is also described in terms of marketable vs. non-marketable securities. As of February 2011, total marketable securities were $9.0 trillion while the non-marketable securities were $5.2 trillion. Most of the marketable securities are Treasury notes, bills, and bonds held by investors and governments globally. The non-marketable securities are mainly the "government account series" owed to certain government trust funds such as the Social Security Trust Fund, which represented $2.5 trillion dollars in 2010.[11][12] Other large intragovernmental holders include the Federal Housing Administration, the Federal Savings and Loan Corporation's Resolution Fund and the Federal Hospital Insurance Trust Fund (Medicare).
Fannie Mae and Freddie Mac obligations excluded
Although not included in the debt figures reported by the government, the U.S. government has moved to more explicitly support the soundness of obligations of Freddie Mac and Fannie Mae, starting in July 2008 via the Housing and Economic Recovery Act of 2008, and the September 7, 2008 Federal Housing Finance Agency (FHFA) conservatorship of both government sponsored enterprises (GSEs). The on- or off-balance sheet obligations of those two independent GSEs was just over $5 trillion at the time the conservatorship was put in place, comprised mainly of mortgage payment guarantees.[13] The extent to which the government will be required to pay these obligations depends on a variety of economic and housing market factors. The federal government provided over $110 billion to Fannie and Freddie by 2010.[14]
Guaranteed obligations excluded
Starting in late 2008, the U.S. federal government is guaranteeing large amounts of obligations relating to mutual funds, banks, and corporations under several new programs designed to deal with the problems initiated by the Financial crisis of 2007–2010. Guarantees are off-balance sheet and therefore excluded in the calculation of federal debt. The funding of direct investments made in response to the crisis, such as those made under the Troubled Assets Relief Program, are captured by the debt totals.
Unfunded obligations excluded
The U.S. government is committed under current law to mandatory payments for programs such as Medicare, Medicaid and Social Security. The GAO projects that payouts for these programs will significantly exceed tax revenues over the next 75 years. The Medicare Part A (hospital insurance) payouts already exceed program tax revenues and Social Security payouts exceeded payroll taxes in fiscal 2010. These deficits require funding from other tax sources or borrowing.[15]
The present value of these deficits or unfunded obligations is an estimated $45.8 trillion. This is the amount that would have to be set aside during 2009 such that the principal and interest would pay for the unfunded commitments through 2084. Approximately $7.7 trillion relates to Social Security, while $38.2 trillion relates to Medicare and Medicaid. In other words, health care programs are nearly five times as serious a funding challenge as Social Security. Adding this to the national debt and other federal commitments brings the total obligations to nearly $62 trillion.[16] However, these amounts are excluded from the national debt computation.
The Congressional Budget Office (CBO) has indicated that: "Future growth in spending per beneficiary for Medicare and Medicaid—the federal government’s major health care programs—will be the most important determinant of long-term trends in federal spending. Changing those programs in ways that reduce the growth of costs—which will be difficult, in part because of the complexity of health policy choices—is ultimately the nation’s central long-term challenge in setting federal fiscal policy."[17]
Measuring debt relative to gross domestic product (GDP)
![](http://upload.wikimedia.org/wikipedia/commons/thumb/7/74/Federal_debt_to_GDP_-_2000_to_2010.png/300px-Federal_debt_to_GDP_-_2000_to_2010.png)
GDP is a measure of the total size and output of the economy. One measure of the debt burden is its size relative to GDP. In fiscal 2007, U.S. public debt was approximately $5 trillion (36.8 percent of GDP) and total debt was $9 trillion (65.5 percent of GDP.)[18] Public debt represents money owed to those holding government securities such as Treasury bills and bonds. Total debt includes intra-governmental debt, which includes amounts owed to the Social Security Trust Funds (about $2.2 trillion in FY 2007)[19] and Civil Service Retirement Funds. By August 2008, the total debt was $9.6 trillion.[20]
Based on the 2010 U.S. budget, total national debt will nearly double in dollar terms between 2008 and 2015 and will grow to nearly 100% of GDP, versus a level of approximately 80% in early 2009.[21] Multiple government sources including the current and previous presidents, the GAO, Treasury Department, and CBO have said the U.S. is on an unsustainable fiscal path.[22] As the debt ratio increases, the exchange value of the dollar may fall. Paying back debt with cheaper currency could cause investors (including other governments) to demand higher interest rates if they anticipate further dollar depreciation. Paying higher interest rates could slow domestic U.S. growth.
Higher debt increases interest payments on the debt, which already exceed $430 billion annually as discussed below, or about 15 cents of every tax dollar for 2008.[23] According to the CIA Factbook, only six other countries have debt to GDP ratios over 100% for 2008, the largest of which is Japan at 170%.[24]
Further, a high public debt to GDP ratio may also slow economic growth. Economists Carmen Reinhart and Kenneth Rogoff calculated that countries with public debt above 90 percent of GDP grow by an average of 1.3 percentage points per year slower than less debt-ridden countries. The public debt-to-GDP ratio in March 2010 is about 60 percent of GDP; CBO projects it will reach 90 percent around 2020 under policies in place in 2010. If growth slows, all of the economic challenges the U.S. faces will worsen.[25]
Calculating the annual change in debt
![](http://upload.wikimedia.org/wikipedia/commons/thumb/1/12/Deficit_to_Change_in_Debt_Comparison_-_2008.png/300px-Deficit_to_Change_in_Debt_Comparison_-_2008.png)
The annual change in debt is not equal to the "total deficit" typically reported in the media. Social Security payroll taxes and benefit payments, along with the net balance of the U.S. Postal Service are considered "off-budget" while most other expenditure and receipt categories are considered "on-budget." The total federal deficit is the sum of the on-budget deficit (or surplus) and the off-budget deficit (or surplus). Since FY1960, the federal government has run on-budget deficits except for FY1999 and FY2000, and total federal deficits except in FY1969 and FY1998-FY2001.[26]
In large part because of Social Security surpluses, the total deficit is smaller than the on-budget deficit. The surplus of Social Security payroll taxes over benefit payments is spent by the government for other purposes. However, the government credits the Social Security Trust fund for the surplus amount, adding to the "intragovernmental debt." The total federal debt is divided into "intragovernmental debt" and "debt held by the public." In other words, spending the "off budget" Social Security surplus adds to the total national debt (by increasing the intragovernmental debt) while the surplus reduces the "total" deficit reported in the media.
Certain spending called "supplemental appropriations" is outside the budget process entirely but adds to the national debt. Funding for the Iraq and Afghanistan wars was accounted for this way prior to the Obama administration. Certain stimulus measures and earmarks are also outside the budget process.
For example, in FY2008 an off-budget surplus of $183 billion reduced the on-budget deficit of $642 billion, resulting in a total federal deficit of $459 billion. Media often reported the latter figure. The national debt increased by $1,017 billion between the end of FY2007 and the end of FY2008.[27] The federal government publishes the total debt owed (public and intragovernmental holdings) at the end of each fiscal year [28] and since FY1957, the amount of debt held by the federal government has increased each year.
Ownership of debt
![](http://upload.wikimedia.org/wikipedia/commons/thumb/1/17/Estimated_ownership_of_treasury_securities_by_year.gif/300px-Estimated_ownership_of_treasury_securities_by_year.gif)
Because a large variety of people own the notes, bills, and bonds in the "public" portion of the debt, the U.S. Treasury also publishes information, that groups the types of holders by general categories to portray who owns United States debt. In this data set, some of the public portion is moved and combined with the total government portion, because this amount is owned by the Federal Reserve as part of United States monetary policy. (See Federal Reserve System)
As is apparent from the chart, a little less than half of the total national debt is owed to the "Federal Reserve and intragovernmental holdings". The foreign and international holders of the debt are also put together from the notes, bills, and bonds sections. To the right is a chart for the data as of June 2008:
Foreign ownership
As of January 2011, foreigners owned $4.45 trillion of U.S. debt, or approximately 47% of the debt held by the public of $9.49 trillion and 32% of the total debt of $14.1 trillion. The largest holders were the central banks of China ($1.1 trillion) and Japan ($885 billion).[29][30] The share held by foreign governments has grown over time, rising from 25% of the public debt in 2007[31] and 13% in 1988.[32]
This exposure to potential financial or political risk should foreign banks stop buying Treasury securities or start selling them heavily was addressed in a June 2008 report issued by the Bank of International Settlements, which stated, "Foreign investors in U.S. dollar assets have seen big losses measured in dollars, and still bigger ones measured in their own currency. While unlikely, indeed highly improbable for public sector investors, a sudden rush for the exits cannot be ruled out completely."[33]
On May 20, 2007, Kuwait discontinued pegging its currency exclusively to the dollar, preferring to use the dollar in a basket of currencies.[34] Syria made a similar announcement on June 4, 2007.[35] In September 2009 China, India and Russia said they were interested in buying IMF gold to diversify their dollar-denominated securities.[36] However, in July 2010 China's State Administration of Foreign Exchange "ruled out the option of dumping its vast holdings of US Treasury securities" and said gold "cannot become a main channel for investing our foreign exchange reserves" because the market for gold is too small and prices are too volatile.[37]
Forecasting the debt
![](http://upload.wikimedia.org/wikipedia/commons/thumb/3/3b/2010_Budget_-_Deficit_and_Debt_Increases.png/250px-2010_Budget_-_Deficit_and_Debt_Increases.png)
![](http://upload.wikimedia.org/wikipedia/commons/thumb/c/c6/Debt_to_GDP_Forecast_Chart.png/300px-Debt_to_GDP_Forecast_Chart.png)
Tracking current levels of debt is a cumbersome but rather straightforward process. Making future projections is much more difficult for a number of reasons. For example, before the September 11, 2001 attacks, the George W. Bush administration projected in the 2002 budget that there would be a $1.288 trillion surplus from 2001 through 2004.[38]
In the 2005 Mid-Session Review, however, this had changed to a projected four-year deficit of $851 billion, a swing of $2.138 trillion.[39] The latter document states that 49 percent of this swing was due to "economic and technical re-estimates", 29 percent was due to "tax relief", (mainly the 2001 and 2003 Bush tax cuts), and the remaining 22 percent was due to "war, homeland, and other enacted legislation" (mainly expenditures for the War on Terror, Iraq War, and homeland security).
Projections between different groups will sometimes differ because they make different assumptions. For example, in August 2003, a Congressional Budget Office report projected a $1.4 trillion deficit from 2004 through 2013.[40]
However, a mid-term and long-term joint analysis a month later by the Center on Budget and Policy Priorities, the Committee for Economic Development, and the Concord Coalition stated that "In projecting deficits, CBO follows mechanical 'baseline' rules that do not allow it to account for the costs of any prospective tax or entitlement legislation, no matter how likely the enactment of such legislation may be." The analysis added in a proposed tax cut extension and Alternative Minimum Tax reform (enacted by a 2005 act), prescription drug plan (Medicare Part D, enacted in a 2003 act), and further increases in defense, homeland security, international, and domestic spending. According to the report, this "adjusts CBO's official ten-year projections for more realistic assumptions about the costs of budget policies", raising the projected deficit from $1.4 trillion to $5 trillion.[41]
The 2010 Budget proposed by President Barack Obama projects significant debt increases, both in terms of dollars and relative to GDP.[42][43] The debt was projected to nearly double to $20 trillion by 2015, but was expected to increase to nearly 100% of GDP by 2020 and remain at that level thereafter. The estimates assumed real GDP growth (after inflation) ranging from 2.6% to 4.6% annually from 2010 through 2019, which exceeds Blue Chip consensus estimates.[44] These 2009 projections were subject to revision as the debt had in fact reached about 96.5% of GDP by FY2011, much earlier than 2020.
During FY 2008, approximately 76.6% of federal spending was in the following categories: Departments of Health and Human Services (19.8%), Defense (20.3%) and Veterans Affairs (11.8%); Social Security Administration (18.2%); interest on the public debt (6.6%).[15]
The Office of Management and Budget forecasts that, by the end of fiscal year 2012, gross federal debt will total $16.3 trillion. Thus, the projected debt will equal 101% of projected gross domestic product, which represents a milestone in the U.S. economy. Public debt alone, which excludes amounts that the government owes its citizens via various trust funds, will be 67% of GDP by the end of fiscal 2012.[45]
Historical analysis of government spending or debt relative to GDP can be misleading, according to the GAO, CBO and Treasury Department. This is because demographic shifts and per-capita spending are causing Social Security and Medicare/Medicaid expenditures to grow significantly faster than GDP. If this trend continues, government simulations under various assumptions project mandatory spending for these programs will exceed taxes dedicated to these programs by more than $40 trillion over the next 75 years on a present value basis.[46]
According to the GAO, this will double debt-to-GDP ratios by 2040 and double them again by 2060, reaching 600 percent by 2080.[47] A GAO simulation indicates that Social Security, Medicare, and Medicaid expenditures alone will exceed 20% of GDP by 2080, which is approximately the historical ratio of taxes collected by the federal government. In other words, these mandatory programs alone will take up all government revenues under this simulation.[46]
Causes of change in debt
![](http://upload.wikimedia.org/wikipedia/commons/thumb/c/cf/Taxes_debt.png/300px-Taxes_debt.png)
2001 vs. 2009
![](http://upload.wikimedia.org/wikipedia/commons/thumb/4/44/Federal_Spending_-_Cause_of_Change_2001_to_2009.png/300px-Federal_Spending_-_Cause_of_Change_2001_to_2009.png)
![](http://upload.wikimedia.org/wikipedia/commons/thumb/a/a5/CBO_Forecast_Changes_for_2009-2012.png/300px-CBO_Forecast_Changes_for_2009-2012.png)
According to the CBO, the U.S. last had a surplus during fiscal year (FY) 2001. From FY2001 to FY2009, spending increased by 6.5% of GDP (from 18.2% of GDP to 24.7%) while taxes declined by 4.7% of GDP (from 19.5% of GDP to 14.8%). The drivers of the expense increases (expressed as % of GDP) are Medicare & Medicaid (1.7%), Defense (1.6%), Income Security such as unemployment benefits and food stamps (1.4%), Social Security (0.6%) and all other categories (1.2%). The drivers of tax reductions are individual income taxes (-3.3%), payroll taxes (-0.5%), corporate income taxes (-0.5%) and other (-0.4%). The 2009 spending level is the highest relative to GDP in 40 years, while the tax receipts are the lowest relative to GDP in 40 years. The next highest spending year was 1985 (22.8%) while the next lowest tax year was 2004 (16.1%).[48]
2001 vs. 2012
The U.S. budget situation has deteriorated significantly since 2001, when the Congressional Budget Office (CBO) forecast average annual surpluses of approximately $850 billion from 2009-2012. The average deficit forecast in each of those years as of June 2009 was approximately $1,215 billion. The New York Times analyzed this roughly $2 trillion "swing," separating the causes into four major categories along with their share:
- Recessions or the business cycle (37%);
- Policies enacted by President Bush (33%);
- Policies enacted by President Bush and supported or extended by President Obama (20%); and
- New policies from President Obama (10%).
CBO data is based only on current law, so policy proposals that have yet to be made law are not included in their analysis. The article states that "President Obama’s agenda ... is responsible for only a sliver of the deficits", but that he "...does not have a realistic plan for reducing the deficit..."[49] Presidents have no Constitutional authority to levy taxes or spend money, as this responsibility resides with the Congress, although a President's priorities influence Congressional action.[50]
Peter Orszag, the OMB Director under President Obama, stated in a November 2009 that of the $9 trillion in deficits forecast for the 2010-2019 period, $5 trillion are due to programs from the prior administration, including tax cuts from 2001 and 2003 and the unfunded Medicare Part D. Another $3.5 trillion are due to the financial crisis, including reductions in future tax revenues and additional spending for the social safety net such as unemployment benefits. The remainder are stimulus and bailout programs related to the crisis.[51]
2008 vs. 2009
The CBO reported in October 2009 reasons for the difference between the 2008 and 2009 deficits, which were approximately $460 billion and $1,410 billion, respectively. Key categories of changes included: tax receipt declines of $320 billion due to the effects of the recession and another $100 billion due to tax cuts in the stimulus bill (the American Recovery and Reinvestment Act or ARRA); $245 billion for the Troubled Asset Relief Program (TARP) and other bailout efforts; $100 billion in additional spending for ARRA; and another $185 billion due to increases in primary budget categories such as Medicare, Medicaid, unemployment insurance, Social Security, and Defense - including the war effort in Afghanistan and Iraq. This was the highest budget deficit relative to GDP (9.9%) since 1945.[52] The national debt increased by $1.9 trillion during FY2009, versus the $1.0 trillion increase during 2008.[53]
The Obama Administration also made four significant accounting changes to more accurately report the total spending by the Federal government. The four changes were: 1) accounting for the Wars in Iraq and Afghanistan (”overseas military contingencies”) in the budget rather than through the use of supplemental appropriations; 2) assuming the Alternative Minimum Tax will be indexed for inflation; 3) accounting for the full costs of Medicare reimbursements; and 4) anticipating the inevitable expenditures for natural disaster relief. According to administration officials, these changes will make the debt over ten years look $2.7 trillion larger than it would otherwise appear.[54]
Risks and obstacles
Risks to the U.S. dollar and economy
A high debt level may affect inflation, interest rates, and economic growth. A variety of factors are placing increasing pressure on the value of the U.S. dollar, increasing the risk of devaluation or inflation and encouraging challenges to dollar's role as the world's reserve currency. If another currency or basket of currencies replaced the dollar as the reserve currency, the U.S. would face higher interest rates to attract capital, reducing economic growth for the long-term. The Economist wrote in May 2009:
"Having spent a fortune bailing out their banks, Western governments will have to pay a price in terms of higher taxes to meet the interest on that debt. In the case of countries (like Britain and America) that have trade as well as budget deficits, those higher taxes will be needed to meet the claims of foreign creditors. Given the political implications of such austerity, the temptation will be to default by stealth, by letting their currencies depreciate. Investors are increasingly alive to this danger... "[55]
The Government Accountability Office (GAO), the Federal Government's auditor, argues that the U.S. is on a fiscally "unsustainable" path and that politicians and the electorate have been unwilling to change this path.[15] The 2010 U.S. budget prepared by the President indicated annual debt increases of nearly $1 trillion annually through 2019, projecting the total U.S. national debt to grow to $23.3 trillion by 2019.[44] Further, the subprime mortgage crisis has significantly increased the financial burden on the U.S. government, with over $10 trillion in commitments or guarantees and $2.6 trillion in investments or expenditures as of May 2009, only some of which are included in the budget document.[56]
The U.S. also has a large trade deficit, meaning imports exceed exports. Such deficits are only possible if there is a large foreign investment, or a capital account surplus. The balance of payments identity requires that a country (such as the USA) running a current account deficit also have a capital account (investment) surplus of the same amount. In 2005, Ben Bernanke addressed the implications of the USA's high and rising current account (trade) deficit, resulting from USA imports exceeding its exports. Between 1996 and 2004, the USA current account deficit increased by $650 billion, from 1.5% to 5.8% of GDP.[57]
Debt levels may also affect economic growth rates. Economists Kenneth Rogoff and Carmen Reinhart reported in 2010 that among the 20 advanced countries studied, average annual GDP growth was 3-4% when debt was relatively moderate or low (i.e. under 60% of GDP), but it dips to just 1.6% when debt was high (i.e. above 90% of GDP).[58]
The CBO reported several types of risk factors related to rising debt levels in a July 2010 publication:
- A growing portion of savings would go towards purchases of government debt, rather than investments in productive capital goods such as factories and computers, leading to lower output and incomes than would otherwise occur;
- If higher marginal tax rates were used to pay rising interest costs, savings would be reduced and work would be discouraged;
- Rising interest costs would force reductions in important government programs;
- Restrictions to the ability of policymakers to use fiscal policy to respond to economic challenges; and
- An increased risk of a sudden fiscal crisis, in which investors demand higher interest rates.[59]
Rollover and maturity risks
In addition to the debt increase required to fund government spending in excess of tax revenues during a given year, some Treasury securities issued in prior years mature and must be "rolled-over" or replaced with new security issuance. During the financial crisis, the Treasury issued a sizable amount of relatively shorter-term debt, which caused the average maturity on total Treasury debt to reach a 25-year low of just more than 50 months in 2009. As of late 2009, roughly 43% of U.S. public debt needed to be rolled over within 12 months, the highest proportion since the mid-1980s. The relatively short maturity of outstanding Treasury debt, coupled with the increased reliance on foreign creditors, puts the U.S. at greater risk of sharply higher borrowing costs should risk perceptions change abruptly in credit markets.[58]
Long-term risks to financial health of federal government
![](http://upload.wikimedia.org/wikipedia/commons/thumb/6/64/GAO_Slide.png/350px-GAO_Slide.png)
Several government agencies provide budget and debt data and analysis. These include the Government Accountability Office (GAO), the Congressional Budget Office (CBO), the Office of Management and Budget (OMB), and the U.S. Treasury Department. These agencies have reported that the federal government is facing a series of critical long-term financing challenges. This is because expenditures related to entitlement programs such as Social Security, Medicare, and Medicaid are growing considerably faster than the economy overall, as the population grows older.
These agencies have indicated that under current law, sometime between 2030 and 2040, mandatory spending (primarily Social Security, Medicare, Medicaid, and interest on the national debt) will exceed tax revenue. In other words, all "discretionary" spending (e.g., defense, homeland security, law enforcement, education, etc.) will require borrowing and related deficit spending. These agencies have used such language as "unsustainable" and "trainwreck" to describe such a future.[15]
While there is significant debate about solutions,[60] the significant long-term risk posed by the increase in entitlement spending is widely recognized,[61] with health care costs (Medicare and Medicaid) the primary risk category.[62][63] In a June 2010 opinion piece in the Wall Street Journal, former chairman of the Federal Reserve, Alan Greenspan noted that "Only politically toxic cuts or rationing of medical care, a marked rise in the eligible age for health and retirement benefits, or significant inflation, can close the deficit."[64] If significant reforms are not undertaken, benefits under entitlement programs will exceed government income by over $40 trillion over the next 75 years.[63] According to the GAO, this will cause debt ratios relative to GDP to double by 2040 and double again by 2060, reaching 600 percent by 2080.[15]
In 2006, Professor Laurence Kotlikoff argued the United States must eventually choose between "bankruptcy", raising taxes, or cutting payouts. He assumes there will be ever-growing payment obligations from Medicare and Medicaid.[65] Others who have attempted to bring this issue to the fore of America's attention range from Ross Perot in his 1992 Presidential bid, to motivational speaker Robert Kiyosaki, and David Walker, former head of the Government Accountability Office.[66][67]
Thomas Friedman has argued that increasing dependence on foreign sources of funding will render the U.S. less able to act independently.[68]
Moody's Investors Service warned in March 2010 that the United States' AAA-rated U.S Treasury bonds, while currently not in danger, could be downgraded in the future if the U.S. government failed to rein in public debt, saying that growing the economy cannot be the only solution.[69]
There is a significant difference between the reported budget deficit and the change in debt. The key differences are: 1) The Social Security surplus, which reduces the "off-budget" deficit often reported in the media; and 2) Non-budgeted spending, such as for the Iraq and Afghanistan wars. The debt increased by approximately $550 billion on average each year during the 2003-2007 period, but then increased over $1 trillion during FY 2008.
The cumulative debt of the United States in the past 8 completed fiscal years was approximately $4.3 trillion, or about 43% of the total national debt of ~$10.0 trillion as of September 2008.[3][4][70]
Interest expense
![](http://upload.wikimedia.org/wikipedia/commons/thumb/7/72/Interest_-_Stacked_bar_chart_2006_-_2007.png/350px-Interest_-_Stacked_bar_chart_2006_-_2007.png)
Budgeted net interest on the public debt was approximately $240 billion in fiscal years 2007 and 2008. This represented approximately 9.5% of government spending. Interest was the fourth largest single budgeted disbursement category, after defense, Social Security, and Medicare.[71] Despite higher debt levels, this declined to $189 billion in 2009 or approximately 5% of spending, due to lower interest rates. Average interest rates declined due to the crisis from 1.6% in 2008 to 0.3% in 2009.[72]
During FY2008, the government also accrued a non-cash interest expense of $212 billion for intra-governmental debt, primarily the Social Security Trust Fund, for a total interest expense of $454 billion.[73] This accrued interest is added to the Social Security Trust Fund and therefore the national debt each year and will be paid to Social Security recipients in the future.
Public debt owned by foreigners has increased to approximately 50% of the total or approximately $3.4 trillion.[74] As a result, nearly 50% of the interest payments are now leaving the country, which is different from past years when interest was paid to U.S. citizens holding the public debt. Interest expenses are projected to grow dramatically as the U.S. debt increases and interest rates rise from very low levels in 2009 to more typical historical levels. CBO estimates that nearly half of the debt increases over the 2009-2019 period will be due to interest.[75]
Should interest rates return to historical averages, the interest cost would increase dramatically. Historian Niall Ferguson described the risk that foreign investors would demand higher interest rates as the U.S. debt levels increase over time in a November 2009 interview.[76]
Monitoring the risks of increasing debt levels
Various financial indicators may provide an early warning that market forces are reacting to an increasing level of debt. Examples include Treasury security interest rates (yields), Treasury auction results, credit default swap spreads, and TIPS spreads.
- Treasury note yields: A rising yield for a security of a given maturity could indicate lower demand for Treasury bonds among investors, or nervousness about future rates of inflation. The "yield curve" (a graph that relates the yields of similar securities of different maturities) provides similar information.
- Treasury auctions: The ease with which new securities can be sold reflects the demand for them. For example, a difference between the interest rate that debt trades prior to auction and the yield required to clear the market at auction is called the "tail." A large auction “tail” would be a sign of declining interest from the market. The Treasury also reports the bid-to-cover ratio for each auction, which is the number of market bids received relative to the number of bids accepted and the ratio of international buyers.
- Credit default swap (CDS) spreads: CDS are insurance-like derivative products that offer protection against bond defaults. CDS spreads essentially measure the current market price of insurance against default. When the market perceives a bond is at an increased risk of default, the CDS written on those bonds will increase in price.
- TIPS spreads: A key measure of inflation expectations among U.S. bond market investors is the difference between the yield on nominal Treasury bonds and the yield for Treasury inflation-protected securities, or “TIPS.” This difference is a gauge of investors’ beliefs about future U.S. inflation rates. A growing spread between nominal Treasuries and TIPS would indicate that investors are concerned that U.S. fiscal and monetary policy could lead to higher inflation in the future.[58]
In April 2011, rating agency Standard & Poor's (S&P) issued a "negative" outlook on the U.S. "AAA" (highest quality) debt rating for the first time since the rating agency began in 1860, indicating there is a one in three chance of an outright reduction in the rating over the next two years. According to S&P, meaningful progress towards balancing the budget would be required to move the U.S. back to a "stable" outlook. Losing the AAA rating would likely mean higher interest rates and the sale of treasury bonds by entities required to hold AAA securities.[77] The S&P press release stated: "We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns."[78]
Debates
Is there a "danger level" of debt?
Economists debate the level of debt relative to GDP that signals a "red line" or dangerous level, or if any such level exists. In January 2010, Economists Kenneth Rogoff and Carmen Reinhart stated that 90% of GDP might be an indicative danger level.[79] Reinhart testified to the U.S. Senate in February 2010, stating:[80]
Our main finding is that across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes. Above 90 percent, median growth rates fall one percent, and average growth falls considerably more. In addition, for emerging markets, there appears to be a more stringent threshold for total external debt/GDP; when external debt reaches 60 percent of GDP, annual growth declines by about two percent and for higher levels, growth rates are roughly cut in half. Seldom do countries simply 'grow' their way out of deep debt burdens.
Economist Paul Krugman disputed the existence of a solid debt threshold or danger level, arguing that low growth causes high debt rather than the other way around.[81] He also points out that in Europe, Japan, and the US this has been the case. In the US the only period of debt over 90% of GDP was after World War II when "when real GDP was falling, not because of debt problems, but because wartime mobilization was winding down and Rosie the Riveter was becoming a suburban housewife."[82]
Economists also debate the definition of public debt. Paul Krugman argued in May 2010 that the debt held by the public is the right measure to use, while Reinhart has testified to the President's Fiscal Reform Commission that gross debt is the right figure. Certain members of the Commission are focusing on gross debt.[81] The Center on Budget and Policy Priorities (CBPP) cited research by several economists supporting the use of the lower debt held by the public figure as a more accurate measure of the debt burden, disagreeing with these Commission members.[83]
Fed Chair Ben Bernanke stated in April 2010:[84]
Neither experience nor economic theory clearly indicates the threshold at which government debt begins to endanger prosperity and economic stability. But given the significant costs and risks associated with a rapidly rising federal debt, our nation should soon put in place a credible plan for reducing deficits to sustainable levels over time.
Is intragovernmental debt "real" debt?
There is debate regarding the economic nature of the intragovernmental debt, which was approximately $4.6 trillion in February 2011. A significant portion of the intragovernmental debt is the $2.6 trillion Social Security Trust Fund.[85]
For example, the CBPP argues:[83]
Debt held by the public is important because it reflects the extent to which the government goes into private credit markets to borrow. Such borrowing draws on private national saving and international saving, and therefore competes with investment in the nongovernmental sector (for factories and equipment, research and development, housing, and so forth). Large increases in such borrowing can also push up interest rates and increase the amount of future interest payments the federal government must make to lenders outside of the United States, which reduces Americans’ income. By contrast, intragovernmental debt (the other component of the gross debt) has no such effects because it is simply money the federal government owes (and pays interest on) to itself.
If the U.S. continues to run "on budget" deficits as projected by the CBO and OMB for the foreseeable future, it will have to issue marketable Treasury bills and bonds (i.e., debt held by the public) to pay for the projected shortfall in the Social Security program. This will result in "debt held by the public" replacing "intragovernmental debt" to the extent of the Social Security Trust Fund during the period the Trust Fund is liquidated, which is expected to occur between 2015 and the mid-2030s. This replacement of intragovernmental debt with debt held by the public would not occur if: a) The U.S. runs on-budget surpluses sufficient to offset "off-budget" deficits in the Social Security program; or b) Social Security is reformed to maintain an off-budget surplus.[86]
Debt clocks
In several cities around the United States, there are national debt clocks—electronic billboards that illustrate government debt. Some also attempt to show the money owed per capita or per family. There is a significant level of fluctuation day-to-day, both up and down, so any "clocks" must be continually re-set with proper values.
The first and most famous debt clock, the National Debt Clock located near Times Square in New York City, was created by real estate investor Seymour Durst.[87][88] With Seymour's death, his son Douglas Durst took over responsibility for the clock through the Durst Organization.
Although the total debt continued to increase, the clock was deactivated in 2000 when the public debt began to decrease (after adjusting for inflation) due to budget surpluses.[89] However, following large increases in the debt (total and public) a few years later, the clock was reactivated in July 2002.[90]
In 2004, the original clock was unmounted from its location near 42nd Street; the building has since made way for One Bryant Park. An updated model, which could run backwards, was installed one block away on a Durst building at 1133 Avenue of the Americas. Since September 30, 2008, when the debt surpassed $10 trillion, the clock's dollar sign has been replaced by the extra digit. An upgrade adding to the digits had been announced for 2009, but so far has not been undertaken.
Appendix
National debt for selected years
End of Fiscal Year |
Gross Debt in $Billions undeflated Treas.[70] |
Gross Debt in $Billions undeflated OMB[89][91] |
as % of GDP Low-High est. or a - Treas. audit |
Debt Held By Public ($Billions) |
as % of GDP (Treas/MW, OMB or Treas/BEA) |
GDP $Billions OMB/BEA[4] est.=MW.com |
---|---|---|---|---|---|---|
1910 | 2.653 | 8.0 | 2.653 | 8.0 | est. 32.8 | |
1920 | 25.95 | 29.2 | 25.95 | 29.2 | est. 88.6 | |
1927 | [92] 18.51 | 19.2 | 18.51 | 19.2 | est. 96.5 | |
1930 | 16.19 | 16.6 | 16.19 | 16.6 | est. 97.4 | |
1940 | 42.97 | 50.70 | 44.4-52.4 | 42.97 | 42.1 | 96.8/ |
1950 | 257.3 | 256.9 | 91.2-94.2 | 219.0 | 80.2 | 273.1/281.7 |
1960 | 286.3 | 290.5 | 54.6-56.0 | 236.8 | 45.6 | 518.9/523.9 |
1970 | 370.9 | 380.9 | 36.2-37.6 | 283.2 | 28.0 | 1,013/1,026 |
1980 | 907.7 | 909.0 | 33.4 | 711.9 | 26.1 | 2,724 |
1990 | 3,233 | 3,206 | 56.0-56.4 | 2,412 | 42.1 | 5,735 |
2000 | (a1)5,674 | 5,629 | a57.6 | 3,410 | 34.7 | 9,821 |
2001 | (a2)5,807 | 5,770 | a56.6 | 3,320 | 32.5 | 10,225 |
2002 | (a3)6,228 | 6,198 | a59.0 | 3,540 | 33.6 | 10,544 |
2003 | (a)6,783 | 6,760 | a61.8 | 3,913 | 35.6 | 10,980 |
2004 | (a)7,379 | 7,355 | a63.2 | 4,296 | 36.8 | 11,686 |
2005 | (a4)7,933 | 7,905 | a63.6 | 4,592 | 36.9 | 12,446 |
2006 | (a5)8,507 | 8,451 | a64.0 | 4,829 | 36.5 | 13,255 |
2007 | (a6)9,008 | 8,951 | a64.8 | 5,035 | 36.2 | 13,896 |
2008 | (a7)10,025 | 9,986 | a69.6 | 5,803 | 40.2 | 14,394 |
2009 | (a8)11,910 | 11,876 | a~84.4 | 7,552 | 53.6 | ~14,098 |
2010 | (a9)13,562 | 13,529 | a~93.4 | 9,023 | 62.2 | ~14,508/14,512 |
Fiscal years 1940-2009 GDP figures are derived from February 2011 Office of Management and Budget figures which contained revisions of prior year figures due to significant changes from prior GDP measurements. Fiscal years 1950-2010 GDP measurements are derived from December 2010 Bureau of Economic Analysis figures which also tend to be subject to revision, especially more recent years. The two measures in Fiscal Years 1980, 1990 and 2000-2009 diverge only slightly.
Absolute differences from advance (one month after) BEA reports of GDP percent change to current findings (as of January 2011) found in revisions are stated to be 1.2% ± 1.8% or a 95% probability of being within the range of 0.0-3.0%, assuming the differences to occur according to standard deviations from the average absolute difference of 1.2%. E.g. with an advance report of a $500 billion increase of a $15 trillion GDP, for example, one could be 95% confident that the range would be 0.0 to 3.0% different than 3.3% (500 ÷ 15,000) or $0 to $450 billion different than the hypothetical $500 billion.
Fiscal years 1940-1970 begin July 1 of the previous year (for example, Fiscal Year 1940 begins July 1, 1939 and ends June 30, 1940); fiscal years 1980-2010 begin October 1 of the previous year.
Intergovernmental debts before the Social Security Act are presumed to equal zero.
1909-1930 calendar year GDP estimates are from MeasuringWorth.com [93] Fiscal Year estimates are derived from simple linear interpolation.
(a1)Audited figure was "about $5,659 billion."[94]
(a2)Audited figure was "about $5,792 billion."[95]
(a3)Audited figure was "about $6,213 billion."[95]
(a)Audited figure was said to be "about" the stated figure.[5]
(a4)Audited figure was "about $7,918 billion."[96]
(a5)Audited figure was "about $8,493 billion."[96]
(a6)Audited figure was "about $8,993 billion."[73]
(a7)Audited figure was "about $10,011 billion."[73]
(a8)Audited figure was "about $11,898 billion."[72]
(a9)Audited figure was "about $13,551 billion."[97]
Foreign holders of U.S. Treasury Securities
The following is a list of the Foreign Holders of U.S. Treasury Securities as listed by the U.S. Treasury (revised by June 2010 survey completed February 28, 2011):[74]
Leading Foreign Holders of US Treasury Securities | ||||
---|---|---|---|---|
December 2010 | November 2010 | |||
Nation/Territory | billions of dollars (est.) | percent of total foreign holdings | billions of dollars (est.) | percent of total foreign holdings |
China | 1,160.1 | 26.1% | 1,164.1 | 26.4% |
Japan | 882.3 | 19.9% | 875.9 | 19.8% |
United Kingdom | 272.1 | 6.1% | 242.5 | 5.5% |
Oil exporters1 | 211.9 | 4.8% | 204.3 | 4.6% |
Brazil | 186.1 | 4.2% | 189.8 | 4.3% |
Caribbean Banking Centers2 | 168.6 | 3.8% | 159.3 | 3.6% |
Hong Kong (Special Administrative Region) | 134.2 | 3.0% | 134.9 | 3.1% |
Switzerland | 107.0 | 2.4% | 107.0 | 2.4% |
Taiwan | 155.1 | 3.5% | 154.4 | 3.5% |
Russia | 151.0 | 3.4% | 167.3 | 3.8% |
Subtotal of top 10 holders | 3,428.4 | 77.2% | 3,399.5 | 77.0% |
Grand Total | 4,439.6 | 100.0% | 4,413.8 | 100.0% |
1Saudi Arabia, Venezuela, Libya, Iran, Iraq, the United Arab Emirates, Bahrain, Kuwait, Oman, Qatar, Ecuador, Indonesia, Algeria, Gabon, and Nigeria
2Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, British Virgin Islands and Panama
Statistics and comparisons
![]() | This article contains a list of miscellaneous information. (February 2011) |
- U.S. official gold reserves, totaling 275.0 million troy ounces, have a book value as of 31 December 2010[update] of approximately $11.6 billion,[98] vs. a commodity value as of 23 January 2011[update] of approximately $369 billion.[99]
- A total of 161,000 tonnes of gold have been mined in human history, as of 2009.[100] This is roughly equivalent to 5.175 billion troy ounces, which, at $1350 per troy ounce, would be $7.0 trillion.
- Foreign exchange reserves $133 billion as of December 2010[update].[101]
- The Strategic Petroleum Reserve had a value of approximately $65 billion as of January 2011[update], at a Market Price of $98/barrel with a $15/barrel discount for sour crude.[102]
- The national debt equates to $44,900 per person U.S. population, or $91,500 per member of the U.S. working population,[103] as of December 2010.
- In 2008, $242 billion was spent on interest payments servicing the debt, out of a total tax revenue of $2.5 trillion, or 9.6%. Including non-cash interest accrued primarily for Social Security, interest was $454 billion or 18% of tax revenue.[73]
- Total U.S. household debt, including mortgage loan and consumer debt, was $11.4 trillion in 2005. By comparison, total U.S. household assets, including real estate, equipment, and financial instruments such as mutual funds, was $62.5 trillion in 2005.[104]
- Total U.S Consumer Credit Card revolving credit was $931.0 billion in April 2009.[105]
- Total third world debt was estimated to be $1.3 trillion in 1990.[106]
- The U.S. balance of trade deficit in goods and services was $725.8 billion in 2005.[107]
- The global market capitalization for all stock markets that are members of the World Federation of Exchanges was $32.5 trillion by the end of 2008.[108]
- The 2009 net worth of the 400 richest U.S. citizens is $1.27 trillion.[109]
- According to a retrospective Brookings Institute study published in 1998 by the Nuclear Weapons Cost Study Committee (formed in 1993 by the W. Alton Jones Foundation), the total expenditures for U.S. nuclear weapons from 1940 to 1998 was $5.5 trillion in 1996 Dollars.[110] The total public debt at the end of fiscal year 1998 was $5,478,189,000,000 in 1998 Dollars[111] or $5.3 trillion in 1996 Dollars. The entire public debt in 1998 was therefore equivalent to the funds spent on the research, development, and deployment of U.S. nuclear weapons and nuclear weapons-related programs during the Cold War.[110][112][113]
Table: International debt comparisons
Gross debt as percentage of GDP | ||
---|---|---|
2007 | 2011 Forecast | |
Austria | 62% | 82% |
France | 70% | 99% |
Germany | 65% | 85% |
Greece | 104% | 130% |
Ireland | 28% | 93% |
Italy | 112% | 130% |
Japan | 167% | 204% |
Netherlands | 52% | 82% |
Portugal | 71% | 97% |
Spain | 42% | 74% |
United Kingdom | 47% | 94% |
United States | 62% | 100% |
Asia1 | 37% | 41% |
Central Europe2 | 23% | 29% |
Latin America3 | 41% | 35% |
Sources: IMF, World Economic Outlook (emerging market economies); OECD, Economic Outlook (advanced economies)[114]
1China, Hong Kong SAR, India, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand
2The Czech Republic, Hungary and Poland
3Argentina, Brazil, Chile and Mexico
Recent additions to the public debt of the United States
![](http://upload.wikimedia.org/wikipedia/commons/thumb/5/56/Deficits_vs._Debt_Increases_-_2009.png/350px-Deficits_vs._Debt_Increases_-_2009.png)
Fiscal year (begins 10/01 of prev. year) |
Value of increase $Billions |
% of GDP | Total debt $Billions |
% of GDP |
---|---|---|---|---|
1994 | $282–292 | 4.0-4.2% | ~$4,650 | 66.6-67.2% |
1995 | 278-281 | 3.8% | ~4,950 | 67.0-67.8% |
1996 | 251-260 | 3.3-3.4% | ~5,200 | 67.2-67.6% |
1997 | 188 | 2.3% | ~5,400 | 65.4-66.0% |
1998 | 109-113 | 1.3% | ~5,500 | 63.2-63.8% |
1999 | 128-130 | 1.4% | 5,641 | 61.2% |
2000 | 18 | 0.2% | 5,659 | 57.6% |
2001 | 133 | 1.3% | 5,792 | 56.6% |
2002 | 421 | 4.0% | 6,213 | 59.0% |
2003 | 570 | 5.2% | 6,783 | 61.8% |
2004 | 596 | 5.1% | 7,379 | 63.2% |
2005 | 539 | 4.3% | 7,918 | 63.6% |
2006 | 575 | 4.3% | 8,493 | 64.0% |
2007 | 500 | 3.6% | 8,993 | 64.8% |
2008 | 1,018 | 7.1% | 10,011 | 69.6% |
2009 | 1,887 | ~13.4% | 11,898 | ~84.4% |
2010 | 1,653 | ~11.4% | 13,551 | ~93.4% |
2011 (Oct.'10-Feb.'11) |
~633 | ~14,200 | ~96.8% |
The more precise FY 1999-2010 debt figures are derived from Treasury audit results.
The variations in the FY 2009-2010 figures are due to double-sourced or relatively preliminary GDP figures.
Debt ceiling
The Second Liberty Bond Act of 1917 established a statutory limit on federal debt.[115] Congress had previously approved each debt issuance separately. The debt limit provided the U.S. Treasury with more leeway in the administration of debt, allowing for modern management techniques in government finance.
The U.S. Treasury Department now conducts more than 200 sales of debt by auction every year. The Treasury has been granted authority by Congress to issue such debt as was needed to fund government operations as long as the total debt (excepting some small special classes) does not exceed a stated ceiling.
The most recent[citation needed] increase in the U.S. debt ceiling to $14.294 trillion by H.J.Res. 45 was signed into law on February 12, 2010.[116] Congress is currently considering whether and by how much to extend the debt ceiling again.[117][needs update]
Even when the debt ceiling is reached, the U.S. Treasury has several mechanisms to temporarily acquire a limited amount of funding to buy some time and not default.[118] This was used in 2004, when the debt ceiling was reached on October 14, 2004 and actions were taken by the administration to stay below the debt ceiling.[119] The ceiling was raised on November 16, 2004 by $800 billion to a total of $8.184 trillion.
Section 4 of the Fourteenth Amendment to the United States Constitution, passed in the context of the Civil War Reconstruction, confirmed the legitimacy of all United States public debt legislated by the Congress. In Perry v. United States (1935), the Supreme Court ruled that voiding a United States government bond "went beyond the congressional power" on account of Section 4.[120] Republican economist Bruce Bartlett argues that Section 4 renders the debt ceiling unconstitutional, and obligates the President to consider the debt ceiling null and void.[121]
Table of historical debt ceiling levels | ||
---|---|---|
Date | Debt Ceiling (billions of dollars) |
Change in Debt Ceiling (billions of dollars) |
June 25, 1940 | 49 [122] | |
February 19, 1941 | 65 | +16 |
March 28, 1942 | 125 | +60 |
April 11, 1943 | 210 | +85 |
June 9, 1944 | 260 | +50 |
April 3, 1945 | 300 | +40 |
June 26, 1946 | 275 | -25 |
August 28, 1954 | 281 | +6 |
July 9, 1956 | 275 | -6 |
February 26, 1958 | 280 | +5 |
September 2, 1958 | 288 | +8 |
June 30, 1959 | 295 | +7 |
June 30, 1960 | 293 | -2 |
June 30, 1961 | 298 [123] | +5 |
July 1, 1962 | 308 | +10 |
March 31, 1963 | 305 | -3 |
June 25, 1963 | 300 | -5 |
June 30, 1963 | 307 | +7 |
August 31, 1963 | 309 | +2 |
November 26, 1963 | 315 | +6 |
June 29, 1964 | 324 | +9 |
June 24, 1965 | 328 | +4 |
June 24, 1966 | 330 | +2 |
March 2, 1967 | 336 | +6 |
June 30, 1967 | 358 | +22 |
June 1, 1968 | 365 | +7 |
April 7, 1969 | 377 | +12 |
June 30, 1970 | 395 | +18 |
March 17, 1971 | 430 | +35 |
March 15, 1972 | 450 [124] | +20 |
October 27, 1972 | 465 | +15 |
June 30, 1974 | 495 | +30 |
February 19, 1975 | 577 | +82 |
November 14, 1975 | 595 | +18 |
March 15, 1976 | 627 | +32 |
June 30, 1976 | 636 | +9 |
September 30, 1976 | 682 | +46 |
April 1, 1977 | 700 | +18 |
October 4, 1977 | 752 | +52 |
August 3, 1978 | 798 | +46 |
April 2, 1979 | 830 | +32 |
September 29, 1979 | 879 [125] | +49 |
June 28, 1980 | 925 | +46 |
December 19, 1980 | 935 | +10 |
February 7, 1981 | 985 | +50 |
September 30, 1981 | 1,079 | +94 |
June 28, 1982 | 1,143 | +64 |
September 30, 1982 | 1,290.2 | +147.2 |
May 26, 1983 | 1,389 | +98.8 |
November 21, 1983 | 1,490 | +101 |
May 25, 1984 | 1,520 | +30 |
June 6, 1984 | 1,573 | +53 |
October 13, 1984 | 1,823 | +250 |
November 14, 1985 | 1,903.8 | +80.8 |
December 12, 1985 | 2,078.7 | +174.9 |
August 21, 1986 | 2,111 | +32.3 |
October 21, 1986 | 2,300 | +189 |
May 15, 1987 | 2,320 [126] | +20 |
August 10, 1987 | 2,352 | +32 |
September 29, 1987 | 2,800 | +448 |
August 7, 1989 | 2,870 | +70 |
November 8, 1989 | 3,122.7 | +252.7 |
August 9, 1990 | 3,195 | +72.3 |
October 28, 1990 | 3,230 | +35 |
November 5, 1990 | 4,145 | +915 |
April 6, 1993 | 4,370 | +225 |
August 10, 1993 | 4,900 | +530 |
March 29, 1996 | 5,500 | +600 |
August 5, 1997 | 5,950 | +450 |
June 11, 2002 | 6,400 [127] | +450 |
May 27, 2003 | 7,384 [128] | +984 |
November 16, 2004 | 8,184 [127] | +800 |
March 20, 2006 | 8,965 [129] | +781 |
September 29, 2007 | 9,815 [130] | +850 |
June 5, 2008 | 10,615 [131] | +800 |
October 3, 2008 | 11,315 [132] | +700 |
February 17, 2009 | 12,104 [133] | +789 |
December 24, 2009 | 12,394 [134] | +290 |
February 12, 2010 | 14,294 [135] | +1,900 |
See also
US topics:
- Federal Debt: Answers to Frequently Asked Questions- Provides a broad range of information about federal debt including its relationship to the budget, ownership of the debt, debt management, and key policy considerations
- Economy of the United States - discusses U.S. national debt and economic context
- Emergency Economic Stabilization Act of 2008 - part of the Troubled Asset Relief Program
- Financial position of the United States
- History of the U.S. public debt - a table containing historical debt data
- National debt by U.S. presidential terms
- Starve the beast - Post 1970s taxation/budget policy
- United States federal budget - analysis of federal budget spending and long-term risks
General:
- Balance of payments
- Budget deficit
- Deficit
- Fiat currency
- Inflation
- National bankruptcy
- Public debt - a general discussion of the topic
- Securities
International:
- Global debt
- List of public debt - list of the public debt for many nations, as a percentage of the GDP
References
- ^ United States Government Accountability Office, "Federal Debt: Answers to Frequently Asked Questions"
- ^ a b United States Department of the Treasury, Bureau of the Public Debt (November 2010). "Debt position and activity report". TreasuryDirect. Retrieved January 16, 2011.
- ^ a b c d United States Department of the Treasury, Bureau of the Public Debt (December 2010). "The debt to the penny and who holds it". TreasuryDirect. Retrieved March 2, 2011.
- ^ a b c d United States Department of Commerce, Bureau of Economic Analysis (February 25, 2011). "National Economic Accounts: Gross Domestic Product: Current-dollar and 'real' GDP". BEA.gov. Retrieved January 1, 2011.
- ^ a b United States Congress, Government Accountability Office (November 5, 2004). Financial Audit: Bureau of the Public Debt's Fiscal Years 2004 and 2003 Schedules of Federal Debt GAO-05-116 United States Government Accountability Office (GAO). Retrieved January 16, 2011.
- ^ "Measuring the Deficit: Cash vs. Accrual". Government Accountability Office. Retrieved 19 January 2011.
- ^ United States Department of the Treasury, Bureau of the Public Debt (Oct 1, 2010). "Government - Historical Debt Outstanding - Annual 2000-2010" TreasuryDirect. Retrieved January 17, 2011.
- ^ "U.S. credit outlook cut by S&P on deficit concerns". New York: Reuters. 2011-04-18. Retrieved 2011-04-18.
"Because the U.S. has, relative to its AAA peers, what we consider to be very large budget deficits and rising government indebtedness, and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," S&P said in a release.
- ^ U.S. Treasury Direct-February Monthly Statement of the Public Debt of the U.S.
- ^ CBO Historical Tables - 1970 to 2010
- ^ a b Treasury Department-Monthly Statement of the Public Debt of the United States-February 2011
- ^ Social Security Trust Fund 2010 Report Summary
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Debt of Principal Nations and Aggregate for All Nations of the World at Various Dates (in millions of dollars): '1928........18,510'
{{cite encyclopedia}}
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and|coauthors=
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{{cite book}}
: Unknown parameter|coauthors=
ignored (|author=
suggested) (help) - ^ Historical Budget Tables
- ^ "The peak U.S. inventory was around 35,000 nuclear weapons. The United States spent more than $5.5 trillion on the nuclear arms race, an amount equal to its national debt in 1998..." Graham, Jr., Thomas (2002). Disarmament sketches: three decades of arms control and international law. USA: University of Washington Press. p. 35. ISBN 978-0295982120.
{{cite book}}
: Cite has empty unknown parameter:|coauthors=
(help) - ^ "...the total figure will likely be equal to the $5 trillion national debt. In short, one quarter to one third of all military spending since World War II has been devoted to nuclear weapons and their infrastructure..." page 33, Schwartz, Steven I. (November 1995). "Four Trillion Dollars and Counting". Bulletin of Atomic Scientists. 51 (6). Educational Foundation for Nuclear Science, Inc.: 32–53. ISSN 0096-3402.
{{cite journal}}
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ignored (|author=
suggested) (help) - ^ Cecchetti, Stephen G. et al. (February 2010). "The future of public debt: prospects and implications", p. 3. Bank for International Settlements [website]. Retrieved January 31, 2011.
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- Wright, Robert (2008). One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe. Mc-Graw Hill. ISBN 0071543937.Argues that America completely paid off its first national debt but is unlikely to do so again.
- Bonner, William (2006). Empire of Debt: the Rise of an Epic Financial Crisis. Wiley. ISBN 047178253X.
{{cite book}}
: Unknown parameter|coauthors=
ignored (|author=
suggested) (help) Argues that America is a world empire that uses credit in lieu of tribute and that history shows this to be unsustainable. - Cavanaugh, Frances X. (1996). The Truth About the National Debt: Five Myths and One Reality. Boston, Mass.: Harvard Business School Press. ISBN 087584734X. Argues that the US is in good economic condition and that talk of the consequences of its debt is unduly alarmist.
- Hargreaves, Eric L. (1966). The National Debt.
- Macdonald, James (2006). A Free Nation Deep in Debt: The Financial Roots of Democracy. Princeton University Press. ISBN 0-691-12632-1. Argues that democracies eventually defeat autocracies because "countries with representative institutions are able to borrow more cheaply than those with autocratic governments" (p. 4). Bond markets also strengthen democracies internally by giving citizens some of the proverbial power of the purse and by aligning their interests with those of their governments.
- Rothbard, Murray Newton (1994). The Case Against the Fed. Auburn, AL: Ludwig Von Mises Institute. ISBN 094546617X. Describes the process of debt monetization by a nation's central bank and it's unfortunate consequences on society.
- Taylor, George Rogers (ed.) (1950). Hamilton and the National Debt.
{{cite book}}
:|first=
has generic name (help)