Definition Of Public Debt
Economists also debate the definition of public debt. 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 appropriate measure. The Center on Budget and Policy Priorities 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.
There is debate regarding the economic nature of the intragovernmental debt, which was approximately $4.6 trillion in February 2011. For example, the CBPP argues: that “large increases in 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 has no such effects because it is simply money the federal government owes to itself.” However, if the U.S. government 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 to pay for the projected shortfall in the Social Security program. This will result in “debt held by the public” replacing “intragovernmental debt”.
National Debt Of The United States
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The national debt of the United States is the total national debt owed by the federal government of the United States to Treasury security holders. The national debt at any point in time is the face value of the then-outstanding Treasury securities that have been issued by the Treasury and other federal agencies. The terms “national deficit” and “national surplus” usually refer to the federal government budget balance from year to year, not the cumulative amount of debt. In a deficit year the national debt increases as the government needs to borrow funds to finance the deficit, while in a surplus year the debt decreases as more money is received than spent, enabling the government to reduce the debt by buying back some Treasury securities. In general, government debt increases as a result of government spending and decreases from tax or other receipts, both of which fluctuate during the course of a fiscal year. There are two components of gross national debt:
During the COVID-19 pandemic, the federal government spent trillions in virus aid and economic relief. The CBO estimated that the budget deficit for fiscal year 2020 would increase to $3.3 trillion or 16% GDP, more than triple that of 2019 and the largest as % GDP since 1945.
The Best Way To Measure Debt By President
The best way to measure a president’s debt is to add up their budget deficits and compare that total to the debt level when they took office. A president’s budget reveals their administration’s priorities.
Though they sound similar, deficit and debt are two different things. A deficit is a budget shortfall, whereas debt is the running total of all deficits and surpluses. Deficits add to the debt, while surpluses reduce it.
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Us National Debt Statistics
- The current US national debt is $26,498,433,296,171 TreasureDirect – The debt to the Penny and Who Holds It
- Thatâs an increase of $3,326,434,162,341 since January 2nd 2020
- In 2020, national debt has increased $14,850,152,510 per day or $1.031 million per minute
- By December 31st 2020, the national debt is currently set to increase a further $2.15 trillion to $28,651,705,410,186
- The national debt per citizen equals $80,274 per person
- Between 2010 and 2020, national debt increased $9,157,778,722,542, an increase of 71.9%
- Since Jan 12nd 2020, national debt has increased more than $2.9 trillion
- National debt has increased for the last 64 years consecutively – the last time it fell was 1956 – 57
- The most expensive decade in American history was the 1860s, where national debt increased 3,726% from $64.8 million to $2.48 billion.
- 1836 – 37 saw the fastest ever increase in US national debt, soaring 882%. This was even quicker than the second fastest debt increase in history, 1835 – 1836, when it rose 798%
- National debt was almost eradicated in in the 1830s, dropping 99.4% during Andrew Johnsonâs Presidency
The U.S. national debt gets a lot of attention from the media and politicians. Still, few Americans truly understand what it means.
National Debt For Selected Years
On July 27, 2018, the BEA revised its GDP figures in a comprehensive update and figures back to FY2013 were revised accordingly.
On June 25, 2014, the BEA announced: “n addition to the regular revision of estimates for the most recent 3 years and for the first quarter of 2014, GDP and select components will be revised back to the first quarter of 1999.
Fiscal years 19402009 GDP figures were 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 19502010 GDP measurements were derived from December 2010 Bureau of Economic Analysis figures which also tend to be subject to revision, especially more recent years. Afterwards the OMB figures were revised back to 2004 and the BEA figures were revised back to 1947.
Fiscal years 19401970 begin July 1 of the previous year fiscal years 19802010 begin October 1 of the previous year. Intragovernmental debts before the Social Security Act are presumed to equal zero.
19091930 calendar year GDP estimates are from MeasuringWorth.com Fiscal Year estimates are derived from simple linear interpolation.
Audited figure was “about $5,659 billion.”
Audited figure was “about $5,792 billion.”
Audited figure was “about $6,213 billion.”
Audited figure was said to be “about” the stated figure.
Audited figure was “about $7,918 billion.”
Audited figure was “about $8,493 billion.”
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Consequences Of Growing National Debt
Japan’s experience shows sovereigns can incur a surprising amount of debt if the country’s central bank is willing to monetize the borrowing, and so long as it doesn’t stoke inflation.
But even if we discount the remote risk of a default, rising debt imposes higher interest costs, especially when interest rates rise. The CBO expects the U.S. government’s net interest costs to triple over the next decade, reaching $1.2 trillion annually by 2032.
That will force lawmakers to decide between running even larger deficits just to keep spending and revenue constant, or some combination of spending cuts and revenue increases.
If the choice is even larger deficits, bond buyers might require higher yields to compensate them for the resulting increase in risk. Or they may not, if slowing economic growth prompts investment flows into fixed income amid expectations of lower interest rates.
Calculating The Annual Change In Debt
Conceptually, an annual deficit should represent the change in the national debt, with a deficit adding to the national debt and a surplus reducing it. However, there is complexity in the budgetary computations that can make the deficit figure commonly reported in the media considerably different from the annual increase in the debt. The major categories of differences are the treatment of the Social Security program, Treasury borrowing, and supplemental appropriations outside the budget process.
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 and the off-budget deficit . Since FY1960, the federal government has run on-budget deficits except for FY1999 and FY2000, and total federal deficits except in FY1969 and FY1998FY2001.
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Data Sources And Methodology
This visualization was created using theMonthly Statement of the Public Debt as the data source for federal debt of the United States.Historic gross domestic product figures come from theBureau of Economic Analysis . GDP for FY 2021 is based on the economic forecast for the2022 Mid-Session Review, adjusted for theBureau of Economic Analysis revisions. Throughout this page, we use the gross domestic product for the Fiscal Year, not the Calendar Year, in order to facilitate an appropriate comparison.
Interest Expense On The Debt Outstanding
As of June 6, 2022, this data moved permanently to FiscalData.treasury.gov, where it is available for download in multiple machine-readable formats with complete metadata!
The Interest Expense on the Debt Outstanding includes the monthly interest for:
- State and Local Government series and other special purpose securities.
Amortized discount or premium on bills, notes and bonds is also included in the monthly interest expense.
The fiscal year represents the total interest expense on the Debt Outstanding for a given fiscal year. This includes the months of October through September.
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A Brief History Of Us Debt
Investopedia / Sabrina Jiang
Nearly all national governments borrow money. The U.S. has carried national debt throughout its history, dating back to the borrowing that financed the Revolutionary War. Since then the debt has grown alongside the economy, as a result of increased government responsibilities, and in response to economic developments.
Why Is El Salvador Ranked Higher
Despite having lower values in the two metrics discussed above, El Salvador ranks higher than Ukraine because of its larger interest expense and total government debt.
According to the data above, El Salvador has annual interest payments equal to 4.9% of its GDP, which is relatively high. Comparing to the U.S. once more, Americas federal interest costs amounted to 1.6% of GDP in 2020.
When totaled, El Salvadors outstanding debts are equal to 82.6% of GDP. This is considered high by historical standards, but today its actually quite normal.
The next date to watch will be January 2023, as this is when the countrys $800 million sovereign bond reaches maturity. Recent research suggests that if El Salvador were to default, it would experience significant, yet temporary, negative effects.
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Use The Controls Below To Customize Chart Or Change The Data Series
|Spending Units: By default, government spending is displayed in billions of dollars. But using a dropdown control in the table heading you can select billions of 2012 dollars, percent of GDP, 2012 dollars per capita, percent of federal spending, or percent of total spending.Chart Title: You can create a title for your chart. Use the text field to enter a title and click the button to the right of the text field. > Chart Size: By default, the chart is displayed at medium size. But you can use the dropdown control to change the size. US Budget Year: By default, the chart displays budgeted and estimated federal spending in the current US Budget submitted to the Congress by the president. But you can look at previous budgeted numbers using this dropdown control.Mandatory: By default the chart shows all spending without regard to mandatory or discretionary. Select Mandatory if you want to chart only federal Mandatory spending, Discretionary if you want to chart only federal Discretionary spending, Both if you want both federal Mandatory and Discretionary spending broken out using the dropdown control in the table heading.|
The table shows overall budgeted federal expenditures for major functions for the next five years, as estimated in the historical tables in the current presidential budget. You can compare these estimates with the actualexpenditures for the most recent historical fiscal year.
Wars In Iraq And Afghanistan
Overseas wars and military operations launched after the Sept. 11, 2001, attacks in the U.S., in combination with increased domestic security spending, interest costs, and long-term veterans funding obligations, has added about $8 trillion to the national debt since 2001, by one estimate.
Meanwhile, annual U.S. military spending exceeds that of the next nine highest spenders combined.
Who Decides How Much Interest The Us Pays On Its Debt
Supply and demand. In other words, the marketplace. When the government needs to raise debt financing, it sells debt securities in an auction. Bidders offer to buy the debt for a specific rate, yield, or discount margin, and all successful bidders receive the highest yield or discount the Treasury accepts. Government debt buyers may include central banks, though their goal is typically to foster sustainable economic growth rather than to finance deficit spending.
Stock Market Crash & The Great Depression
On October 29, 1929, wild speculation and rapid expansion finally caught up with Wall Street. The Black Tuesday stock market crash resulted in billions of dollars lost. In its aftermath, America and the rest of the industrialized world spiraled into the Great Depression, which lasted until 1939. It was the deepest and longest-lasting economic downturn in the U.S. up to that time.
National Debt: $17 billion
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Raising Reserve Requirements And Full Reserve Banking
Two economists, Jaromir Benes and Michael Kumhof, working for the International Monetary Fund, published a working paper called The Chicago Plan Revisited suggesting that the debt could be eliminated by raising bank reserve requirements and converting from fractional-reserve banking to full-reserve banking. Economists at the Paris School of Economics have commented on the plan, stating that it is already the status quo for coinage currency, and a Norges Bank economist has examined the proposal in the context of considering the finance industry as part of the real economy. A Centre for Economic Policy Research paper agrees with the conclusion that “no real liability is created by new fiat money creation and therefore public debt does not rise as a result.”
The debt ceiling is a legislative mechanism to limit the amount of national debt that can be issued by the Treasury. In effect, it restrains the Treasury from paying for expenditures after the limit has been reached, even if the expenditures have already been approved and have been appropriated. If this situation were to occur, it is unclear whether Treasury would be able to prioritize payments on debt to avoid a default on its debt obligations, but it would have to default on some of its non-debt obligations.
Income Security And Covid
Income security spending of $1.6 trillion was boosted by $569.5 billion in pandemic relief payments and $79 billion in child tax credit payments. It also included $397.9 billion for unemployment compensation, $168.1 billion on food and nutrition assistance, $89.8 billion in housing assistance, and $156.1 billion in federal employee retirement and disability costs.
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The Politics Of National Debt
Disagreements about national debt have repeatedly preoccupied U.S. Congress. Whenever the national debt approaches the limit periodically reset by Congress, lawmakers are faced with a choice of raising the ceiling once again or letting the U.S. government default on its obligations, risking dire economic consequences. The U.S. government briefly shut down before Congress raised the limit in 2013. A similar standoff two years earlier led Standard & Poor’s to downgrade its U.S. credit rating.
In 2021, Congress narrowly averted a scheduled Oct. 1 government shutdown by passing a short-term funding bill, then raised the U.S. debt ceiling by $2.5 trillion to $31.4 trillion in December. That limit was expected to be reached in early 2023.
Americans profess to be concerned about the national debt in poll after poll, while also overwhelmingly supporting defense spending and outlays for Social Security and Medicare, and opposing tax increases.
As a result, elected officials too have been eager to be seen to be addressing the national debt, usually without linking it to the spending the debt enables or to the tax increases that a balanced budget would require.
Social Security System Strains
For decades, payroll tax receipts earmarked for Social Security have exceeded benefit payments, producing system surpluses that have masked the structural U.S. budget deficit.
But those surpluses shrank before turning into a shortfall in 2021, and in the near future the deficits are expected to increase as Baby Boomer retirements swell the ranks of Social Security recipients.
The Old-Age and Survivors Insurance Trust Fund funding the Social Security payments for retirees saw annual gains that peaked at about $180 billion in 2006-2008. Those surpluses are projected by the trust fund’s board of trustees to give way to growing deficits topping $200 billion annually by 2028 and $300 billion from 2031. In combination with payroll taxes, the $2.75 trillion trust fund is expected to finance full benefit payments until it is exhausted in 2034.
Growing life expectancy and reduced fertility rates are expected to reduce the share of working-age population from 58.3% in 2021 to 54.6% by 2050. Over the same span, the ratio of working-age Americans to those of retirement age is projected to drop from 3.4-to-1 to 2.6-to-1.
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The Sovereign Debt Vulnerability Ranking
Bloombergs Sovereign Debt Vulnerability Ranking is a composite measure of a countrys default risk. Its based on four underlying metrics:
- Government bond yields
- 5-year credit default swap spread
- Interest expense as a percentage of GDP
- Government debt as a percentage of GDP
To better understand this ranking, lets focus on Ukraine and El Salvador as examples.
1 basis point = 0.01%