2008-10-22

OSO's debt watch

Here's something I might do on a regular basis - reporting US government debt.

Unlike the "Debt Clock" in New York, I'll be making a more judicious measurement.

For starters, while it is true that US Federal Government Debt is now nearly $10.5 Trillion, a substantial part of that debt is deemed as "intergovernmental holdings". I'm not absolutely certain how to describe what intergovernmental holdings are, but I am certain of one thing - it is government debt held by the government itself. This means that when intergovernmental holdings are paid off, the money simply goes back to the government. So when we look at the debt level, you can pretty much "write off" that section of debt.

As of today, however, US Federal Government debt held by the public is $6,189,647,424,005.11. That is approximately $6.19 Trillion. Debt held by the public is debt that the government has to pay out to those outside of government. It is thus a true measure of just how indebted the government is.

But numbers can mean anything. $6.19 Trillion sounds like a lot, but if GDP was $500 Trillion then this debt would be quite small. Moreover, GDP changes as the economy runs along, which means that an expanding GDP could actually make debt levels proportionally lower despite increasing in size. That's not been happening however. 2008 Q3 GDP is due to be released next week and should show a contraction.

Public Debt on 2008-10-20 was $6.19 Trillion
(Source)


US GDP in 2008 Q2 was $14.29 Trillion
(Source)


Debt/GDP Ratio: 43.32%
( [Debt / GDP] x 100)


Public Debt/Person: $20,264.04
(Public Debt / US Population)
(September 2008 resident population + armed forces overseas = 305,449,862 source)

5 comments:

JD Walters said...

Even with a GDP contraction, the debt/GDP ratio doesn't look so bad for the US. At least not when compared with Zimbabwe or Japan, which have 221.9% and 195.5%, respectively.

(Source: http://en.wikipedia.org/wiki/List_of_countries_by_public_debt)

It actually makes me wonder how the hell Japan manages to have a modern economy with such obscene levels of public debt. Doesn't it basically mean they're paying interest on interest?

One Salient Oversight said...

It depends on how fast the debt/GDP ratio expands. It may double within the next five years.

Japan's debt is a worry, however interest rates there are so low (less than 0.5%) that the interest repayments are quite small.

Moreover, Japan's debt was created by a property boom in the early 1990s that went bust, forcing the government to bail out companies and run deficits to stimulate demand. Where Japan is now, the US might be...

detlef1961 said...

I'm not absolutely certain how to describe what intergovernmental holdings are, but I am certain of one thing - it is government debt held by the government itself. This means that when intergovernmental holdings are paid off, the money simply goes back to the government. So when we look at the debt level, you can pretty much "write off" that section of debt.

Are you sure about that?
Around $2,5 trillion of that debt belong to the OASDI ("Old age"=social security, survivor, disability insurance) trust funds. As in (surplus) taxes already paid by employees to finance the coming boomers retirement. IIRC the Greenspan commission in the 1980s recommended this plan. And around 2017 I believe the trust fund will start to need that some of that money.
(By then the trust fund is expected to hold $4,2 trillion of special US treasuries according to the latest trustee report.)

Simply put, at least in the case of Social Security this is money collected by a government agency from employees. And then - as required by law - invested in another government agency (special treasury bills). It is not money simply moved around between different government agencies.

Another $390 billion in the Medicare ("Federal Hospital Insurance Trust Fund" and "Federal Supplementary Medical Insurance Trust Fund") trust funds. And $708 billion in the "Federal employees retirement funds".
To just name the three largest holders of that intergovernmental debt.

Source:
Debt to the Penny (look at "Trust Funds Program").

It´ll take a brave politician to "write down" these debts. :)
Wanna face the voters and win an election afterwards?

detlef1961 said...

You can also find the numbers here. Quarterly treasury bulletins with nice tables.

Eclipse Now said...

Nah, you're all far, far too optimistic. Try $65 trillion.

Check out Chris Martenson's debt video, 12 minutes long.

http://tinyurl.com/4e2uh2

His companion article to the above video can be read here
http://www.chrismartenson.com/immoral-level-debt

or

http://tinyurl.com/5aegp7