Federal debt only, not including state:
Debt held by public Governmentally Total public
directly "held" debt
Per federal statistics, 6/19/12: 11.03 trillion the difference 15.78 trillion
% of GDP 74% 100+ %
US GDP Around 15 trillion
Our Federal Budget deficit 1.2-1.4 trillion
The % of our GDP coming from government deficit spending 8%
In other words, with no deficit spending the gdp is not overly inflated any more - and it would be 8+% less - which would, of course, not look good for any President - so is it any wonder the current President does not actually proactively address it or present a budge to do so (his budgets have been voted down in the Senate 97-0 and 99-0). For some reason, people fail to see this.
In other words, if you want to grow GDP by 2%, you can just increase government spending by 2% - and you'll look like an effective economic manager.
Note that federal spending itself has increased $1 trillion over the 2007 level.
WHICH IS IT? 74% or 100+%?
The Fed (Federal Reserve Bank, which is independent of the Fed government) has bought $2.3 trillion of US bonds. So we theoretically owe ourselves that, somehow.
But it gets worse. We also have in the Social Security Trust over $2 trillion is I.O.U.s from the US (bonds).
When social security is to be paid out, the federal government will have to do the paying, since there is no actual money in the trust account. It will add to our deficit spending when we need to pay beneficiaries more than the amount being paid into social security by current wage earners. (Currently we are paying out extra.)
The bottomline here is that the govenmentally held debt is really public debt as there are no actual moneys backing that up.
We owe to the public (and countries, etc.) $15.78 trillion. The other number is meaningless as far as debt.
BUT, WE "OWN" OUR OWN DEBT, DON'T WE"
Those who say we only owe 74% of our GDP somehow believe we can solve all of this with magic.
To create further magic, I would just have the Fed buy up all of the other $11.03 trillion, so we would then owe 0% of our GDP.
But isn't something wrong there? What is wrong with this magic?
The problem is that the Fed doesn't really have any assets to buy the debt with. It essentially is "printing the money" to theoretically fund the debt.
If we "print the money", doesn't that mean there is more money - and that eventually the extra printing lowers the value of our money, so that we purchase less goods for more money.
That shows up in either inflation or the devaluation of the dollar relative to other currencies.
The Fed calls this printing of money (buying up US bonds) "quantitative easing" - it is increasing the amount of money so that interest rates will stay low. Everyone knows that if there is more money available to buy debt, the borrowers will get lower interest rates. And lower interest rates are good for borrowers, such as business, though they dramatically hurt those people who live off of interest or invest conservatively.
AND WHEN THE INTEREST RATES GO UP, WHAT HAPPENS TO US?
A number of people say we oughta just borrow freely, as it is cheap. But what happens when we've borrowed so much that we have alot of interest to pay? Even at today's interest rates, our interest is projected to be well over $600 billion, from 200+ billion, in a few years. And if interest rates double (they will go up when the economy improves), we would have to pay $1.2 trillion in interest. The extra trillion has to come, ultimately from taxes, which total 2.1 trillion right now (including fees), so our tax burden would have to rise 48%. The rich cannot make up the difference - they don't have that much money! (See Tax The Rich! They Must Pay Their Fair Share! But what are the facts and how much money is there?)
The Congressional Budget Office projects net interest of $800 billion by 2020. Gulp!
THE BOTTOMLINE
As is obvious, excess borrowing cannot go on forever for an individual or for a government. True, the government can print money, but its citizens pay for that in inflation and decreased purchasing borrow internationally.
There is no magic. (Duh!)
We cannot sustain this without hurting our children to a huge degree and ourselves somewhat, too (unless we die real soon, of course). The boogeyman (debt) will surely come to get us. Imagine having to have a tax burden that is 48% higher! And that doesn't include the effects of not solving the social security and medicare funding problems. See Actual Total US Debt.
"It doesn't take a genius to guess the consequences of excess..."
