Debt Clock upgraded to show publicly-held debt

The Debt Clock at the upper right of this weblog was long overdue for an upgrade.  It now shows “Publicly-held Debt” in addition to the total debt.  Note that the ratio of public debt to GDP is ticking backward.  [If you don't see the new numbers, try hitting your browser's refresh button.] 

Why add the extra numbers?  Simply to help clarify the debate.  Most politicians and journalists like to trumpet the total debt ($8.6 trillion) in their headlines and speeches.  Many economists, on the other hand, argue that the important number is not total debt (including intragovernmental), but publicly-held debt—partly because that’s the number on which the government pays out “net interest.”   Note that the Bureau of Public Debt always publishes both numbers, for good reason; we’ll start watching both numbers here, too. 

The reason I originally limited the Debt Clock to total debt is twofold: (1) in theory, today’s intragovernmental debt will someday become publicly-held—although that’s not a certainty; and (2) total debt is the most-widely recognized number, thanks to the politicians and journalists—not to be confused with economists.

As you may have seen elsewhere already, the debate on which number is more important (total vs publicly-held) can quickly degrade from an objective search by adults for the truth—to an emotional cat fight suitable for elementary school mentality pseudo-adults.  I don’t want to spark one of those, but I did want to upgrade the debt clock as a prelude to subsequent articles that will clarify the basic theme of this website, which is this:

In a growing economy such as the one we enjoy today, deficits and debt not only fail to cause harmful effects, but they are desirable because they can enhance economic growth—so why doesn’t the mainstream media devote more time to economic growth, and less time to deficits and debt? 

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[One of the next articles I have in the works will explode the myth that debt incurred today implies tax rate hikes in the future—as politically potent as that assertion has been over the decades for the party that wishes it held the White House.]

Comments

[ilsm]

Yes, the intragovernmental holding!!

They may never be converted to cash merely rolled over into?????

The Fed could increase their holdings and just print lots more money. They already hold about 900B in monetary expansionary t-bills they have bought, and they get paid no interest either.

Maybe the politicians will raise the cash from the tax payers.

Maybe they will renege and we will see a net decline in consumption born by the boomers.

Maybe they will roll to new T Bills bought by someone, maybe the Saudis, Japanese or Chinese.

The issue is: there are taxes levied (not just SS and Medicare) and used for other things and someday they won't be paid back?????

Or maybe we just worry about what we wish and tomorrow will take care of itself.

Your new clock has not loaded.

[gunthestops]

Are you just another guy who either does not understand the national debt or it is a ruse to defuse the idea that running up the biggest national debt of all time by republicans is not such a bad thing. But here are some simple questions that cuts to the bottom line: 1) Is the US taxpayer is on the hook for all or only part of the national debt? A. All of it, and that is why it is called “The Public Debt”. 2) How do the CBO budget numbers keep going down and national debt numbers keep going up? A. Because they can spend surplus trust fund money like SS 180 billion surplus in FY 2006, and since it is off budget the CBO does not have to record it as expenditure in the regular budget. And then you also have the war spending of over 100 billion that is also not included in the CBO budget. 3) Why have two types of debt for the public debt? A. Long answer short, it allows the government to spend the surplus trust fund money without have to account for it in the CBO FY budget numbers making the deficits smaller then what they really are and they do not have to go out to the public and flood the market with even more treasury paper. Plus the interest they owed the trust funds (170 billion in FY 2006) can be added to the trust fund debt instead of being paid.

FYI: You will never see the SS separated from the Unified budget into individual retirement accounts because the government has spent the total amount of the SS surplus funds over 2 trillion, and is using the yearly SS surpluses to reduce the CBO yearly deficits.

Here is just my opinion: Some of you are just plain lazy when it comes to really looking hard at how bad things are when it comes to the debt and deficits. Our reckless spending and neglect will be passed on to our children and grandchildren. This is not just a Republican or Democratic problem it is America’s biggest problem. As Milton said “ government debt and deficits are taxes unpaid and due at some future time.” Now we have 9 trillion of actual taxes unpaid national debt and 50 trillion of future liabilities coming due. It looks like the greatest generation (the one before the baby boomers) will be followed by the most irresponsible generation.

[John]

Hi, gun, you must be new here. Welcome. Stick around, read some of the articles. I'd start out with this one myself: Why Debt Doomsday is a Myth
http://www.optimist123.com/optimist/2005/10/why_debt_doomsd.html

[Steve]

gun:

If you disliked that article, you'll really hate the one about how we'll never have to pay back any of the national debt. Go to the search box and search for "best kept secret".

[mark]

Hey Gun

The "Greatest Generation" ran up far more debt as a percent of GDP than the "Irresponsible Generation". I for one am glad they spent all that fiat money winning WWII. Most of the money was spent on stuff that got destroyed, except maybe freedom and how do you put a price tag on that.
I am sure you are intelligent. Can you do the math to put a spacecraft on a translunar trajectory? Me neither. Knowledge and intelligence are two different things. Can you honestly say you have the knowledge of the workings of a fiat money system with floating exchange rates? Steve is doing an outstanding job trying to educate us on this (our) money system.

[jp]

Another month, another great report from the Treasury. Receipts continue to power ahead, growing by 11.5% Y over Y, and Outlays growth continues to drop, now down to 5.6% YOY. Confirms the projection again, that the unified Budget will be in balance as of July 08, and I actually predict earlier, as 2007 Outlays will be held relatively flat over 2006 due to the continuing resolution funding. Cheers
jp

[ilsm]

Mark,

Did you do the sum of national debts from 1940 to 1945?

Yeah, ran it up for that 5 year period. Look what they did with it. A valid use for the debt that is.

This stuff is pure BS.

They did not stay at near 100% of GDP for long, then they came home and paid it down, until the cold war when it rarely achieved 65% of GDP.

Of course, we may be looking at the ragheads as fearsome like the Nazis or communists.

Not real.

Knowledge and intelligence are indeed two things; logic is missing here. Fiat money and the machinations here are cons.

But you can denigrate the greatest generation as easily as Cheney and Bush can denigrate current combat vets.

The indebtedness to SS and medicare is embezzlement.

That money was taxed from working people and used to hide the debt by the con of the misquoted deficit.

[gunthestops]

Again---facts are facts--BS is BS---Why does the national debt go up Y over Y and the CBO budget deficit go down?

[pawnking]

I think Steve must have had this post linked to a KOS one... I am distressed because those guys are pretty good at deginerating an intelligent forum like this one with a lot of name calling.

[ilsm]

"deginerating an intelligent forum "

New code for exposing the con artists. Yeah I read Kos and sftt.org and a few other librul sites.

Also Warsh.

And the Y to Y rise in the total debt? Anyone?

Yes, I do not understand pure monetarism. I do not understand how long the press can run.

The unified budget is all that counts.

paaashhhhh

[ilsm]

Hey Mark,

I just checked the federal debt to GDP since 1935.

It was well over 60% of GDP from 1942 until 1957 when it went below 60% of GDP.

I guess no one in the WW II generation paid it down by 60% of GDP in those 12 years. I will say some of the pay down was GDP growth.

How do ya'all monetarists see GDP growth with declining debt????

Milton Friedman could say that would incite depression.

The debt ratio did not exceed 60% again until 1989. About 32 years when the WW II generation paid it down and stood to the cold war.

In the 60s and 70s it nudged below 40% of GDP on occasion.

I guess we were in deep depression those several decades.

And there was no SS surplus until the Greenspan commission raised the ages and rates.

So, let's look at GDP to debt in WW II years alone!!

What was you point?

The greatest generation saved your bacon and you degrade them, when they were the exemplars of thrift and growth, without the debt monetarists con.

[Syphax]

"Why does the national debt go up Y over Y and the CBO budget deficit go down?"

a deficit means that spending is higher than revenues. A falling deficit means that the debt will not go up by as much year over year, but it will still go up.

Even the with the off-budget included, the deficit has fallen from $700 billion in 2004 to $434 billion in 2006 and will fall to $357 billion.

"I guess no one in the WW II generation paid it down by 60% of GDP in those 12 years. I will say some of the pay down was GDP growth."

The national debt increased from $269 billion in 1946 to $930 billion in 1980... so no, it wasn't paid down. Growth pushed the Debt/GDP down from 120% to 33% during those years.

[ilsm]

Syphax,

The point was there was no need to finance that growth. from 1946 to 1980, with increasing "real" debt.

Debt as part of GDP gives some relation and accounts for real, hedonistic and inflationary issues in considering the different 'times' discussed.

I "own" a house in 1946 with a mortgage of 100 doodles. My income is 40 doodles (old saw 2.5 time income).

In 35 years my income is 120 doodles, I have a heloc my debt on the house is 160 doodles.

I am better off now than before because......

My debt load is only 1.33 times my income.

So, as I experience growth and inflation and increased perforamnce at higher price of my stuff I reduced my debt load.

I guess I did not pay anything off I just did got less deep into debt.

It is all the way you look at it.

We do not pay off debt when we reduce the percent of GDP owed? Huh??

We are not beggars when the percent of GDP rises? Or stays constant?

Huh?

It is all how you look at it.

Money to be continuously rolled as debt is beggary in my view.

See it as you will.

And the fed keep prining so who cares. It is all just paper.

And the Old Testament prohibited usury and other things the fed does.

I wonder how they missed inflation?

[ilsm]

Syphax,

I was wrong, the Old Testament got inflation.

God has it in the 10 Commandments.

"Thou Shalt Not Steal"

[Syphax]

"The point was there was no need to finance that growth. from 1946 to 1980, with increasing "real" debt."

I would argue that the growth experienced was financed with increasing debt... Debt incurred during WWII. Had WWII not been fought and had we not raised our national debt to 120% of the GDP, it's unlikely the US would have experienced such growth during that period.

That being said, I think its very likely the economy could have grown faster during that period had tax rates been lowered drastically(for example lower the top bracket from 90% to at least 40%). The national debt may have risen more, but it would certainly have been worth it for faster growth.

[ilsm]

Syphax,

You would argue.........

Wht other than running up a huge debt caused the US to grow after WW II?

How about: pent up demand, we paid ourselves the debt, unlike today when the debt goes to India, Japan and China, the Japanese, German, French, and to a lesser edxtent the British economies were bombed to the 18th century.

The only result I see from the debt is it saved the world from fascism and Asian nationalism.

The post war growth has many more substantial authors than debt.

You think............

Taxes that do not match spending cuts are delaying the taxation.

I think we pay later with interest.

We all have thoughts.