Confused about national debt: how much we owe and to whom? Try this short and clear John Steele Gordon’s piece in the WSJ today.Gordon writes:
The total national debt of the United States is the sum of all federal bills, notes and bonds that have been issued by the Treasury and not yet redeemed. The publicly held debt is the sum of the Treasury securities held by individuals, financial institutions and foreign governments…The intra-governmental debt is the sum of Treasury bonds held by agencies of the federal government, principally the so-called Social Security Trust Fund. The liabilities equal the future pensions, health care, Social Security payments, etc., that are promised under current legislation…In absolute numbers, the total public debt as of Aug. 11 was $9.924 trillion, and the intra-government debt was $4.666 trillion, for a total of $14.587 trillion.
Gordon goes on to make the case that Washington’s focus should be on reducing the debt-to-GDP ratio, because, as he says, “It’s the debt’s size relative to gross domestic product that matters, just as personal debts must be measured against a person’s income before they can be properly evaluated”. And reducing the debt-to-GDP ratio requires the government to slow spending, stop adding to the debt, and allow the GDP to grow, thus bringing down the ratio:
If the country can experience GDP growth equal to what we had in the 1990s, the debt-to-GDP ratio would drop, in just a decade, to 56.7%, about where it was in 2000.
There is no substitute for growth.