Quotes on United States National Debt & Budget Deficits
"I was happy to find your name among those of the committee sent to camp. This was a wise measure. The most severe economy in the expenditure of public money will, I hope, be observed. The credit of the United States has, both at home and abroad, been so heavily and perhaps imprudently laden that care should be taken lest the strength should become inadequate to its burdens."
“Then I say the earth belongs to each of these generations during it’s course, fully, and in their own right. The 2d. generation receives it clear of the debts and incumbrances of the 1st., the 3d. of the 2d. and so on. For if the 1st. could charge it with a debt, then the earth would belong to the dead and not the living generation. Then no generation can contract debts greater than may be paid during the course of it’s own existence.”
"It is my duty to recommend to your serious consideration those objects which by the Constitution are placed particularly within your sphere - the national debts and taxes.
Since the decay of the feudal system, by which the public defense was provided for chiefly at the expense of individuals, the system of loans has been introduced, and as no nation can raise within the year by taxes sufficient sums for its defense and military operations in time of war the sums loaned and debts contracted have necessarily become the subjects of what have been called funding systems. The consequences arising from the continual accumulation of public debts in other countries ought to admonish us to be careful to prevent their growth in our own. The national defense must be provided for as well as the support of Government; but both should be accomplished as much as possible by immediate taxes, and as little as possible by loans."
"In time of peace there can, at all events, be no justification for the creation of a permanent debt by the Federal Government. Its limited range of constitutional duties may certainly under such circumstances be performed without such a resort."
"If business is to find such terms as will bring back prosperity, the universal waste by public authorities and the tendency of many corporate bodies to make both ends meet by borrowing instead of saving must come to a speedy end.
Our progress toward a centralized paternalism is so marked and has gone so far that the middle-of-the-road Socialist has little reason to complain that his party has not already secured a majority. Under laws passed at the last session of congress, most corporate business in the United States is under direct federal control. Every year sees the transaction of business made more expensive by laws prescribing multiplied and costly reports, ordering expensive improvements or additional services, laying new taxes, compelling the engagement of additional employes [sic] and the raising of the compensation of the old. This is the history of paternalism, of centralization, since ever the words or the things were known to the world. That governing method has always been the most wasteful of all, no matter whether it hid itself under the title of monarchy, aristocracy or democracy. Under the tribute it attempts to levy, business in the United States would eventually become unable to conform to the onerous conditions of the new era."
"The National Debt stood at $10.626 trillion the day Mr. Obama was inaugurated. The Bureau of Public Debt reported today that the National Debt had hit an all time high of $13.665 trillion.
The Debt increased $4.9 trillion during President Bush's two terms. The Administration has projected the National Debt will soar in Mr. Obama's fourth year in office to nearly $16.5-trillion in 2012. That's more than 100 percent of the value of the nation's economy and $5.9-trillion above what it was his first day on the job."
"Over the course of our deliberations, the urgency of our mission has become all the more apparent. The contagion of debt that began in Greece and continues to sweep through Europe shows us clearly that no economy will be immune. If the U.S. does not put its house in order, the reckoning will be sure and the devastation severe. ... After all the talk about debt and deficits, it is long past time for America’s leaders to put up or shut up. The era of debt denial is over, and there can be no turning back."
National Commission on Fiscal Responsibility and Reform, The White House
“As Federal Reserve Chairman Ben Bernanke recently told Congress, the best time to get started addressing the problem was '10 years ago.' There’s still time to fix it. But ignoring the problem — just like hanging up on the debt collector — is not a great way to go.”
"Our nation is on an unsustainable fiscal path. Spending is rising and revenues are falling short, requiring the government to borrow huge sums each year to make up the difference. We face staggering deficits. In 2010, federal spending was nearly 24 percent of Gross Domestic Product (GDP), the value of all goods and services produced in the economy. Only during World War II was federal spending a larger part of the economy. Tax revenues stood at 15 percent of GDP this year, the lowest level since 1950. The gap between spending and revenue – the budget deficit – was just under nine percent of GDP."
National Commission on Fiscal Responsibility and Reform, The White House
"In a 1789 letter to his friend James Madison, Thomas Jefferson raised the philosophical and moral question of whether 'one generation of men has a right to bind another.' He believed the answer was no, 'that the earth belongs in usufruct to the living.' He believed it a principle of 'very extensive application and consequence, in every country.' Applying it to government borrowing, he argued that it was unjust and unrepublican for one generation of a nation to encumber the next with the obligation to discharge the debts of the first. After all, the following generation cannot have given their consent to decisions made by their fathers, nor will have they have necessarily benefited from the deficit expenditures."
"History is littered with examples of major economic and financial crises in countries that have engaged in public spending profligacy. That sad experience should be raising red flags in the United States, where the unsustainable longer-run trajectory of the US public finances is now suggesting the real risk of either a destructive burst of inflation or an outright government debt default. This is particularly the case in today’s US context where an ever-increasing portion of the US budget deficit is being financed by foreigners and where entitlement programs threaten over the longer haul to compound an already highly compromised public finance position.”
"The problem is real, and the solution will be painful. We must stabilize and then reduce the national debt, or we could spend $1 trillion a year in interest alone by 2020. There is no easy way out of our debt problem, so everything must be on the table. A sensible, realistic plan requires shared sacrifice – and Washington must lead the way and tighten its belt."
National Commission on Fiscal Responsibility and Reform, The White House
“Whopper budget deficits for so many years will mean that the cumulative debt will creep up as a percentage of the nation's gross domestic product (GDP). How much debt the country can handle is debatable. The problem is that, if investors believe the United States isn't fiscally responsible, they could start demanding much higher interest rates when they bid on Treasury securities. The feedback loop could get ugly. The nation could have to borrow hundreds of billions just to pay interest. This has been touted as a classic path to irreversible national decline.”
That's what the National Debt topped this week, a record.
Go ahead, let it soak in: Thirteen trillion, fifty billion, eight hundred twenty-six million, four hundred sixty thousand, eight hundred eighty-six dollars . . . and ninety-seven cents.
Seen on the 'debt clock' in Times Square, that number seems little more than an abstraction, something almost impossible to process. But think about it this way: If you earned one dollar every second, it would take you 416,000 years to earn enough money to pay it off."
“One thing is clear, though: the level of debt relative to income cannot rise without limit. This insight is important, given that there is strong reason to believe that the extraordinary rise in the debt-to-GDP ratio is a result of the government-controlled, fiat-money system in which the money supply is increased through bank lending.”
"By putting the blame on debt as the cause of economic recessions, one absolves the Fed from any responsibility in actually setting the whole thing in motion. Additionally, once it is accepted that debt can set in motion a monetary implosion and in turn an economic depression, it seems to make sense that the Fed must step in and lift monetary pumping in order to offset a disappearing money supply.
However, rather than countering depression, what monetary pumping in fact does here is to further weaken the pool of real funding and thereby deepen the economic crisis. (Note that many commentators are of the view that on account of price deflation the debt burden intensifies. Consequently, it is held that by means of monetary printing this burden can be eased, thereby arresting the economic plunge. Again we suggest that pumping more money only dilutes the pool of real funding and makes things much worse)."
"To avoid perpetual trillion-dollar debt limit increases, Members of Congress should also finally address the long-term entitlement-driven budget problem. Adding to today’s deeply troubling spending-driven public debt levels, the Congressional Budget Office estimates that as Social Security IOUs are redeemed and rising health care costs drive up expenditures for Medicare and Medicaid, the publicly held debt will exceed 320 percent of GDP by 2050. Net interest expense by that time will increase nearly tenfold from today’s level of 1.4 percent of GDP to 13.5 percent."
"The remedy for what ails the economy is, in my view, in the hands of the fiscal and regulatory authorities, not the Fed. I could not state with conviction that purchasing another several hundred billion dollars of Treasuries—on top of the amount we were already committed to buy in order to compensate for the run-off in our $1.25 trillion portfolio of mortgage-backed securities—would lead to job creation and final-demand-spurring behavior. But I could envision such action would lead to a declining dollar, encourage further speculation, provoke commodity hoarding, accelerate the transfer of wealth from the deliberate saver and the unfortunate, and possibly place at risk the stature and independence of the Fed.
My perspective, as with those of all other members of the FOMC, was given a thoughtful and fair hearing at the table. After deliberation, the majority of the committee concluded that under current and foreseeable conditions, the better approach was to purchase $600 billion in Treasuries between now and the end of the second quarter of next year, on top of the amount projected to replace the paydown in mortgage backed-securities. The math of this new exercise is readily transparent: The Federal Reserve will buy $110 billion a month in Treasuries, an amount that, annualized, represents the projected deficit of the federal government for next year. For the next eight months, the nation’s central bank will be monetizing the federal debt.
This is risky business. We know that history is littered with the economic carcasses of nations that incorporated this as a regular central bank practice."
"I would suggest that even if you share my cautious perspective on this matter, you might be assuaged by looking at this new initiative as a bridge loan to fiscal sanity. We have a new Congress. From my perspective, there are two ways your central bank can approach them: the way it is being done by the Bank of England, which appears to me to be seeking to cushion the adjustment to a policy of fiscal abstinence by a new government after a prolonged period of fiscal debauchery; or to provide the space necessary for our newly elected Congress to work with the president to find a way to restore fiscal sobriety without choking off economic recovery.
The new leadership of the House of Representatives, and the reelected leadership of the reshaped Senate, together with President Obama, surely must understand that we are at the end of the line and that time is of the essence. The Fed is doing its level best to deliver on the dual mandate it was given by the Congress. But monetary accommodation, by itself, is not the answer to our current woes. The Fed, as I see it, has taken a leap of faith that our political leaders will forge a sensible budgetary and regulatory path that incentivizes businesses to put to work the money the Fed is printing to invest in creating jobs for American workers while averting what the Stanford historian David Kennedy described in yesterday’s New York Times as 'a looming fiscal apocalypse.' We need for the Congress to move quickly, beginning in its lame-duck session. As Winston Churchill said, 'We need action this day!'"
"'The fairness argument is largely political,' said Yandle. 'The majority of people aren’t rich, so the majority of voters aren’t rich. But while the fairness is an important issue and one that must be addressed by wise politicians, it doesn’t get you very far in looking for more revenues and lower spending.'
Yandle says that attempting to make a fair tax code doesn’t help to close the deficit. 'Raising taxes on the rich doesn't necessarily generate more revenue,' he said. 'Wealthy investors have too many ways to escape. With higher tax rates, less investment will follow, and more will be spent in finding ways to avoid taxes. If the goal is more revenue, then tax rates should be reduced and loopholes closed.'"
"The great majority of central banks were established after 1900 to help governments spend money they didn’t have. They became engines of inflation. The largest number of runaway inflations and the worst runaway inflations have occurred since 1900."
"It’s politically almost impossible to control runaway spending when people believe that government can continue making payments. As long as there’s any money in the lock box, political pressure will be overwhelming to spend it. The tens of millions of voters who receive government benefits – such as elderly pensioners, unionized government employees, solar panel hustlers and rich Wall Street bankers ‑ are likely to demonize courageous politicians who suggest the government can no longer afford to pay for everything. This is where we are now."
"There is widespread concern that, even without an actual default on the nation’s debt, a delay in raising the debt limit could so worry investors that they would demand higher interest rates to lend money to the U.S. government. ...
While it appears that bond investors will shrug off brinksmanship in the short run, ... this confidence is unlikely to last if the current unsustainable level of spending continues. In fact, raising the debt limit on time—but without a serious commitment to improving the nation’s fiscal path by reducing spending—would signal investors that U.S. debt is riskier than before Congress raised the debt limit."
“The U.S. government spent $369 billion in March, more than any previous month in U.S. history. And the Treasury Department's $198 billion one-month deficit was a March record, though it said the numbers were boosted because $30 billion in benefit payments due this month were made in late March because April started on a Sunday.
The federal deficit is projected to total $1.2 trillion for the fiscal year ending Sept. 30, down from $1.3 trillion for fiscal 2010 and 2011 and $1.4 trillion for fiscal 2009.
The government also is on track to hit its $16.394 trillion borrowing limit sometime in November or December.”
"The amount of debt is one thing. The burden of interest payments is another. The Treasury now has a preponderance of its debt issued in very short-term durations, to take advantage of low short-term interest rates. It must frequently refinance this debt which, when added to the current deficit, means Treasury must raise $4 trillion this year alone. So the debt burden will explode when interest rates go up.
The government has to get the money to finance its spending by taxing or borrowing. While it might be tempting to conclude that we can just tax upper-income people, did you know that the U.S. income tax system is already very progressive? The top 1% pay 37% of all income taxes and 50% pay none."
"Did you know that, during the last fiscal year, around three-quarters of the deficit was financed by the Federal Reserve? Foreign governments accounted for most of the rest, as American citizens' and institutions' purchases and sales netted to about zero. The Fed now owns one in six dollars of the national debt, the largest percentage of GDP in history, larger than even at the end of World War II."
"Republicans in Congress are calling for $2.2 trillion in deficit-reduction, including significant cuts to healthcare programs for the elderly and poor along with tax changes that they argue would boost the economy, congressional aides said on Thursday.
The plan offered by Republicans who serve on a congressional 'super committee' tasked with slashing deficits calls for cuts to the...
"The 2012 political year is right around the corner and the recent failure by the so-called 'Super Committee' to reach agreement on $1.2 trillion in deficit reduction will re-cast the environment on Capitol Hill and shape the 2012 campaign.
With divided control of Congress, and a 60-vote threshold in the U.S. Senate, major Congressional action before the 2012 election is now extremely...
Claire Suddath explains the current budget deficit level and how the projections for the 2009 deficit were actually lower then expected. However, the current national deficit will increase the debt to GDP ratio faster then during any time since World War II. The overarching changes in the national debt since the founding of the United States are also explained. The...
"As Washington scrambles to find the 'just right' package that will allow enough of Congress to vote for an increase in the debt ceiling, some leaders have asked those Americans who make more money to be willing to pay more taxes, calling for fairness to be reflected in the tax code. However, new research from Bruce Yandle finds that from 1979 to 2007 the individual income tax burden on the...
"Members of President Obama’s bipartisan deficit commission argued on Wednesday that the government’s mountain of debt is higher than it appears and already threatens to hamper economic growth. But on a day when Republicans and Democrats bent over backwards to be polite to one another, Democrats themselves appeared divided between fiscal conservatives and liberals...
"In Q2 2009, total debt outstanding in the United States — financial plus nonfinancial debt — amounted to 373.4% of GDP. At the start of 1952, the debt-to-GDP ratio stood at only 130%. In fact, in the last decades the rise in total debt has increasingly outpaced nominal income — a development which gained momentum after the erosion of the last vestiges of the...
"Today, without much fanfare, US debt to GDP hit 101% with the latest issuance of $32 billion in 2 Year Bonds. If the moment when this ratio went from double to triple digits is still fresh in readers minds, is because it is: total debt hit and surpassed the most recently revised Q4 GDP on January 30, or just three weeks ago. Said otherwise, it has taken the US 21 days to add a full percentage...
"The federal budget deficit appears to be narrowing slowly but steadily, as corporate and individual income taxes rise thanks to the rebounding economy.
The Treasury Department reported Wednesday that it collected $171 billion in taxes and other revenue last month, the highest March tally since 2008, when Bear Stearns was acquired at a government-run fire sale by J.P. Morgan Chase JPM -...
"The amount of U.S. debt per person has ballooned by more than a factor 50 in the past 90 years. This tremendous increase of inflation-adjusted federal government borrowing was explained in a post on Monday. But as some readers noted, real income has increased as well over the years. If you take rising incomes into account, does the picture look any better?"
Due to the fact that Treasury Secretary Geithner stated that President Obama desired to return to the fiscal policies of the Clinton administration, Keith Hennessey uses this piece to draw comparisons between the two presidents. According to Hennessey, the spending...
"Earlier this week, the Obama White House criticized Members of Congress for examining the effects of the $1.2 trillion in automatic spending cuts scheduled to kick in next year. Instead, the Administration said it would prefer that lawmakers turn their attention to longer-term deficit reduction proposals. But this is not an either/or situation; both need serious attention.
"IT SEEMED a good idea at the time. But sequestration, an ugly word for an ugly thing, now threatens to rip the heart out of America's defence budget.
Sequestration was part of the deal hammered out last August to extend America's debt-ceiling when it was on the verge of default. The deal set up a congressional 'super-committee' charged with cutting the deficit by $1.5 trillion on top...
"I could not resist posting this beautiful graph of the current state of the momentousness US debt. The graph is particularly useful for eyeballing the historical path of U.S. debt to GDP. Often pundits will say that our current debt to GDP ratio is not unreasonable because it is not too high relative to the period following the WWII and the Great Depression."
"The federal deficit is higher than it has been since the 1940s, in the years immediately after World War II. ...
In every second of 2011, for example, the government spent $114,253—even though it was only taking in $73,043 in revenue. According to Face the Facts, that means the federal government spent $41,210 every second that it didn't actually have."
"To summarize, Ryan’s budget plan would make crucial reforms to federal health care programs, and it would limit the size of the federal government over the long term. However, his plan would be improved by adopting more cuts and...
In this week’s chart, Mercatus Center Research Fellow Matthew Mitchell uses data from the Bureau of Economic Analysis to illustrate the increase in the size of federal, state, and local expenditures as a share of GDP over the course of the past century.
"The gridlocked members of the congressional supercommittee should grab President Obama and decamp to a tropical island. Specifically, they should visit Puerto Rico, where a courageous leader is using free-market reforms to reinvigorate this previously moribund U.S. territory."
"The chairman of the Republican Study Committee (RSC) called out the president for his willful neglect of the process in the wake of the failure of the Super Committee to present a deficit reduction plan before the November 23 deadline.
'Though President Obama acknowledged that entitlement programs are some of the biggest drivers of our debt, he has failed to show any leadership in...
"There are numerous clichés concerning the national (i.e. federal government) debt. In this article I attempt to show the grain of truth (and pile of falsehood) in these typical statements. But before doing so, I will first give a quick primer on government debt and its financing."
"Late this month [September 2011], the 131st edition of the Statistical Abstract of the United States is scheduled for release. It will be the final installment of the paper edition of the fact-packed government annual, a planned casualty of the current budget austerity that stands only a slight chance, sources say, of winning a reprieve when Congress tackles appropriations this fall."
"Democrats looking to capitalize on voter anger at Congress began targeting Republican incumbents in the House of Representatives Wednesday, saying they were responsible for the failure of the bipartisan super committee to reach a deal cutting the country's federal debt.
The Democratic Congressional Campaign Committee is launching robotic calls to voters in 30 GOP-held House districts,...
"The House votes Friday on a constitutional amendment to balance the budget, and members of both parties say they support one. But a dispute over which version of the amendment should pass could doom the whole effort."
"There's widespread agreement the national debt is a problem. And since voters have picked up on the issue, you're going to be hearing more about it from Republicans and Democrats in Washington, who last week began the annual circus known as 'the budget process.'"
"The recent flow of funds data released by the Fed shows that a level of private debt continues to soar. For instance, home mortgages as a percentage of disposable income rose to 97.9% in Q2 from 97% in the quarter before. The non-financial debt-to-nominal-GDP ratio stood at a record 2.1 in Q2 the same figure as in the previous quarter.
"When President Barack Obama signed the American Recovery and Reinvestment Act of 2009 into law yesterday, he was adding to what is already almost guaranteed to be the largest deficit in American history. In January, the Congressional Budget Office projected that the deficit this year would be $1.2 trillion ...
"Today’s release of the 2012Q2 Quarterly Report on Household Debt and Credit indicates a continuation of the downward trend in household debt, which followed a long period of substantial increases. As of June 30, 2012, total outstanding household debt was down nearly $1.3 trillion since its peak in the third quarter of 2008."
"With the hours ticking away toward a self-imposed deadline, Congressional leaders conceded Sunday that talks on a sweeping deficit agreement were near failure and braced for recriminations over their inability to reach a deal.
The stalemate was the latest sign of partisan deadlock in Washington, which members of both parties do not expect to lift until the 2012 election has clarified...
"The United States is not the first nation to wrestle with large and unsustainable national debt. Economists have identified a number of other instances in which wealthy, industrialized nations have taken on dangerous levels of national debt and have attempted reform. The bad news, as this week’s chart by Mercatus Research Fellow Matthew Mitchell demonstrates, is that the large majority of...
In this piece, Paul Krugman skeptically questions the current popular fervor to cut government spending. Instead of following popular opinion, Krugman declares that "governments should be spending while the private sector won’t, so that debtors can pay down their...
This piece reports on the national debt increases incurred so far under President Obama's tenure in office. Knoller notes that although President Obama often blames President Bush for the nation's high deficit, it is believed that President Obama will manage...
"In 2011, as in 2010, America was in a technical recovery but continued to suffer from disastrously high unemployment. And through most of 2011, as in 2010, almost all the conversation in Washington was about something else: the allegedly urgent issue of reducing the budget deficit.
This misplaced focus said a lot about our political culture, in particular about how disconnected...
"President Obama placed blame for the failure of the 'super committee' squarely on Republicans, saying their refusal to consider raising taxes as part of a 'balanced approach' to deficit reduction remains the key stumbling block.
'There are still too many Republicans in Congress who have refused to listen to the voices of reason and compromise that are coming from outside of Washington...
"The national debt is skyrocketing. In 2009 publicly held debt is projected to jump to 54.8 percent of GDP, up from 40.8 percent in 2008. A year-to-year increase of this size hasn’t occurred since World War II."
"America’s financial situation is unsustainable. In 2009 the federal government spent $3.5 trillion but collected only $2.1 trillion in revenue. The result was a $1.4 trillion deficit, up from $458 billion in 2008. That’s 10 percent of gross domestic product, a level unseen since World War II. Worse, the Congressional Budget Office (CBO) projects that we’ll be drowning in red ink for the...
"Thus, if the ruling elite has its way, and it shall, as the American people have no opinion on the matter, or can even be bothered to think about it, we are faced with at least half a century of intermittent war and a further augmentation of the national security state that has been draining our wealth like a voracious vampire since 1950. There is no secret...
"In the spring of 1981, conservative Republicans in the House of Representatives cried. They cried because, in the first flush of the Reagan Revolution that was supposed to bring drastic cuts in taxes and government spending, as well as a balanced budget, they were being asked by the White House and their own leadership to vote for an increase in the statutory...
"Government spending drives taxes, deficits, debt and inflation, so it’s at the core of our economic problems. What to do about runaway spending? The tendency is to imagine that it might be controlled by electing the right politicians, enacting a law like a balanced budget amendment, passing a spending limitation ballot initiative, establishing a super committee or coming up with some kind...
"Veronique de Rugy examines the fiscal year-over- fiscal year deficit effects of the final healthcare legislation, the Patient Protection and Affordable Care Act (PPACA), using Congressional Budget Office projections."
"The high stakes game on Capitol Hill to cut $1.2 trillion from the federal deficit ended in a stalemate Monday, effectively suspending tough decisions on budget cuts or tax increases until after next year’s presidential election.
The Joint Select Committee on Deficit Reduction chaired by Sen. Patty Murray (D.–Wash.) and Rep. Jeb Hensarling (R.–Texas) made the announcement in a joint...
"Debt is the essential fuel for a superpower that spends billions of dollars more than it receives in tax revenue — every day. The job of the debt auctioneers is to keep things humming smoothly. It's a boring process, but maybe not forever. When adjusted for inflation, the United States' publicly held debt is nearly $8 trillion. That number could more than double...
"While most are keenly aware of the rapidly nearing debt-limit increase deadline, few can explain—or even agree on—what that deadline means: specifically, what are the potential implications of missing the deadline, and what’s at stake in the negotiations for passing an increase?"
De Rugy discusses the affect of interest payments on the national debt. "Starting in 2012, the cost of the debt as a percentage of GDP will explode from a mere 1.8 percent of GDP to more than 30 percent of GDP in 2082."
"Did you know that annual spending by the federal government now exceeds the 2007 level by about $1 trillion? With a slow economy, revenues are little changed. The result is an unprecedented string of federal budget deficits, $1.4 trillion in 2009, $1.3 trillion in 2010, $1.3 trillion in 2011, and another $1.2 trillion on the way this year. The four-year increase in borrowing amounts to $55,...
"About that $14 trillion national debt: Get ready to tack some zeroes onto it. Taken alone, the amount of debt issued by the federal government that $14 trillion figure that shows up on the national ledger — is a terrifying, awesome, hellacious number: Fourteen trillion seconds ago, Greenland was covered by lush and verdant forests, and the Neanderthals had...
"Back in January, we featured a post where we looked at who are the largest holders of the U.S. national debt. Since that time, the U.S. Treasury has revised their data, specifically to identify who the real foreign owners of the U.S. national debt are."
"The great uncertainty about how much debt is too much has tended to make fiscal discipline seem less urgent, rather than more. There is no obvious threshold beyond which investors will demand higher real yields for holding U.S. debt. Vague warnings from ratings agencies about the loss of America's 'AAA' status haven't added much clarity — until recently."
"This week, Mercatus Center Senior Research Fellow Veronique de Rugy re-examines the components of the federal debt using the most recent data from the Treasury Department’s Bulletin June 2011 and Monthly Statement of the Public Debt March 2011."
"The United States faces economic crisis after members of the bipartisan congressional 'super committee' given the task of finding spending cuts of $1.2 trillion admitted on Sunday night that they are heading for failure."
"When complicated issues like the debt suddenly become national news controversies, sometimes the tendency is to emphasize the drama of the story rather than explain the basics of the issue. What is the debt? Why is it growing? Should we be terribly concerned about it? And how would we fix it if we had to? Martin Baily answers those questions in the interview...
"The White House released a detailed breakdown of the sequestration cuts to defense and non-defense budgets Friday, giving the clearest picture to date of where the ax will fall if lawmakers fail to prevent the automatic spending cuts with new legislation.
Cuts of approximately $110 billion are set to take effect in Jan. 3, according to an agreement reached by the administration and...
"'There are two basic truths about the enormous deficits that the federal government will run in the coming years.
The first is that President Obama's agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying. The second is that Mr. Obama does...
"Most of the 77 million post-World War II baby boomers (representing one-fourth of the U.S. population) are still working, but some are beginning to retire. As boomers retire, federal spending for Social Security and especially Medicare, given rapidly rising health care costs, will grow dramatically."
"The federal budget is a key instrument in federal policy making. Through the budget process the Congress and the President determine national priorities and allocate resources among the many competing needs."
The graph above shows in blue the personal debt of Americans indexed to the growth of America's population in red. Proportionally, debt has been rising rapidly in recent decades compared to the population. Only since the beginning of the 2007-2009 recession has personal debt decreased.
The graph above, using data gathered by the Federal Reserve Bank of St. Louis, compares the United States' government's debt to household debt (private debt, personally held by the public) with both indexed for population.
From early 2007 onwards there were signs that economies were reaching the limit of their ability to absorb more borrowing. The growth-boosting potential of debt seemed to peter out. According to Leigh Skene of Lombard Street Research, each additional dollar of debt was associated with less and less growth (see chart 2).
The graph above tracks the total public debt since 1966. On January 1, 1980, the national debt was roughly $863 billion. By the end of the decade, December 31, 1989, the national debt was over $2.9 trillion.
The chart above compares the population of the United States and inflation as well as the federal government's tax revenues and expenditures. The red line indicates population growth, the green line indicates inflation, the blue line indicates federal tax receipts and the orange line indicates federal spending.
This chart by Mercatus Center Senior Research Fellow Veronique de Rugy illustrates the recent expansion of federal spending per American household, using household data from the United States Census Bureau and spending data from the Congressional Budget Office.
This chart by Veronique de Rugy pairs the changes in the statutory debt limit since 2000 with the corresponding debt subject to this statutory limit. Years in which the limit was raised a single time are noted by squares; years in which the limit was raised twice are noted by triangles.
Debt increased at every level, from consumers to companies to banks to whole countries. The effect varied from country to country, but a survey by the McKinsey Global Institute found that average total debt (private and public sector combined) in ten mature economies rose from 200% of GDP in 1995 to 300% in 2008 (see chart 1 for a breakdown by country).
That total - equal to $29,700 per American and $78,683 per household - is the amount as of Sept. 19 that the federal government has borrowed from the public as well as its own accounts such as the Social Security Trust Fund. If the government paid $1 billion a day toward the debt, it would take 25 years to pay off.
This chart by Mercatus Center Senior Research Fellow Veronique de Rugy examines likely options for the long-term cost of carrying the debt held by the public if investors begin to demand higher interest rates.
This chart by Mercatus Center Senior Research Fellow, Veronique de Rugy, compiles data from the United States Treasury to illustrate our nation’s total commitments – even if no new participants ever enroll in Medicare or Social Security.
These graphs show the proportion of government spending for various discretionary and non-discretionary purposes. As a result of increased debt, the proportion spent on interest payments is expected to significantly increase by 2015.
Figure 1 shows that spending rises more slowly over the next decade under Ryan’s plan than Obama’s plan. But spending rises substantially under both plans —between 2012 and 2021, spending rises 34 percent under Ryan and 55 percent under Obama.
This graph clearly shows that even if the US debt to GDP ratio is lower than it was at some previous point in history—the MAGNITUDE of the change is worth ... serious attention. Since the 1980s, the effects of a shift toward a dominant Keynesian view of economic policy are clear.
The chart above compares the President’s budget deficit projections to the Congressional Budget Office’s budget deficit projections under current law. In other words, the policy changes embodied in President Obama’s 2011 Budget puts our country $2.5 trillion deeper in debt by 2020 than it other wise would be if current law were left unchanged.
Do you remember back in April 2010, when the administration was trumpeting how much better the expected budget deficit for 2010 was going to be? When, magically, the White House’s Office of Management and Budget’s projection of the expected deficit dropped by just over $300 billion U.S. dollars from its originally forecast value of $1.6 trillion dollars to $1.29 trillion dollars?
As of March 2011, our gross federal debt amounts to $14.27 trillion. This debt is comprised of debt held by the public ($9.6 trillion) plus debt held in intragovernmental accounts ($4.6 trillion). In total, gross debt is 94.6% of estimated GDP for FY 2011. Debt held by the Federal Reserve—as a portion of public debt—increased 74% from 2010 to 2011.
"Using data from the Congressional Budget Office’s 2010 Long-Term Budget Outlook, this chart illustrates the harsh reality that if we do not deviate from our current path, the majority of future federal spending will be to finance the spending of the past."
If current policies continue, debt held by the public will nearly double in the next ten years. According to the Congressional Budget Office, this measure of debt, which does not include securities issued by the Treasury to federal trust funds and other government accounts, will reach $18.3 trillion by 2021.
"When we combine nonmortgage and mortgage debt, we find that the active reduction of debt continued in 2010 and 2011. We conclude that while nonmortgage debt rebounded somewhat in 2011, household deleveraging continued, primarily as homeowners continued to pay down their housing debt."
The above chart by Mercatus Center senior research fellow, Veronique de Rugy examines the fiscal year-over-fiscal year deficit effects of the final healthcare legislation, the Patient Protection and Affordable Care Act (PPACA), using Congressional Budget Office projections.
The chart shows how expenditures as a share of GDP spiked during World War II but were reduced rapidly and significantly. However, spending never returned to the pre-war level and has followed a general upward trend ever since.
"So somehow the world's two most indebted countries (recall that Japan is about to in total pass 1 quadrillion debt) are out there and buying up the biggest amount of US debt (after the Fed of course)?"
This represents the number of times Americans' annual personal income could pay off the national debt. For example, if the ratio is three, that means that Americans earned enough income during the year to have paid off the national debt three times. Put another way, the national debt amounted to one-third of total personal annual income.
The exceedingly low interest rates of the 21st century have allowed the U.S. Debt burden to stay much lower than it would be under more normal interest rates. According to this chart, even a 6% interest rate could dramatically increase the debt burden.
"Interestingly, the chart ... reveals that the trends are starkly different for various loan types; consumers actively reduced debt for consumption-related expenditures for both 2009 and 2010, but new borrowing for education was fairly constant throughout the period."
"The federal government's budget deficit for fiscal year 2011 was $1.3 trillion; at 8.7% of gross domestic product (GDP), that deficit was the third-largest shortfall in the past 40 years. (GDP is the sum of all income earned in the domestic production of goods and services. In 2011, it totaled $15.0 trillion.)"
"Back in January, we featured a post where we looked at who are the largest holders of the U.S. national debt. Since that time, the U.S. Treasury has revised their data, specifically to identify who the real foreign owners of the U.S. national debt are."
n light of the final debt ceiling kabuki theater, lets take a look at the historical government spending, via Jim Bianco of Bianco Research. Jim gives us this snapshot looking at total Federal government outlays as a percentage of GDP.
Under the Obama budget, interest would top 18% of revenue in 2018 and 20% in 2020, CBO projects. But under more adverse scenarios than the CBO considered, including higher interest rates, Moody's projects that debt service could hit 22.4% of revenue by 2013.
What we find is that even after adjusting for inflation, President Obama intends to permanently increase the federal government spending by an average of $576.4 billion during the years from 2010 through 2013. We also see that he doesn’t plan to stop there.
This paper presents evidence that public debts in the advanced economies have surged in recent years to levels not recorded since the end of World War II, surpassing the heights reached during the First World War and the Great Depression. At the same time, private debt levels, particularly those of financial institutions and households, are in uncharted territory and are (in varying degrees) a contingent liability of the public sector in many countries.
"This special report will argue that, for the developed world, the debt-financed model has reached its limit. Most of the options for dealing with the debt overhang are unpalatable. As has already been seen in Greece and Ireland, each government will have to find its own way of reducing the burden."
"The United States needs a defense budget worthy of its name, one that protects Americans rather than wasting vast sums embroiling us in controversies remote from our interests. This paper outlines such a defense strategy and the substantial cuts in military spending that it allows."
"Some things a person does owe to himself–intangibles like respect, integrity, responsibility. 'This above all, to thine own self be true.' But such duties to self are not a debt in the usual sense of a repayable loan or obligation."
"This paper explores the possibility of the U.S. experiencing a debt crisis in the medium run, meaning somewhere between 2015 and 2035. It is impossible to state precisely the trigger point for a crisis. At best, we can make guesses about some of the key parameters."
"President Bush signed a $152 billion stimulus bill in 2008 and President Obama signed a $787 billion stimulus bill early in 2009, and the ranks of unemployed continue to swell. Despite the paucity of results, some policymakers are suggesting the need for a third round of debt-financed spending."
"The title of my presentation [at the Nebraska Library Association annual conference, October 2011] 'Learning to Live Without a Statistical Abstract,' signals that our gathering this morning is something of a memorial. The Statistical Abstract, born in 1878 and published annually thereafter, may well be dead...."
"That sad experience should be raising red flags in the United States, where the unsustainable longer-run trajectory of the US public finances is now suggesting the real risk of either a destructive burst of inflation or an outright government debt default."
"As the debt grows, government’s interest burden grows with it. The more of our tax dollars consumed by interest, the fewer dollars available for discretionary spending. What’s worse, more pressure is then exerted to use tax increases to fund mandatory spending programs, such as Social Security, Medicare, and Medicaid."
"This article examines the political and economic implications of China's rising share of U.S. public debt, and asks whether foreign-held debt is a real threat to U.S. prosperity or an excuse for economic nationalism."
Imagine a team of doctors hovering over the bed of the U.S. economy. With charts in hand and apparatus all around them, the medical team confers about a patient that has been in intensive care since June of 2009, which is when the recession ended. While the patient listens, the senior physician makes a quick rundown.
"The specter of a credit downgrade looms, and it is frightful. A downgrade threatens to push interest rates higher, making it more difficult for consumers to borrow, for businesses to hire, and for the economy to grow."
"Households headed by older adults have made dramatic gains relative to those headed by younger adults in their economic well-being over the past quarter of a century, according to a new Pew Research Center analysis of a wide array of government data."
"Experience in Illinois indicated that our home state’s budgeting process regularly evaded the intent of our constitutional and statutory requirements for balanced budgets and sound accounting principles.
Now complete, our report discovered that the budgeting and accounting problems we first identified in Illinois are rampant in other states."
"For most individuals, maxing out one’s credit card is usually a sign of a spending problem—but not if you’re Congress. For the first time in history, the national debt has hit $12 trillion, and it will soon exceed the $12.1 trillion maximum amount of debt allowed by law."
This report looks at the federal government as if it were a business, with the goal of informing the debate about our nation's financial situation and outlook. In it, we examine USA Inc.'s income statement and balance sheet. We aim to interpret the underlying data and facts and illustrate patterns and trends in easy-to-understand ways.
"Keith Hennessey of Stanford University's Hoover Institution talks with EconTalk host Russ Roberts about the debt ceiling and the budget process. Hennessey, who worked for Senate Majority Leader Trent Lott on budget issues in the late 1990s, explains the politics of the debt ceiling and the budget process. Using his past experience as a staffer, Hennessey gives those of us on the outside a...
Using a penny as a visual aid to demonstrate one billion dollars, Bob Williams explains the massive growth in America's national debt in recent history. This video provides a brief, clear, and rather overwhelming example of the great financial burden that is piling up for future generations.
"Do you know what the national debt means to you? This video explores some of the most shocking facts about the current U.S. debt, including the whopping $125,000 each citizen would have to owe today if we had to pay off our country's debt."
"Huge budget deficits and record levels of national debt are getting a lot of attention, but this video explains that unfunded liabilities for entitlement programs are Americas real red-ink challenge. More important, this CF&P mini-documentary reveals that deficits and debt are symptoms of the real problem of an excessive burden of government spending."
"Dreamland" is a video created by Intellectual Takeout through its Momthink.org project. It is the first of several videos aimed to raise awareness with moms about the national debt and the perils America faces. The video is careful to point out that it is not just politicians and the government that have embraced debt, but also many Americans.
"The erosion of private property rights, a prodigious federal debt, and a nearly incomprehensible tax code are all part of an overweening administrative state that today threatens the liberty of all Americans.
The Second Constitution Town Hall on April 16, 2011, addressed these issues and took questions from a live audience. Congressman Mike Pence and Hillsdale College faculty and...
"The erosion of private property rights, a prodigious federal debt, and a nearly incomprehensible tax code are all part of an overweening administrative state that today threatens the liberty of all Americans. The Second Constitution Town Hall on April 16, 2011, addressed these issues and took questions from a live audience. Congressman Mike Pence and Hillsdale College faculty and leading...
"It's official, trillion is the new billion. No longer is government spending talked about in terms of a mere ten digits. With the recent flurry of government spending, we are going to need another three zeros to make sense of it all. One trillion dollars is a number that few people can comprehend, let alone your standard nine digit calculator. So what does one trillion dollars look like?"
Peter Schiff, a candidate for Senator in Connecticut, explains the economic crisis. Schiff argues that the economic collapse is not over. Because of our inability to allow markets to restructure, Schiff argues, the coming downturn will be much worse than expected.
"Joke-telling robots, expensive walking tunnels, Blackberries for smokers, and training American prostitutes to drink responsibly. What do these things have in common? They're all questionable government spending projects in a time when our economy is struggling and people can't get jobs....or, maybe we just made them up.
Put yourself to the test. See if you can outwit the Rebel...
"This video takes you to the United Estates--a gated community in sunny Florida--to help you understand the impact of Congress’ decision to annually raise our nation’s debt limit without addressing the out-of-control spending that keeps us buried in debt."
"The U.S. federal government collected $2.2 trillion and spent $3.8 trillion in 2011. At the same time, it was $14.6 trillion in debt. These numbers are too big to comprehend, so what if we scale it down to an average household's income level? If you spent the way the government does, you might be contemplating bankruptcy. What should be done to ensure the government gets its fiscal house in...
"On its current course, United States fiscal policy threatens to hobble the nation's prospects for economic growth. Economic theory suggests that an important source of the problem is the government's ability to purchase services for current voters with taxes levied on future generations. A balanced budget requirement, by "internalizing" both the costs and benefits of government services,...
"We begin a new year at a moment of continuing challenge for the American people. Even as we recover from crisis, millions of families are still feeling the pain of lost jobs and savings. Businesses are still struggling to find affordable loans to expand and hire workers. Our Nation is still experiencing the consequences of a deep and lasting recession, even as we...
"Over the past few years, U.S. government debt held by the public has grown rapidly—to the point that, compared with the total output of the economy, it is now higher than it has ever been except during the period around World War II. The recent increase in debt has been the result of three sets of factors: an imbalance between federal revenues and spending that...
"Once again the federal government has reached its 'debt ceiling,' and once again Congress is poised to authorize an increase in government borrowing. Between its ever-growing bureaucracies, expanding entitlements, and overseas military entanglements, the federal government is borrowing roughly one billion dollars every day to pay its bills...
"Is the United States bankrupt? Many would scoff at this notion. Others would argue that financial implosion is just around the corner. This paper explores these views from both partial and general equilibrium perspectives. It concludes that countries can go broke, that the United States is going broke, that remaining open to foreign investment can help stave off...
"As there is reason to believe that you are still in Congress, I refer you for the political state of affairs here to my public letters, which you will find long and particular.
I am a little apprehensive, as the great exertions of America during the last campaign have not produced correspondent events, that either relaxation or divisions may succeed. They are both to be dreaded, and...
"The excitement which grew out of the territorial controversy between the United States and Great Britain having in a great measure subsided, it is hoped that a favorable period is approaching for its final settlement. Both Governments must now be convinced of the dangers with which the question is fraught, and it must be their desire, as it is their interest, that this perpetual cause of...
This document provides the OMB's assessment of issues relating to the United States Budget. Among other things, this piece gives a variety of charts and graphs describing the national debt, budget deficits, and the many expenditures that...
"This report concerns a mechanism different from the Joint Committee sequester. The Budget Control Act put into place a set of discretionary spending caps. If the Congress spends more than these caps allow, a sequestration of discretionary spending ('discretionary sequester') is ordered. This report discusses whether, under the actions taken to date by each chamber of the Congress on...
This proposed amendment to the Constitution would require that expenditures of the Federal government not exceed receipts of the Federal government. There would be, however, exceptions to the rule. A three-fifths vote by both houses of congress could increase expenditures beyond receipts if for specific purposes.
According to Joe Weisenthal, this speech finds "Dallas Fed Chief Richard Fisher...warning of the impact of cash that's not being lent out, and what he sees is debt monetiziation -- the Federal Reserve financing the government's spending directly. ...
"Since the commencement of the term, for which I have been again called into office, no fit occasion has arisen for expressing to my fellow-citizens at large, the deep and respectful sense, which I feel, of the renewed testimony of public approbation. While, on the one hand, it awakened my gratitude for all those instances of affectionate partiality, with which I have been honored by my...
"Each January, CBO prepares 'baseline' budget projections spanning the next 10 years. Those projections are not a forecast of future events; rather, they are intended to provide a benchmark against which potential policy changes can be measured. Therefore, as specified in law, those projections generally incorporate the assumption that current laws are implemented.
"Throughout our nation’s history, Americans have found the courage to do right by our children’s future. Deep down, every American knows we face a moment of truth once again. We cannot play games or put off hard choices...
"The United States is facing significant and fundamental budgetary challenges. The federal government's budget deficit for fiscal year 2011 was $1.3 trillion; at 8.7% of gross domestic product (GDP), that deficit was the third-largest shortfall in the past 40 years. (GDP is the sum of all income earned in the domestic production of goods and services. In 2011, it totaled $15.0 trillion.)"
"I sit down to write to you without knowing by what occasion I shall send my letter. I do it because a subject comes into my head which I would wish to develope a little more than is practicable in the hurry of the moment of making up general despatches.
The question Whether one generation of men has a right to bind another, seems never to have been started either on this or our side of...
"A fully updated follow-up to Peter Schiff's bestselling financial survival guide-Crash Proof, which described the U.S. economy as a house of cards on the verge of collapse.
The economic and monetary disaster which seasoned Wall Street prognosticator Peter Schiff predicted is no longer hypothetical-it is here today. And nobody understands what to do in this situation better than the man...
"Like its current citizens, the United States was born in debt-a debt so deep that it threatened to destroy the young nation. Thomas Jefferson considered the national debt a monstrous fraud on posterity, while Alexander Hamilton believed debt would help America prosper. Both, as it turns out, were right.
"America's debt-in the trillions-is serious business. Although contemporary press coverage hovers over the story of annual budgets and the associated deficits (and rare surpluses), not much attention is given to the overall national debt and even less to the interest spent serving it. 'It's like worrying about the five dollars you borrowed last week and ignoring the mortgage you can't afford...
"Cavanaugh worked in the U.S. Department of the Treasury for more than 30 years and was the first U.S. 'pensions czar,' overseeing the federal employee pension trust fund as the inaugural head of the Federal Retirement Thrift Investment Board. Given the current election-year political posturing with regard to this country's budget deficit, Cavanaugh provides a...
"Throughout history, rich and poor countries alike have been lending, borrowing, crashing--and recovering--their way through an extraordinary range of financial crises. Each time, the experts have chimed, 'this time is different'--claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. This book...
"GovTrack.US takes you inside the legislative process on Capitol Hill. We have a team of paid reporters going where no one has taken you before inside Congress, and we combine those reports with nonpartisan reporting from other sources." This is a great resource for following proposed legislation relating to the...
"The Government Cost Calculator is a unique service from The Independent Institute that enables any American to clearly understand three aspects of federal government spending. First, the Calculator helps you determine how much you will pay for various federal...
"President Obama created the bipartisan National Commission on Fiscal Responsibility and Reform to address our nation's fiscal challenges. The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Specifically, the Commission shall propose recommendations designed to balance the budget,...
"OMB's predominant mission is to assist the President in overseeing the preparation of the federal budget and to supervise its administration in Executive Branch agencies. In helping to formulate the President's spending plans, OMB evaluates the effectiveness of agency programs, policies, and procedures, assesses competing funding demands among agencies, and sets funding priorities. OMB...
"The U.S. Government Accountability Office (GAO) is known as 'the investigative arm of Congress' and 'the congressional watchdog.' GAO supports the Congress in meeting its constitutional responsibilities and helps improve the performance and accountability of the federal government for the benefit of the American people."
"The purpose of US Debt Clock.org is to inform the public of the financial condition of the United States of America. We are dedicated to bringing to the public the most accurate up-to-date debt information possible. The numbers are laid out in such a way to give a complete real-time snapshot of the country's balance sheet. Although the numbers involved are enormous, it is still easy to see...