United States public debt

Part of a series of articles on
United States budget and debt topics
Major dimensions
Federal budget · Public debt Expenditures · Taxation Economy · Financial position Military budget
Programs
Medicare · Social Security
Contemporary issues
Health care reform · Social Security debate Subprime mortgage crisis Bush tax cuts · Starve the beast Bowles-Simpson Commission Debt-ceiling crisis
Terminology
Cumulative deficit = Debt Inflation · Balance of payments
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U.S. debt from 1940 to 2010. Red lines indicate the debt held by the public (net public debt) and black lines indicate the total public debt outstanding (gross public debt), the difference being that the gross debt includes that held by the federal government itself. The second panel shows the two debt figures as a percentage of U.S. GDP (dollar value of U.S. economic production for that year). The top panel is deflated so every year is in 2010 dollars.

The United States public debt is the money borrowed by the federal government of the United States at any one time through the issue of securities by the Treasury and other federal government agencies. The US national public debt consists of two components:

• Debt held by the public comprises securities held by investors outside the federal government, including that held by investors, the Federal Reserve System and foreign, state and local governments.^[1]
• Intragovernment debt comprises Treasury securities held in accounts administered by the federal government, such as the Social Security Trust Fund.

Public debt increases or decreases as a result of the annual unified budget deficit or surplus. The federal government budget deficit or surplus is the cash difference between government receipts and spending, ignoring intra-governmental transfers. However, there is certain spending (supplemental appropriations) that add to the debt but are excluded from the deficit. The deficit is presented on a cash rather than an accruals basis, although the accrual basis may provide more information on the longer-term implications of the government's annual operations.^[2]

The public debt has increased by over $500 billion each year since fiscal year (FY) 2003, with increases of $1 trillion in FY2008, $1.9 trillion in FY2009, and $1.7 trillion in FY2010.^[3] As of November 17, 2011 the gross debt was $15.03 trillion, of which $10.31 trillion was held by the public and $4.72 trillion was intragovernmental holdings.^[4] The annual gross domestic product (GDP) to the end of June 2011 was $15.003 trillion (July 29, 2011 estimate),^[5] with total public debt outstanding at a ratio of 100% of GDP, and debt held by the public at 69% of GDP.

In the United States, there continues to be disagreement between Democrats and Republicans regarding the United States debt. On August 2, 2011, President Barack Obama signed into law the Budget Control Act of 2011, averting a possible financial default. During June 2011, the Congressional Budget Office called for "...large and rapid policy changes to put the nation on a sustainable fiscal course."^[6]

History

U.S. federal debt held by the public, from 1800 to 1999

Time series of U.S. federal debt overlaid with partisan affiliation of the White House and the Congress.

See also: National debt by U.S. presidential terms

The United States has had a public debt since its founding in 1791. Debts incurred during the American Revolutionary War and under the Articles of Confederation amounted to $75,463,476.52 on January 1, 1791. From 1796 to 1811 there were 14 budget surpluses and 2 deficits. There was a sharp increase in the debt as a result of the War of 1812. In the 20 years following that war, there were 18 surpluses and the US paid off 99.97% of its then debt.^{[citation needed]}

Another sharp increase in the debt occurred as a result of the Civil War. The debt was just $65 million in 1860, but passed $1 billion in 1863 and reached $2.7 billion by the end of the war. During the following 47 years, there were 36 surpluses and 11 deficits. During this period 55% of the national debt was paid off.

The next period of major increase in the national debt took place during World War I, reaching $25.5 billion at its conclusion. It was followed by 11 consecutive surpluses and saw the debt reduced by 36%.

Social programs enacted during the Great Depression and the buildup and involvement in World War II during the F.D. Roosevelt and Truman presidencies in the 1930s and 1940s caused the largest increase — a sixteenfold increase in the gross public debt from $16 billion in 1930 to $260 billion in 1950. When Roosevelt took office in 1933, the national debt was almost $20 billion; a sum equal to 20 percent of the U.S. gross domestic product (GDP). During its first term, the Roosevelt administration ran large annual deficits between 2 and 5 percent of GDP. By 1936, the national debt had increased to $33.7 billion or approximately 40 percent of GDP.^[7] Gross debt relative to GDP rose to over 100% to pay for WWII.

After this period, beginning in 1965 and each year afterward, the growth of the U.S. aggregate debt began to increase faster than GDP as GDP growth rates in western countries began to taper off.^[8] Gross debt in nominal dollars quadrupled during the Reagan and Bush presidencies from 1980 to 1992. The net public debt quintupled in nominal terms. Gross debt relative to GDP declined after WWII, then rose during the 1980s as part of Reaganomics.^[9][10] During the 1970s, debt held by the public declined from 28% of GDP to 26% of GDP. During the 1980s, it rose to 41% of GDP.

In nominal dollars the net public debt rose and then fell between 1992 and 2000 from $3 trillion in 1992 to $3.4 trillion in 2000, in part due to the Dot-com bubble.^[11] During the 1990s, debt held by the public rose to 50% and then was reduced to 39% by the end of the decade.

During the presidency of George W. Bush, the gross public debt increased from $5.7 trillion in January 2001 to $10.7 trillion by December 2008.^[12] Under President Barack Obama, the debt increased from $10.7 trillion in 2008 to $14.2 trillion by February 2011.^[13] Debt relative to GDP rose due to recessions and policy decisions in the early 21st century. From 2000 to 2008 debt held by the public rose from 35% to 40%, and to 62% by the end of fiscal year 2010.^[14]

Valuation and measurement

Public and government accounts

Detailed breakdown of government holders of treasury debt and debt instruments used of the public portion.

The total or gross national debt is the sum of the "debt held by the public" and "intragovernmental" debt. As of February 2011, the "debt held by the public" was $9.6 trillion and the "intragovernmental debt" was $4.6 trillion, for a total of $14.2 trillion.^[13]

The national debt can also be classified into marketable or non-marketable securities. As of February 2011, total marketable securities were $9.0 trillion while the non-marketable securities were $5.2 trillion. Most of the marketable securities are Treasury notes, bills, and bonds held by investors and governments globally. The non-marketable securities are mainly the "government account series" owed to certain government trust funds such as the Social Security Trust Fund, which represented $2.5 trillion in 2010.^[13][15] Other large intragovernmental holders include the Federal Housing Administration, the Federal Savings and Loan Corporation's Resolution Fund and the Federal Hospital Insurance Trust Fund (Medicare).

Fannie Mae and Freddie Mac obligations excluded

See also: Federal takeover of Fannie Mae and Freddie Mac

Although not included in the debt figures reported by the government, the U.S. government has moved to more explicitly support the soundness of obligations of Freddie Mac and Fannie Mae, starting in July 2008 via the Housing and Economic Recovery Act of 2008, and the September 7, 2008 Federal Housing Finance Agency (FHFA) conservatorship of both government sponsored enterprises (GSEs). The on- or off-balance sheet obligations of those two independent GSEs was just over $5 trillion at the time the conservatorship was put in place, consisting mainly of mortgage payment guarantees.^[16] The extent to which the government will be required to pay these obligations depends on a variety of economic and housing market factors. The federal government provided over $110 billion to Fannie and Freddie by 2010.^[17]

Guaranteed obligations excluded

See also: Temporary Liquidity Guarantee Program and Exchange Stabilization Fund

U.S. federal government guarantees are not included in the public debt total, until such time as there is a call on the guarantees. For example, the U.S. federal government in late-2008 guaranteed large amounts of obligations of mutual funds, banks, and corporations under several programs designed to deal with the problems arising from the late-2000s financial crisis. The funding of direct investments made in response to the crisis, such as those made under the Troubled Assets Relief Program, are included in the debt.

Unfunded obligations excluded

The U.S. government is obligated under current law to mandatory payments for programs such as Medicare, Medicaid and Social Security. The GAO projects that payouts for these programs will significantly exceed tax revenues over the next 75 years. The Medicare Part A (hospital insurance) payouts already exceed program tax revenues, and social security payouts exceeded payroll taxes in fiscal 2010. These deficits require funding from other tax sources or borrowing.^[18]

The present value of these deficits or unfunded obligations is an estimated $45.8 trillion. This is the amount that would have to be set aside during 2009 so that the principal and interest would pay for the unfunded obligations through 2084. Approximately $7.7 trillion relates to Social Security, while $38.2 trillion relates to Medicare and Medicaid. In other words, health care programs will require nearly five times the level of funding than Social Security. Adding this to the national debt and other federal obligations would bring total obligations to nearly $62 trillion.^[19] However, these unfunded obligations are not counted in the national debt.

The Congressional Budget Office (CBO) has indicated that: "Future growth in spending per beneficiary for Medicare and Medicaid — the federal government’s major health care programs — will be the most important determinant of long-term trends in federal spending. Changing those programs in ways that reduce the growth of costs — which will be difficult, in part because of the complexity of health policy choices — is ultimately the nation’s central long-term challenge in setting federal fiscal policy."^[20]

Measuring debt relative to gross domestic product

2010 Budget: Total Debt $ and % to GDP 2000–2010

GDP is a measure of the total size and output of the economy. One measure of the debt burden is its size relative to GDP. In the 2007 fiscal year, U.S. federal debt held by the public was approximately $5 trillion (36.8 percent of GDP) and total debt was $9 trillion (65.5 percent of GDP).^[21] Debt held by the public represents money owed to those holding government securities such as Treasury bills and bonds. Total debt includes intra-governmental debt, which includes amounts owed to the Social Security Trust Funds (about $2.2 trillion in FY 2007)^[22] and Civil Service Retirement Funds. By August 2008, the total debt was $9.6 trillion.^[23]

Based on the 2010 U.S. budget, total national debt will nearly double in dollar terms between 2008 and 2015 and will grow to nearly 100% of GDP, versus a level of approximately 80% in early 2009.^[24] Multiple government sources including the current and previous presidents, the GAO, Treasury Department, and CBO have said the U.S. is on an unsustainable fiscal path.^[25] However, ahead of predictions, total national debt reached 100% by the third quarter of 2011.^[26]

As the debt ratio increases, the exchange value of the dollar may fall. Paying back debt with cheaper currency could cause investors (including other governments) to demand higher interest rates if they anticipate further dollar depreciation. Paying higher interest rates could slow domestic U.S. growth.

Higher debt increases interest payments on the debt, which already exceed $430 billion annually as discussed below, or about 15 cents of every tax dollar for 2008.^[27] According to the CIA Factbook, nine countries have debt to GDP ratios over 100% for 2010, the largest of which is Japan at approximately 197.5%.^[28]

Further, a high public debt to GDP ratio may also slow economic growth. Economists Carmen Reinhart and Kenneth Rogoff calculated that countries with public debt above 90 percent of GDP grow by an average of 1.3 percentage points per year slower than less indebted countries. The public debt-to-GDP ratio in March 2010 is about 60 percent of GDP; CBO projects it will reach 90 percent around 2020 under policies in place in 2010. If growth slows, all of the economic challenges the U.S. faces will worsen.^[29]

Calculating the annual change in debt

Comparison of deficits to change in debt in 2008

The annual change in debt is not equal to the "total deficit" typically reported in the media. Social Security payroll taxes and benefit payments, along with the net balance of the U.S. Postal Service, are considered "off-budget", while most other expenditure and receipt categories are considered "on-budget." The total federal deficit is the sum of the on-budget deficit (or surplus) and the off-budget deficit (or surplus). Since FY1960, the federal government has run on-budget deficits except for FY1999 and FY2000, and total federal deficits except in FY1969 and FY1998–FY2001.^[30]

In large part because of Social Security surpluses, the total deficit is smaller than the on-budget deficit. The surplus of Social Security payroll taxes over benefit payments is spent by the government for other purposes. However, the government credits the Social Security Trust fund for the surplus amount, adding to the "intragovernmental debt." The total federal debt is divided into "intragovernmental debt" and "debt held by the public." In other words, spending the "off budget" Social Security surplus adds to the total national debt (by increasing the intragovernmental debt) while the surplus reduces the "total" deficit reported in the media.

Certain spending called "supplemental appropriations" is outside the budget process entirely but adds to the national debt. Funding for the Iraq and Afghanistan wars was accounted for this way prior to the Obama administration. Certain stimulus measures and earmarks are also outside the budget process.

For example, in FY2008 an off-budget surplus of $183 billion reduced the on-budget deficit of $642 billion, resulting in a total federal deficit of $459 billion. Media often reported the latter figure. The national debt increased by $1,017 billion between the end of FY2007 and the end of FY2008.^[31] The federal government publishes the total debt owed (public and intragovernmental holdings) at the end of each fiscal year^[32] and since FY1957 the amount of debt held by the federal government has increased each year.

Debt ceiling

See also: United States debt-ceiling crisis

US debt ceiling at the end of each year from 1981 to 2010.

Under Article I Section 8 of the United States Constitution, Congress has the sole power to borrow money on the credit of the United States. From the founding of the United States until 1917 Congress directly authorized each individual debt issuance separately. In order to provide more flexibility to finance the United States' involvement in World War I, Congress modified the method by which it authorizes debt in the Second Liberty Bond Act of 1917.^[33] Under this act Congress established an aggregate limit, or "ceiling," on the total amount of bonds that could be issued.

The current debt ceiling, in which an aggregate limit is applied to nearly all federal debt, was substantially established by Public Debt Acts^[34][35] passed in 1939 and 1941. The Treasury is authorized to issue debt needed to fund government operations (as authorized by each federal budget) up to a stated debt ceiling, with some small exceptions.

The process of setting the debt ceiling is separate and distinct from the regular process of financing government operations, and raising the debt ceiling does not have any direct impact on the budget deficit. The US government proposes a federal budget every year, which must be approved by Congress. This budget details projected tax collections and outlays and, if there is a budget deficit, the amount of borrowing the government would have to do in that fiscal year. A vote to increase the debt ceiling is, therefore, usually treated as a formality, needed to continue spending that has already been approved previously by the Congress and the President. The Government Accountability Office explains: "The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred."^[36] The apparent redundancy of the debt ceiling has led to suggestions that it should be abolished altogether.^[37][38]

Since 1979, the House of Representatives passed a rule to automatically raise the debt ceiling when passing a budget, without the need for a separate vote on the debt ceiling, except when the House votes to waive or repeal this rule. The exception to the rule was invoked in 1995, which resulted in two government shutdowns.^[39]

When the debt ceiling is reached, Treasury can declare a debt issuance suspension period and utilize "extraordinary measures" to acquire funds to meet federal obligations but which do not require the issue of new debt.^[40] Treasury first used these measures on December 16, 2009, to remain within the debt ceiling, and avoid a government shutdown,^[41] and also used it during the debt-ceiling crisis of 2011. However, there are limits to how much can be raised by these measures.

The debt ceiling was increased on February 12, 2010, to $14.294 trillion.^[42][43][44] On April 15, 2011, Congress finally passed the 2011 United States federal budget, authorizing federal government spending for the remainder of the 2011 fiscal year, which ends on September 30, 2011, with a deficit of $1.48 trillion,^{[citation needed]} without voting to increase the debt ceiling. The two Houses of Congress were unable to agree on a revision of the debt ceiling in mid-2011, resulting in the United States debt-ceiling crisis. The impasse was resolved with the passing on August 2, 2011, the deadline for a default by the US on its debt, of the Budget Control Act of 2011, which immediately increased the debt ceiling to $14.694 trillion, required a vote on a Balanced Budget Amendment, and established several complex mechanisms to further increase the debt ceiling and reduce federal spending.

On September 8, 2011, one of the complex mechanisms to further increase the debt ceiling took place as the Senate defeated a resolution to block a $500 billion automatic increase. The Senate's action allowed the debt ceiling to increase to $15.194 trillion, as agreed upon in the Budget Control Act.^[45] This was the third increase in the debt ceiling in 19 months, the fifth increase since President Obama took office, and the twelfth increase in 10 years. The August 2 Act also created the United States Congress Joint Select Committee on Deficit Reduction‎ for the purpose of developing a set of proposals by November 23, 2011, to reduce federal spending by $1.2 trillion. The Act requires both houses of Congress to convene an "up-or-down" vote on the proposals as a whole by December 23, 2011. The Joint Select Committee met for the first time on September 8, 2011.

Credit rating downgrade, 2011

Main articles: United States federal government credit-rating downgrade, 2011 and August 2011 stock markets fall

On August 5, 2011, after Congress voted to raise the debt ceiling of the United States federal government, the credit rating agency Standard & Poor's downgraded the credit rating of the United States federal government from AAA to AA+. It was the first time the US had been downgraded since it was originally given a AAA rating on its debt by Moody's in 1917.^[46] According to the BBC, Standard & Poor's had "lost confidence" in the ability of the United States government to make decisions.^[47] The United States Treasury, political figures from both parties in the United States including the Obama administration, Mitt Romney, Michele Bachmann and John Kerry, billionaire Warren Buffett and Nobel Memorial Prize winner Paul Krugman criticized the move.

Together with the budget deficit, the political climate at the time was one of the reasons given by Standard & Poor's to revise the outlook on the US sovereign credit rating down to negative on April 18, 2011.^[48] Standard and Poor's downgraded the credit rating by one notch from AAA to AA+ on August 5, 2011, for the first time ever. The long-term outlook is negative and it could lower the rating further to AA within the next 2 years.^[49][50] The downgrade was met with severe criticism from the Obama administration, commentators, and other political figures.^[51][52] The US still has a AAA rating from other ratings agencies.

Ownership of debt

Estimated ownership each year through time.

Because a large variety of people own the notes, bills, and bonds in the "public" portion of the debt, Treasury also publishes information that groups the types of holders by general categories to portray who owns United States debt. In this data set, some of the public portion is moved and combined with the total government portion, because this amount is owned by the Federal Reserve as part of United States monetary policy. (See Federal Reserve System.)

As is apparent from the chart, a little less than half of the total national debt is owed to the "Federal Reserve and intragovernmental holdings". The foreign and international holders of the debt are also put together from the notes, bills, and bonds sections. To the right is a chart for the data as of June 2008:

Foreign ownership

Composition of U.S. Long-Term Treasury Debt held by foreign states, Nov. 2005–Nov. 2010. June figures are results of comprehensive Treasury Department surveys.

As of January 2011, foreigners owned $4.45 trillion of U.S. debt, or approximately 47% of the debt held by the public of $9.49 trillion and 32% of the total debt of $14.1 trillion.^[53] The largest holders were the central banks of China, Japan, the United Kingdom and Brazil.^[55] The share held by foreign governments has grown over time, rising from 13% of the public debt in 1988^[56] to 25% in 2007.^[57]

As of May 2011 the largest single holder of U.S. government debt was China, with 26 percent of all foreign-held U.S. Treasury securities (8% of total US public debt).^[58] China's holdings of government debt, as a percentage of all foreign-held government debt, have decreased a bit over the last year, but are up significantly since 2000 (when China held just 6 percent of all foreign-held U.S. Treasury securities).^[59]

Major Foreign Holders of U.S. Treasury Securities, 2000–2010 Source: http://FutureofUSChinaTrade.com

Major foreign holders of U.S. Treasury securities, June 2010-May 2011^[60]

This exposure to potential financial or political risk should foreign banks stop buying Treasury securities or start selling them heavily was addressed in a June 2008 report issued by the Bank of International Settlements, which stated, "Foreign investors in U.S. dollar assets have seen big losses measured in dollars, and still bigger ones measured in their own currency. While unlikely, indeed highly improbable for public sector investors, a sudden rush for the exits cannot be ruled out completely."^[61]

On May 20, 2007, Kuwait discontinued pegging its currency exclusively to the dollar, preferring to use the dollar in a basket of currencies.^[62] Syria made a similar announcement on June 4, 2007.^[63] In September 2009 China, India and Russia said they were interested in buying International Monetary Fund gold to diversify their dollar-denominated securities.^[64] However, in July 2010 China's State Administration of Foreign Exchange "ruled out the option of dumping its vast holdings of US Treasury securities" and said gold "cannot become a main channel for investing our foreign exchange reserves" because the market for gold is too small and prices are too volatile.^[65]

Forecasting the debt

Further information: United States federal budget

Tracking current levels of debt is a cumbersome but fairly straightforward process. Making future projections is much more difficult for a number of reasons. For example, before the September 11 attacks in 2001, the George W. Bush administration projected in the 2002 budget that there would be a $1.288 trillion surplus from 2001 through 2004.^[66]

In the 2005 Mid-Session Review this had changed to a projected four-year deficit of $851 billion, a swing of $2.138 trillion.^[67] The latter document states that 49% of this swing was due to "economic and technical re-estimates", 29% was due to "tax relief" (mainly the Bush Tax Cuts), and the remaining 22% was due to "war, homeland, and other enacted legislation" (mainly expenditures for the War on Terror, Iraq War, and homeland security).

Projections between different groups will sometimes differ because they make different assumptions. For example, in August 2003, a Congressional Budget Office report projected a $1.4 trillion deficit from 2004 through 2013.^[68]

However, a mid-term and long-term joint analysis a month later by the Center on Budget and Policy Priorities, the Committee for Economic Development, and the Concord Coalition stated that "In projecting deficits, CBO follows mechanical 'baseline' rules that do not allow it to account for the costs of any prospective tax or entitlement legislation, no matter how likely the enactment of such legislation may be." The analysis added in a proposed tax cut extension and Alternative Minimum Tax reform (enacted by a 2005 act), prescription drug plan (Medicare Part D, enacted in a 2003 act), and further increases in defense, homeland security, international, and domestic spending. According to the report, this "adjusts CBO's official ten-year projections for more realistic assumptions about the costs of budget policies", raising the projected deficit from $1.4 trillion to $5 trillion.^[69]

The Office of Management and Budget forecasts that, by the end of fiscal year 2012, gross federal debt will total $16.3 trillion. Thus, the projected debt will equal 101% of projected gross domestic product, which represents a milestone in the U.S. economy. Public debt alone, which excludes amounts that the government owes its citizens via various trust funds, will be 67% of GDP by the end of fiscal 2012.^[70]

Historical analysis of government spending or debt relative to GDP can be misleading, according to the GAO, CBO and Treasury Department. This is because demographic shifts and per-capita spending are causing Social Security and Medicare/Medicaid expenditures to grow significantly faster than GDP. If this trend continues, government simulations under various assumptions project mandatory spending for these programs will exceed taxes dedicated to these programs by more than $40 trillion over the next 75 years on a present value basis.^[71]

According to the GAO, this will double debt-to-GDP ratios by 2040 and double them again by 2060, reaching 600% by 2080.^[72] A GAO simulation indicates that Social Security, Medicare, and Medicaid expenditures alone will exceed 20% of GDP by 2080, which is approximately the historical ratio of taxes collected by the federal government. In other words, these mandatory programs alone will take up all government revenues under this simulation.^[71]

CBO long-term scenarios

CBO-Public Debt Under "Extended" and "Alternate" Scenarios

The CBO reported during June 2011 two scenarios for how debt held by the public will change during the 2010–2035 time period. The "extended baseline scenario" assumes that the Bush tax cuts (extended by Obama) will expire per current law in 2012. It also assumes the alternative minimum tax (AMT) will be allowed to affect more middle-class families, reductions in Medicare reimbursement rates to doctors will occur, and that revenues reach 23% GDP by 2035, much higher than the historical average 18%. Under this scenario, government spending on everything other than the major mandatory health care programs, Social Security, and interest on federal debt (activities such as national defense and a wide variety of domestic programs) would decline to the lowest percentage of GDP since before World War II. Under this scenario, public debt rises from 69% GDP in 2011 to 84% by 2035, with interest payments absorbing 4% of GDP vs. 1% in 2011.^[73]

CBO estimated in August 2011 that if laws currently "on the books" were enforced without changes, meaning the "extended baseline scenario" described above is implemented along with deficit reductions from the Budget Control Act of 2011, the deficit would decline from 8.5% GDP in 2011 to around 1% GDP by 2021.^[74]

The "alternative fiscal scenario" more closely assumes the continuation of present trends, such as permanently extending the Bush tax cuts, restricting the reach of the AMT, and keeping Medicare reimbursement rates at the current level (the so-called "Doc Fix" versus declining by one-third as mandated under current law.) Revenues are assumed to remain around the historical average 18% GDP. Under this scenario, public debt rises from 69% GDP in 2011 to 100% by 2021 and approaches 190% by 2035.^[73]

The CBO reported: "Many budget analysts believe that the alternative fiscal scenario presents a more realistic picture of the nation’s underlying fiscal policies than the extended-baseline scenario does. The explosive path of federal debt under the alternative fiscal scenario underscores the need for large and rapid policy changes to put the nation on a sustainable fiscal course."^[73]

Causes of change in debt

Historical comparison of US Public Debt to marginal tax rates for highest and lowest income brackets. Sources: Congressional Budget Office and U.S. Bureau of the Public Debt

Public debt is the cumulative result of budget deficits; that is, government spending exceeding revenues. In the figure to the right, debt is shown to increase as revenue (taxes) decrease.

2008 vs. 2009

In October 2009, the Congressional Budget Office (CBO) gave the reasons for the higher budget deficit in 2009 ($1,410 billion, i.e. $1.41 trillion) over that of 2008 ($460 billion). The major changes included: declines in tax receipt of $320 billion due to the effects of the recession and another $100 billion due to tax cuts in the stimulus bill (the American Recovery and Reinvestment Act or ARRA); $245 billion for the Troubled Asset Relief Program (TARP) and other bailout efforts; $100 billion in additional spending for ARRA; and another $185 billion due to increases in primary budget categories such as Medicare, Medicaid, unemployment insurance, Social Security, and Defense – including the war effort in Afghanistan and Iraq. This was the highest budget deficit relative to GDP (9.9%) since 1945.^[75] The national debt increased by $1.9 trillion during FY2009, versus the $1.0 trillion increase during 2008.^[76]

The Obama Administration also made four significant accounting changes to more accurately report the total spending by the federal government. The four changes were:

1. accounting for the wars in Iraq and Afghanistan (”overseas military contingencies”) in the budget rather than through the use of supplemental appropriations;
2. assuming the Alternative Minimum Tax will be indexed for inflation;
3. accounting for the full costs of Medicare reimbursements; and
4. anticipating the inevitable expenditures for natural disaster relief.

According to administration officials, these changes will make the debt over ten years look $2.7 trillion larger than it would otherwise appear.^[77]

2001 vs. 2009

Causes of change in Federal spending as % GDP 2001–2009 from CBO Data

Causes for Changes in CBO Forecasts.

According to the CBO, the U.S. last had a surplus during fiscal year (FY) 2001. From FY2001 to FY2009, at the height of the Global Financial Crisis, spending increased by 6.5% of GDP (from 18.2% of GDP to 24.7%) while taxes declined by 4.7% of GDP (from 19.5% of GDP to 14.8%). Spending increases (expressed as % of GDP) were in the following areas: Medicare & Medicaid (1.7%), defense (1.6%), income security such as unemployment benefits and food stamps (1.4%), social security (0.6%) and all other categories (1.2%). Revenue reductions were individual income taxes (−3.3%), payroll taxes (−0.5%), corporate income taxes (−0.5%) and other (−0.4%).

The 2009 spending level is the highest relative to GDP in 40 years, while the tax receipts are the lowest relative to GDP in 40 years. The next highest spending year was 1985 (22.8%) while the next lowest tax year was 2004 (16.1%).^[78]

2001 vs. 2012

The U.S. budget situation has deteriorated significantly since 2001, when the CBO forecast average annual surpluses of approximately $850 billion from 2009–2012. The average deficit forecast in each of those years as of June 2009 was approximately $1,215 billion. The New York Times analyzed this roughly $2 trillion "swing," separating the causes into four major categories along with their share:

• Recessions or the business cycle (37%);
• Policies enacted by President Bush (33%);
• Policies enacted by President Bush and supported or extended by President Obama (20%); and
• New policies from President Obama (10%).

CBO data is based only on current law, so policy proposals that have yet to be made law are not included in their analysis. The article states that "President Obama’s agenda ... is responsible for only a sliver of the deficits", but that he "...does not have a realistic plan for reducing the deficit...."^[79] Presidents do not, acting alone, have constitutional authority to levy taxes or spend money; all such proposals must originate in Congress, but the President has a veto over new laws, and his priorities influence Congressional action.^[80]

Peter Orszag, the OMB Director under President Obama, stated in a November 2009 that of the $9 trillion in deficits forecast for the 2010–2019 period, $5 trillion are due to programs from the prior administration, including tax cuts from 2001 and 2003 and the unfunded Medicare Part D. Another $3.5 trillion are due to the financial crisis, including reductions in future tax revenues and additional spending for the social safety net such as unemployment benefits. The remainder are stimulus and bailout programs related to the crisis.^[81]

The Pew Center reported in April 2011 the cause of a $12.7 trillion shift in the debt situation, from a 2001 CBO forecast of a cumulative $2.3 trillion surplus by 2011 versus the estimated $10.4 trillion public debt we actually face in 2011. The major drivers were:

• Revenue declines due to the recession, separate from the Bush tax cuts of 2001 and 2003: 28%
• Defense spending increases: 15%
• Bush tax cuts of 2001 and 2003: 13%
• Increases in net interest: 11%
• Other non-defense spending: 10%
• Other tax cuts: 8%
• Obama Stimulus: 6%
• Medicare Part D: 2%
• Other reasons: 7%^[82]

Risks and obstacles

Risks to the U.S. dollar and economy

A high debt level may affect inflation, interest rates, and economic growth. A variety of factors are placing increasing pressure on the value of the U.S. dollar, increasing the risk of devaluation or inflation and encouraging challenges to dollar's role as the world's reserve currency. If another currency or basket of currencies replaced the dollar as the reserve currency, the U.S. would face higher interest rates to attract capital, reducing economic growth for the long-term. The Economist wrote in May 2009:

Having spent a fortune bailing out their banks, Western governments will have to pay a price in terms of higher taxes to meet the interest on that debt. In the case of countries (like Britain and America) that have trade as well as budget deficits, those higher taxes will be needed to meet the claims of foreign creditors. Given the political implications of such austerity, the temptation will be to default by stealth, by letting their currencies depreciate. Investors are increasingly alive to this danger...^[83]

The Government Accountability Office (GAO), the federal government's auditor, argues that the U.S. is on a fiscally "unsustainable" path and that politicians and the electorate have been unwilling to change this path.^[18] The 2010 U.S. budget prepared by the President indicated annual debt increases of nearly $1 trillion annually through 2019, projecting the total U.S. national debt to grow to $23.3 trillion by 2019.^[84] Further, the subprime mortgage crisis has significantly increased the financial burden on the U.S. government, with over $10 trillion in commitments or guarantees and $2.6 trillion in investments or expenditures as of May 2009, only some of which are included in the budget document.^[85]

U.S. Oil Production and Imports 1920 to 2005.

The U.S. also has a large trade deficit, meaning imports exceed exports. Such deficits are only possible if there is a large foreign investment, or a capital account surplus. The balance of payments identity requires that a country (such as the USA) running a current account deficit also have a capital account (investment) surplus of the same amount. In 2005, Ben Bernanke addressed the implications of the USA's high and rising current account (trade) deficit, resulting from USA imports exceeding its exports. Between 1996 and 2004, the USA current account deficit increased by $650 billion, from 1.5% to 5.8% of GDP.^[86]

Debt levels may also affect economic growth rates. Economists Kenneth Rogoff and Carmen Reinhart reported in 2010 that among the 20 advanced countries studied, average annual GDP growth was 3–4% when debt was relatively moderate or low (i.e. under 60% of GDP), but it dips to just 1.6% when debt was high (i.e., above 90% of GDP).^[87]

The CBO reported several types of risk factors related to rising debt levels in a July 2010 publication:

• A growing portion of savings would go towards purchases of government debt, rather than investments in productive capital goods such as factories and computers, leading to lower output and incomes than would otherwise occur;
• If higher marginal tax rates were used to pay rising interest costs, savings would be reduced and work would be discouraged;
• Rising interest costs would force reductions in important government programs;
• Restrictions to the ability of policymakers to use fiscal policy to respond to economic challenges; and
• An increased risk of a sudden fiscal crisis, in which investors demand higher interest rates.^[88]

Rollover and maturity risks

In addition to the debt increase required to fund government spending in excess of tax revenues during a given year, some Treasury securities issued in prior years mature and must be "rolled-over" or replaced with new security issuance. During the financial crisis, the Treasury issued a sizable amount of relatively shorter-term debt, which caused the average maturity on total Treasury debt to reach a 25-year low of just more than 50 months in 2009. As of late 2009, roughly 43% of U.S. public debt needed to be rolled over within 12 months, the highest proportion since the mid-1980s. The relatively short maturity of outstanding Treasury debt, coupled with the increased reliance on foreign creditors, puts the U.S. at greater risk of sharply higher borrowing costs should risk perceptions change abruptly in credit markets.^[87]

Long-term risks to financial health of federal government

Main article: United States federal budget

Risks due to increasing entitlement spending, according to GAO's projections of future trends

Several government agencies provide budget and debt data and analysis. These include the Government Accountability Office (GAO), the Congressional Budget Office (CBO), the Office of Management and Budget (OMB), and the U.S. Treasury Department. These agencies have reported that the federal government is facing a series of critical long-term financing challenges. This is because expenditures related to entitlement programs such as Social Security, Medicare, and Medicaid are growing considerably faster than the economy overall, as the population grows older.

These agencies have indicated that under current law, sometime between 2030 and 2040, mandatory spending (primarily Social Security, Medicare, Medicaid, and interest on the national debt) will exceed tax revenue. In other words, all "discretionary" spending (e.g., defense, homeland security, law enforcement, education, etc.) will require borrowing and related deficit spending. These agencies have used such language as "unsustainable" and "trainwreck" to describe such a future.^[18]

While there is significant debate about solutions,^[89] the significant long-term risk posed by the increase in entitlement spending is widely recognized,^[90] with health care costs (Medicare and Medicaid) the primary risk category.^[91][92] In a June 2010 opinion piece in the Wall Street Journal, former chairman of the Federal Reserve, Alan Greenspan noted that "Only politically toxic cuts or rationing of medical care, a marked rise in the eligible age for health and retirement benefits, or significant inflation, can close the deficit."^[93] If significant reforms are not undertaken, benefits under entitlement programs will exceed government income by over $40 trillion over the next 75 years.^[92] According to the GAO, this will cause debt ratios relative to GDP to double by 2040 and double again by 2060, reaching 600 percent by 2080.^[18]

In 2006, Professor Laurence Kotlikoff argued the United States must eventually choose between "bankruptcy", raising taxes, or cutting payouts. He assumes there will be ever-growing payment obligations from Medicare and Medicaid.^[94] Others who have attempted to bring this issue to the fore of America's attention range from Ross Perot in his 1992 Presidential bid, to motivational speaker Robert Kiyosaki, and David Walker, former head of the Government Accountability Office.^[95][96]

Thomas Friedman has argued that increasing dependence on foreign sources of funding will render the U.S. less able to act independently.^[97]

Moody's Investors Service warned in March 2010 that the United States' AAA-rated U.S Treasury bonds, while currently not in danger, could be downgraded in the future if the U.S. government failed to rein in public debt, saying that growing the economy cannot be the only solution.^[98]

There is a significant difference between the reported budget deficit and the change in debt. The key differences are: 1) The Social Security surplus, which reduces the "off-budget" deficit often reported in the media; and 2) Non-budgeted spending, such as for the Iraq and Afghanistan wars. The debt increased by approximately $550 billion on average each year during the 2003–2007 period, but then increased over $1 trillion during FY 2008.

The cumulative debt of the United States in the past eight completed fiscal years was approximately $4.3 trillion, or about 43% of the total national debt of ~$10.0 trillion as of September 2008.^{[12][99][100]}

Interest expense

Components of interest on the debt.

Budgeted net interest on the public debt was approximately $240 billion in fiscal years 2007 and 2008. This represented approximately 9.5% of government spending. Interest was the fourth largest single budgeted disbursement category, after defense, Social Security, and Medicare.^[101] Despite higher debt levels, this declined to $189 billion in 2009 or approximately 5% of spending, due to lower interest rates. Average interest rates declined due to the crisis from 1.6% in 2008 to 0.3% in 2009.^[102]

During FY2008, the government also accrued a non-cash interest expense of $212 billion for intra-governmental debt, primarily the Social Security Trust Fund, for a total interest expense of $454 billion.^[103] This accrued interest is added to the Social Security Trust Fund and therefore the national debt each year and will be paid to Social Security recipients in the future.

Public debt owned by foreigners has increased to approximately 50% of the total or approximately $3.4 trillion.^[104] As a result, nearly 50% of the interest payments are now leaving the country, which is different from past years when interest was paid to U.S. citizens holding the public debt. Interest expenses are projected to grow dramatically as the U.S. debt increases and interest rates rise from very low levels in 2009 to more typical historical levels. CBO estimates that nearly half of the debt increases over the 2009–2019 period will be due to interest.^[105]

Should interest rates return to historical averages, the interest cost would increase dramatically. Historian Niall Ferguson described the risk that foreign investors would demand higher interest rates as the U.S. debt levels increase over time in a November 2009 interview.^[106]

Monitoring the risks of increasing debt levels

Various financial indicators may provide an early warning that market forces are reacting to an increasing level of debt. Examples include Treasury security interest rates (yields), Treasury auction results, credit default swap spreads, and TIPS spreads.

• Treasury note yields: A rising yield for a security of a given maturity could indicate lower demand for Treasury bonds among investors, or nervousness about future rates of inflation. The "yield curve" (a graph that relates the yields of similar securities of different maturities) provides similar information.
• Treasury auctions: The ease with which new securities can be sold reflects the demand for them. For example, a difference between the interest rate that debt trades prior to auction and the yield required to clear the market at auction is called the "tail." A large auction “tail” would be a sign of declining interest from the market. The Treasury also reports the bid-to-cover ratio for each auction, which is the number of market bids received relative to the number of bids accepted and the ratio of international buyers.
• Credit default swap (CDS) spreads: CDS are insurance-like derivative products that offer protection against bond defaults. CDS spreads essentially measure the current market price of insurance against default. When the market perceives a bond is at an increased risk of default, the CDS written on those bonds will increase in price.
• TIPS spreads: A key measure of inflation expectations among U.S. bond market investors is the difference between the yield on nominal Treasury bonds and the yield for Treasury inflation-protected securities, or “TIPS.” This difference is a gauge of investors’ beliefs about future U.S. inflation rates. A growing spread between nominal Treasuries and TIPS would indicate that investors are concerned that U.S. fiscal and monetary policy could lead to higher inflation in the future.^[87]

In April 2011, rating agency Standard & Poor's (S&P) issued a "negative" outlook on the U.S. "AAA" (highest quality) debt rating for the first time since the rating agency began in 1860, indicating there is a one in three chance of an outright reduction in the rating over the next two years. According to S&P, meaningful progress towards balancing the budget would be required to move the U.S. back to a "stable" outlook. Losing the AAA rating would likely mean higher interest rates and the sale of treasury bonds by entities required to hold AAA securities.^[107] The S&P press release stated: "We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns."^[108] In June, Moody's followed suit, warning that if Congress did not quickly raise the debt ceiling above $14.3 trillion, the agency might reduce the debt rating. Moody's also commented on the political process, warning that the heightened polarization on both sides increased the risk of a default.^[109] However, on August 5, 2011, S&P made the decision to give a first-ever downgrade to U.S. sovereign debt, lowering the rating one notch to a "AA+" rating, with a negative outlook.^[110] S&P stated that "[w]e lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process."^[110]

Debates

Is there a "danger level" of debt?

Economists debate the level of debt relative to GDP that signals a "red line" or dangerous level, or if any such level exists. In January 2010, Economists Kenneth Rogoff and Carmen Reinhart stated that 90% of GDP might be an indicative danger level.^[111] Reinhart testified to the U.S. Senate in February 2010, stating:^[112]

Our main finding is that across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes. Above 90 percent, median growth rates fall one percent, and average growth falls considerably more. In addition, for emerging markets, there appears to be a more stringent threshold for total external debt/GDP; when external debt reaches 60 percent of GDP, annual growth declines by about two percent and for higher levels, growth rates are roughly cut in half. Seldom do countries simply 'grow' their way out of deep debt burdens.

Economist Paul Krugman disputes the existence of a solid debt threshold or danger level, arguing that low growth causes high debt rather than the other way around.^[113] He also points out that in Europe, Japan, and the US this has been the case. In the US the only period of debt over 90% of GDP was after World War II "when real GDP was falling."^[114]

Fed Chair Ben Bernanke stated in April 2010:^[115]

Neither experience nor economic theory clearly indicates the threshold at which government debt begins to endanger prosperity and economic stability. But given the significant costs and risks associated with a rapidly rising federal debt, our nation should soon put in place a credible plan for reducing deficits to sustainable levels over time.

Measure of public debt

Economists also debate the definition of public debt. Krugman argued in May 2010 that the debt held by the public is the right measure to use, while Reinhart has testified to the President's Fiscal Reform Commission that gross debt is the appropriate measure. (Gross debt includes government debt held by government institutions, such as the Federal Reserve and the Social Security trust fund.) Certain members of the Commission are focusing on gross debt.^[113] The Center on Budget and Policy Priorities (CBPP) cited research by several economists supporting the use of the lower debt held by the public figure as a more accurate measure of the debt burden, disagreeing with these Commission members.^[116]

Intragovernmental debt

There is debate regarding the economic nature of the intragovernmental debt, which was approximately $4.6 trillion in February 2011. A significant portion of the intragovernmental debt is the $2.6 trillion Social Security Trust Fund.^[117]

For example, the CBPP argues:^[116]

Debt held by the public is important because it reflects the extent to which the government goes into private credit markets to borrow. Such borrowing draws on private national saving and international saving, and therefore competes with investment in the nongovernmental sector (for factories and equipment, research and development, housing, and so forth). Large increases in such borrowing can also push up interest rates and increase the amount of future interest payments the federal government must make to lenders outside of the United States, which reduces Americans’ income. By contrast, intragovernmental debt (the other component of the gross debt) has no such effects because it is simply money the federal government owes (and pays interest on) to itself.

If the U.S. continues to run "on budget" deficits as projected by the CBO and OMB for the foreseeable future, it will have to issue marketable Treasury bills and bonds (i.e., debt held by the public) to pay for the projected shortfall in the Social Security program. This will result in "debt held by the public" replacing "intragovernmental debt" to the extent of the Social Security Trust Fund during the period the Trust Fund is liquidated, which is expected to occur between 2015 and the mid-2030s. This replacement of intragovernmental debt with debt held by the public would not occur if: a) The U.S. runs on-budget surpluses sufficient to offset "off-budget" deficits in the Social Security program; or b) Social Security is reformed to maintain an off-budget surplus.^[118][119]

Appendix

National debt for selected years

End of Fiscal Year	Gross Debt in $Billions undeflated Treas.[100]	Gross Debt in $Billions undeflated OMB[120][121]	as % of GDP Low-High est. or a – Treas. audit	Debt Held By Public ($Billions)	as % of GDP (Treas/MW, OMB or Treas/BEA)	GDP $Billions OMB/BEA[99] est.=MW.com
1910	2.653		8.0	2.653	8.0	est. 32.8
1920	25.95		29.2	25.95	29.2	est. 88.6
1927	[122] 18.51		19.2	18.51	19.2	est. 96.5
1930	16.19		16.6	16.19	16.6	est. 97.4
1940	42.97	50.70	44.4–52.4	42.97	42.1	96.8/
1950	257.3	256.9	91.2–94.2	219.0	80.2	273.1/281.7
1960	286.3	290.5	54.6–56.0	236.8	45.6	518.9/523.9
1970	370.9	380.9	36.2–37.6	283.2	28.0	1,013/1,026
1980	907.7	909.0	33.4	711.9	26.1	2,724
1990	3,233	3,206	56.0–56.4	2,412	42.1	5,735
2000	(a1)5,674	5,629	a57.6	3,410	34.7	9,821
2001	(a2)5,807	5,770	a56.6	3,320	32.5	10,225
2002	(a3)6,228	6,198	a59.0	3,540	33.6	10,544
2003	(a)6,783	6,760	a61.8	3,913	35.6	10,980
2004	(a)7,379	7,355	a63.2	4,296	36.8	11,686
2005	(a4)7,933	7,905	a63.6	4,592	36.9	12,446
2006	(a5)8,507	8,451	a64.0	4,829	36.5	13,255
2007	(a6)9,008	8,951	a64.8	5,035	36.2	13,896
2008	(a7)10,025	9,986	a69.6	5,803	40.2	14,394
2009	(a8)11,910	11,876	a~84.4	7,552	53.6	~14,098
2010	(a9)13,562	13,529	a~93.4	9,023	62.2	~14,508/14,512

Fiscal years 1940–2009 GDP figures are derived from February 2011 Office of Management and Budget figures which contained revisions of prior year figures due to significant changes from prior GDP measurements. Fiscal years 1950–2010 GDP measurements are derived from December 2010 Bureau of Economic Analysis figures which also tend to be subject to revision, especially more recent years. The two measures in Fiscal Years 1980, 1990 and 2000–2009 diverge only slightly.

Absolute differences from advance (one month after) BEA reports of GDP percent change to current findings (as of January 2011) found in revisions are stated to be 1.2% ± 1.8% or a 95% probability of being within the range of 0.0–3.0%, assuming the differences to occur according to standard deviations from the average absolute difference of 1.2%. E.g. with an advance report of a $500 billion increase of a $15 trillion GDP, for example, one could be 95% confident that the range would be 0.0 to 3.0% different than 3.3% (500 ÷ 15,000) or $0 to $450 billion different than the hypothetical $500 billion.

Fiscal years 1940–1970 begin July 1 of the previous year (for example, Fiscal Year 1940 begins July 1, 1939 and ends June 30, 1940); fiscal years 1980–2010 begin October 1 of the previous year.

Intergovernmental debts before the Social Security Act are presumed to equal zero.

1909–1930 calendar year GDP estimates are from MeasuringWorth.com^[123] Fiscal Year estimates are derived from simple linear interpolation.

(a1)Audited figure was "about $5,659 billion."^[124]

(a2)Audited figure was "about $5,792 billion."^[125]

(a3)Audited figure was "about $6,213 billion."^[125]

(a)Audited figure was said to be "about" the stated figure.^[126]

(a4)Audited figure was "about $7,918 billion."^[127]

(a5)Audited figure was "about $8,493 billion."^[127]

(a6)Audited figure was "about $8,993 billion."^[103]

(a7)Audited figure was "about $10,011 billion."^[103]

(a8)Audited figure was "about $11,898 billion."^[102]

(a9)Audited figure was "about $13,551 billion."^[128]

Foreign holders of U.S. Treasury securities

Foreign holders account for approximately one-third of all holders.^[129] The following is a list of the foreign holders of U.S. Treasury securities as listed by the U.S. Treasury (revised by June 2010 survey completed February 28, 2011):^[104]

Leading Foreign Holders of US Treasury Securities
	December 2010		November 2010
Economic Area	billions of dollars (est.)	percent of total foreign holdings	billions of dollars (est.)	percent of total foreign holdings
Mainland China	1,160.1	26.1%	1,164.1	26.4%
Japan	882.3	19.9%	875.9	19.8%
United Kingdom	272.1	6.1%	242.5	5.5%
Oil exporters1	211.9	4.8%	204.3	4.6%
Brazil	186.1	4.2%	189.8	4.3%
Caribbean Banking Centers2	168.6	3.8%	159.3	3.6%
Taiwan	155.1	3.5%	154.4	3.5%
Russia	151.0	3.4%	167.3	3.8%
Hong Kong SAR	134.2	3.0%	134.9	3.1%
Switzerland	107.0	2.4%	107.0	2.4%
Subtotal of top 10 holders	3,428.4	77.2%	3,399.5	77.0%
Grand Total	4,439.6	100.0%	4,413.8	100.0%

¹Saudi Arabia, Venezuela, Libya, Iran, Iraq, the United Arab Emirates, Bahrain, Kuwait, Oman, Qatar, Ecuador, Indonesia, Algeria, Gabon, and Nigeria

²Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, British Virgin Islands and Panama

Statistics

• U.S. official gold reserves, totaling 275.0 million troy ounces, have a book value as of 31 December 2010 (2010 -12-31)^[update] of approximately $11.6 billion,^[130] vs. a commodity value as of 23 January 2011 (2011 -01-23)^[update] of approximately $445 billion.^[131]
• Foreign exchange reserves $133 billion as of December 2010^[update].^[132]
  

  United States balance of trade (1980–2010), with negative numbers denoting a trade deficit.
  

  Revenue and Expense as % GDP.
• The Strategic Petroleum Reserve had a value of approximately $65 billion as of January 2011^[update], at a Market Price of $98/barrel with a $15/barrel discount for sour crude.^[133]
• The national debt equates to $44,900 per person U.S. population, or $91,500 per member of the U.S. working population,^[134] as of December 2010.
• In 2008, $242 billion was spent on interest payments servicing the debt, out of a total tax revenue of $2.5 trillion, or 9.6%. Including non-cash interest accrued primarily for Social Security, interest was $454 billion or 18% of tax revenue.^[103]
• Total U.S. household debt, including mortgage loan and consumer debt, was $11.4 trillion in 2005. By comparison, total U.S. household assets, including real estate, equipment, and financial instruments such as mutual funds, was $62.5 trillion in 2005.^[135]
• Total U.S Consumer Credit Card revolving credit was $931.0 billion in April 2009.^[136]
• Total third world debt was estimated to be $1.3 trillion in 1990.^[137]
• The U.S. balance of trade deficit in goods and services was $725.8 billion in 2005.^[138]
• The global market capitalization for all stock markets that are members of the World Federation of Exchanges was $32.5 trillion by the end of 2008.^[139]
• According to a retrospective Brookings Institute study published in 1998 by the Nuclear Weapons Cost Study Committee (formed in 1993 by the W. Alton Jones Foundation), the total expenditure for U.S. nuclear weapons from 1940 to 1998 was $5.5 trillion in 1996 Dollars.^[140] The total public debt at the end of fiscal year 1998 was $5,478,189 million in 1998 Dollars^[141] or $5.3 trillion in 1996 dollars. The entire public debt in 1998 was therefore equivalent to the funds spent on the research, development, and deployment of U.S. nuclear weapons and nuclear weapons-related programs during the Cold War.^{[140][142][143]}

Table: International debt comparisons

Gross debt as percentage of GDP
	2007	2010	2011 Forecast
Austria	62%	78%	82%
France	70%	92%	99%
Germany	65%	82%	85%
Greece	104%	123%	130%
Republic of Ireland	28%	81%	93%
Italy	112%	116%	119%
Japan	167%	197%	204%
Netherlands	52%	77%	82%
Portugal	71%	91%	97%
Spain	42%	68%	74%
United Kingdom	47%	83%	94%
United States	62%	92%	100%
Central Europe2	23%	28%	29%
Latin America3	41%	37%	35%

Sources: International Monetary Fund, World Economic Outlook (emerging market economies); Organisation for Economic Co-operation and Development, Economic Outlook (advanced economies)^[144]

¹China, Hong Kong SAR, India, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand

²The Czech Republic, Hungary and Poland

³Argentina, Brazil, Chile and Mexico

Recent additions to the public debt of the United States

Deficit and debt increases 2001–2009.

Recent additions to U.S. public debt^{[12][99][100][120]}

Fiscal year (begins 10/01 of prev. year)	Value of increase $Billions	% of GDP	Total debt $Billions	% of GDP
1994	$282–292	4.0–4.2%	~$4,650	66.6–67.2%
1995	278–281	3.8%	~4,950	67.0–67.8%
1996	251–260	3.3–3.4%	~5,200	67.2–67.6%
1997	188	2.3%	~5,400	65.4–66.0%
1998	109–113	1.3%	~5,500	63.2–63.8%
1999	128–130	1.4%	5,641	61.2%
2000	18	0.2%	5,659	57.6%
2001	133	1.3%	5,792	56.6%
2002	421	4.0%	6,213	59.0%
2003	570	5.2%	6,783	61.8%
2004	596	5.1%	7,379	63.2%
2005	539	4.3%	7,918	63.6%
2006	575	4.3%	8,493	64.0%
2007	500	3.6%	8,993	64.8%
2008	1,018	7.1%	10,011	69.6%
2009	1,887	~13.4%	11,898	~84.4%
2010	1,653	~11.4%	13,551	~93.4%
2011 (Oct.'10-Feb.'11)	~633		~14,200	~96.8%

The more precise FY 1999–2010 debt figures are derived from Treasury audit results.

The variations in the FY 2009–2010 figures are due to double-sourced or relatively preliminary GDP figures.

Historical debt ceiling levels

Table of historical debt ceiling levels[145]
Date	Debt Ceiling (billions of dollars)	Change in Debt Ceiling (billions of dollars)	Statute
June 25, 1940	49[146]
February 19, 1941	65	+16
March 28, 1942	125	+60
April 11, 1943	210	+85
June 9, 1944	260	+50
April 3, 1945	300	+40
June 26, 1946	275	−25
August 28, 1954	281	+6
July 9, 1956	275	−6
February 26, 1958	280	+5
September 2, 1958	288	+8
June 30, 1959	295	+7
June 30, 1960	293	−2
June 30, 1961	298[147]	+5
July 1, 1962	308	+10
March 31, 1963	305	−3
June 25, 1963	300	−5
June 30, 1963	307	+7
August 31, 1963	309	+2
November 26, 1963	315	+6
June 29, 1964	324	+9
June 24, 1965	328	+4
June 24, 1966	330	+2
March 2, 1967	336	+6
June 30, 1967	358	+22
June 1, 1968	365	+7
April 7, 1969	377	+12
June 30, 1970	395	+18
March 17, 1971	430	+35
March 15, 1972	450[148]	+20
October 27, 1972	465	+15
June 30, 1974	495	+30
February 19, 1975	577	+82
November 14, 1975	595	+18
March 15, 1976	627	+32
June 30, 1976	636	+9
September 30, 1976	682	+46
April 1, 1977	700	+18
October 4, 1977	752	+52
August 3, 1978	798	+46
April 2, 1979	830	+32
September 29, 1979	879[149]	+49
June 28, 1980	925	+46
December 19, 1980	935	+10
February 7, 1981	985	+50
September 30, 1981	1,079	+94
June 28, 1982	1,143	+64
September 30, 1982	1,290.2	+147.2
May 26, 1983	1,389	+98.8	Pub.L. 98-34
November 21, 1983	1,490	+101	Pub.L. 98-161
May 25, 1984	1,520	+30
June 6, 1984	1,573	+53	Pub.L. 98-342
October 13, 1984	1,823	+250	Pub.L. 98-475
November 14, 1985	1,903.8	+80.8
December 12, 1985	2,078.7	+174.9	Pub.L. 99-177
August 21, 1986	2,111	+32.3	Pub.L. 99-384
October 21, 1986	2,300	+189
May 15, 1987	2,320[150]	+20
August 10, 1987	2,352	+32
September 29, 1987	2,800	+448	Pub.L. 100-119
August 7, 1989	2,870	+70
November 8, 1989	3,122.7	+252.7	Pub.L. 101-140
August 9, 1990	3,195	+72.3
October 28, 1990	3,230	+35
November 5, 1990	4,145	+915	Pub.L. 101-508
April 6, 1993	4,370	+225
August 10, 1993	4,900	+530	Pub.L. 103-66
March 29, 1996	5,500	+600	Pub.L. 104-121
August 5, 1997	5,950	+450	Pub.L. 105-33
June 11, 2002	6,400[151]	+450	Pub.L. 107-199
May 27, 2003	7,384	+984	Pub.L. 108-24
November 16, 2004	8,184[151]	+800	Pub.L. 108-415
March 20, 2006	8,965[152]	+781	Pub.L. 109-182
September 29, 2007	9,815	+850	Pub.L. 110-91
June 5, 2008	10,615	+800	Pub.L. 110-289
October 3, 2008	11,315[153]	+700	Pub.L. 110-343
February 17, 2009	12,104[154]	+789	Pub.L. 111-5
December 24, 2009	12,394	+290	Pub.L. 111-123
February 12, 2010	14,294	+1,900	Pub.L. 111-139

See also

• Debt levels and flows Global debt
• Emergency Economic Stabilization Act of 2008 – part of the Troubled Asset Relief Program
• Fiat money
• History of the U.S. public debt – a table containing historical debt data
• List of sovereign states by public debt – for many nations, as a percentage of the GDP
• National bankruptcy

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Further reading

• Bonner, William; Wiggin, Addison (2006). Empire of Debt: the Rise of an Epic Financial Crisis. Wiley. ISBN 047178253X.  Argues that America is a world empire that uses credit in lieu of tribute and that history shows this to be unsustainable.
• Cavanaugh, Frances X. (1996). The Truth About the National Debt: Five Myths and One Reality. Boston, Mass.: Harvard Business School Press. ISBN 087584734X.  Argues that the US is in good economic condition and that talk of the consequences of its debt is unduly alarmist.
• Hargreaves, Eric L. (1966). The National Debt. 
• Macdonald, James (2006). A Free Nation Deep in Debt: The Financial Roots of Democracy. Princeton University Press. ISBN 0-691-12632-1.  Argues that democracies eventually defeat autocracies because "countries with representative institutions are able to borrow more cheaply than those with autocratic governments" (p. 4). Bond markets also strengthen democracies internally by giving citizens some of the proverbial power of the purse and by aligning their interests with those of their governments.
• Taylor, George Rogers (ed.) (1950). Hamilton and the National Debt. 
• Wright, Robert (2008). One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe. Mc-Graw Hill. ISBN 0071543937.  Argues the US completely paid off its first national debt but is unlikely to do so again.

External links

• 10 Inconvenient Truths About the Debt Ceiling, by Jon Perr, Crooks and Liars June 2, 2011
• Documentary about the debt, "Ten Trillion and Counting", by PBS Frontline
• Bureau of the Public Debt
  • The Debt to the Penny and Who Holds It public and intragovernmental
• Federal Debt: Answers to Frequently Asked Questions- Provides a broad range of information about federal debt including its relationship to the budget, ownership of the debt, debt management, and key policy considerations
• The United States Public Debt, 1861 to 1975
• GAO Citizen's Guide – 2008
• National Commission on Fiscal Responsibility and Reform
• Historical Tables, Office of Management and Budget
• History of Public Debt and Treasury Securities since 1860