So, children, today we will address the National Debt so that we can know what we are talking about when we argue against Bush policies. I have put links to various sites I used under the Critical Issues typelist. Also, I put Wikipedia under my typelist, "Adventures." Wikipedia is a weird and wonderful resource, worth browsing just for the fun of it (if you are into that kind of browsing).
The National Debt
What does the debt include?
Government bonds, loans and Treasury securities, unfunded lilabilities which at this point include Social Security. There is other debt. For instance, state government, city government, corporate and finance company debt, and personal debt. This is money owed both within the United States and to foreign entities. It is not included in the National Debt.
Who holds the debt?
People and companies in the United States that buy savings bonds and Treasury Bills.
Companies, individuals and Central (National) Banks in Foreign Countries: among them, Japan owns about 37%. China owns about 9%. More United States debt is owned by foreign countries than the United States owns debts in foreign countries.
How is the debt figured?
As with the Gross Domestic Product, there are a number of ways to calculate it. According to Wikipedia, these are some of the ways:
a. To include everything owed regardless of when it has to be paid.
b. To calculate it as a percentage of the Gross Domestic Product, that is, as a ratio: for instance in 2002 the debt was 60% of the GDP. As pointed out in Wikipedia, it is still lower than in some other developed countries like Japan where the debt is over 100% of the GDP.
c. To calculate it as the amount owed in any given year.
There is manipulation of the way the National Debt is presented. For instance, according to Wikipedia, the budget office prepares its report and issues it assuming that existing laws continue or expire as planned and that “no new programs are added or subtracted.” Thus, the debt can be increased immediately after the budget is issued but the new debt does not show up.
The National Debt does not include money taken from one source to pay for another. Thus, The Department of the Treasury used the $2.4 trillion Social Security surplus to offset cash shortfalls. This is money taken from what was called, under Clinton , the Social Security “Lock Box.” Thus, in 2013, the Government will owe Social Security about $4 trillion dollars.
Sometimes it is hard to figure out which is being talked about, the deficit or the debt. The debt is much bigger than the deficit, but both are critical indicators of our status as a debtor nation. Lots of data on this growth can be found on The Grandfather Economic Report, home.att.net/~mwhodges/debt.htm.
The debt rose dramatically during the presidencies of Ronald Reagan and the first George Bush. Growth leveled off to zero during the Bill Clinton’s presidency and increased its rise even more dramatically under the current George Bush.
The debt breaks down to $23,270 per person in the United States. Of course this is a bit inexact, too. But it gives an idea.
Why do people worry about the national debt?
n 58% of Treasury securities were bought by foreigners, 60% by national banks, much by China and Japan (see above). If these large debt holders suddenly stop buying U.S. Treasury securities, or start selling them off, it could undercut our economy.
n OPEC might begin to price oil in Euros (Saddam Hussein had started to do this). I don’t understand all this, but apparently, if this happened, then countries would want the money it holds as a hedge against rising prices in Euros, not dollars. The needed reserve of funds is called a “float.” I gather that the conversion of this “float” from dollars to euros results in the dollars being used to purchase US goods. This leads to inflation, rises in interest rates, increases in bankruptcies and money again going overseas. This is a little beyond me at this point. This ultimately could lead to what is refered to as “a round of hyper-inflation” in the industrialized world.
n Every time the debt increases, and every time interest rates go up, we decrease our ability to pay back our debts. If the U.S. defaulted on its debt instruments: bonds, treasury notes, it would devalue the U.S. dollar and U.S. savings drastically. People still regard this as unlikely, but this is what happened to Argentina which followed U.S. instructions on economics to a T. Economic collapse leading to societal collapse followed patterns leading to hyper inflation in the Russia that emerged with the collapse of the Soviet Union and in pre-Hitler Germany
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How do we repay the debt?
n With Tax revenues
n By not incurring new debt.
n By “growing” the Gross Domestic Product. Obviously this is why President Bush was so anxious that we keep buying stuff after September 11 and why it is so hard to figure out how to get us to slow down our consumption habits and materialism. It’s gotten to be simply un-American not to buy stuff!
n The worst way…by inducing inflation which can be done simply by the Government printing more money.
It’s good to remember that other governments can’t force a government into bankruptcy to pay the debt.
See my typelist Critical Issues for links to economic information sites.
