Relevant Numbers on Federal Debt

$10,574,094,462,968.23

October 31, 2008

The National Debt:

• As of October 31, 2008, the total outstanding debt was $10.574 trillion, which is approximately 73% of U.S. Gross Domestic Product. This amounts to a share of over $35,000 per citizen.
• The gross national debt can be divided into $6.302 trillion of publicly held debt (domestic and foreign), and $4.271 trillion of debt held by government accounts (trust funds), the largest of which is Social Security.
• Because trust fund debt is a matter of internal governmental bookkeeping, economists focus on the publicly held debt. It is this number that reflects the impact of federal borrowing on the economy and the budget.

Publicly Held Debt:

• The publicly held debt is currently $6.302 trillion, a historic high in nominal terms.
• A more important measure of the debt is its size in relation to the nation's economy, generally stated in terms of Gross Domestic Product (GDP). In CBO's baseline projection, accumulated federal debt held by the public will equal 38.2% of GDP in 2008.
• Roughly 90 percent of the publicly held debt consists of marketable securities--Treasury bills, notes, bonds, and inflation-indexed issues (called TIPS). The remaining 10 percent comprises non-marketable securities, such as savings bonds and securities in the state and local government series, which are nonnegotiable, nontransferable debt instruments issued to specific investors.
• By 2018, CBO projects publicly held debt to equal 35.5% of GDP. If materialized, this would approach a post-World War II low. Previously, its post-World War II high was 109% of GDP in 1946, and its post-WWII low was reached 24% of GDP in 1974.
• Under the Government Accountability Office's (GAO) Long-Term Budget Scenario, publicly held debt will be 60.8% of GDP by 2020 and 188.4% of GDP by 2040. The Long-Term Budget Scenario assumes discretionary spending grows with GDP and all expiring tax provisions are extended.
• The Concord Coalition plausible baseline assumes an addition $6.5 trillion deficit over the next ten years. This scenario assumes that discretionary spending grows at the rate of nominal GDP, that continued operations in Iraq and Afghanistan are gradually scaled back to about a third the current level, and that all expiring tax provisions are extended with AMT relief.

Foreign Holdings of Debt:

• As of August 2008, foreign investors held $2.740 trillion of the publicly held debt.
  
• The amount of the debt held by foreigners is at a historic high. As of August 2008, foreign investors held $2.740 trillion of Treasury Securities, $1.785 trillion of which are held by official institutions.
  
• As of August 2008, Japan and China were the two largest foreign holders of treasury securities with $585.9 billion and $541 billion respectively.
• Foreign holdings of Treasury securities have increased by more than one trillion since 2000.

Interest on the Publicly Held Debt:

• Every borrowed dollar carries an interest cost. The most direct impact of public debt on the federal budget is, therefore, the amount of money taxpayers must come up with each year to finance past borrowing.
• Net interest in fiscal year 2007 was $237 billion -- roughly 9% of the federal budget.
• Spending for interest on the debt in fiscal year 2007 ($237 billion) equaled 20.4% of all personal income tax revenue and more than the entire federal share of the Medicaid program in fiscal year 2007 ($191 billion).
  
• During the 1980s and 90s, before the 1998-2001 surpluses, interest regularly consumed 13 percent or more of the federal budget a year, reaching a high point of 15.4 percent in 1996.
• For fiscal year 2007, outlays for net interest equaled ($237 billion) 1.7 percent of GDP. Its recent high point was 3.3 percent of GDP in 1991.
• Under GAO's long-term budget scenario, net interest costs will reach 2.7% of GDP by 2020 and 8.5% of GDP by 2040.

Trust Fund Debt:

• While trust fund debt does not have the same economic and budgetary effects as publicly held debt, it is nevertheless a relevant, if incomplete, indicator of future burdens such as Social Security, Medicare and federal government pension payments.
• As explained by the GAO: "Because debt held by the trust funds is neither equal to future benefit payments, nor a measure of the commitments of the current system, it cannot be seen as a measure of this future burden. Nevertheless, it provides an important signal of the existence of this burden." [1]
• As a technical matter, trust fund balances are credited with interest. However, trust fund interest is simply a credit of IOUs to the respective trust fund. It does not involve an outlay of federal dollars and thus has no economic or budgetary effect.
• According to the 2008 Monthly Treasury Statement, the five largest trust funds are (by the close of the month):
  1. Social Security's Federal Old Age and Survivors Insurance, $2.150 trillion.
  2. Employees Retirement, $728 billion.
  3. Department of Health and Human Services Federal Hospital Insurance, $318 billion.
  4. Social Security's Federal Disability Insurance, $216 billion.
  5. Military Retirement Fund, $215 billion

Gross Debt and the Statutory Limit:

• The debt subject to limit is the maximum amount of money the government is allowed to borrow without receiving additional authority from Congress.
• The current statutory debt limit is $11.315 trillion.
• Congress has approved six increases in the statutory debt limit totaling $4.915 trillion since 2002.
• The most recent legislation adopted by Congress provided for an additional $700 billion increase in the debt limit occurred on October 3, 2008.

[1]GAO, Federal Debt: Answers to Frequently Asked Questions -- An Update, May 1999, p.12.