Treasury Department figures showed the federal debt passing the $16 trillion mark last week, triggering political charges and counter-charges while underscoring the need for elected officials in both parties to take steps to curb its growth.
“What’s really important is how big the debt is relative to our economy and how fast it’s growing, and those things are both kind of alarming,” said Robert L. Bixby, executive director of The Concord Coalition.
The debt is now roughly the size of the U.S. economy, as measured by the Gross Domestic Product (GDP), although $4.7 trillion of the debt is money the government has borrowed from itself. Economists are generally more concerned about how much the government owes investors, which is now roughly $11.3 trillion.
The government on track to run its fourth consecutive $1 trillion-plus deficit in the fiscal year that ends Sept. 30. While the recession and weak recovery have been important factors in these large deficits, current federal policies would result in heavy federal borrowing even after a full economic recovery.
Even at today’s low interest rates, the government is spending about $200 billion a year on interest payments. That is more than we are spending on military operations in Afghanistan -- or on Medicaid. The number will rise rapidly when interest rates return to more normal levels, particularly if the government continues to run up more debt.
Nor does the federal debt figure tell the whole story. In addition to the debt, the government faces tens of trillions of dollars in various unfunded liabilities.
This point is made clear by David M. Walker, former U.S. comptroller general, in his “$10 Million Per Minute” bus tour and with his new U.S. Financial Burden Barometer. According to Walker's Comeback America Initiative, the government's debt, unfunded promises and obligations, and other commitments and contingencies now total $70.4 trillion -- and counting.