Our national debt has increased by over 6 and a half billion dollars over the last day. Can we afford this?
Does a country's national debt matter? Can the national debt be reversed and eliminated? Would the United States (or any nation) become incredibly profitable and rich if there was no national debt? (Or even more unthinkable, a national surplus!) What does the national debt mean? Like every good complex question, even the experts disagree on the answers. Many of these experts have been engaged in research about such topics longer than I have been alive; I do not purport myself to be an "expert" on the economy and its process. I am, however, a student engaged in learning more about my own government in a quest to improve it and its ability to meet my own needs. I invite you to join me on this path of discovery as I share the basic facts I have uncovered, and I hope that these facts serve as a motivation for finding knowledge and inspiring action to my fellow countrymen and anyone who reads this.
The national debt of the United States currently stands at just under 13 trillion dollars, or 12,989,095,409,531 dollars and 9 cents, if you prefer exact change (for future reference, I pulled this off of Treasury Direct at 12:00 P.M. on May 25, 2010). The link provided is to the Treasury Direct website, a site that maintains a daily history of the debt of the United States--down to the exact penny. The site also publishes detailed historical information about the U.S. debt at each fiscal year starting from 1791. Here are the links for the historical data:
The pages above are full of a lot of statistics; here are the highlights. On January 1, 1791, the national debt was reported to be $75,463,476.52 as a result of the Revolutionary War. This brings up an important point that fellow Factoidz writer Abron Toure has also illuminated: much of the national debt was taken on during wartime. On January 8, 1835, the economic progress of the United States allowed our debt to contract to zero for the first and only time in history. You will notice that the debt figures for 1835 and 1836 are both just over $30,000; the debt quickly grew back into the millions in the years afterward. Reductions in the debt were visible in the 1850's, but in 1861 the debt grew above 90 million, surpassing the 1791 report. In 1862, the 1816 debt record of $127 million was shattered when Civil War spending reached over half a billion; the following year was the first the debt grew above 1 billion dollars. As a result of the Civil War, the debt climbed as high as $2.35 billion by 1879, fell back about a billion, then climbed again with the Spanish-American War and World War I to reach $15 billion by 1918. The number reached a quarter of a trillion dollars after the end of World War II, broke a trillion in 1982 as a result of Cold War spending (including the Vietnam War), achieved 5.5 trillion by the end of the last century, and then added another 7 trillion dollars as a result of Operation Iraqi Freedom and Operation Enduring Freedom (and the costs from this latest conflict and the recent stimulus spending are still mounting).
The debt is divided into two segments: debt held by the public (foreign and domestic investors) and intragovernmental holdings (programs like Social Security and trust funds). Below is an exact quotation of the difference between the two from Treasury Direct:
What is the Debt Held by the Public?
The Debt Held by the Public is all federal debt held by individuals, corporations, state or local governments, foreign governments, and other entities outside the United States Government less Federal Financing Bank securities. Types of securities held by the public include, but are not limited to, Treasury Bills, Notes, Bonds, TIPS, United States Savings Bonds, and State and Local Government Series securities.
What are Intragovernmental Holdings?
Intragovernmental Holdings are Government Account Series securities held by Government trust funds, revolving funds, and special funds; and Federal Financing Bank securities. A small amount of marketable securities are held by government accounts.
The national debt was primarily owned by U.S. citizens in the past. While the debt was negative then just as it is today, the interest paid out from that deficit was primarily paid out to American citizens. Thus, the revenue stream associated with American debt was kept within American borders. Now, however, with the incessant pursuit of lower prices by the consumer cultures of the world, production of cheap goods has gravitated overseas. The process is extremely simple to understand: trillions of dollars have flowed into the East Asian economy as they have broken into production sectors including toys, electronics, and technology. When we were in need of money to finance our debt, these nations (most particularly China and Japan) were the only ones with enough free capital to purchase our debt. The end result is predictable: as the preceding link shows, funds have continued to gravitate away from the United States to other countries. The preceding link shows countries and the amount of U.S. debt they own in Treasury securities. I have taken the data from March 2010 and expressed the amount the top ten countries own as a percentage of the entire national debt, including public debt and intragovernmental holdings, below (I expressed it this way to illustrate points explained below).
#1: China: 6.9%
#2: Japan: 6.0%
#3: United Kingdom: 2.1%
#4: Oil Exporters: 1.8%
#5: Brazil: 1.3%
#6: Hong Kong: 1.2%
#7: Caribbean Banking Centers: 1.1%
#8: Taiwan: 1.0%
#9: Russia: .9%
#10: Luxembourg: .7%
The values above seem small (especially when many have suggested that China owns half or more of our national debt), but the bottom of the chart shows that other nations own 3.8846 trillion dollars in debt securities. The bottom line? As of March 2010, other countries owned 29.9% of our entire national debt. Does this still seem like a relatively small ratio? Consider the interest. According to the data from the payment schedules chart, the U.S. federal government accrued 33.405 billion dollars in last month alone in interest! (Just go to the link provided and add public debt interest accrued to the intragovernmental holdings interest). Expressed another way, this means every living soul in the country lost another $111.35 to the interest on the country's debt last month (or if you prefer, the 140 million or so of us that are a part of the work force lost $238.61).
Even if the information above appalls you, there is something even more sinister afoot. Remember those percentages of the nations that owned our debt? Based upon the figures published, China got 2.305 billion dollars in interest from owning our debt (the following figures are estimates which could be high or low). This is $2,304,945,000 in American money that went to China for free, netting no McDonald's toys, microchips, or cell phones in return. Also, a grand total of $9.98 billion flowed out of our country to other nations last month from the interest on our debt. If that doesn't concern us as the people of this nation, nothing will.
The national debt of the United States is a monster that is growing into a maelstrom. Soon, you and I, and our children, and our grandchildren will be left with a burden even heavier than it is today. Stay tuned for the next chapter, which will explain the national debt as a percentage of GDP and some possible solutions to the crisis. Oh, and in the day that it took me to compose this, the national debt rose to 12,995,779,490,444 dollars and 52 cents. Since I published the first figure, our debt has increased $6,684,080,913.43. The clock is ticking.