[/caption]The topic being touted from the right wing over the last few days has focused on the rising national debt, with alarm bells being sounded for its recent and predicted further increase. The problem is, as Paul Krugman recently pointed out regarding an article in the same paper he writes for, is that a lot of emphasis is put on Big Scary Numbers, with little to no context provided to help non-economist laypeople understand.
Additionally, there is another sneaky tactic being used to further cloud the issue. Some right wingersare trying to redefine the national debt to include anything and everything, including Social Security and Medicare pay-outs as the fabled Baby Boomers approach their “gimme gimme age” (aka, retirement). This allows them to say the national debt is something like $100 trillion, or any other idiotic number they want to pull from an orifice. Aside from being a completely false measure of the national debt, it also plays into the myth that SS/Medicare is going to bankrupt us with no hope in sight. More on that particular subject in a later post.
However, even Krugman possibly over-estimates either the capacity for understanding or maybe underestimates the apathy within the mainstream public. So let’s break it down a bit more and provide the required definitions and context to make sense of the manufactured hysteria over the national debt.
First off, national debt is a measure of how much the government of a country owes to various creditors whenever deficit spending has required that government to borrow money. Right now, that total debt amounts to (Big Scary Number Alert) $12,016,320,934,466.71. Of that amount, exactly $4,404,965,065,999.66 (36.6%) is owed by the government to ....the government. That’s right, the US government owes itself over 1/3 of the national debt. This can be everything from the SS/Medicare fund owning US securities or various agencies borrowing money from the Treasury in order to meet obligations (eg. US Postal Service).
This leaves $7,611,355,868,467.05 of the debt owned by the “public”, which is anyone who is not the US government. This includes private citizens, banks, funds, or even other governments like China, which is another Scary Thing the right wing continually touts about the national debt.
China currently owns about $800,000,000,000 of debt, which is about 7% of the national debt.
Now, to put this set of very large numbers into context, let’s consider what the US is “worth”. Aside from borrowing, the government funds its operations through taxes. The US collected nearly $3 trillion in taxes last year, but budgeted for $3.4 trillion (the second US budget topping $3 trillion, the first being under Bush). This results in a budget deficit which means we are back to borrowing.
But tax receipts are the true measure of our country’s worth. That’s were the Gross Domestic Product (GDP) comes in. This is the measure of our total economic value, as a country. Currently, that value is $14.2 trillion, which for those paying attention, is a BIGGER number than our national debt. The national debt is thus approximately 85% of our GDP.
To put this into perspective, consider someone who earns $100,000 per year. That person then buys a house for $300,000, using a 30 year mortgage. Not counting interest payments, the person now owes $300,000 while only making $100,000 per year. Thus, his debt load is 300%, not even counting his other debt obligations like credit cards, etc.
This situation describes a great number of us, where our total debt owed far exceeds our yearly incomes. Yet, to hear right wingers tell it, having an 85% debt load is akin to an economic disaster.
For further context, consider other nations, such as Japan. Their economy is just behind the US in size, yet has a national debt load of 170%, over TWICE that of the US, without the dreaded hyperinflation fears pointed to by the right wing in their continual fascination with comparing everything to Germany in the early 20th century.
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