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Four facts about the national debt you may not know print Comments 93 Email Share 937 > Obama responds to Senates passage of shutdown-ending billPlay Icon Obama responds to Senates passage of shutdown-ending bill Senate Votes to Reopen Govt, Avoid DefaultPlay Icon Senate Votes to Reopen Govt, Avoid Default Senate leaders announce deal to end government shutdown, raise debt limitPlay Icon Senate leaders announce deal to end government shutdown, raise debt limit Congress Expected To Pass Bill Ending ShutdownPlay Icon Congress Expected To Pass Bill Ending Shutdown Boehner: House fought with everything it hasPlay Icon House GOP plan unclear as debt deadline nearsPlay Icon Reid-McConnell Deal to End Shutdown Said ClosePlay Icon Sen. Cruz: Never Intended to Delay Timing of VotePlay Icon Sen. McConnell: Confident We Can Reopen GovernmentPlay Icon Shutdown Day 16: Debt Ceiling Hinges on Senate PlanPlay Icon Obama Waits as Congress Negotiates Fiscal DealPlay Icon House GOP Plan Unclear As Debt Deadline NearsPlay Icon Are Prospects for Deal Before Oct. 17 Diminishing?Play Icon Sen. Reid: Extremist Republicans Torpedo ProgressPlay Icon Boehner: Working Both Sides of Aisle to Open GovtPlay Icon Government Shutdown Near An End?Play Icon Whats In the Reid, McConnell Shutdown Compromise?Play Icon Is This Senator Mitch McConnells Moment?Play Icon White House Expects Market Panic to Spark DealPlay Icon Whats Unique About Sen. Harry Reid?Play Icon Shutdown Delays Federal Court CasesPlay Icon Sequestration Is Back in Center of Budget BattlePlay Icon Reid: Productive Conversation With McConnellPlay Icon White House, GOP commit to talks on avoiding debt default Play Icon House GOP, White House Seeking End To Budget FightPlay Icon Starbucks petition urges Congress to end shutdown Play Icon Could it Be? Compromise in Washington?Play Icon Negotiations Begin Over Debt DealPlay Icon Carney: Obama Happy to See Cooler Heads PrevailingPlay Icon Republicans offer plan to extend debt ceilingPlay Icon Boehner: The President Doesnt Want to TalkPlay Icon Is the Affordable Care Act Off the Table?Play Icon Starbucks offers free coffee amid government shutdown Play Icon Washington DC mayor protests government shutdownPlay Icon Now telemarketers are free to call you thanks to government shutdownPlay Icon Government Shutdown Continues, No Progress To Break StalematePlay Icon Video: How government is like the elevator operatorPlay Icon Govt Shutdown Stops Payments of Military Death BenefitsPlay Icon Video: Government shutdown, Day 8Play Icon Shutdown Enters 7th DayPlay Icon Armed Forces Network Affected by Government ShutdownPlay Icon The Government Shutdown: The Effects On TravelPlay Icon Government shutdown could stunt economys growthPlay Icon Pentagon to Call Back Civilian WorkersPlay Icon Govt shutdown enters 7th dayPlay Icon Veterans Affairs employees not receiving pay during shutdownPlay Icon Shutdown Hits Low-income Food PlanPlay Icon FEMA workers recalled despite shutdown for tropical stormPlay Icon Why federal employees working through shutdown could cost taxpayers BILLIONSPlay Icon Shutdown Could Jeopardize School Field Trips To D.C.Play Icon Obama Pins Government Shutdown on BoehnerPlay Icon Government Shutdown: Stalemate Continues in WashingtonPlay Icon Ireland Baldwin Studies Politics During Government Shut-DownPlay Icon Obama blasts reckless Republican shutdown, warns of debt-ceiling dangerPlay Icon Cantor: Democrats Must Negotiate to End ShutdownPlay Icon Government Shutdown: Stalement Continues in WashingtonPlay Icon Anger, Frustration Continues Over Government ShutdownPlay Icon How the Government Shutdown Could Affect Your Ability to Get a MortgagePlay Icon Federal employees protest government shutdownPlay Icon Local Workers Hurt By Fed Government ShutdownPlay Icon Boehner: House Wants Government OpenPlay Icon Film Industry Affected By Government ShutdownPlay Icon Government shutdown moves into second dayPlay Icon Day 2 of government shutdown: Republicans and Democrats continue to sparPlay Icon Obama to hold budget talks with top congressional leaders Play Icon Stocks Resilient to Govt ShutdownPlay Icon Obamacare Begins as Government Shuts DownPlay Icon Obama denounce Republicans for ideological crusadePlay Icon Vets Cross barricades despite shutdownPlay Icon Senators Trade Barbs on Government ShutdownPlay Icon Owner of Subway restaurants talks shutdown impact on small businessesPlay Icon Why the government has to shutdown and what happens nextPlay Icon Federal Government Shuts DownPlay Icon Video: Government shutdown rallyPlay Icon Government shutdown- what happens now?Play Icon How does the Government shutdown affect you?Play Icon Government Shutdown: Whats Closed, Whats Open?Play Icon Boehner: House Wants Government OpenPlay Icon White House Orders Federal Government To Prepare For Partial Shutdown After Congress Fails To Pass BudgetPlay Icon Federal Government Shuts Down for First Time in 17 YearsPlay Icon Government shutdown deadline ticks closer Play Icon Looking past politics toward investing fundamentals Play Icon Live blog: Senate, House expected to OK shutdown/debt deal tonightLive blog: Senate, House expected to OK shutdown/debt deal tonight Scenes from the government shutdown, debt limit debatePhotos: Scenes from the government shutdown, debt limit debate The impact of the government shutdownPhotos: The impact of the government shutdown Document: Senate deal on shutdown, debt limitDocument: Senate deal on shutdown, debt limit White House: Government is nearing a cash-on-hand situationWhite House: Government is nearing a cash-on-hand situation Senate leaders announce shutdown/debt limit deal Senate leaders announce shutdown/debt limit deal Ads by Google By David Lauter October 16, 2013, 2:48 p.m. Now that Congress is set to lift the current limit on how much the government can borrow, here are four facts about the national debt that, polls indicate, many people don’t know. 1. The U.S. debt burden is starting to decline. That’s right – it’s going down, not up. The important measure of the debt is not the dollar amount, but its size relative to that of the economy. Just as a wealthy family easily can handle a mortgage that would crush a poor person, a large economy can handle a much bigger debt than can a smaller one. Economists measure the debt relative to the total size of the gross domestic product. By that measure, the debt grew rapidly during most of President George W. Bush’s tenure and President Obama’s first term as the government borrowed money to fight two wars and the deepest recession in more than half a century. But the rapid growth ended more than a year ago. FULL COVERAGE: The U.S. government shutdown Debt held by the public currently stands at about 75% of the GDP and will remain at about the same level next year, according to the latest projections from the Congressional Budget Office. After that, the debt will tick down slowly to around 71% of GDP in 2018, then get back up to 74% a decade from now. In the mid-2020s, the debt will once again start to grow more rapidly, the CBO projects, although such forecasts of the economy a decade hence come with a big measure of uncertainty. 2. China holds only a relatively small fraction of U.S. debt. The U.S. owes money to anyone who owns a savings bond, a Treasury bill or any other form of U.S. government security either directly or by having money invested in a fund that invests in Treasury securities. That amounts to a fairly large percentage of the U.S. population. Slightly under 40% of the total debt is owned by people or institutions, including individual investors, banks, insurance companies and retirement funds in the U.S. About a quarter of the debt is held by various U.S. government trust funds that are required to invest their money in Treasury securities. Thats a form of internal governmental accounting that gets included in calculations of the federal debt limit but doesn’t count as debt held by the public since it amounts to one part of the government lending money to another part. Just about one-third of the debt is owned by people and institutions in other countries, of which the largest single holder is China, which has, at last count, about $1.3 trillion in U.S. treasury securities, or about 7.8% of the U.S. outstanding debt. PHOTOS: 2013s memorable political moments 3. The U.S. has had a national debt for almost its entire history. The federal government has been without a debt for only one year in U.S. history, during parts of 1835 and 1836. As a percentage of the GDP, the debt peaked at the end of World War II. Notably, the dollar value of the debt increased through the 1950s and 1960s, but because of rapid economic growth, the debt fell dramatically relative to the size of the economy. As the rapid growth after World War II indicates, a large debt doesn’t necessarily strangle an economy. That doesn’t mean that large debts are good for a country, just that the relationship between the debt and economic growth is a lot more complicated than political rhetoric would indicate. 4. Debt crises have marked American politics from the beginning. One of the biggest political fights of the George Washington administration involved the national debt. Alexander Hamilton successfully pushed a plan under which the new federal government would assume the debts that the states had incurred during the Revolution. Thomas Jefferson and James Madison fought the idea. In the end, the two sides reached a compromise under which Congress approved the debt plan and Hamilton backed the idea of placing the new nation’s capital on the banks of the Potomac River, rather than in Philadelphia. QUIZ: Test your knowledge of the debt limit Follow Politics Now on Twitter and Facebook Twitter: @davidlauter david.lauter@latimes
Posted on: Thu, 17 Oct 2013 03:25:25 +0000
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