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September 3, 2009

Open Thread – Government Debt

by Brad Warbiany

From the Treasury, as of Tuesday 9/1:

Total US Debt: 11,792,918,170,836.43
——————————–
Debt Held By The Public: 7,481,218,854,095.12
Intragovernmental Holdings: 4,311,699,316,741.31

Debt held by the “public” includes anything not held by other government agencies. I.e. this is t-bills sold to individuals, corporations, foreign individuals and even foreign governments or sovereign wealth funds.

Intragovernmental holdings a money the government owes the government, such as the social security trust fund.

I contend that the ONLY meaningful number is debt held by the public.

Tell me why I’m wrong.


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7 Comments

  1. The intragovernmental debt matters to some degree because the trust funds are expecting to draw heavily on that in the very near future. The general account is itself in deficit, so it will soon have have to convert the intragovernmental debt into public debt in order to make the trust funds appear solvent.

    Comment by Jeff Molby — September 3, 2009 @ 8:58 am
  2. In so far as the “intergovernmental” debt represents IOUs taken against the social security “trust fund” and similar tomfoolery, it represents promises made (to e.g. old people). It is an accounting of money that we are going to spend, so it is number representing already committed future spending.

    Ditching these future costs is theoretically possible, but probably politically unfeasible.

    Comment by EscapedWestOfTheBigMuddy — September 3, 2009 @ 11:00 am
  3. Jeff & EWotBM,

    The United States Government has effectively promised seniors their future Social Security checks. This is regardless of whether the general fund has promised the SSA to pay back those bonds.

    Internal debt may be useful as an accounting entry, but making it zero wouldn’t change the fundamental situation of Social Security and Medicare.

    Making the intragovernmental debt zero by fiat wouldn’t invalidate those promises. In fact, I doubt it would change anything to anyone.

    Conversely, making the publicly-held debt zero would be a pretty major default and would throw the world into a pretty big economic tailspin.

    Comment by Brad Warbiany — September 3, 2009 @ 12:17 pm
  4. Government accounting is pretty much fraudulent, since the government has been running up very large amounts of not-quite-government debt. For example. Government insists on affirmative action loans, government repeatedly adjusts the rules to get private individuals to hold the resulting debt, the day comes when nothing will make them hold the resulting debt, the federal reserve exchanges those worthless mortgages for interest bearing deposits with the federal reserve – which “interest bearing deposits” are not counted as government debt. These off the books liabilities are in the form of complex financial products which are difficult to evaluate, but which probably dwarf that seven billion in plain old fashioned treasuries held by the public.

    Comment by James A. Donald — September 3, 2009 @ 12:18 pm
  5. I don’t disagree, Brad. The $7 trillion is the most immediate concern. The $4 trillion is no less real, though. True, it’s an accounting fiction, but it’s an accounting fiction that stands a 99% chance of being non-fiction in just a matter of years. If you had included the $60+ trillion in unfunded liabilities as one of the options, I would have picked it, because it is the truest picture of our predicament. Since that wasn’t an option, I chose the option that quantifies the immediate problem and at least hints at the future problem.

    Comment by Jeff Molby — September 3, 2009 @ 6:43 pm
  6. @Brad: Er…isn’t that what I said?

    I mean “it represents promises made” and “It is an accounting of money that we are going to spend”.

    Comment by EscapedWestOfTheBigMuddy — September 4, 2009 @ 8:33 pm
  7. Total American indebtedness is much larger than federal debt, and has been rising very rapidly. The primary cause of this rise has been implicit and explicit governmental and quasi governmental guarantees – FHA guarantees, debt of too-big-to-fail corporations, guarantees by too-big-to-fail corporations, state debt, for example California, and so on and so forth.

    Thus the excess “private” debt is not private.

    Total debt is sixty trillion. Some substantial part of this is secured by real assets such as houses and the income stream of hard working people, and some substantial part …. is not.

    Comment by James A. Donald — September 5, 2009 @ 11:20 am

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