APPENDIX C - U.S. Federal Budget - National Debt and Interest On The National Debt (fb-66.html) (159)

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Table Of Contents - Appendix C

[A] National debt (160)

[B] Interest On The National Debt (161)

[B1] Interest: Gross, Net, On Trust Fund Debt, On Publicly-Held Debt, etc. (162)

[B2] Foreign Ownership of the Publicly - Held Federal Debt (1.2 T$, 33%) , and Interest Paid To Foreigners On This Debt (91 B$, 36%) (163)

[A] National debt (160)

This section deals mostly with the size of the national (or federal) debt, and its components -- the publicly-held debt and the trust-funds debt.

See also:

** A High National Debt Lowers Our Fiscal Safety Margin, in section non25.

National debt and Federal debt are synonymous. National debt is the more popular term. Federal debt is the term used in government publications.

The below table shows the CBO's January 1999 projection of the federal debt (E&B0199.PDF). We see that the debt held by the public is projected to drop 68% -- from $3720 Billion in 1998 to $1206 Billion in 2009. Meanwhile, the debt held by government accounts (also called the "trust fund debt") is projected to soar by 149% -- from $1759 billion in 1998 to $4382 in 2009. Most startling are the proportions: in 1998, 68% of the total debt was publicly-held debt, and only 32% was trust fund debt. Whereas in 2009, it is projected that only 22% of the total debt will be publicly-held debt, while 78% will be trust fund debt.

Finally, we see that the total debt is projected to increase only slightly, from $5479 billion to $5587 billion. As a percent of GDP, the total debt will decline considerably. This is all nice, but remember that it depends on maintaining the fiscal discipline of the last few years. And, this nice scenario is also the result of our Demographic Indian Summer. The first boomers start to reach age 65 in 2010, and that's about when big fiscal problems begin.
==============================================

Federal Debt At End Of Fiscal Years, 1998 - 2009

  1998    2004   2008   2009  Fiscal Years
  ----    ----   ----   ----

  3720    2770   1574   1206  Debt Held By Public

   730    1624   2416   2633  Debt Held by SS trust funds  
  1028    1437   1692   1748  Debt held by other gov't accounts
  ----    ----   ----   ----  
  1759    3060   4107   4382  Total Debt Held By Govt Accounts

  5479    5831   5682   5587  Total Federal Debt

   68%     48%    28%    22%  % of Total Debt That Is 
                                Publicly Held
   32%     52%    72%    78%  % of Total Debt That Is 
                                Held by Govt Accounts
  

The Debt Held by Government Accounts is almost entirely made up of non-marketable securities. The Government Accounts are the trust funds, such as the Social Security and Medicare trust funds.

The above table is constructed based on current law, and does not include any Clinton or Republican proposals to "save" Social Security. Were Clinton's proposal (made during the State Of The Union speech in January 1999) adopted, the trust fund debt would be greatly increased. The Clinton proposal -- and similar Republican proposals -- to credit the SSTF with some of the surplus (in the form of more Special Interest Treasury obligations), has been characterized as a shell game on top of a shell game by the Concord Coalition in its February crtique of the Clinton Plan

I haven't heard anyone argue that putting more SIT obligations into the SSTF will make it easier for taxpayers in the future to pay the SS beneficiaries. And plenty of official government documents say that the SIT obligations in the trust funds will not help the federal government at all to pay benefits. See the official government document quotes in section non122 about the trust fund assets being meaningless.  

[B] Interest On The National Debt (161)

See also:

** Net Interest and Gross Interest, in section non155.

** Interest on the National Debt, in section non23.

** Interest on the Federal Publicly-Held Debt Costs Over $930 Per Capita In Higher Taxes, in section non24.

** But Aren't The Interest Payments On the Debt Just A Redistribution?, in section non26.

[B1] Interest: Gross, Net, On Trust Fund Debt, On Publicly-Held Debt, etc. (162)

 Interest payments in Fiscal Year 1998, in $ Billions 

            to trust funds      
           +--------------
       114 |              \
           V              |
       |------ | --114-->/
       |       |
       | Fed   | -->- 250 ---------> |--------|  
       | Govt  |  int. on p-h debt   | Public | 
       |       |                     |        |
       | ----- | <--- 7 ------------ |--------|
                  "Other interest" 
                  e.g. on student loans

[B2] Foreign Ownership of the Publicly - Held Federal Debt (1.2 T$, 33%) , and Interest Paid To Foreigners On This Debt (91 B$, 36%) (163)

At the end of fiscal year 1998, the debt held by the public was $3,720 Billion. The amount of this that was owned by foreign residents was $1,217 Billion, or 32.7% of the total.

The total amount of interest paid on the debt held by the public was $250.0 Billion. Of that amount, $91.1 Billion, or 36.4% of the total, was paid to foreign residents. The below two little tables provide some more information:
==============================================

From Table 12-1 of Anaper2000.pdf, p. 259:

  Debt held by public (end of FY 1998):

    Total:                    3,720 B$
    % of GDP:                   44.3%

  Interest on debt held by public (FY 1998):

    Total:                      250.0 B$ (from Table 12-6)
    As % of total outlays:       15.1%
    As % of GDP:                  3.0%

From Table 12-6 of Anaper2000.pdf, p. 270:
        
  Debt held by public (end of FY 1998):

    Total amount:              3,720 B$
    Foreign res. amount        1,217 B$
    Foreign res. %               32.7%

  Interest on debt held by public (FY 1998):

    Total amount:               250.0 B$  
    Paid to foreign res:         91.1 B$
    % Paid to foreign res:       36.4%

Source: Anaper2000.pdf, Chapter 12 "Federal Borrowing and Debt"

[C] National Debt as % of GDP in 1998 and Historically (164)

Per the book, The Great Deficit Scares, p. 12, the federal debt held by the public has been as high as 111% of GDP in 1946, and then it reached a post - WWII low of 24% of GDP in 1974. In 1998, as explained in the next paragraphs, it was 44% of GDP. But this does not include the trust fund debt. The gross federal debt (including trust fund debt) in 1998 was 64% of GDP. I don't know what the trust fund debt was in 1974 or 1946, but as a percent of GDP, it was probably negligible.

Per TR99 Table III.B1, the GDP in 1998 was $8,509 Billion. Using the CBO numbers from E&B0199.pdf for debt figures at the end of Fiscal Year 1998, we see that the publicly - held debt was 43.7% of GDP. And total federal debt (including the trust fund debt) was 64.4% of GDP.
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Fiscal Year                        1998

Debt Held By The Public, B$        3720
Debt Held By Govt Accounts
              (Trust Funds), B$    1759

Total Federal Debt, B$             5479

GDP (Gross Domestic Product), B$   8509
Debt Held By The Public
           As % of GDP             43.7%
Debt Held By Govt Accounts
   (Trust Funds) As % of GDP       20.7%
Total Federal Debt As % Of GDP     64.4%

For the historic federal debt figures, the Great Deficit Scares book references "Historical Tables, Budget of the United States Government, Fiscal Year 1998 (Government Printing Office, 1997), Table 1.3 1997, Table 7.1." Try http://www.gpo.gov/usbudget to find this document or a later version online.