Reality check: The United States has added two times more debt than wealth in the past two years

posted at 4:41 pm on October 9, 2013 by Erika Johnsen

It’s mighty tempting to look at the current shutdown/debt-ceiling fight as some kind of perverse abstraction, and to dismiss all of the hijinks on Capitol Hill and in the White House as exhibitions happening merely for their own political sakes — i.e., to completely divorce it all from the real reason we’re actually here right now. We are a stone’s throw away from $17 trillion in national debt, with absolutely zero plans to even just stop aggressively adding to that number, let alone come anywhere close to simply breaking even. So many liberals are so blithely convinced that ‘we face no impending debt crisis’ and that the simple legislative act of once again raising the debt ceiling has no substantive reason to devolve into such a circus — but here’s a handy little chart to consider, first posted by the Weekly Standard from the Senate Budget Committee:

…When the Treasury department started using so-called extraordinary measures to avoid a breach of the debt ceiling in May, 2011, the debt limit stood at $14,294 billion.

“Today it stands at $16,699 billion, which was reached when Treasury started using extraordinary measures in May of this year.  That’s a $2,405 billion increase in 2 years.

“Meanwhile, the economy, as measured by GDP only increased by $1,199 billion between the second quarter of 2011 and the second quarter of this year.

Read: The amount of debt we incurred over the past two years was double the amount of wealth we added to our GDP; or, the rate at which our debt is growing is two times the rate at which our economy is growing — and Democrats’ only proffered solutions to this entirely unsustainable scenario are 1) increasing government spending and 2) raising taxes. Awesome.

Yet, entertaining as all this political drama may seem, the theater itself is indeed burning. For the fiscal position of the federal government is in fact much worse today than is commonly realized. As anyone can see who reads the most recent long-term budget outlook—published last month by the Congressional Budget Office, and almost entirely ignored by the media—the question is not if the United States will default but when and on which of its rapidly spiraling liabilities.

True, the federal deficit has fallen to about 4% of GDP this year from its 10% peak in 2009. The bad news is that, even as discretionary expenditure has been slashed, spending on entitlements has continued to rise—and will rise inexorably in the coming years, driving the deficit back up above 6% by 2038. …

“At some point, investors would begin to doubt the government’s willingness or ability to pay U.S. debt obligations, making it more difficult or more expensive for the government to borrow money. Moreover, even before that point was reached, the high and rising amount of debt that CBO projects under the extended baseline would have significant negative consequences for both the economy and the federal budget.”


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I’ll stick with Evil DarkCurrent – it’s much faster to type ;-)

Steve Eggleston on October 9, 2013 at 7:01 PM

So many liberals are so blithely convinced that ‘we face no impending debt crisis’

Democrats were singing a very different tune 7 years ago, when our FY 2007 budget (passed in 2006) deficit was less than $161 Billion and the Democrats made deficits and debt a 2006 campaign issue.

Obama, Reid, and Pelosi are all on record with very strong condemnations of deficits and debt, and voting against raising the debt limit.

In 2006 and 2008, they said raising the debt limit was “irresponsible”.

In 2013, they say NOT raising the debt limit would be “irresponsible”.

ITguy on October 9, 2013 at 7:05 PM

The other 50% split was between raiding and spending the “excess” entitlement money (SocSecurity, Medicare, federal employee pension fund, et al) and crediting past raids with “interest” (and then promptly spending that). Historical note – that’s why, even when there were 3 years of “unified” budget surplus and a 4th year of a “primary” budget surplus, the total debt load increased each and every one of those years.

Steve Eggleston on October 9, 2013 at 6:12 PM

I hate quoting myself, but I must. I went back through the only set of stats I could find from the various “trust funds” that differentiates between “primary” surplus (overpayment of FICA, SECA, and benefit taxes) and “interest-driven” “surplus” (the amount of “interest” paid to the “trust funds”), the SocSecurity “Trust Fund” (since 1987), and I inadvertently minimized the lust of overspending. Approximately $1.7 trillion of the $2.6 trillion in surpluses booked by SocSecurity between January 1987 and August 2013 are “interest” payments.

That “interest” is, in reality, “whole-cloth” money, borrowed from the future to be spent at the moment. Worse, that itself “earns” “interest”, snowballing into an avalanche that even now is starting to cascade into us.

Steve Eggleston on October 9, 2013 at 7:11 PM

In 2006 and 2008, they said raising the debt limit was “irresponsible”.

In 2013, they say NOT raising the debt limit would be “irresponsible”.

ITguy on October 9, 2013 at 7:05 PM

In 1974 they said that burning fossil fuels causes global cooling.

In 2013 they say that burning fossil fuels causes global warming.

ThePrimordialOrderedPair on October 9, 2013 at 7:22 PM

I’ll stick with Evil DarkCurrent – it’s much faster to type ;-)

Steve Eggleston on October 9, 2013 at 7:01 PM

This isn’t as easy a decision as it seems. :) In the old days, before I retired from the front and moved to the chalkboard, I’m pretty sure I would have had to type “Malevolent Arch Nemesis” on principle, to reinforce and protect my humility. A Knight of Goodness and Light going toe-to-toe with the dark powers in the social-con threads has to be careful.

But now, I’ve retired from that life. Also, I’ve been corrupted by an evil witchy-woman who’s made me her whimpering love-slave. I can hardly aspire to the standard I once maintained without risking the great, good-guy disarmament: Hypocrisy.

. . . I think . . . I think I’ll go as far as Malevolent. That should water humility whilst simultaneously protecting me from the mocking disdain of what’s-her-whip and that canker of silvered armor, hypocrisy.

————-

^ lol – show me anyone else capable of that comment. :)

Axe on October 9, 2013 at 7:23 PM

This is actually worse than it seems. Back in the day (pre-SCOAMT), “only” 50% (give or take a couple points) of the debt increase was due to “immediate” government overspending, that is, spending more than what was being taken in.

The other 50% split was between raiding and spending the “excess” entitlement money (SocSecurity, Medicare, federal employee pension fund, et al) and crediting past raids with “interest” (and then promptly spending that).

Correct me if I’m wrong, but isn’t the 1st one “Debt Held by the Public”, and the 2nd one is “Intragovernmental Holdings”?

Historical note – that’s why, even when there were 3 years of “unified” budget surplus and a 4th year of a “primary” budget surplus, the total debt load increased each and every one of those years.

Correct. The last Fiscal Year where the debt went down, not up, was FY 1957.

Now, it’s almost exclusively “immediate” overspending because the entitlements that had been raided are, by and large, looking for the redemption of the IOUs they were given.

At FY-end 2007, the end of the last fiscal year when appropriations had been passed by a Republican House, Republican Senate, and Republican President, the “Debt Held by the Public” was $5.05 Trillion.

At FY-end 2013, the “Debt Held by the Public”, after we repay approximately $550 Billion of “Extraordinary Measures”, is approximately was $12.47 Trillion. It has close to two and a half times what it was just 6 short years ago.

The welfare state is collapsing. It’s going to take a while for it to hit the ground, but it’s going to hit the ground with an Earth-shattering thud.

Steve Eggleston on October 9, 2013 at 6:12 PM

An Inconvenient Truth

ITguy on October 9, 2013 at 7:25 PM

Approximately $1.7 trillion of the $2.6 trillion in surpluses booked by SocSecurity between January 1987 and August 2013 are “interest” payments.

That “interest” is, in reality, “whole-cloth” money, borrowed from the future to be spent at the moment. Worse, that itself “earns” “interest”, snowballing into an avalanche that even now is starting to cascade into us.

Steve Eggleston on October 9, 2013 at 7:11 PM

. . . because they “represent” “loans.”

?

Axe on October 9, 2013 at 7:31 PM

Bush!!!!

/

Does Obama own anything?

CWchangedhisNicagain on October 9, 2013 at 7:36 PM

Hey! I saw David Buckner on Glenn Beck’s TV show a couple weeks ago, and he said that the Fed’s low interest rates are sending money to Europe and overseas, and that when the Fed raises interest rates, it’ll bring all the money back and cause hyperinflation.

That goes a little over my head. Can anyone explain why the Fed interest rate sends money to/brings money back from Europe?? I see Steve Egg talking about stuff like this a lot…

blockchords on October 9, 2013 at 7:39 PM

“lol – show me anyone else capable of that comment. :)

Axe on October 9, 2013 at 7:23 PM”

LOL! But you forgot to capitalize Dark Powers :D

AsianGirlInTights on October 9, 2013 at 7:43 PM

Can anyone explain why the Fed interest rate sends money to/brings money back from Europe?? I see Steve Egg talking about stuff like this a lot…

blockchords on October 9, 2013 at 7:39 PM

Interest rates are higher in Europe. If you had $100 to invest, where would you put it in an investment that would give you a 4% ROI or a 1% ROI? Interest rates in the US are extremely low. In fact, in some situations, your investment won’t even keep up with inflation.

Once interest rates start to tick up here, people will start investing here because it has, historically, been a safer bet than, say, Greece or Portugal.

Resist We Much on October 9, 2013 at 7:45 PM

Resist We Much on October 9, 2013 at 7:45 PM

Thx!! I didn’t even think about interest rates being higher in Europe! So people get easy dollars here and invest them in Europe b/c it’ll have a higher rate of return. But, when the interest rates go up here, it’ll have a higher rate of return here and bring all those dollars back??

If that’s so, then I get it!! And that means our country is doomed!! (what doesn’t mean our country is doomed??)

Thx RWM!

blockchords on October 9, 2013 at 7:50 PM

…anybody got any money?

KOOLAID2 on October 9, 2013 at 7:59 PM

blockchords on October 9, 2013 at 7:50 PM

You got it and you’re welcome. :-)

Resist We Much on October 9, 2013 at 8:05 PM

LOL! But you forgot to capitalize Dark Powers :D

AsianGirlInTights on October 9, 2013 at 7:43 PM

You’re right. Could use some revision. :) But still.

Axe on October 9, 2013 at 8:22 PM

ITguy on October 9, 2013 at 7:25 PM (done first because I’m taking this in parts)…

Correct me if I’m wrong, but isn’t the 1st one “Debt Held by the Public”, and the 2nd one is “Intragovernmental Holdings”?

Exactly correct. Intragovernmental debt holdings consist of two parts – the overpayment of money allocated for various “trust funds” invested in Treasury securities and the “interest” “earned” by said overpayments (i.e. “whole-cloth” money stolen from the future). If the other “trust funds” have behaviors similar to that of the SocSecurity “trust funds”, that’s somewhere between 60% and 80% of the intragovernmental holdings.

Correct. The last Fiscal Year where the debt went down, not up, was FY 1957.

Again correct. While the publicly-held portion of the debt did decline between the start of Clinton’s second term and the end of it, the increase of intragovernmental debt overwhelmed that modest decrease.

Steve Eggleston on October 9, 2013 at 10:38 PM

Resist We Much on October 9, 2013 at 8:05 PM

Thanks for bailing me out while I was out.

Blockchords, I wouldn’t call that process “hyperinflation”. In a vacuum, that process of dollars returning to the US would merely put inflation where it has historically been – in the 3%-6% range. Yes, it will seem like “hyperinflation” after years of microscopic inflation, but (again, in a vacuum), it wouldn’t even be what we had in the late 1970s.

Steve Eggleston on October 9, 2013 at 10:42 PM

I wouldn’t expect anything less from our resident Ebay princess!

brayam on October 9, 2013 at 6:20 PM

It’s eBay, stupid.

Just curious-I asked you several days ago about your associating me with eBay. What exactly are you referring to? I haven’t used eBay in many years.

Only possible solution I can think of is that you’re trying to data-mine from my Hot Gas user info. Either that or it’s something more sinister, something that you would have called evil if a Republican President did the same thing.

That’s very sad, and is a tactic that is a banning offense at Democratic Underground.

F-

Del Dolemonte on October 9, 2013 at 10:57 PM

Keep voting democrat!

Murphy9 on October 10, 2013 at 12:35 PM

LOL! But you forgot to capitalize Dark Powers :D

AsianGirlInTights on October 9, 2013 at 7:43 PM

Been awhile since HA was graced by DarkCharlesCreepInTights.

Murphy9 on October 10, 2013 at 12:36 PM

I have an Abyssinian cat that knows more about economics than King Putt.
And the little Bengal knows more than any of member of the Spite House Presstitute corpse.
(yea, I spell it the way I wanted to)

Missilengr on October 10, 2013 at 8:55 PM

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