Relevant Numbers on Federal Debt
March 12, 2008
The National Debt:
- As of March 12, 2008, the total outstanding debt was $9.397 trillion, which is approximately 66% of U.S. Gross Domestic Product. This amounts to a share of over $30,000 per citizen.
- The Congressional Budget Office (CBO) January 2008 baseline projects that the gross national debt will reach $10.5 trillion in 2010 and $12.7 trillion in 2017.
- The national debt can be divided into $5.304 trillion of publicly held debt (domestic and foreign), and $4.093 trillion of debt held by government accounts (trust funds), the largest of which is Social Security.
- Because trust fund debt is a matter of internal governmental bookkeeping, economists focus on the publicly held debt. It is this number that reflects the impact of federal borrowing on the economy and the budget.
Publicly Held Debt:
- The publicly held debt is currently $5.304 trillion, a historic high in nominal terms.
- A more important measure of the debt is its size in relation to the nation's economy, generally stated in terms of Gross Domestic Product (GDP). In CBO's baseline projection, accumulated federal debt held by the public will equal 36.8% of GDP in 2008.
- Roughly 90 percent of the publicly held debt consists of marketable securities--Treasury bills, notes, bonds, and inflation-indexed issues (called TIPS). The remaining 10 percent comprises non-marketable securities, such as savings bonds and securities in the state and local government series, which are nonnegotiable, nontransferable debt instruments issued to specific investors.
- By 2018, CBO projects publicly held debt to equal 22.6% of GDP. If materialized, this would approach a post-World War II low. Previously, its post-World War II high was 109% of GDP in 1946, and its post-WWII low was reached 24% of GDP in 1974.
- Under the Government Accountability Office's (GAO) Long-Term Budget Scenario, publicly held debt will be 62.7% of GDP by 2020 and 250.3% of GDP by 2040. The Long-Term Budget Scenario assumes discretionary spending grows with GDP and all expiring tax provisions are extended.
- Under The Concord Coalition plausible baseline, publicly held debt in 2015 would grow to $8.713 trillion or 44% of GDP. This scenario assumes that discretionary spending grows at the rate of nominal GDP, that continued operations in Iraq and Afghanistan are gradually scaled back to about a third the current level, and that all expiring tax provisions are extended with AMT relief.
Foreign Holdings of Debt:
- As of December 2007, foreign investors held $2.354 trillion (46%) of the publicly held debt.
- The amount of the debt held by foreigners is at a historic high. Of the $2.354 trillion of publicly held debt owned by foreigners, $1.641 trillion owned by official institutions.
- As of December 2007, Japan and China were the two largest foreign holders of treasury securities with $581.2 billion and $477.6 billion respectively.
- Foreign holdings of Treasury securities have increased by more than a trillion since 2000.
Interest on the Publicly Held Debt:
- Every borrowed dollar carries an interest cost. The most direct impact of public debt on the federal budget is, therefore, the amount of money taxpayers must come up with each year to finance past borrowing.
- Net interest in fiscal year 2007 was $238 billion -- roughly 9% of the federal budget.
- Spending for interest on the debt in fiscal year 2007 ($238 billion) equaled 20.5% of all individual income tax revenue and more than the net outlays for international affairs ($28.5 billion), general science, space and technology ($21.0 billion), agriculture ($19.6 billion), transportation ($73.0 billion), and education, training, employment and social services ($89.7 billion) combined.
- During the 1980s and 90s, before the 1998-2001 surpluses, interest regularly consumed 13 percent or more of the federal budget a year, reaching a high point of 15.4 percent in 1996.
- For fiscal year 2007, outlays for net interest equaled ($238 billion) 1.7 percent of GDP. Its recent high point was 3.3 percent of GDP in 1991.
- Under GAO's long-term budget scenario, net interest costs will reach 2.9% of GDP by 2020 and 11.6% of GDP by 2040.
Trust Fund Debt:
- While trust fund debt does not have the same economic and budgetary effects as publicly held debt, it is nevertheless a relevant, if incomplete, indicator of future burdens such as Social Security, Medicare and federal government pension payments.
- As explained by the GAO: "Because debt held by the trust funds is neither equal to future benefit payments, nor a measure of the commitments of the current system, it cannot be seen as a measure of this future burden. Nevertheless, it provides an important signal of the existence of this burden." 
- As a technical matter, trust fund balances are credited with interest. However, trust fund interest is simply a credit of IOUs to the respective trust fund. It does not involve an outlay of federal dollars and thus has no economic or budgetary effect.
- According to the February 2008 Monthly Treasury Statement, the five largest trust funds are (by the close of the month):
- Social Security's Federal Old Age and Survivors Insurance, $2.046 trillion.
- Civil Service Retirement and Disability, $703 billion.
- Department of Health and Human Services Federal Hospital Insurance, $322 billion.
- Military Retirement Fund, $222 billion.
- Social Security's Federal Disability Insurance, $215 billion
Gross Debt and the Statutory Limit:
- The debt subject to limit is the maximum amount of money the government is allowed to borrow without receiving additional authority from Congress.
- The current statutory debt limit is $9.815 trillion.
- Congress has approved five increases in the statutory debt limit totaling $3.865 trillion since 2002.
- The most recent legislation adopted by Congress provided for an additional $850 billion increase in the debt limit occurred on September 29, 2007.
GAO, Federal Debt: Answers to Frequently Asked Questions -- An Update, May 1999, p.12.