The National Debt 

The National Debt  (10 points)

 

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Step 1:  When the government runs a deficit, it must borrow money from the public (and some from government funds currently in surplus (e.g. the Social Security trust fund)) to pay for its excess spending. Additional deficits in following years lead to a larger accumulation of debt. The total amount owed by the government from years of overspending it called the national debt.

  1. Question 1: Go to the Balance at https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124 According to the data given there, the total “Debt Held by the Public” equals approximately $_________ trillion. This is money owed to you and me (if we own Treasury securities), our pensions, foreigners, etc.
  2. Question 2: Current surpluses in the Social Security Trust fund and other Government Trust Funds have been tapped to finance a significant fraction of this total debt (that is, the government is, essentially, writing itself an “IOU” to pay back these trust funds at a later date), so that the “Intragovernmental Debt” is approximately $_______trillion.

 

Some of the major concerns raised about the U.S. debt including the increasing percent of the publicly-held debt owned by foreigners and the large interest payments on the debt that mean we can’t spend money on other social needs. Explore

 

  1. Question 3: According to the data provided on this site, approximately _____% of the publicly-held national debt is owned by “foreigners,” with the two largest holders of U.S. government Treasury securities being the countries of ________ & _______. Foreign holdings of the public-held U.S. debt are at historic levels. (For updated, though less snappy/visual, data, see “current foreign ownership” at https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124
  2. Question 4: One of the most important costs of our national debt is the interest payment that must be made each year on this debt. Using data from http://www.pewresearch.org/fact-tank/2017/08/17/5-facts-about-the-national-debt-what-you-should-know/ (scroll down to the 4th fact), net interest on the publicly-held debt are estimated to equal $______ billion, roughly ___% of the federal budget. This spending on interest constitutes money that cannot be spent on other things (i.e. the opportunity cost); specifically, net interest on the debt typically totals more than the combined federal budget spending on energy, the environment, agriculture, veterans benefits, and education.

 

Step 3:  While the total debt number above are quite large, they are potentially misleading if taken out of context.  As an individual, you don’t just look at the total amount of your debt, but rather the size of your debt relative to your ability to repay that debt – this determines the “burden” of your debt.  In the U.S., our national ability to support the debt is our national income, as measured by our nation’s Gross Domestic Product (fact 2 from the Pew Research site above site

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