Sunday, September 15, 2013

National Debt: Why Is It $16 Trillion ?


The National Debt Clock in New York on Dec. 31, 2012. (JUSTIN LANE/EPA - EPA)

“Our government has built up too much debt. …At $16 trillion and rising, our national debt is draining free enterprise and weakening the ship of state.”
— House Speaker John A. Boehner, Jan. 3, 2013
With a debt ceiling limit looming in the next two months, Congress and the Obama administration appear set to have another bruising battle over spending priorities.
 Before embarking on that course, lawmakers might want to re-read the Standard & Poor’s report on why it reduced the nation’s debt rating after the 2011 deal that ended the last conflict over the debt ceiling. The report offered two key reasons:
 
1) “The downgrade reflects our opinion that the fiscal consolidation plan  that Congress and the Administration recently agreed to falls short of  what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.”
 2) “More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.”
As part of its analysis, S&P assumed Republicans in Congress would never agree to raise taxes, but that actually happened as part of the “fiscal cliff’ negotiations. But S&P was also worried Congress would not fulfill the second half of promised spending cuts — and those have now been deferred for two months.
In any case, S&P was clearly looking for more signs of cooperation on restraining the debt — not confrontation.
As a refresher course, let’s look anew at the sources of this $16 trillion in debt.
The Facts
 While polls indicate that many Americans continue to believe that foreign aid is a large part of government spending, it actually constitutes less than 1 percent of the budget. And, no, the deficit can’t be eliminated by just cracking down on “waste, fraud and abuse.” We once awarded the American public Four Pinocchios for ignorance about the federal budget.
So where does the debt come from? This clever Washington Post interactive feature provides some clues — much of it comes from promises made to keep paying Social Security and Medicare. The programs annually funded by Congress generally have become a smaller share of the U.S. economy, even with funding two wars.
 (An aside: the national debt is made up of publicly held debt and money that the government owes to itself. Boehner’s $16 trillion number is this “gross debt” figure. About $11.5 trillion is public debt and the rest comes from bonds held by Social Security, Medicare and other trust funds. You can have an endless debate about whether these bonds are real or not — read our Social Security primer — but ultimately these are obligations that must be paid with either new debt or general government funds, thus taking away from other programs. There is also dispute over whether gross debt is really the best picture of the U.S. debt load, as economists often focus mostly on publicly traded debt.)
Using the White House’s historical budget tables, let’s look at what has happened to the growth of the debt under various presidents — both the overall debt and the debt that government owes to itself. The figures are for the end of each presidential term, except for Obama. The figure for Obama is as of Jan. 2, based on the Treasury’s debt-to-the-penny Web site.
                                           Size of gross debt           Federal account debt
Before Reagan                           $1 trillion                            $250 billion
Ronald Reagan                          $2.9 trillion                         $677 billion
George H.W. Bush                    $4 trillion                             $1 trillion
Bill Clinton                                 $5.6 trillion                          $2.2 trillion
George W. Bush                         $10.6 trillion                       $4.3 trillion
Barack Obama                          $16.4 trillion                       $4.9 trillion
 While raw numbers are interesting, the more telling statistic is when debt is expressed as a percentage of the overall economy (gross domestic product). We’ve rounded the numbers to keep it simple.
                                             Size of gross debt           Federal account debt
Before Reagan                           33 percent                          7 percent
Ronald Reagan                          53 percent                         12.5 percent
George H.W. Bush                    64 percent                          16 percent
Bill Clinton                                 56.5 percent                        24 percent
George W. Bush                        77 percent                          30 percent
Barack Obama                          105 percent                         31 percent
The Bottom Line
The data show that the growth of the debt in the last three decades certainly has been a bipartisan enterprise, with only Clinton reducing debt as a percentage of the U.S. economy. But even then, debt owed to Social Security, Medicare and the like kept climbing as a share of the U.S. economy.
Moreover, an increasingly large portion of the debt is money that the government owes to itself because of borrowing from large entitlement programs such as Social Security and the Medicare. That’s because the money spent on discretionary programs has generally declined, as a share of the economy, while spending on mandatory programs has soared — and will only consume a larger share of the economy as the Baby Boom generation heads into retirement.
In fact, the debt owed to entitlement programs is now almost as large a share of the economy as all U.S. government debt before Ronald Reagan became president.
Willie Sutton once supposedly said he robbed banks because “that’s where the money is.” By the numbers, some restraint on the growth of entitlements will be needed in order to control the growth of the national debt.

21 comments:

Anthony Rocco said...

With the national debt raising above 16 trillion dollars, in my opinion something needs to be done to lower it. The common misconception among Americans was that the government spent a bulk of the money on foreign aid, and I also find myself thinking the same thing. In reality, the government only spends about 1% on foreign aid; Most of the money is spent on social security, medicare, and country defense, which i feel like is all very much needed. Even though money is spent in countless other places, those uses are necessary too, its not like the government is just wasting money. The one thing the government shouldn't do to get us out of debt is just print up a whole bunch of money, because all that would do is decrease the value of the dollar.

Colby Stover said...

This article concerning the nations outstanding 16 trillion dollar debt was very interesting. Prior to reading I thought that too much money is being spent on foreign nations and that was a major factor behind the national debt. I was shocked to read that foreign aid is less than 1% of the national budget and that most the debt is coming from social security and medicare. I think that in order to decrease the national debt, the government should spend less money on those two programs. Too much money is being funded into Medicare and social security and is one of the major factors behind our nations excessive national debt.

Maria Biondi said...

It's evident from reading this article that the 16 trillion dollars of national debt is only increasing as time goes on. This article carefully cuts down the national debt of this country into various groups of where the debt is coming from such as social security, medicare, or even foreign aid. I believe that if the national debt continues to rise like its doing the government is going to have a larger problem on their hands, clearly. The bigger issue on the hands of the government is public debt, meaning public spending is based on borrowing instead of taxation. Another important issue that came up in this article was the increase in taxation and the decrease in government spending. Hopefully this is an effective action the government is taking in order to help ease the national debt.

Mary O'Shea said...

Before reading this article I was not aware that the national debt was at 16 trillion dollars. The article depicts the national debt into different groups so that the readers can see where most of debt is occurring. It really shocked me too see that most of the debt was coming from medicare and social security, or the likes. I strongly agree however that something needs to be done as soon as possible to stop this sky rocketing debt rate. The government needs to re-evaluate where they essentially MUST spend money, and make cuts in other places that need it. I personally believe that the government is investing too much money into Medicare and Social Security, and if these funds were cut back then the national debt would undoubtedly decrease.

Jennifer Palladino said...

This article was actually very interesting. Before reading, I had no idea what the main source of the debt was. The author stated, “much of it comes from promises made to keep paying Social Security and Medicare.” This is crazy that most of our debt is because we are trying to help people in debt/struggling to get by, thus putting ourselves in more of a debt. Also, there are so many people on welfare who do not deserve to be on welfare. I read an article recently that stated that there was a few kids right out of college who received food stamps to purchase their meals. There is no way that a student right out of college needs food stamps. Yes, I know that there are job shortages, but welfare should be reserved for those who truly need it. Those who have some sort of restriction that prevents them from working. The government needs to take a step back, and really look into how they are determining the recipients of welfare, because they way they are now is not a very effective method.

Alexa Piccoli said...

The National Debt is at an astounding 16 trillion dollars and counting. There is much debate on how to lower this but it has not helped the situation that the United States is in today. What was interesting to read in this article was that only 1% of the national debt is due to forigen aid which people, myself included, believe contributes to more of that number. I now know that, that is a common misconception. Also what I found interesing is that the national debt that we owe is really owed to ourselves because the government has been taking funds from its own practices like social securtiy and medicare. The goverment is investing too much money into these two practices as is and in order for the debt to decrease that needs to stop. Many factors contribute to our national debt but the governement should start finding ways to cut costs where it can and stop making promises it cannot keep.

Anthony Caronia said...

It's incredibly frustrating to hear that part of the government's debt is a result of Social Security. The same Social Security that my biweekly pay is taxed roughly %15 to provide, and the same Social Security that won't be there when it comes time for me to retire. Additionally, it is incredibly astonishing that most of the increase in the nations' debt has occurred since I've been alive.

Christina Sassone said...

It is shocking to me how much the National Debt has increased over time. It is even more shocking to me that we haven't found a way to lower it yet. I think that the nation needs to create a budget for itself that only uses the money we have instead of borrowing it from other countries. Although this seems like an unrealistic thought the first step to helping our economy would be a budget plan to help use less of the money. There are some expenses the nation needs to put its money towards and then there are some pointless expenses they just waste the money on.

Kristoff Kolodko said...

The national debut is at $16 trillion and rising because of a few factors. One things that account for much of the debt is the governments promise to keep paying for both Medicare and Social Security. Most of the debt comes from public debt and Social Security bonds. I think what also contributes is the 1% of the budget spending on foreign aid. I think that this isn't really necessary for the government to spend all of that money and its not really helping us as a country.

Nicholas Beato said...

The fact that the United States is $16 trillion in national debt is completely stunning. I had no idea how large the debt was before reading this article. I believe I was part of the majority in thinking that most of our taxes to the government to overseas countries for aid, but I had been wrong. In the article it states that less then 1% of government spending goes to foreign aid which is incredibly surprising. The article also states that majority of he spending goes to medicare and social security. I understand that medicare and social security are important but decision need to be made to cut back. I believe that the government should fund less money to these programs in an attempt to help lower the national debt.

Matthew Ramos said...

To think that the national debt has any chance of decreasing in the near future is unrealistic. What is referred to as “the debt ceiling”, which is supposedly 16.7 trillion, was reached during the summer months. Extreme actions need to be taken just to come close to halting the national debt. Government programs, such as social security, welfare, and unemployment insurance must be drastically cut. However, it seems as if we are moving in the opposite direction. With the implementation of such programs as “Obama Care”, and the increase of people on welfare and unemployment; these programs require more government spending, furthermore increasing the national debt. I don’t believe that 16.7 trillion is going to remain the debt ceiling, I for see national debt rising higher than what is considered the debt ceiling before progress is actually made.

Ashleen Ulysse said...

Our nations debt is $16 trillion and on the rise.Before I read the article I do addmit that if someone were to ask me why the number was so high it was because our government spent an extensive amount of money in foregn aid. The factors of Social Security and medicaide are indeed important, but a budget would not hurt the situation. If our government budgeted the scarce recource (money) I do strongly believe it could help toward reducing our nations debt.I did find this article very informative though.

Joanna Pizzurro said...

There are a few reasons as to why the nation debt is over 16 trillion dollars. Many Americans believed that the debt was so high because the money was going to foreign aid. The article makes it clear that the money is going to government spending instead. Obama care is thought out to push 1 million people out of the work force, and it is projected that 800,000 people are going to quit their jobs because they would't have a reason to work. In order to change the national debt, extreme changes need to be made. It would be helpful to look back on past presidents who had a lower national debt, and see if any of their tactics could be helpful. Unnecessary programs that are being funded are making the national debt rise even higher. I do not believe that the debt will decrease any time soon. And it is sad to say, but i believe the debt ceiling will increase also.

Dominic Gomez said...

Most Americans believe that the money spent on foreign aid contributes significantly to the $16 trillions debt we are in. As the article stated however, foreign aid does not even amount to one percent of the debt. Cutting foreign aid, therefore, won't solve anything. One way the government can reduce the debt is enforcing stricter taxes, particularly on the wealthy. The government could also cut medicare and social security. But, even with that, there is no way we will be able to repay even close to the $ 16 trillions. the truth is that we are in a mess that I'm not sure we can get out of. The government did not act when it still had the chance. It's too late now.

Dominic Gomez said...

Most Americans believe that the money spent on foreign aid contributes significantly to the $16 trillions debt we are in. As the article stated however, foreign aid does not even amount to one percent of the debt. Cutting foreign aid, therefore, won't solve anything. One way the government can reduce the debt is enforcing stricter taxes, particularly on the wealthy. The government could also cut medicare and social security. But, even with that, there is no way we will be able to repay even close to the $ 16 trillions. the truth is that we are in a mess that I'm not sure we can get out of. The government did not act when it still had the chance. It's too late now.

Kenneth Belle said...

For us to be in an economic debt of 16 million dollars is an absolute catastrophe. But there is a reason for everything, I believe one of the reasons we are in debt is because of the basic trait "greed". The fact that almost every american is out to get rich in someway doesn't help the economy in any way. The expenses such as military and medicare are one of the most expensive of all, and some may say that the military is a horrible place to put money in but they are both highly needed. After having these setbacks and much more it will truly be a task for America to get of the debt but it isn't impossible. And to do so would not only be the governments task, but also the people's mission too.

Tiffany Pabon said...

I am not surprised the national debt has reached 16 trillion; this nation’s debt has been doing absolutely nothing other than climb higher and higher. We have currently surpassed the debt ceiling and it would be surprising to me if we stopped borrowing none the less decrease our debt. Before reading this article I believed that the government should stop providing foreign aid and allow other countries to fend for themselves because I thought it was costing us too much. The truth being that foreign aid doesn't contribute to 1% of our debt is astounding. The bulk of our debt is in public debt and about a third of the government’s debt due to programs such as social security. Programs like social security are aid to citizens that serve as a responsibility to the government to provide. The fact that the baby boom generation is soon to be at retirement age leads me to believe there will be more debt if there are not severe reforms in the government’s economy. I believe that the government should decrease spending in areas such as defense and pay off some of the debt and the social security for the next few years. They also should raise taxes, it might not be the solution people would want to hear though it would help pay for the services that they use or will use. In my opinion the government’s debt would decrease if they discover a way to decrease the cost of social security and other programs that are viewed as necessary.

Rich Gordon said...

The national debt is an absolute nightmare and disgrace. This article has informed me more about the reasons for such a incredibly high national debt. We as Americans must find ways ourselves to solve this problem. Clearly the government is not doing the right thing to fixed this very serious problem. Taxation and spending cuts have been tried for years and are not successful. We just keep falling deeper and deeper into this massive black hole. I lose trust for this government in fixing our problems. We as the people should do whatever we can to slowly find a solution for the debt or our country will no longer be as great as we want it to be. We have to stop spending money on things our country does not need such as weapons and prisoners. I read an article that said the U.S spends triple the amount on prisoners to go to jail than the amount for students to get an education. The government has so much trouble with spending cuts. We must stop getting involved with other countries issues as well.

Jamie Santavy said...

I believe this article did very little, but restate the common known fact that something needs to be done about the growing national debt. The one constructive concept presented is that this is a bipartisan issue. We have reached an era politically where Democrats and Republicans are too busy pointing fingers and jostling for control to work towards any constructive legislation. While the main purpose of the government is to provide national security the domestic defense budget is out of control. In the past war has had a positive economic impact on the United States, but ever since Vietnam the government has grown obsessed with holding tactical locations across the entire planet. Domestic programs such as Medicare, Medicaid, and Social Security, as well as most domestic programs are all the government truly has to offer to the average citizen. They are also exponentially cheaper to sustain than maintaining a war that has been going on for well over a decade. However the new bottom line has become that law makers and politicians can no longer sit on the fence and try and pass the burden, and it is time for definitive action.

Kenneth Reilly said...

There are many factors that contribute to the national debt. This article showed that foreign affairs has only contributed a small part to the national deficit. This article shows how that in fact is not the case. I believe taxation must be increased unfortunately for us as citizens. Taxation will help our debt situation drastically but there are also other factors like welfare that need to be addressed. All in all we continue to dig ourselves deeper and deeper and from the statistics shown on the debt increase from president to president, we are on track for it to keep rising if nothing happens.

Matthew Corrie said...

This article really describes just jow bad of a bind the united states is in. With a debt accumulating over 16 trillion dollars the question is being raised, why is the national debt still increasing? This article describes how over the last three decades and last five presidents the debt has drastically increased. The government needs to change the way that it is spending it's funding because all of these programs that they are trying out because they are really not working. All in all this article really made me think about the economy and is really concerning me because this is very important when I get out of college.