The last time the U.S. Government had a balanced annual budget — meaning it spent as much or less than it brought in through taxes — was in 2001. Whenever the government spends more than the annual budget, the U.S. Department of Treasury must borrow money to cover the difference, and this is what comprises our national debt. The national debt is essentially the debt the U.S. Government has accumulated throughout the nation's existence, comprised mostly of annual budget deficit spending.
As of June of this year the national debt totals about $36.2 trillion dollars. Most of that — about $29 trillion dollars — is what’s called ‘public debt’ and the rest is what’s called ‘intragovernmental debt’ which is debt being shifted around different parts of the government.
Economists primarily focus on the public debt, which currently represents about $87,000 for every U.S. citizen, children included. It’s $109,000 per person if you include intragovernmental debt.
Because our economy has grown over time the raw national debt number is less informative than how it compares to our Gross Domestic Product, or GDP. Right now our public debt is about 97% of our GDP. The last time we had a ratio that high was around World War II.
A key number that economists are focused on right now is how much interest the U.S. Government is paying to manage the national debt. Right now, we’re paying almost $1 trillion dollars per year in interest. That is more than we spend on the military budget and almost as much as we spend on healthcare, including Medicare and Medicaid, every year.
So, this all sounds troubling, right? Well, economists are of varying minds when it comes to how bad the current situation is and what the future might bring. In order to get an overview of how the U.S. national debt works, how the government borrows money to service the debt or even pay it back, how we’ve found ourselves in a place with such a high debt to GDPT ratio, and how concerned we all should be, we talk with the author of a recent piece in The Journalist’s Resource titled “The national debt: How and why the US government borrows money.”
The Journalist’s Resource is a project of Harvard Kennedy School's Shorenstein Center. They curate, summarize and contextualizes high-quality research relevant to the news of the day like our national debt.
Guest: Clark Merrefield is the senior editor for economics and legal systems at The Journalist's Resource.
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