Saturday, October 5, 2013

How big is the federal public debt?

Once one discounts the amounts held by the Federal Reserve and other federal agencies and trusts, like the Social Security Trust Fund, it is around 60% of GDP, as shown in the figure below.
This is not high by historical standards. It is far from clear also that if we used the gross value of 100% of GDP that would be a problem. Further, low rates of interest imply that borrowing is not expensive. In short, there is no rationale for not raising the debt-ceiling. If you had any doubts.

4 comments:

  1. Why would anyone want to discount the amount held by the social security trust fund? Just asking, I want to understand.

    ReplyDelete
    Replies
    1. Eremildo, the reply is simply because is debt owed by the government to the government.

      Delete
  2. Knowledge, so free for now, yet so "un-sung"! Thank you!

    ReplyDelete
  3. Yet at the same time the amount of debt held by Federal governmental bodies and by Federal and local governmental bodies has fallen in percentage terms. What's more this trend started prior to the 2008 crisis.

    http://ftalphaville.ft.com/2013/08/30/1619602/guest-post-why-the-fed-is-a-marginal-player-in-us-debt/

    ReplyDelete

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