Five Fun Facts About the $14 Trillion National Debt
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Our public debt – now at around $14 trillion dollars ( $14,233,559,283,692.40 as of this writing, to be precise) – has been in the news lately, but how we accrued it, who holds it and whether it represents a problem are not well understood.
In one sense, for better or worse, our growing public debt has put trillions into the pockets of the American people. There's an economic principle known as “Wagner’s law,” which holds that as a country gets wealthier, its tax burden tends to increase. Wagner’s law makes perfect sense: in a poor country, citizens are happy to have a paved road; in a middle-income country, they expect a public school on that road; and in the wealthiest countries in the world, the public expects safe air-traffic control to guide them into an airport where they can catch a cab to a world-class public university. As the expectations of what we want government to do rise, so do the tax revenues that are necessary to pay for it all.
Wagner’s law holds true for every country in the world except the United States, where conservative economic discourse prevails. Thirty years ago the Right convinced a lot of Americans they could enjoy tax cuts without losing out on any of the services they’d come to expect. That's a big part of why our public debt jumped from $997 billion when Reagan took office to over 14 times that number today.
We could have paid for everything as we went through higher taxes but we didn't – in 2008,we ranked 26th out of the 30 countries in the Organization for Economic Cooperation and Development in terms of our total tax burden (the share of our economy we fork over to the government), coming in almost 9 percentage points below the average of the group of wealthy nations.
Here are five more fun facts about the national debt.
1. We've Always Been In Debt
Before the first session of the U.S. Congress came to a close, the public debt stood at more than $75 million, and since that time it has never been paid down. In 1835, we came close – that year, the national debt stood at just under $34,000.
The last time the public debt decreased was in the mid-1950s, so every year since we've hit a “record high” debt in dollar terms. But a better measure is how much debt we have in relation to our economic output, and that number peaked at around 120 percent of GDP during World War II.
2. The Chinese Are Not Our “Bankers”
It's become conventional wisdom that central banks in China and Japan hold a ton of U.S. debt. In The Hill this week, Tom Schatz, president of the conservative disinformation outfit known as Citizens Against Government Waste, offered some typical fearmongering, writing that the public debt will not only result in “a lower standard of living for future generations,” but that “the Chinese, who own the largest foreign share of U.S. debt, will have the American people 'working' for them.”
The reality is that, as of last year, China held 9.5 percent of our outstanding debt. The largest lender to the U.S. government is the people of the United States – we own 42.1 percent of the national debt in the form of Treasury bills held in our pension funds, 401(K)s, etc.
And 4.6 trillion – about a third – is held by the government itself. Almost 18 percent of the T-bills outstanding are sitting in the Social Security trust fund, earning interest and making the retirement program incredibly secure despite all the claims to the contrary.
3. Republicans Leave More Debt Than Dems
Between 1960 and 2010, federal spending as a share of the economy has bounced around within a fairly narrow range of between 17.7 percent (under Eisenhower) and 21.8 percent (during the first George Bush's term in office). Republicans are just as happy to spend, but they run on tax cuts, and the result is that since the middle of the last century, contrary to the “tax-and-spend” label, it's been Democrats who are far more conservative when it comes to keeping deficits under control than their Republican counterparts.
Although Congress has to share credit or blame for the budget situation at any given time, the numbers are fairly clear. As financial analyst Hale Stewart noted after George W. Bush’s first term,