WSJ OPINION
By JOHN STEELE GORDON
AUGUST 29, 2011
A Short Primer on the National Debt
With a return to 1990s growth rates, the debt-to-GDP ratio could drop to 56.7%, about where it was in 2000, in just one decade.
With the national debt certain to be a front-and-center issue in the 2012 campaign, it is important to understand the true measure of its size. That size seems to vary considerably in news reports. Some news organizations use the debt held by the public, others use total debt. Still others report total future liabilities of the federal government, without making clear what, exactly, that means.
So, a few definitions. The total national debt of the United States is the sum of all federal bills, notes and bonds that have been issued by the Treasury and not yet redeemed. The publicly held debt is the sum of the Treasury securities held by individuals, financial institutions and foreign governments. (That’s not just the Chinese, by the way. Both Great Britain and Japan are also major holders of U.S. debt, as are many other countries in lesser amounts.)
The intra-governmental debt is the sum of Treasury bonds held by agencies of the federal government, principally the so-called Social Security Trust Fund. The liabilities equal the future pensions, health care, Social Security payments, etc., that are promised under current legislation.
Mr. Gordon is the author of numerous books, including “Hamilton’s Blessing: The Extraordinary Life and Times of Our National Debt” (Walker, revised edition, 2010).