WSJ.com - A Short Primer on the National Debt

If you’ve ever been confused about the various terminology used in the debt debates, this article contains very accessible definitions and explanations, as well as a breakdown of the figures to understand today’s debt in relation to the past.

 

WSJ.com - Opinion: A Short Primer on the National Debt

 

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 de bt is the sum of the Treasury securities held by individuals, financial institutions and foreign governments.

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.

But while the Treasury securities bear the full faith and credit of the United States and any failure to pay the interest or redeem the principal in a timely fashion would be a default, the liabilities are liabilities only so long as current law remains unchanged.

In absolute numbers, the total public debt as of Aug. 11 was $9.924 trillion, and the intra-government debt was $4.666 trillion, for a total of $14.587 trillion.

It's the debt's size relative to gross domestic product that matters, just as personal debts must be measured against a person's income before they can be properly evaluated. The GDP of the United States was $15.003 trillion at the end of the first quarter in 2011. That makes the public debt equal to 66.1% of GDP and the intra-governmental debt 31.1%. Total debt is now 97.2% of GDP and climbing rapidly.