Now that the gross federal debt has smashed the $16 trillion milestone, more people are focusing on the gravity of the debt crisis. However, too many people are being exposed to the spurious idea that it’s only the public share of the debt that counts. Many liberal economists are saying that the non-public share of the debt is “money we owe ourselves,” and is inconsequential to the discussion of the debt crisis.
The national debt consists of two components; debt held by the public and intra-government debt. The debt held by the public is the sum of the treasury securities held by entities outside the federal government, with the lion’s share owned by foreign countries. The debt held by the public currently stands at $11.27 trillion. The top two shareholders are China ($1.164 trillion) and Japan ($1.119 trillion).
The other component, the intra-governmental share, is owed to other federal agencies and consists of the non-existent Social Security Trust Fund, as well as accounts holding pensions for military veterans and government workers. That share of the debt currently stands at $4.74 trillion.
Here are two things you won’t hear in the media.
First, the claim that the intra-governmental debt is immaterial because it is self-owned is quite dubious. As we all know, the Social Security Trust Fund is a notional accounting gimmick; an empty box of IOUs. At some point, we will still need to issue more (public) debt, print more money, or raise taxes to pay for SS and federal pensions – unless we cut benefits. So most of the intra-governmental share of the debt will eventually be converted into public debt.
Second, 92% of the $5.4 trillion in debt accrual under Obama is comprised of the public share. When Obama was inaugurated, the public share of the debt stood at $6.307 trillion. Now it is $11.272 trillion, a $4.97 trillion increase.
We heard a lot about the burden of student debt (which was created by interminable subsidies and federal collusion with Big Ed) at the freak show in Charlotte last night. One thing we didn’t hear was a plan to bail out those kids from the crushing burden of the Obama national debt.