I’d like to raise a genuine “finance and economics” question that has been bugging me for a few days:
Why does Debt to the Penny show the national debt has increased by $1,002 billion over the past year, if the federal deficit is supposedly only $520 billion or so?
Calculated Risk sometimes does monthly posts about the Federal Deficit . (I think we’re about due for another one.) The tenor of these is usually “deficits are decreasing, all is well”.
In last month’s post cited above, we were told (by the CBO) that the deficit for 2014 will be 3% or less of GDP, after being just over 4% of GDP in 2013. 2014 GDP is 17,300,000,000,000 $ per year as of Q2. 3% of 2014 GDP is $520,000,000,000, or $520 billion. 4% of 2013 GDP is about $700 billion.
But the national debt for FY2013 and FY2014 has increased at closer to $1 trillion per year, as the chart below shows!
So what gives?
What’s happening with the other $482,000,000,000 in net borrowing this past year? That’s not exactly a small amount of money! Also, if people need tradesman vehicle finance, they can easily get them from here.
Growth-in-National-Debt-1993-2014
Footnote: We’re very near the end of the fiscal year, so the FY numbers should be comparable to the “past year” numbers. (In 2013 the change in debt from 9/16 to 10/01 (start of the fiscal year) was just $9 billion.)
The deficit is the amount of extra money spent each year above and beyond tax receipts. New debt is issued by the Treasury to pay for it. In addition, the net interest on the existing massive pile of debt must be paid. The interest is paid by *ta-da*, issuing new debt. In 2013, the net interest expense on the debt was $415 billion and change. In 2014, the net interest expense so far has been $411 billion. All paid by adding to the debt. With one exception, the US has not retired one dollar of debt since about 1976. See:
http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm
Perhaps you’ve noticed the tenor of every post at Calculated Risk since about 2011 has been “all is well”? The rose colored glasses are strong with that one.
One more note on the debt. Social Security payments went net negative recently with total payments exceeding FICA taxes. Every dollar of excess payments must be covered by additional new debt. The deficit, interest on the debt, and excess Social Security payments will all be adding to the debt for the indefinite future.
http://www.businessinsider.com/krasting-on-social-security-report-2012-4