America’s Looming Debt Crisis

Executive MBAGeorge Mason University

Spring 2012

Uncle Sam in Debt

Federal Debt:Then and Now

September 30, 1991 $ 3,665,303,351,697.03

Per Person 1991 $14,505

October 11, 2011 $14,822,787,487,080.00

Per Person 2011 $47,445

Who Holds U.S. Debt?

Debt Held by Public $9.946 Trillion

by Foreign Governments $4.499 Trillion

Debt Held by U.S. Gov’t $4.669 Trillion

Net Debt = Debt Held by Public

Agencies Holding U.S. Debt:Social Security Trust Fund

Agencies Holding U.S. Debt:Federal Reserve Banks

GOVERNMENT AGENCY AMOUNT HELDSocial Security Administration $2.6 TrillionFederal Reserve System $1.5 TrillionMedicare $0.5 TrillionTotal $4.6 Trillion

Agencies Holding Debt(2011)

US Debt Held by Foreign Governments (In $U.S. Billions)

U.S. Debt to GDP Ratio, 1790-2010

U.S. Surplus & Deficit, 1800-1859(In Millions)

FY $ FY $ FY $ FY $ FY $

1800 0.06 1812 10.48 1824 0.95 1836 19.96 1848 9.64

1801 3.54 1813 17.34 1825 5.98 1837 12.29 1849 13.84

1802 7.13 1814 23.54 1826 8.23 1838 7.56 1850 4.06

1803 3.21 1815 16.98 1827 6.83 1839 4.58 1851 4.85

1804 3.11 1816 17.09 1828 8.37 1840 4.84 1852 5.65

1805 3.05 1817 11.26 1829 9.62 1841 9.71 1853 13.40

1806 5.76 1818 1.76 1830 9.70 1842 5.23 1854 15.76

1807 8.04 1819 3.14 1831 13.28 1843 3.56 1855 5.61

1808 7.13 1820 0.38 1832 14.58 1844 6.98 1856 4.49

1809 2.51 1821 1.24 1833 10.93 1845 7.03 1857 1.17

1810 1.23 1822 5.23 1834 3.16 1846 1.93 1858 27.53

1811 6.37 1823 5.83 1835 17.86 1847 30.79 1859 15.59

U.S. Surplus & Deficit, 1860-1909(In Millions)

FY $ FY $ FY $ FY $ FY $

1860 7.07 1870 101.60 1880 65.88 1890 85.04 1900 46.38

1861 25.04 1871 91.15 1881 100.07 1891 26.84 1901 63.07

1862 422.77 1872 96.59 1882 145.54 1892 9.91 1902 77.24

1863 602.04 1873 43.39 1883 132.88 1893 2.34 1903 44.88

1864 600.70 1874 2.35 1884 104.39 1894 61.17 1904 42.57

1865 963.84 1875 13.38 1885 63.46 1895 31.47 1905 23.00

1866 37.22 1876 29.00 1886 93.96 1896 14.04 1906 24.78

1867 133.09 1877 40.07 1887 103.47 1897 18.05 1907 86.73

1868 28.30 1878 20.80 1888 111.34 1898 38.05 1908 57.33

1869 48.08 1879 6.88 1889 87.76 1899 89.11 1909 89.42

U.S. Surplus & Deficit, 1910-1959(In Millions)

FY $ FY $ FY $ FY $

1910 18.11 1920 291.22 1930 737.67 1940 3484.00 1950 4702.00

1911 10.63 1921 509.01 1931 461.88 1941 5594.00 1951 4259.00

1912 2.73 1922 736.50 1932 2735.29 1942 21333.00 1952 3383.00

1913 0.40 1923 712.51 1933 2601.65 1943 55595.00 1953 8259.00

1914 0.41 1924 963.37 1934 3629.63 1944 48735.00 1954 2831.00

1915 62.68 1925 717.04 1935 2791.05 1945 48720.00 1955 4091.00

1916 48.48 1926 865.14 1936 4424.55 1946 16964.00 1956 2494.00

1917 853.36 1927 1155.37 1937 2777.42 1947 2861.00 1957 2639.00

1918 9032.12 1928 939.08 1938 1176.62 1948 10548.00 1958 3315.00

1919 13362.62 1929 734.39 1939 3362.00 1949 684.00 1959 12149.00

U.S. Surplus & Deficit, 1960-2009(In Millions)

FY $ FY $ FY $ FY $ FY $

1960 510 1970 8694 1980 73141 1990 277626 2000 86422

1961 3766 1971 26052 1981 73859 1991 321435 2001 32445

1962 5881 1972 26068 1982 120593 1992 340408 2002 317417

1963 3966 1973 15246 1983 207692 1993 300398 2003 538418

1964 6546 1974 7198 1984 185269 1994 258840 2004 567961

1965 1605 1975 54148 1985 221529 1995 226367 2005 493611

1966 3068 1976 69427 1986 237915 1996 174019 2006 434494

1967 12620 1977 49933 1987 168357 1997 103248 2007 342153

1968 27742 1978 55416 1988 192265 1998 29925 2008 641848

1969 507 1979 39633 1989 205393 1999 1920 2009 1549681

Expenditure/GDP 1790-2010

Expenditure-GDP Ratio

18101%

19102%

201024%

Revenue/GDP 1791-2010

Revenue to GDP

19102%

201015%

Government Expenditures 2010

Item Amount

Total Expenditures 3,207.7

National Defense 719.2

International Affairs 51.1

Science, Space, Technology 33.0

Natural Resources & Environment 47.0

Agriculture 26.6

Transportation 106.5

Education 142.5

Health 372.3

Medicare 457.2

Income Security 685.9

Social Security 721.5

Interest on Debt 425.1

Gov’t Expenditures 2010 ($3.2 Trillion)

Government Receipts 2010(in millions)

Item Amount

Individual Income Taxes 1,051,431

Social Insurance & Retirement 940,370

Corporate Income Taxes 178,933

Excise Taxes 74,745

Other 87,166

Total Receipts 2,332,645

Revenues (%GDP)

Government Receipts 2010$(2.33 Trillion)

Debt to GDP Ratio, 2011-2031CBO Projections*

Alternative Projection

Spending Drivers(as a Per Cent of GDP)

Economists Advocating Deficits

Keynes Keynesians

Krugman Summers

The Keynesian Logic

GDP = C + I + G + (X-M)

Marginal Propensity to Consume (MPC)MPC = ΔC ÷ ΔY

ΔGDP = ΔG ÷ (1-MPC)(Income Multiplier)

Economists Against Deficits

Smith Marx Buchanan Hayek

Marx

Reasons Opposed to Deficits

1. Governments default on loans. 2. Wasteful expenditures.3. Financiers get rich on taxes4. Financiers influence policy5. Crowds out private investment6. Creates trade deficits7. Burdens future generations

Debt to GDP by Country(EIU Estimates)

2010 2011 2012Japan 200% 205% 209%Greece 143% 153% 154%Italy 119% 121% 121%U.S.* 95% 98% 101%Germany 83% 81% 80%China* 41% 41% 41%