About that National Debt

From Wikipedia:

As of October 10, 2010, the "Total Public Debt Outstanding" was approximately 94% of annual GDP, ($13.616 Trillion) with the constituent parts of the debt ("Debt held by the Public") being approximately 66% of GDP ($9.01 Trillion) and "Intergovernmental Debt" standing at 34% of GDP .^[2][3]

A lot of politicians, particularly Tea Partiers and Republicans, but also Democrats afraid to stand up and lead, have been making a big deal about this.  And it is noteworthy, but it isn't the crises the anti-Obama mob makes it out to be.  (And I'll assume that readers here realize that Clinton turned around the debt Bush I left him and gave Bush II a surplus and that Obama has had less than two years to undo the disaster Bush II left him.)


 The National Debt in Perspective 

When the bank evaluates whether it should give you a loan, it looks at what you owe and what you own.  Your net value is the difference between what you owe and what you own.  So if you owe $3000, but you own outright a car worth $5000, your net worth is +$2000.  If they only looked at what you owed and didn't consider your assets, no one would ever qualify for a loan. 

The same is true with a company.  You look at debits and assets.  Debits need to be balanced with assets, like cash, securities, land, buildings, equipment, even a company's good name has value. 

So when we talk about the United States, why do we only consider the debit side?  If we were a company, we'd also look at all the assets. 

What if we start with the military?  That would include:

• All the military bases in the US and abroad - land, structures, and other improvements
  Wikipedia lists 
• 71 air force bases in the US, plus 35 overseas
• About 300 army bases in the US plus overseas bases which are scattered on different pages so I won't even try to count them. 

Just to start getting some sense of the value (the author says these numbers are highly inaccurate and there are a a lot more bases than officially listed) here's a snippet from an alternet article:

Using data from fiscal year 2005, the Pentagon bureaucrats calculated that its overseas bases were worth at least $127 billion -- surely far too low a figure but still larger than the gross domestic products of most countries -- and an estimated $658.1 billion for all of them, foreign and domestic (a base's "worth" is based on a Department of Defense estimate of what it would cost to replace it).

• All the airplanes, ships, vehicles.
• Weapons
• And all the other myriad of physical objects the military owns.  
• And then there's the value of all the training programs and other forms of expertise the military has produced

That's just the military.  What about the Department of Interior and all the land it oversees that belongs to the Federal government?  What's Yosemite worth?  Yellowstone?  The Everglades?  And all the national forests managed by the Department of Agriculture? 

There are dams, highways, and other sorts of infrastructure. 



Dr. John Rutledge at Rutledge Capitol discusses this all in detail including what sorts of numbers we capture and what numbers are unknown.

It doesn't mean we need to sell them off, anymore than a Fortune 500 company needs to sell off its assets because it borrows money.  The reason the rest of the world keeps investing in the US is that they know we have more than enough assets - and should worse come to worse, we could sell some off.  Though, the need for that is still a long way off.  

I just want to say, at this point, that I don't think the US can go on spending the way we are spending, especially if people are unwilling to pay more taxes.  My wife and I have avoided borrowing money (except for our house) by working, saving money, and living relatively modestly.  It also helped that we went to college in the 60's and 70's when tuition was low enough one could easily graduate debt free and that our parents could guarantee the loan on our first house. (Note, they didn't pay anything, they simply guaranteed the loan.)  I say all this just to establish that I think being out of personal debt is a good thing.  However, household economics and national economics are different things.  From Wisegeek:

The study of macroeconomics has led to the use of governmental policies to effect economic change, with the hope of avoiding depressions and other economic shocks. The two key tools used to manage national economies are fiscal and monetary policies. Policies developed from macroeconomics have wide effects — as a rule, they are the politics that make the evening news.

I can't justify my personal spending on the grounds it will help stimulate the economy, but the Federal government can.

The frothing about the debt by some politicians strikes me as either ignorance or intentional manipulation of a gullible public, especially since these politicians who want to lower the debt are taxophobic as well.  Basically, they are simply anti-government and use any arguments they can get away with in a vain effort to force the shrinkage of the government.  

Many of the people being whipped up into an anti-debt frenzy have personally made liberal use of their own credit cards.  I'm not saying all.  I'm sure that there are many folks who handle personal finances like my family, and so they expect the government to do the same.  But as I said above, you can't generalize from household finances to national finances. 

And it's the American public, who champion the Free Market and oppose government regulation, who spend their money on products made overseas increasing our trade imbalance.  Inexpensive goods are great, but they are only so cheap because American jobs are being exported to where the labor is cheaper, safety standards for workers are lower, and environmental standards are even lower. 

Blaming government is much more satisfying than looking in the mirror.

As we vote today, I just wanted to raise this point for people who are out to punish all those evil politicians who are spending us into ruin - if you believe Tea Party and Republican rhetoric.