The Two National Debts

How big is the national debt? $10.3 trillion? $5.8 trillion? Both those figures are bandied about, and both, strangely, are accurate in their way. The reason is that the government keeps two sets of accounts: the General Fund and various trust funds, the largest of which are Social Security and Medicare.

This chart is a snapshot from the moving clocks at zfacts.com, which are a wonder to behold. Clicking on the link (scroll down) shows a General Fund running deeper in the red and the trust funds as accumulating surpluses, such that the net national debt is now $5.8 trillion.

We know, however, that there will come a time when the trust funds for Social Security and Medicare turn from generating surpluses to deficits. The surpluses now accumulated, moreover, are not sufficient to cover the retirement needs of the baby boomers, and both Social Security and Medicare face severe long term funding problems. It is therefore reasonable to segregate the general fund from the retirement funds in estimating the national debt--that is, to place it at $10.3 trillion.

That figure is the debt we have accumulated to run the government, fight our wars, pay interest on the debt, and bail out our bankers. It, rather than $5.8 trillion, is the most apt figure for estimating the size of the public debt. As the national debt clock illustrates, that $10.3 trillion figure is growing rapidly. I mean, $16,637,366 in 174 seconds is pretty darn fast. But as the next chart shows, the $10.3 trillion figure actually understates the true dimensions of the fiscal gap.

October 17, 2008