By Theodoric Meyer

How Bad Is Our Debt Problem, Anyway? And Will A Deal Fix It?

December 28, 2012 4:25 pm Category: Memo Pad 33 Comments A+ / A-
How Bad Is Our Debt Problem, Anyway? And Will A Deal Fix It?

by Theodoric Meyer, ProPublica.

President Obama will meet with congressional leaders today in another attempt to avert the fiscal cliff — the automatic tax increases and spending cuts set to take effect Jan. 1 unless Congress can strike a deal. The cuts and tax hikes, which total more than $500 billion, are so large and so sudden that many economists fear they would plunge the country back into recession.

As Washington tries to hash out a deal, we’ve taken a step back to break down the numbers behind our deficit — how it grew so big, why it is actually shrinking and whether a deal can bring it under control.

How much are we in debt?

The federal debt is just shy of $16.4 trillion at the moment, which also happens to be the debt limit that Congress set in 2011. Treasury Secretary Timothy F. Geithner announced on Wednesday that the nation would hit the limit on Dec. 31. The Treasury can take some “extraordinary measures” to keep paying its bills for a few weeks, but it’ll run out of cash by February or March unless Congress raises the limit again.

And that’s different from the deficit, right?

Yes. The debt is the total amount of the government’s outstanding obligations. The deficit is how much the government is in the red in a given year. In the 2012 fiscal year, which ended Sept. 30, the deficit amounted to $1.1 trillion.

That seems like a huge number. How did the deficit get so big?

The 2012 deficit was actually the smallest one since 2008. But it’s still a giant shortfall.

As Binyamin Appelbaum noted in The New York Times, the federal government has run a deficit in 45 of the last 50 years. (The exceptions were 1969 and 1998 through 2001.) The financial crisis in 2008, however, caused the deficit to skyrocket, as tax revenues fell because of the slump in incomes and production, and government spending on the stimulus and safety net measures such as unemployment insurance shot up. The deficit for the 2008 fiscal year was $455 billion. In 2009, it surged to more than $1.4 trillion.

Since then, the deficit has been falling, albeit very slowly. The government took in 6.4 percent more in taxes in 2012 than in 2011, as the economy improved a bit and several tax breaks expired. And it spent less on Medicaid, unemployment insurance and the continuing operations in Iraq and Afghanistan.

What about the total debt? How much of that is President Obama’s fault?

The debt has grown by nearly $6 trillion since Obama took office, from $10.5 trillion to $16.4 trillion.

Figuring out how much of that is due to Obama is tougher. The Washington Post’s Ezra Klein, working with the Center on Budget and Policy Priorities, calculated in January that the legislation Obama had actually signed — as opposed to factors like the economy — had added about $983 billion to the debt.

Klein has also rounded up several charts that break down exactly what’s caused our debt to grow so large. The biggest single factor has been the weak economy; President George W. Bush’s tax cuts and the wars in Iraq and Afghanistan also fueled the debt buildup, as did President Obama’s stimulus.

Have debt levels ever been this high before?

Yes, proportionally. Economists like to talk about a country’s debt in relation to its gross domestic product (a measure of the economy’s total annual output). And instead of using a country’s total outstanding debt to calculate this debt-to-GDP ratio, economists typically use the amount of debt held by the public. (Somewhat confusingly, the federal government holds about $5 trillion in obligations to itself, most of which is money owed to the funds that support Social Security and other programs.)

Using this measurement, our debt was about 67.7 percent of GDP last year. As this chart compiled by Quartz’s Ritchie King shows, that’s the highest our debt-to-GDP ratio has been since the 1940s, when the need to finance World War II caused the debt to surge to 112.7 percent of GDP. But the economy grew fast enough after the war that the debt soon became a much smaller percentage of the country’s GDP.

It’s worth noting that a number of other developed countries have higher debt-to-GDP ratios than the U.S. Germany’s public debt is 80.6 percent of GDP, and Canada’s is 87.4 percent. The Eurozone’s most troubled countries fare even worse: Italy’s debt is 120.1 percent of GDP; Greece’s is 165.3 percent.

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How Bad Is Our Debt Problem, Anyway? And Will A Deal Fix It? Reviewed by on . by Theodoric Meyer, ProPublica. President Obama will meet with congressional leaders today in another attempt to avert the fiscal cliff -- the automatic tax inc by Theodoric Meyer, ProPublica. President Obama will meet with congressional leaders today in another attempt to avert the fiscal cliff -- the automatic tax inc Rating:

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  • Sand_Cat

    NO DEAL WITH THE REPUBLICANS WILL “FIX” ANYTHING!

  • sigrid28

    Republicans and the NRA, both intent on protecting the rights of Americans to stockpile firearms and ammunition, will not vote for any bill that raises taxes on the rich, even by a teeny-tiny-teeny little bit–but will gladly support any legislation that forces the middle class and working poor to “bite the bullet.”

    • http://profile.yahoo.com/GGHNYPK4GNCRYZLXWVZ447WHJM Plznnn

      The Republicans have offered several proposals only to be ignored by Obama because of his insistence on raising taxes on “certain” Americans but not offering any Spending cuts. The amount of revenue Obama would receive by his taxes on the wealthy will run our bloated Federal Government for 8 1/2 days. The problem is Spending & Debt, not more taxes.

      • http://profile.yahoo.com/HGC4BGWVYXV76PHZBPSPOOU5GA Independent1

        You’re obviously nothing more than a faithful fan of Rush Limbaugh and Faux News who can do nothing but parrot the lies and distortions that both these right-wing wackos spew constantly. You’re comment is pure nonsense.

        • Tom_D44

          OK, let’s forget about what Rush and Fox says then. Can you tell us how much revenue these tax increases can bring in and can you tell us what percentage of spending that revenue is? I would be interested in seeing your numbers.

      • sigrid28

        First, this economy needs jobs, stimulus of all kinds (including a living wage rather than a minimum wage), and extension of unemployment benefits (all supports of the safety net)–period. After that, the economy needs more revenue collected in a way that allows the middle class and working poor to keep being consumers, while the top 2% and successful corporations begin to do their fair share. Only then do spending cuts, except those that eliminate waste, make sense; and let’s start with defense.

        • Tom_D44

          Sigrid, have your living wage if you want but be prepared to pay a lot more for your products and services. You can not force corporations to increase their expenses and expect that to not hit your pocketbook. That is called the hidden tax and it hits everyone – the rich and the poor. So you make more, but you also pay more – exactly how dows that better the lives of the average american? OR, you can continue to buy those cheap Chinese products with your money, keeping your costs down, while forcing american business costs up and you will see more companies disappear or be forced to go overseas – a concept you hate these businesses for. It is a vicious cycle and there is no easy solution but if you want to continue to enjoy your nice lifestyle her in america with the low costs for products, energy, food, and everything else, then be careful what you wish for.

  • http://www.facebook.com/dominick.vila.1 Dominick Vila

    Our debt problem, which includes national, corporate and personal debt, could be solved overnight if ALL Americans decided to put country ahead of personal ambitions. The last Congress is, indeed, the epitome of irresponsibility, not only did they lack the courage to do what is best for our society on every issue they tackled, they admitted their decisions were driven by a desire to make President Obama a one-term president, they remain determined to ensure his presidency fails, and are willing to destroy our country to achieve their goal. They are an embarrassment, and they will not be missed.

    • Jim_n_Panama

      The markets will not demand higher interest rates from the US. They’re currently happy happy joy joy with effectively less than a 2% return. In the real world as it is today, they have no other choice. Where else can they park their money safely?

    • Tom_D44

      Now wait a minute Dominick. While one house was committed to bringing down the president the other was committed to support him unconditionally – so much so that every one of them voted for the health care bill without even knowing what was in it. Let’s be fair, what we have been whitnessing is political theatrics being played by both sides. Everyone knows the seriousness of the problem but they want to play chess with the other side so as to bring them down in public. So the Republicans want to close loopholes but don’t want to tell you which ones because as soon as they do they will be publicly filleted on the news to show how heartless they are and how they don’t care about the poor or the sick or the unemployed or the women or the environment and on and on and on. And the democrats know they need to come up with spending cuts, but are waiting out the republicans because as soon as they throw the specifics out on the table they will go through the same public lynching with the same half truths or outright lies as the dems will use to lynch the republicans. And the american people, who need to face the fact that we have serious financial problems to deal with, and no matter what, we are going to have to suffer through it, are hiding their heads in the sand, loyally, behind their respective parties as if all will be just fine.

      Let’s face it, and you have said this before, the debt crisis is a big deal, and the sooner it is addressed the sooner we get through the pain. You can’t tax your way out of it, you can’t print your way out of it, and you can’t spend your way out of it – we need for the country to come together and stop with the partisan theatrics – on both sides.

    • oldtack

      Your second paragraph addresses the crux of the matter. Our major problem lies a few months down the road.

      Thanks for your article.

  • Jimupset

    Lets get rid of congress and save all the money they waste; and vote on the computer.
    They have done nothing. lets treate them as a company. They are bankrupt! NO MONEY!
    They have no clue as to what is going on. It’s is all about them. Sick of it! We went over the cliff and they have no clue!

  • http://profile.yahoo.com/C22AJV5GXSF4QE3YJY5IGBTULU TSB

    What is truly sad, if we would have paid as we played the debt may not exist! Thus, when you have a dance you’ve got to pay the band, the same applies to wars, etc.

    • http://profile.yahoo.com/HGC4BGWVYXV76PHZBPSPOOU5GA Independent1

      Absolutely, had Bush, like Clinton, had the guts to raise the tax rates when he knew full well the country couldn’t wage two wars without additional revenues, he wouldn’t have driven up the deficits by 9-10 trillion including the deficit increases resulting from him allowing the economy to run amok and end up in total devestation.

      • http://profile.yahoo.com/RFEPMKNCBVGJYV2X7LBNDGRUEY William

        The problem is that the GOP only worries about the deficit when you have a Dem President, as soon as the GOP is in charge the deficit won’t matter anymore. I’ve seen it happen over and over since Ronny was President.

  • nobsartist

    When you consider that the money that we print has nothing to guarantee its value like gold did at one time, the deficit just like our monetary system is a farce.

    Lets just build some more printing presses and print more money.

    What the heck. That will fix the “deficit”.

    • http://pulse.yahoo.com/_B6RROC4IUESHT322QS5VJVPYRM Lynda

      Please look up Monentary Sovereignty and get educated in how our monentary works. We are not Greece and will never be. Gold is a false GOD and it just another commodity based upon an antiquated idea. A return to the gold standard would be of little help in solving our economic issues. Keep it real. BTW, did you read the part that the deficit as a percentage is getting smaller? In real dollars as well. As the economy grows the deficit goes down. It went up along with the demise of the economy in 2008…so why are you so confused?

      • nobsartist

        Me, confused?

        Your opinion is just that. We will never be greece? You do have some proof of that or are you also a swami in addition to being a smart ass?

  • http://pulse.yahoo.com/_KCS3Y6VPV2ZQPEWGGZLPSKQI7M Maynard

    This is not a facetious comment. I seriously think we should sell Puerto Rico. They never vote to become a state anyway and we cannot afford the luxury thanks to two unfunded wars and an irresponsible plutocracy – the military-industrial complex and banking community. Once we get the payment, we pay off our debts and tell them “No More!” We will not swallow their false flag lies like The Gulf of Tonkin “incident”, “The Incubator Babies Lie,”” 9/11″ and the “Anthrax Attacks.” Millions of innocent people have suffered from these deceptions and we have squandered our position as a world leader for good that we had earned after WWII.
    About 9/11, look into it. No skyscrapers have ever fallen in any fashion, let alone explosively with bone fragments of victims found on the Deutsche Bank roof in 2008. A pancaked building does not fall at the speed of gravity or caste steel columns so forcefully they were protruding out of buildings hundreds of feet away. Nor do our leaders start taking anti-anthrax medicine as they did three weeks before the first known anthrax threat, unless they have some prior knowledge.
    The first victim, Robert Stevens was unknown to the scapegoat Bruce Ivins. He was known to the administration because he had published an embarassing photo of Jenna Bush sitting, drunk, on another girl’s lap. Bruce Ivins “committed suicide” before he was even accused and he was CREMATED without AUTOPSY. The site of Steven’s infection in Boca Raton was bought by none other than RUDY GIULIANI!
    Put on your thinking caps people.

  • docb

    We have a REVENUE PROBLEM… Our revenue to GDP is down 5 points! The repubs run away spending and deregulation killed jobs and the economy!

    You work on getting the JOBs and investing in the Nation not starving the ones that provide the impetus to grow the economy! Ignorant repub bagger fools!

  • onedonewong

    Quoting klein,cluelessman and center on budget priorities is like using Huey, Dewey and Louie as your expert commentators for DOD, all 3 are obama stooges. An unbiased source the CIA data base ranks the US the 5th worse debt to GDP with only Greece Ireland Japan and Portugal higher than our 105%.
    thank you barak obama

    • http://www.facebook.com/people/Jim-Myers/100001512942781 Jim Myers

      Replying to onedonewong -

      WHAT AN IDIOT!!!!

      Your idol, George the Second, activated the greatest WELFARE FOR THE WEALTHY even they never dreamed was possible, sucked us into two TRILLION DOLLAR WARS, (UNFUNDED!!!), trashed the housing market, lost jobs, handed President Obama the FIRST EVER budget with a TRILLION DOLLAR PLUS deficit, and more than eleven trillion dollars of National Debt.

      Now it’s President Obama’s fault.

      Let me repeat.
      WHAT AN IDIOT!!!!

      • onedonewong

        of course facts don’t matter to your ilk. Its was Dem’s who took over congress in 2007 that included barak and in the space of 6 years added $10 Trillion to the debt.
        That has always been the lefts agenda so why aren’t you standing tall and taking credit??

  • http://pulse.yahoo.com/_B6RROC4IUESHT322QS5VJVPYRM Lynda

    Any deal that does not address the number one problem of JOB, JOBS, and more JOBS will not fix much of anything. When the economy grows the revenue into the treasury increases which in turn brings down the deficit. The GOP has tabeled several JOBS bill already in favor of cutting funds to Planned Parenthood and other uterus related institutions. I will not hold my breath expecting great things from them on the issues of economic importance…or anything else for that matter.

  • RodgerMitchell

    The author does not know the difference between Monetary Sovereignty and monetary non-sovereignty, so thinks the deficit and debt are “problems,” rather than understanding they are necessary for economic growth.

    GDP = Federal Spending + Non-federal Spending – Net Imports.

    Therefore increased deficits grow GDP.

    The article is misleading to the extreme.

    Question: How do clueless commentators repeatedly get featured in media posts?

  • http://profile.yahoo.com/JMT6C3LHLJDD4RX4NB4KY5ICAE gargray

    Most of the borrowed money are owed to Social Security, now the repbs want to cut or demolish the program. The 2 wars were the main factor in our debt. If our economy improves the debt will decrease. Spending money will put people back to work and grow our economey.

  • http://pulse.yahoo.com/_4HKCTSVHCQJCJUU2VYCERLWWDE Richie T

    Just under 1/3 of the deficit is interest. That’s not from financial screw ups now. It’s been going on for years. They’ve pretty much destroyed the middle class, People need to stop listening to the Republican b#. You can’t pay off a credit card by spending less or making smaller payments.
    Look up the REAL economical history, they’ve been cutting taxes on millionaires for years. The cost of living is rising faster then the a faster then the median family interest in the country.The economy crashed, the number of families with assets over $1 million dollars grew. ? Clinton raised the taxes, the economy grew, Bosh lowered then the lowest they been since Truman was president.
    Millionaires DO NOT “CREATE” JOBS, They start a business, nobody has any money to buy what ever is they’re making. It closes, everybody working they’re unemployed, THEY get as tax right off. The middle class they’ve pretty must destroyed is what drive the economy.
    You’re obviously online, do some research, what percentage of the current deficit was increased with which party in control of DC.
    It’s NOT who the Republicans keep claiming.

  • http://pulse.yahoo.com/_4HKCTSVHCQJCJUU2VYCERLWWDE Richie T

    ANOTHER reason the Deficit is going up.

    January through October 2012
    What’s imported vs.exported.

    China
    Their trade surplus
    They MADE $31.99 billion

    The United States.
    Out trade deficit
    We LOST $42,240 million.
    The average loss between 1992 and 2012, the average was -31,796.3 MILLION.
    Raise the import tax, and stop buying anything made outside this country, IF you can.

  • http://mohammeddressup.com/ I Zheet M’Drawz

    Republicants are the problem. The spending is being pissed away by the construction of more military WMDs & the Republicants are bought & paid for when it comes to protecting the very few weapons manufacturers.

  • oldtack

    Republicans per se are not the problem. The problem lies at the feet of everyone in the house and senate and their fore bearers of the past 50 years that enacted laws or approved legislation that increased our budget in excess of our income. If we had elected officials capable of inductive reasoning that would approach the problem from a business point of view we wouldn’t be in this morass in which we are entangled. If expenditures are going to exceed income then we must either increase revenue (taxes) or make reductions in current spending to cover the new expense. Our Congressmen have opted instead to adopted the same ideology as much of our general population – Borrow on the proverbial credit card and worry about it later. Never worry today about things that can be put off until a future date.

    It’s not one group, it is all the groups.

  • http://www.facebook.com/people/Jim-Myers/100001512942781 Jim Myers

    “For everyone to whom much is given, of him shall much be required.” — Luke 12:48

    EXCEPT IN THE UNITED STATES OF AMERICA, where WELFARE FOR THE WEALTHY is the “law of the land.”

  • bchrista

    Thereis one subject tha I haven’t heard brought up in all the talk about the fiscal cliff and that is how will it affect the Senate and the Congress as far as their insurance, their pay, their perks and any other benifits they receive, do they get a reduction or do they lose it all until the Debit crises is resolved. If their well being depended on it I bet they would be scurring back to Washington to find a compromisebut since most of them already got theirs from their benifactors, the 2% they aren’t hurting like the average American who live day to day on their measly pay and have large family to feed. that’s why it don’t make sense why the average American that voted for them will vote for them again knowing full well that they won’t keep their word they screwed them once they’ll do it again.

  • http://profile.yahoo.com/6A2DQIC47I6WINC4TA2R73DDOA Rm dick Peterson

    It seems to me that the REBs and Dems are stageing the show of there life ,. Hopeing for an Oscar. They could care less about the country as long as they get the annull salary increase.

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