Wednesday, December 10, 2008

The Ten Trillion Dollar Man Update

by Calculated Risk on 12/10/2008 09:30:00 PM

Four years ago I predicted the Total Public Debt Outstanding would reach $10 trillion by the time Mr. Bush left office in Jan 2009. I jokingly called him the "$10 trillion man".

I was too optimistic.

The Total Public Debt Outstanding is now over $10.6 trillion. And the budget deficit has grown significantly.

From MarketWatch: U.S. Nov. budget deficit $164.4 bln vs $98.2 bln yr-ago

The U.S. federal government deficit soared again in November to $164.4 billion, the Treasury Department reported Wednesday. This is a record shortfall for the month of November.
Public Debt Outstanding Click on graph for larger image in new window.

This graph shows the public debt outstanding since the beginning of 1993 (the start of the available data from the Treasury site).

There was a clear trajectory change starting in late 2001, and then a huge amount of borrowing this year due to the credit crisis (hopefully some of this money will be returned).

Public Debt Outstanding The second graph shows the same data, but on a year-over-year basis. This clearly shows the two problems: 1) the Bush structural budget deficit, and 2) the heavy borrowing due to the credit crisis.

Even after the credit crisis is over, the U.S. will still have to address the ill-conceived Bush structural budget deficit (a much larger fiscal problem than any Social Security Insurance shortfall, and about the same size as the Medicare shortfall).

As long as the economy is in a recession, the budget deficit will be ignored. But some day this will an issue again ... and the numbers will be huge. See this story from Bloomberg: Treasuries Fall as U.S. Says Borrowing May Reach $2 Trillion
Yields climbed after Treasury Assistant Secretary Karthik Ramanathan, in a speech in New York, cited private analysts’ estimates of borrowing needs that may reach as much as $2 trillion in the financial year that ends in September 2009.
A trillion here, a trillion there ...