Federal Debt of the United States - Q and A (Part I)

By: Asha_Bangalore

We have encountered questions about debt of the United States in the past few weeks and thought a Q and A about debt would be handy. This is the first of two installments of noteworthy highlights about federal debt. 

1.  What is total amount of U.S. federal debt outstanding?

Total debt of the federal government as of January 6 is $14.011 trillion (Debt to the Penny).  Roughly 67% of federal debt is held by the public inclusive of the Federal Reserve's holdings.  Federally issued debt is also held in government accounts such as Social Security, Medicare, Civil Service Retirement Transportation accounts.  Total debt consists of both publicly held federal debt and those held by government accounts.  Debt of the federal government increases when it sells debt to the public to acquire financial resources to meet its obligations in situations when federal revenues are short of federal outlays. 

2. What is the projected level of federal debt in the next 10 years?

The Congressional Budget Office (CBO) estimates that by 2020, total federal debt would be $21.4 trillion under current law (see Chart 2). 

Frequently, the financial press refers to debt in relation to GDP of the nation.  The numbers in Chart 2 as a percent of nominal GDP are presented in Chart 3.  Federal debt as a percentage of GDP is projected to scale new heights by 2020 from 83.4% in 2009 and 91.4% in 2010. 

3.  What is the statutory debt limit of the United States?

The current statutory debt limit is $14.294 trillion, with expectations of the Treasury touching this limit in the near term.  As noted earlier, the current level of debt ($14.011) is very close to this limit.  Reaching this limit prevents the Treasury from raising funds through issuing new debt and the Treasury may find itself unable to meet its day-to-day obligations.  The statutory debt limit has been raised on ten occasions since 2001.  The second installment will be published tomorrow. 

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com
Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2011 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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