The total debt, or gross national debt, is divided into two categories: the debt held by the public (personal debt) and debt the government owes itself. Debt held by the public, (also be called personal debt, household debt, or consumer debt) can come in the form of credit card debt, home mortgages, student loans, auto loans and other loans held by individuals. When a household is deeply in debt all it can do is cease its discretionary spending to begin to reduce its debt burden as quickly as possible. High levels of household debt are actually what creates and fuels long, deep recessions.
When the government borrows from itself, it’s called “intragovernmental holdings.” The United States Treasury Department defines intragovernmental holdings as “Government Account Series securities held by Government trust funds, revolving funds, special funds, and Federal Financing Bank securities”. In plain English, the federal government borrowed money from over one hundred government trust funds and retirement accounts such as the Department of Defense Military Retirement Fund, Federal Hospital Insurance Trust Fund, and most famously the Federal Old-Age and Survivors Insurance Trust Fund (Social Security). You see, while many individuals thought that their Social Security contributions were tucked away in a safe somewhere, the reality is that the government looted $2.5 trillion from the account to pay for current spending. At this point in time Social Security is a redistribution system where contributions are taken from current workers and immediately given to eligible retirees and beneficiaries. (Total intragovernmental holdings: $4.8 trillion, which is roughly 30% of the debt.)
As citizens of the United States, arguably we are each responsible for the national debt. Every American approximately owes $189,488 and every household owes close to $751,864. No, we won’t receive a bill in the mail for this amount. The government has several ways to solve their debt problems. They will cut government programs enough to close the budget gap, raise taxes by the amount of the budget gap and print money to pay off the debt, thereby generating inflation. While it works in the government’s favor in the short term to print money, in the long term it makes most Americans poorer as their hard-earned dollars purchase less. Additionally, inflating the money supply encourages reckless speculation in the stock market, destroys savings, causes prices to rise, and generally does great economic harm. While you may avoid getting directly billed or taxed for the costs of the debt, but you will pay for the debt whenever you buy groceries, gas, a house, or anything else.
The revenues to the federal government were $2.3 and $2.45 trillion respectively. However, spending was still well above this amount at $3.6 trillion and $3.54 trillion respectively. Therefore, our intergovernmental debt continues to rise until this gap is depleted. You may hear this gap referred to as the deficit, not to be confused with the total debt.
When you woke up this morning, the gross national debt was approximately $16,200,000,000,000. That is a lot of zeros. For all you numbers people, I have included a link to a great resource to see the changes in our nations debt, GDP, Interest, as well as changes in total national assets. (http://www.usdebtclock.org/ ) (Kelsey Farnham)