The National Debt is Equal to $48,700 for Every American or $128,300 for Every U.S. Household: It is Now Equivalent to the Size of the Entire U.S. Economy

Rep. Randy Forbes says national debt comes to $48,700 per person

January 24, 2012

PolitiFact  - U.S. Rep. Randy Forbes is sounding the alarm on the U.S. debt.

"The national debt is equal to $48,700 for every American or $128,300 for every U.S. household," Forbes, R-4th, wrote in a January 24 blog post.  "It is now equivalent to the size of our entire economy."

Those are some eye-catching numbers, so wanted to see if Forbes was right.

Forbes is referring to gross national debt -- which includes publicly held debt as well as the amount the government owes trust funds for Social Security and Medicare. The gross debt was about $15.2 trillion on the day the congressman made his statement, according to data from the U.S. Treasury Department.

Joe Hack, Forbes’ spokesman, said the congressman used census data to break down the debt load to per-person and per-household shares.

Hack referred us to the U.S. Census population clock, which continuously updates the estimated number of people living in the the nation. On Feb. 1, the clock showed the U.S. population was 312.9 million.

When you divide the amount the U.S. owes creditors by the population,  the national debt equals $48,686. So Forbes, rounding up, is right in saying the debt comes to $48,700 per person.

Now, let’s turn to households. There were 118.7 million of them in the U.S. in March 2011, according to the most current Census Bureau estimate. Doing the math, that means the debt per household comes to $128,378 -- just above Forbes’ calculation of $128,300.

Still, Forbes is comparing a January 2012 debt figure to a March 2011 household number. We found a sure-fire way to make an updated estimate.

The Census 2012 Abstract of the United States shows that the size of the average household was 2.6 people in 1990, 2000 and 2010. So we divided 312.9 million (the Feb. 1, 2012 U.S. population tally) by 2.6, and arrived at 120.4 million households. That would equal $126,585 of debt per household at the of this month -- pretty close to the number Forbes cited.

But if the debt comes $48,700 per person, does that mean each individual in the U.S. would end up paying that amount to make the nation whole?

Bill Frenzel, a guest scholar at the Brookings Institution, said the answer is no.

The debt is owed by the U.S. government, which ultimately pays up through its ability to tax, said Frenzel, a former Republican congressman.

"We as individual citizens will pay for that debt in quite differing amounts," Frenzel said.

Frenzel, the former ranking member of the House Budget Committee, used multi-billionaire Warren Buffett as an example. The overall amount Buffett would pay in taxes would be much higher than Americans of lesser means, he said.

Breaking down the debt by person and household creates a "gee whiz" number aimed at grabbing people’s attention, Frenzel said.

"The problem is that $15 trillion is such a big number that it doesn’t mean anything to anybody," he added.

Patrick Louis Knudsen, a senior fellow at the conservative Heritage Foundation, echoed that sentiment. But he said it would be better to measure debt not by its gross total, but rather by the amount of "publicly-held" debt.

"That’s how much the government actually owes to outside entities," Knudsen said.

On the day Forbes made his statement, publicly-held debt was about $10.5 trillion. Running the numbers again, that would equal to $33,470 per person or $87,023 per household.

Economists have told PolitiFact in recent years that publicly-held debt as well as the gross national debt tally are each valid measures of the nation’s debt load.

What about Forbes’ last contention -- that the national debt is equivalent to the size of the U.S. economy?

Hack cited data from the U.S. Bureau of Economic Analysis showing that the average U.S. Gross Domestic Product -- the market value of all final goods and services produced -- was $15.1 trillion throughout all of 2011. That’s just below the total debt level of $15.2 trillion.

The BEA data also shows that for the last three months of last year, the GDP came in at $15.3 trillion. Still, when talking about such large numbers, that’s roughly equal to the size of the national debt.

Our ruling:

Forbes said the national debt is equal to $48,700 per person and $128,300 per household. He also said the debt is equivalent to the size as the U.S. economy.

On all three scores, he’s pretty much on target.

We rate the claim True.

Federal Debt $73,000 Debt Per American Under Obama's Budget Plan

April 6, 2012 

TWS - The latest chart from the Republican side of the Senate Budget Committee, showing that under President Obama's budget plan, debt would be $73,000 per American in 2022:



By contrast, debt per person was still an astonishing $33,000 in 2008, at the end of George W. Bush's term, and $20,000 in 2000, at the beginning of Bush's presidency.

Government Acquires the Money It Pumps into the Economy from Taxing or Borrowing (Excerpt)

Why Government Spending Does Not End Recessions

January 8, 2010

Heritage Foundation - Moving forward, the important question is why government spending fails to end recessions. Spending-stimulus advocates claim that Congress can "inject" new money into the economy, increasing demand and therefore production. This raises the obvious question: From where does the government acquire the money it pumps into the economy? Congress does not have a vault of money waiting to be distributed. Every dollar Congress injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It is merely redistributed from one group of people to another.

Congress cannot create new purchasing power out of thin air. If it funds new spending with taxes, it is simply redistributing existing purchasing power (while decreasing incentives to produce income and output). If Congress instead borrows the money from domestic investors, those investors will have that much less to invest or to spend in the private economy. If they borrow the money from foreigners, the balance of payments will adjust by equally raising net imports, leaving total demand and output unchanged. Every dollar Congress spends must first come from somewhere else.

For example, many lawmakers claim that every $1 billion in highway stimulus can create 47,576 new construction jobs. But Congress must first borrow that $1 billion from the private economy, which will then lose at least as many jobs. Highway spending simply transfers jobs and income from one part of the economy to another. As Heritage Foundation economist Ronald Utt has explained,

"The only way that $1 billion of new highway spending can create 47,576 new jobs is if the $1 billion appears out of nowhere as if it were manna from heaven."

This statement has been confirmed by the Department of Transportation and the General Accounting Office (since renamed the Government Accountability Office), yet lawmakers continue to base policy on this economic fallacy.

Removing water from one end of a swimming pool and pouring it in the other end will not raise the overall water level. Similarly, taking dollars from one part of the economy and distributing it to another part of the economy will not expand the economy.

University of Chicago economist John Cochrane adds that:

First, if money is not going to be printed, it has to come from somewhere. If the government borrows a dollar from you, that is a dollar that you do not spend, or that you do not lend to a company to spend on new investment. Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can't help us to build more of both. This form of "crowding out" is just accounting, and doesn't rest on any perceptions or behavioral assumptions.

Second, investment is "spending" every bit as much as is consumption. Keynesian fiscal stimulus advocates want money spent on consumption, not saved. They evaluate past stimulus programs by whether people who got stimulus money spent it on consumption goods rather than save it. But the economy overall does not care if you buy a car, or if you lend money to a company that buys a forklift.

Government spending can affect long-term economic growth, both up and down. Economic growth is based on the growth of labor productivity and labor supply, which can be affected by how governments directly and indirectly influence the use of an economy's resources. However, increasing the economy's productivity rate--which often requires the application of new technology and resources-- can take many years or even decades to materialize. It is not short-term stimulus

In fact, large stimulus bills often reduce long-term productivity by transferring resources from the more productive private sector to the less productive government. The government rarely receives good value for the dollars it spends. However, stimulus bills provide politicians with the political justification to grant tax dollars to favored constituencies. By increasing the budget deficit, large stimulus bills eventually contribute to higher interest rates while dropping even more debt on future generations.

Answering the Critics
 
Despite the foregoing evidence, some analysts maintain that governments can spend their way out of recession. Their common objections are addressed below:

Critics' Objection No. 1: People Are Saving Instead of Spending, and Banks Are Not Lending.

By borrowing and spending these "idle savings," government can circulate more money through the economy. This is the most common defense of government stimulus cited by policymakers. Indeed, among proponents of government spending there is a strong focus on whether people are spending or saving, with the implication that spending circulates through the economy while savings effectively drop out.

But savings do not drop out of the economy. Nearly all people put their savings in: (1) banks, which quickly lend the money to others to spend; (2) investments in stocks and bonds; or (3) personal debt reduction. In each of these situations, the financial system transfers one person's savings to someone else who can spend it. So all money is quickly spent regardless of whether it was initially consumed or saved. The only savings that drop out of the economy are those hoarded in mattresses and safes.

Some contend that recession-weary banks are hoarding savings well beyond the legal minimum reserves. Yet even when banks hesitate to lend their deposits, they invest them in Treasury bills to keep them circulating through the economy and earning interest. In fact, the federal funds market--where banks lend each other any excess cash at the end of the day--exists because banks refuse to sit on unused cash even overnight. Thus, even in recessions, one person's savings quickly finances another person's spending.

Advocates of the "idle savings" theory fail to specify the location of all these newly hoarded piles of dollar bills they believe have been shielded from spending in the financial system. Even more telling, they also fail to explain--even if there were massive amounts of idle savings--how the federal government is supposed to acquire them for injection as new spending. After all, even if individuals, businesses, and banks were hoarding dollar bills in mattresses and safes, why would they suddenly lend them to the government to finance a stimulus bill? The very idea of hoarding dollars suggests these people and businesses would not trust the financial system, and would be quite unlikely to attend the next Treasury bill auction.

Stimulus spending advocates must be able to show that nearly all money lent to Washington would have otherwise sat idle in mattresses and bank safes. Otherwise, Washington is merely a middleman transferring purchasing power from one part of the economy to another--and the justification for government spending as stimulus collapses.

Critics' Objection No. 2: Borrowing from Foreign Nations Can Provide "New" Money for the Economy. 

Accepting that domestic borrowing is no free lunch, some analysts have asserted that foreign borrowing can inject new dollars into the economy. However, these nations must acquire American dollars before they can lend them back to Washington. Foreign countries can acquire American dollars by either:

Attracting American investments in their country. In that instance, the dollars leaving America match the dollars lent back to America. The net flow of saving circulating through the U.S. economy does not increase.

Selling goods and services to Americans and receiving American dollars in return. For the United States, these imports raise the trade deficit and thus reduce domestic demand. The government's subsequent borrowing back and spending of these dollars merely offsets the increased trade deficit.

In either situation, American dollars must first leave the country before they can be lent back into the U.S. economy. The balance of payments between America and other nations must net zero. Consequently, government spending funded from foreign borrowing does not provide stimulus.

Critics' Objection No. 3: Government Spending Has a Multiplier Effect That Allows the Money to Re-circulate Through the Economy Multiple Times. 

This point is correct but irrelevant to the question of stimulus. Yes, $100 in unemployment benefits can be spent at a grocery store, which, in turn, can use that $100 to pay salaries and support other jobs. The total amount of additional economic activity will be well above $100; but because government borrows the $100, that same money is now unavailable to the private sector--which would have spent the same $100 with the same multiplier effect.

Consider a more comprehensive example. A family might normally put its $10,000 savings in a CD at the local bank. The bank would then lend that $10,000 to the local hardware store, which would then recycle that spending around the town, supporting local jobs. Suppose that the family instead buys a $10,000 government bond that funds the stimulus bill. Washington spends that $10,000 in a different town, supporting jobs there instead. The stimulus has not created new spending, jobs, or a multiplier effect. It has merely moved them to a new town.

The mistaken view of fiscal stimulus persists because people can easily observe the factories and people put to work with government funds. By contrast, people cannot easily observe the jobs that would have been created or factories used elsewhere in the economy with those same dollars had they not been lent to Washington.

In his 1848 essay, "What Is Seen and What Is Not Seen," French economist Frederic Bastiat termed this the "broken-window fallacy," a reference to a local myth that breaking windows would stimulate the economy by creating window-repair jobs. In reality, the window-repair spending comes out of funds that otherwise would have been spent (and created jobs) elsewhere in town. Today, the broken-windows fallacy explains why thousands of new stimulus jobs are not improving the total employment picture.

Critics' Objection No. 4: During a Recession, Government Spending Can Put Unused Resources to Work.

This restates the overall spending fallacy. Yes, government spending can put under-utilized factories and individuals to work--but only by idling other resources in whatever part of the economy supplied the funds. If adding $1 billion would create 40,000 jobs in one depressed part of the economy, then losing $1 billion will cost roughly the same number of jobs in whatever part of the economy supplied Washington with the funds. It is a zero-sum transfer regardless of whether the unemployment rate is 5 percent or 50 percent.

Critics' Objection No. 5: Government Reports Show That the Stimulus Has Already Created or Saved 640,000 New Jobs.

According to a White House survey, businesses have used much of the $200 billion in stimulus dollars distributed thus far to hire or retain 640,000 workers. These figures have been ridiculed for their absurdity, such as reporting $6.4 billion spent in congressional districts that do not exist, and the survey's assertion that a single lawnmower purchase in Arkansas saved or created 50 jobs.

Setting aside these inaccuracies, this jobs figure is not surprising. Businesses that receive large government grants would be expected to expand and hire more workers. However, this ignores half of the equation. If injecting $200 billion into the economy supports 640,000 jobs, how many jobs were first lost by borrowing that $200 billion from the economy?

The White House says zero. The White House job numbers assume that all $200 billion is new and supports jobs that would not otherwise exist. But that could be true only if the private sector would have otherwise hoarded the entire $200 billion in safes and mattresses, where it could not be consumed, invested, or deposited in banks for investment spending--but instead turned the entire $200 billion over to the government.

When dollars are transferred from one part of the economy to another, jobs will transfer accordingly. The White House's single-entry bookkeeping ignores the part of the economy that financed all these jobs. Not surprisingly, the nation's overall unemployment rate has continued to rise.

Critics' Objection No. 6: Government Should Subsidize Consumption, Which Represents 60 Percent of the Economy. 

This confuses the creation of income with its application. All income is applied somewhere in the economy: most on private consumption, some on private investment (converted from savings via the financial system), and some by government (taxed or borrowed out of consumption and investment). In the short run, the distribution of spending does not affect the total amount spent. The only way to increase consumption spending immediately is to take it from investment or government spending.

Declining consumption means that either: (A) more income is diverted into investment or government spending (which is zero-sum in the short run); or (B) less income is created overall, which typically leads to less spending across all categories. For the latter situation, the solution is to create incentives for productivity that create more wealth and income for people to spend across all categories.

It is Inherently Impossible for Government to Create Jobs

Big government can not create jobs but it can remove the barriers for the private sector to create jobs of value. Lower the corporate tax rate; America has one of the highest corporate tax rates in the world. Doing so would enable companies to expand, hire and be more competitive in the world market. In fact, don’t stop there. Lower income tax rates to free up individuals to invest. But Obama’s Marxist agenda won’t allow for that since the goal is to grow federal government and dependency of its citizens upon it. It is ridicules to think we can spend out way out of debt. Insulting to be fed such nonsense. Instead, instill in persons to become self-reliant; not to become slaves to an entitlement system. Beware of the man; he hates our system and is bent on destroying it. [Fedup_11]

Cut taxes and get the hell out of the way of the productive Americans. Right now we are telling the kids the future is in the government. That will be our downfall as a country. The future has always been in the American people who produce, strive, and struggle for a better life. Not those who want to do the minimum and have the government fill in the rest. [Tom]

It is crazy to think that a deficit is good. Is it a good thing that our country is dependent on China buying our debt? China knows that we are dependent on them buying our debt, so they have manipulated their currency, driving the cost of their goods down, which makes it unaffordable for American businesses to compete domestically and globally with the goods that come out of China. Not only is China driving the cost of their goods down, the cost of our goods are rising because of the inflation that our central bank has created by printing money to fund our massive debt and all the spending to keep all of our government programs afloat. The federal deficit will increase under a job creation initiative that will cost one trillion dollars. Why not let the private sector create jobs for one trillion dollars cheaper (for free). To create tax revenue through job creation, jobs should be created through the private sector. That is done with less government interference and their crippling regulations and taxes. Jobs will generate revenue, cutting spending will reduce our 16 trillion dollar deficit, and a reduced deficit will secure the future of our country and children.

If the government spends money to create jobs, the government decides where the new jobs will be. This is an opportunity for government officials to play favorites and return political favors. I am not (few of us are) in line for political favors. When the government reduces taxes on businesses, the marketplace decides where the jobs will be. This is an opportunity for businesses to adjust to the economy of the marketplace. Every taxpayer (including me) is part of the marketplace. I put my faith in the marketplace to restore the economy. Those roads, sidewalks, etc. are paid for with OUR money, The government is our hired help in that situation. And transportation, at least interstate transportation, is a Constitutional provision. There are legitimate Government expenditures and there are those that are tolerated, and those that are enacted or attempted that have no business being run by the Government. Health Care Reform falls in the last. The States have the governmental powers not delegated to the Federal system according to the Constitution. [Libraryjim]

It is the production of goods and non-government services which people need or desire that builds an economy. Government does not produce goods. Government functions as a regulator over every aspect of our lives and redistributer of wealth from one group to another.

Cut taxes and get the hell out of the way of the productive Americans. Right now we are telling the kids the future is in the government. That will be our downfall as a country. The future has always been in the American people who produce, strive, and struggle for a better life. Not those who want to do the minimum and have the government fill in the rest. [Jim K]

The Great Society is coming to fruition. When the government is determined to be "all things to all people" and the people accept that this is OK and acceptable behavior, the end result looks more like socialist Europe (no constitution, no individual rights). Will the government argue the next step to save our country is to abolish the Constitution to save the entitlement state? Let's hope not or we will be ruled by a dictator/King.

Obama vows job creation without adding to deficit

February 12, 2013

AP - President Barack Obama is urging a divided Congress to boost job creation and strengthen the middle class through a package of government-backed proposals.

In his State of the Union address, Obama is calling for increasing the federal minimum wage, spending more to fix the nation's roads and bridges, and expanding early childhood education.

The president is also pledging to cut the number of U.S. troops in Afghanistan in half within a year.
Obama says his proposals would not increase the deficit "by a single dime." But with unemployment persistently high and consumer confidence falling, he is pressing a progressive case for Washington's role in reigniting the economy.

Pledging to revive a "rising, thriving middle class," President Barack Obama promised Tuesday night to create solid new jobs without raising the federal deficit. He's calling for a "smarter government" but not a bigger one.

In excerpts released ahead of his State of the Union address, Obama called job creation his "North Star" and implored a divided Congress to center its work on attracting more jobs to the U.S., equipping Americans to compete for those positions and making sure hard work leads to a decent living.

"It is our unfinished task to restore the basic bargain that built this country — the idea that if you work hard and meet your responsibilities, you can get ahead, no matter where you come from, what you look like, or who you love," Obama said.

The president said his proposals to increase spending on manufacturing, infrastructure and clean-energy technologies would be fully paid for, though he did not specify in the excerpts how he would offset the cost of his proposals.

"Nothing I'm proposing tonight should increase our deficit by a single dime," Obama said. "It's not a bigger government we need, but a smarter government that sets priorities and invests in broad-based growth."

In focusing his annual address on jobs and the deficit, the president is underscoring the degree to which the economy still threatens to disrupt his broader second-term agenda. Despite marked improvements since he took office four years ago, the unemployment rate is still hovering around 8 percent and consumer confidence has slipped.

White House officials said Obama was offering an outline for job creation, though much of his blueprint apparently includes elements Americans have heard before, including spending more money to boost manufacturing and improve infrastructure. Getting that new spending through Congress appears unlikely, given that it would require support from Republicans who blocked similar measures during Obama's first term.

Florida Sen. Marco Rubio, a rising Republican star, was to deliver his party's response. In excerpts of his remarks, Rubio also appealed to the middle class, but sought to draw a distinction with the president by citing "our free enterprise economy" as the source of prosperity, not the government.

The president was expected to be uncompromising in his calls for lawmakers to offset across-the-board spending cuts that are scheduled to begin March 1 with a mix of tax increases as well as targeted budget cuts.

The president hasn't detailed where he wants lawmakers to take action, though he and his aides often mention as examples of unnecessary tax breaks a benefit for owners of private jets and tax subsidies for oil and gas companies. Such measures are modest, however. Ending the corporate plane and oil and gas breaks would generate about $43 billion in revenue over 10 years.

That appeal for new revenue is getting stiff-armed by Republicans, who reluctantly agreed at the start of the year to increase tax rates on the wealthiest Americans in exchange for extending Bush-era tax rates for the rest of taxpayers.

"He's gotten all the revenue he's going to get," Senate Minority Leader Mitch McConnell, R-Ky., said. "Been there, done that."

Still, buoyed by his re-election, the president and his top aides are confident that Americans back their vision for the economy. Immediately following his speech, Obama was to hold a conference call with supporters to urge them to pressure lawmakers to back his agenda. He'll also seek to rally public support with trips this week to North Carolina, Georgia and Illinois.

Though Obama was devoting less time to foreign policy in this year's speech, he was to announce that 34,000 U.S. troops — about half the size of the American force — would leave Afghanistan within a year. The drawdown announcement has been highly anticipated and puts the nation on pace to formally finish the protracted war by the end of 2014.

The Myth of Government Job Creation (Excerpt)

February 19, 1984

Thomas J. DiLorenzo - It is inherently impossible for government to create jobs; only economic growth in the private sector of the economy can create employment opportunities. Government taxing and spending programs only redistribute existing jobs: taxation reduces the economic vitality of the private economy, destroying jobs there, even though jobs may be "created" elsewhere by government spending on jobs programs.

Moreover, the question of whether government should "provide employment for all employable United States citizens living in poverty" revolves around another question, whether it is legitimate for government to benefit one group of citizens at the expense of another. If one believes that government owes its citizens justice and equality of treatment, then it is clear that government has no role in trying to "create jobs" through government jobs programs.

But jobs programs are politically appealing. When people are put to work through such programs the jobs are highly visible: workers know their temporary jobs have been doled out by certain politicians for whom they will therefore be more likely to vote.

By contrast, the private sector jobs destroyed through taxation (to finance the jobs programs) are much less visible: the unemployed are not likely to realize that it is the higher level of taxation that has placed them on the unemployment rolls.

Thus, referring to government jobs programs as a means of "creating jobs" is misleading at best, and dishonest and deceitful at worst. This is not to minimize the problem of poverty, but to suggest that government jobs programs are not the solution and in fact very often make things even worse.

The present paper will discuss the economic logic of why governments cannot create jobs and will offer evidence to support this analysis.

Can Government Create Jobs ?
 
Despite the rhetoric of "government job creation," economic logic denies the possibility that jobs can, on net, be created by government. The economist's notion of "opportunity cost" is the key to understanding this phenomenon.

Every action has an opportunity cost, the subjective value of the most highly valued alternative course of action foregone. For example, the opportunity cost of reading this paper is the subjective value one places on whatever alternative activity one might otherwise engage in.

With respect to government jobs programs, what is important is that they are usually financed by taxation or borrowing by the federal government. In either case, resources are withdrawn from alternative, private sector uses. Higher taxes mean consumers have less to spend in the private sector, and reduced consumer demand leads to less production and employment. 

If the government borrows money to finance a jobs program, alternative uses of credit by private individuals and business firms are precluded. This, too, causes economic stagnation and higher unemployment in the private sector. The "cost" of government jobs programs, regardless of how they are financed, is therefore best viewed as the reduction of private sector production and the employment that production creates.

Those who believe that government jobs programs can create jobs fail to realize or acknowledge that they also destroy jobs elsewhere in the economy. Government jobs programs alter the composition of jobs in the economy--more government employment, less private employment--but do not increase the number of jobs. Some may prefer a larger government sector relative to the private sector--and this is what government jobs programs give us--but it is misleading to pursue this objective under the guise of creating jobs.

Jobs programs are politically appealing, despite their inherent inability to create jobs, because the jobs that are fabricated are highly visible: the recipients of such jobs know where they came from and who to thank for them at election time. People employed building bridges or highways know that they are employed because of a particular jobs bill. Consequently, they are more likely to support the politicians responsible for the bill at election time. By contrast, those thrown out of work because private economic activity has been crowded out by taxing or borrowing to finance jobs programs are not aware of precisely why they became unemployed. The costs of jobs programs, in other words, are almost invisible to the average citizen. If one believes that the existence of unemployment is unjust, then the creation of unemployment in the private sector, under the guise of creating government jobs, would seem especially unjust and deceitful.