And this is an honest question, one that I have been poking around in but maybe don’t have the chops to answer.
Lets take three measures of Public Debt:
One nominal. Public Debt as of the 16th was $17.899 trillion. And rising.
Two as percentage of GDP. And BTW the preferred measure of deficit fetishists prior to the blowup in R-R, but still active enough. Well depending on whether you take Total Public Debt or its major component Debt Held by the Public this ratio is either close to 100 or 70 depending (top of head, please insert real number.
Three when measured as debt service as share of GDP.
Now I would argue that this last measure is the right one for measuring ‘sustainability’ of debt. For one thing it is generally the measure used my most households and corporations because it directly effects cash flow, and for most people Cash is King. Take the following thought experiment:
I have borrowed a billion dollars at zero percent interest on an interest only loan with no term. Is that borrowed money actually to be considered ‘debt’ if it costs nothing to hold it and never has to be paid back? Well lets just say that it is an odd kind of debt. Now obviously no one is going to loan me a billion on those terms but increasingly people are effectively offering something close to that to Uncle Sam. That is the real rate on the 10 year is at or even below the zero bound, in effect people are paying the U.S. to hold their money for them. On the other hand there are still older issues of the 10 year and longer notes and bonds that are carrying higher yields and so there is actual debt service. But how much of that is real? And what is the percentage of federal revenues and/or GDP going to that? Because this is a harder number to come up with than you might think for a couple reasons.
One, most debt service on the Intragovernmental Holdings component of Total Public Debt is not financed in real terms, instead it is just credited to various Trust Funds and shows up as an increase in Debt. But mostly not as an expenditure.
Two, a good deal of debt service on the Debt Held by the Public component of Total Public Debt is being paid/credited to the Federal Reserve. Which in turn returns any ‘profits’ to the Treasury. To me it is an open question as to whether debt service actually paid to the Fed should count as ‘Real Debt Service’ at all. Which is why I posed all this as a question.
Has anyone actually taken the ‘Interest on the Public Debt’ figure and related it to the actual budget line items for ‘Debt Service’ and then adjusted THAT for such debt service actually paid to governmental and quasi-governmental institutions? I have been meaning to make an attempt at doing this myself but have run into problems of time and expertise. But the question still remains: in real terms how close is the U.S. Treasury to being in the same position as my theoretical borrower with a no term billion dollar zero interest rate interest only loan? Not all that close maybe but the answer is far far away from most people’s assumption of what it means to carry $17.9 trillion in debt.