1) What is the national debt? The national debt is the measure of the United States’ federal government’s accumulated debt.
2) What’s the difference between the national debt and the deficit? The deficit is the measure of how much the United States’ federal government borrows in one year. The national debt is the amount of all of the deficits (subtracting any surplus years) added together.
3) What's the difference between the publicly-held national debt and the total national debt?
There are two ways of looking at the national debt: 1) Publicly-held debt and 2) total debt. The publicly-held debt is debt that the federal government owes to individuals, corporations, and foreign entities (including foreign countries). The total national debt, or gross national debt, is the publicly-held debt plus the debt the federal government owes itself (i.e. intragovernmental holdings). As of October 31, 2012, the government owed the public $11.4 trillion and owed itself nearly $4.85 trillion for a total of $16.3 trillion. (Source: TreasuryDirect.gov)
4)Why does the debt the government borrows from itself matter? Doesn’t it come out of the same pool of tax revenues?
When the government borrows from itself, it is labeled “intragovernmental holdings.” The United States Treasury Department defines intragovernmental holdings as “Government Account Series securities held by Government trust funds, revolving funds, and special funds; and Federal Financing Bank securities. A small amount of marketable securities are held by government accounts.” (TreasuryDirect.gov) The total amount that the government borrowed from itself is $4.8 trillion which is roughly 30% of the debt.
In plain English, the federal government borrowed money from various government trust funds and retirement accounts such as the Department of Defense Military Retirement Fund ($376 billion), Civil Service Retirement and Disability Fund Office of Personnel Management ($819 billion), Federal Hospital Insurance Trust Fund ($228 billion), Federal Old-Age and Survivors Insurance Trust Fund ($2.6 trillion), and over one hundred other accounts. (Numbers are from September 2012: TreasuryDirect.gov)
The last one, the Federal Old-Age and Survivors Insurance Trust Fund, is what is commonly known as Social Security. (Social Security Administration) You see, while many individuals thought that their Social Security contributions were tucked away in a lock box, 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 wherein contributions are taken from current workers and immediately given to eligible retirees and beneficiaries.
So why does it matter that the government borrowed from itself? Simply put, the government ran a deficit of $1.1 trillion in 2012 (Financial Management Service) and is expected to be between $641 billion and $1 trillion in 2013 (Congressional Budget Office). Worse yet, programs like Social Security are currently running deficits and are projected to do so off and on for many, many years. In 2011, Social Security ran an estimated $45 billion deficit. (Social Security Administration) The deficit for 2012 is expected to increase to an estimated $53 billion. In the graph below from the Mercatus Center of George Mason University, you can see the Congressional Budget Office's projections from 2010 didn't foresee a deficit in Social Security even for 2011:
After looking at the graph above and considering that the United States can’t pay for its current spending obligations, do you think that it will also be able to pay back the money that it has borrowed from Social Security and other retirement accounts? Furthermore, shouldn't such debts also be included when considering the national debt?
5) How big is the national debt? As of October 25, 2012, the official debt of the United States government is nearly $16.2 trillion. (Source: TreasuryDirect.gov)
Below is the up to the second amount of the official national debt (Source: UWSA):
It's worth noting that the official debt published by the United States’ government does not include unfunded liabilities like Medicare, Medicaid, and Social Security. Unfunded liabilities are promises that the government has made in the past about future spending. On November 8, 2010, the Chief of the Dallas Federal Reserve estimated that the total unfunded liabilities of the United States federal government could be more than $100 trillion:
According to our calculations at the Dallas Fed, that unfunded debt of Social Security and Medicare combined has now reached $104 trillion—trillion with a 'T'—in discounted present value. – Richard Fisher, February 10, 2010
$104 trillion is over seven times the United States’ GDP, which is an annual measurement of all of the wealth of the United States.
In 2012, another economist, Laurence Kotlikoff of Boston University, calculated the "fiscal gap" which he describes as a measurement of "the present value difference between all projected future federal expenditures (including servicing official debt) and all projected future taxes." (Source: Yahoo News) This measurement "captures all government liabilities, whether they are official obligations to service Treasury bonds or unofficial commitments, such as paying for food stamps or buying drones." (Source: Bloomberg) Using the CBO's alternative fiscal scenario, Mr. Kotlikoff calculated the U.S. fiscal gap to be $222 trillion.
Obviously, this number did not grow by $118 trillion in two years, but this demonstrates that the reported debt is dwarfed by the liabilities the government has taken on and that it is not entirely certain what the government's future financial responsibilities are.
6) How fast is the national debt going up?
Between fiscal years 2003 and 2012, the national debt more than doubled from $6.8 trillion on October 1, 2003 to $16.1 trillion on September 30, 2012 (Source: TreasuryDirect.gov). The rate of growth has been worse. For instance, on January 1, 1980, the national debt was roughly $863 billion. By the end of the decade, December 31, 1989, the national debt was over $2.9 trillion. That means that during the 1980s, the national debt more than tripled. You can see the growth of the national debt in the chart below (Source: St. Louis Federal Reserve):
Using the Congressional Budget Office's numbers, the Mercatus Center of George Mason University calculates that the national debt will nearly double again between 2011 and 2021 (Source: Mercatus Center):
Besides simply looking at the nominal amount of the national debt on a per year basis, it's important to consider the ratio of the total national debt to the gross domestic product (GDP) of the United States. For 1970, the debt was roughly 35% of the United States' GDP. In 1980, it was down to 32% of GDP. By 1990, the debt was over 55% of the GDP and in 2000 the debt was 57% of the GDP. What should give anyone pause is the fact that by the end of fiscal year 2012, the national debt has topped 100% of the United States GDP! You can see the acceleration of the debt in the graph below (Source: USGovernmentSpending.com):
7) In 2012, are we still adding to the national debt?
Unfortunately, yes. According to the Congressional Budget Office on August 22, 2012, “For fiscal year 2012 (which ends on September 30), the federal budget deficit will total $1.1 trillion, CBO estimates, marking the fourth year in a row with a deficit of more than $1 trillion. That projection is down slightly from the $1.2 trillion deficit that CBO projected in March. At 7.3 percent of gross domestic product (GDP), this year’s deficit will be three-quarters as large as the deficit in 2009 when measured relative to the size of the economy. Federal debt held by the public will reach 73 percent of GDP by the end of this fiscal year—the highest level since 1950 and about twice the share that it measured at the end of 2007, before the financial crisis and recent recession.” (Source: CBO)
On February 13 2012, President Obama released his proposed budget for fiscal year 2013. Under this budget, the CBO anticipates the deficit for 2013 to be $977 billion. This budget will also increase the debt by nearly $6.4 trillion in the following 10 years. (Source: CBO) The analysis of Michael Tanner of the Cato Institute can be viewed below. (Source: Cato Institute)
8) What does a $16,200,000,000,000 national debt mean to me?
As citizens of the United States, arguably we are each responsible for the national debt. In monetary terms, that means as of October 3, 2012 (Source: JustFacts.com):
Every American owes $51,521.
Every household in America owes $136,158.
9) Would I really get a bill for $51,521? Sort of. Governments have a tendency to solve their debt problems in a number of different ways.
Cut government programs enough to close the budget gap.
Raise taxes by the amount of the budget gap.
Print money to pay off the debt, thereby generating inflation.
11) We’ve had large national debts in the past, how is this one any different? It is true that the United States has had large deficits in the past, but those were a result of borrowing during times of war (Revolutionary War, Civil War, World War I, and, especially, World War II). Additionally, after each period, the United States government substantially reduced the national debt.
The debt that America is rapidly running up now is not the result of war, but a result of runaway spending by the United States government. You can see this fact clearly in the graph below which was published by the Congressional Budget Office in June of 2012 (Source: CBO):
"The extended baseline scenario generally adheres closely to current law, following CBO’s 10-year baseline budget projections through 2022 and then extending the baseline concept for the rest of the long-term projection period. The extended alternative fiscal scenario incorporates the assumptions that certain policies that have been in place for a number of years will be continued and that some provisions of law that might be difficult to sustain for a long period will be modified."
12) How did America reduce its debts in the past? The deficits that were run up in the past followed wars, namely the Revolutionary War, Civil War, World War I, and World War II. Some deficit spending did take place during the Great Depression. The common theme after each war though was the reduction of government spending, namely military spending.
Government spending was also different prior to the Great Depression. The United States Government did not have entitlement spending programs such as Medicare and Social Security, nor was it spending money on various departments such as the Department of Education, Environmental Protection Agency, Department of Energy, or the Department of Housing and Urban Development.
Because the United States government didn’t spend money on a lot of programs it was able to dramatically increase spending (and borrowing) during times of war. Conversely, once the war was over, the government greatly reduced its spending on the military.
You can see how this played out in this graph produced by the Mercatus Center of George Mason University using Federal Reserve Bank data (Source: The U.S. Postwar Miracle):
13) So, can’t we just reduce military spending to stop deficit spending and start reducing the national debt? As of October 2012, total spending for fiscal year 2012 (ending on September 30, 2012) was estimated to be $3.54 trillion, while the deficit was approximately $1.09 trillion. (Source: CBO) In March of 2012, the CBO released an analysis of President Obama's proposed 2013 budget. They concluded that the proposed budget would increase government spending to $3.7 trillion, but would decrease the deficit to an estimated $977 billion as a result of a $350 billion increase in revenue. The next section will discuss tax increases as a means of balancing the budget. (Source: CBO)
It is estimated that military spending will have consumed $651 billion in 2012 (Source: CBO) and $640 billion under President Obama's proposed 2013 budget. (Source: CBO) As you can see, in both cases this amount is well below the deficit.
To look at it another way, you can see from the chart below (produced by The Cato Institute) that we could completely eliminate the military (19% of the budget) and we would still be running a deficit. Alternatively, we could eliminate Social Security (20% of the budget), Medicare (12% of the budget), and Medicaid (7% of the budget) and still be running a deficit. There is no easy solution to our problems.
14) Can't we just raise taxes to balance the budget?
There are two problems with raising taxes:
Raising taxes will take more money from the very businesses we depend on for jobs.
It’s not realistic to balance the budget by just raising taxes.
What Raising Taxes on All Working Americans Means: As of October 5, 2012, the CBO estimates the deficit for fiscal year 2012 to be $1.09 trillion. (Source: Congressional Budget Office) As of October 2012, there are 143 million Americans in the employed civilian labor force. (Source: Bureau of Labor Statistics) If the taxes were spread equally across all of them, then each employed civilian (excluding military) would owe an extra $7,622.38 in taxes just to balance the budget in fiscal year 2012.
$1,090,000,000,000 = $7,622.38 in new taxes per working American 143,000,000
Can you afford an extra $7,622.38 in taxes this year?
What Raising Taxes on Rich Americans Means: Let’s say we just wanted to raise taxes on the top 10% of working civilians, which would be 14,300,000 Americans. Simple division tells us that each of those working Americans would owe roughly $76,223.78 in addition to the taxes they are already paying.
$1,090,000,000,000 = $76,223.78 in new taxes for the top 10% of wage earners 14,300,000
Since individuals making slightly over $100,000/year are included in that 10% working civilians, some individuals will literally have to pay out more in taxes than they actually make.
15) Can’t we just print more money to solve the debt problem? In economic terms, printing money would be called “monetizing the debt.” When a country prints more money to get out of a debt problem, it hopes to pay back the debt with more money than it had before. Doing so is inflationary and debases the currency.
When money is created out of thin air, as happens with “monetizing the debt,” it loses value. There’s more money out there while there are still the same amount of resources available. That means everything goes up in cost.
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.
If the government prints its way out of the debt problem, you may avoid getting directly taxed for the costs of the debt, but you will pay for the debt whenever you buy groceries, gas, a house, or anything else. Life, and especially the necessities, become a bigger and bigger part of your monthly budget.
16) Are we running deficits because the U.S. government has a revenue problem? Simply put, no. The government has a spending problem, not a revenue problem.
During 2011 and 2012, 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 leaving us with greater than $1 trillion deficits each of those years. (Source: CBO)
Runaway government spending in 2011 and 2012 added nearly $2.4 trillion to the national debt. (Source: CBO) That’s roughly $16,783.22 for every working American. In October of 2012, there were 143 million working Americans according to the Bureau of Labor Statistics.
The Federal Reserve provides the graph below (produced on October 30, 2012) to show the disparity between spending and revenue. The blue line, as you can see, shows that government revenue has been steadily climbing. The red line is government spending which has far outpaced revenues, particularly over the last three decades. (Source: Federal Reserve)
17) Does the US owe money to foreign countries? If so, which ones? As of August 2012, the United States government owed $5.43 trillion to foreign countries. Of that amount, $1.15 trillion was owed to China. Japan is the second largest holder of US debt, holding nearly $1.12 trillion.
With $5.43 trillion owed to foreign countries, this means that every American's share of that debt is over $17,292. (In August 2012, there were 314 million Americans according to the U.S. Census.)
Numbers are in Billions (e.g. 1150 = $1.15 trillion)
18) Is the interest on the national debt a big deal?
In the long run, yes. Currently, the overall interest rate on the national debt is quite low with interest rates ranging from roughly 0% on a 3 month bond to 2.75% on a 30 year bond. You can see the rates as of early November 2012 in the chart below (Source: Bloomberg):
Because portions of the national debt were purchased at different times for different terms (e.g. 3 month, 10 year, etc.), there is no one interest rate for it. Because some of the terms of US debt purchases are short-term (e.g. 3 months), the debt actually rolls over and must be "resold." It is when the debt is "resold" that the interest rate can change. Therefore, while the overall interest rates on the national debt are low right now, they could become much higher in the future.
As Bloombergreported in early 2011: "Still, about $4.5 trillion, or 63 percent of the $7.2 trillion in public Treasury coupon debt, needs to be refinanced by 2016. That gives the government a narrowing window as growing interest expense will curtail its ability to spend."
To help understand the cost of the interest on the national debt, the Congressional Budget Office (CBO) estimates the cost of the interest as a percentage of GDP (the annual measurement of economy). The CBO estimates that the net interest payments as of December 2010 are roughly 1.5% of GDP. While low, as a percent of GDP, interest payments as a percent of GDP have been just over 3% of GDP in the past. You can see the historical data and future projections in the chart below (Source: CBO):
Now, the chart above can be a bit misleading because the public national debt as a percentage of GDP is at its highest since roughly World War II. The interest rates on the debt, though, are at historic lows. This means that the interest paid on the debt today is quite small when considered as a percent of GDP.
If interest rates go up from today's historic lows, then the United States would have significantly higher interest payments on the national debt as a portion of GDP. You can see the historical interest rates in the chart below (Source: CBO):
The amount paid in 2012 for interest on the national debt was $359,796,008,919.49. (Source: Department of the Treasury) As an aside, this number is qualified with a note explaining that the accounting methods at the Department of Defense were adjusted resulting in a one-time decrease of $75 billion, but we will consider the reported number. $460 billion in interest payments amounts to roughly $1,143 for every man, woman, and child in America. You can see the historical interest payments on the national debt in the chart below:
If interest rates were to rise to those seen in the 1970s or the 1980s, interest payments on the debt would rise significantly as well.
6% Interest Rate
In the early 1970s, the net interest rate was roughly 6% on the national debt. A 6% annual interest rate on today's national debt ($16.3 trillion) would be $978 billion, which is more than 2.5 times the interest payment for 2012. This would consume around 40% of the estimated $2.45 trillion in revenues to the government in 2012. Based on a population of 314 million Americans, if divided equally each American's share in taxes would be $3,114.65.
8% Interest Rate
In the early 1980s, the net interest rate was roughly 8% on the national debt. An 8% annual interest rate on today's national debt ($16.3 trillion) would be $1.3 trillion, which is more than 3.5 times the interest payment for 2012. This would consume around 53% of the estimated $2.45 trillion in revenues to the government in 2012. Based on a population of 314 million Americans, if divided equally each American's share in taxes would be $4,140.13.
10% Interest Rate
In the mid-1980s, the net interest rate was roughly 10% (for some bonds, it went as high as roughly 14% in the 1980s). A 10% annual interest rate on today's national debt ($16.3 trillion) would be $1.6 trillion, which is nearly 4.5 times the interest payment for 2012. This would consume around 65% of the estimated $2.45 trillion in revenues to the government in 2012. Based on a population of 314 million Americans, if divided equally each American's share in taxes would be $5,095.54.
Impact on Government
The federal government would be severely impacted by rising interest rates on the national debt. If the net interest rate on the national debt rises, even to just 6%, the interest payments alone would consume increasingly more of the national economy and would reduce the capacity of the federal government to fulfill its other obligations. You can see this danger in the chart below (Source: Mercatus Center):
To go to the topic page on the United States' national debt, click here.
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"The great uncertainty about how much debt is too much has tended to make fiscal discipline seem less urgent, rather than more. There is no obvious threshold beyond which investors will demand higher real yields for holding U.S. debt. Vague warnings from ratings agencies about the loss of America's 'AAA' status haven't added much clarity — until recently."
"This week, Mercatus Center Senior Research Fellow Veronique de Rugy re-examines the components of the federal debt using the most recent data from the Treasury Department’s Bulletin June 2011 and Monthly Statement of the Public Debt March 2011."
"The United States faces economic crisis after members of the bipartisan congressional 'super committee' given the task of finding spending cuts of $1.2 trillion admitted on Sunday night that they are heading for failure."
"When complicated issues like the debt suddenly become national news controversies, sometimes the tendency is to emphasize the drama of the story rather than explain the basics of the issue. What is the debt? Why is it growing? Should we be terribly concerned about it? And how would we fix it if we had to? Martin Baily answers those questions in the interview...
"The White House released a detailed breakdown of the sequestration cuts to defense and non-defense budgets Friday, giving the clearest picture to date of where the ax will fall if lawmakers fail to prevent the automatic spending cuts with new legislation.
Cuts of approximately $110 billion are set to take effect in Jan. 3, according to an agreement reached by the administration and...
"'There are two basic truths about the enormous deficits that the federal government will run in the coming years.
The first is that President Obama's agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying. The second is that Mr. Obama does...
"Most of the 77 million post-World War II baby boomers (representing one-fourth of the U.S. population) are still working, but some are beginning to retire. As boomers retire, federal spending for Social Security and especially Medicare, given rapidly rising health care costs, will grow dramatically."
"The federal budget is a key instrument in federal policy making. Through the budget process the Congress and the President determine national priorities and allocate resources among the many competing needs."
The graph above shows in blue the personal debt of Americans indexed to the growth of America's population in red. Proportionally, debt has been rising rapidly in recent decades compared to the population. Only since the beginning of the 2007-2009 recession has personal debt decreased.
The graph above, using data gathered by the Federal Reserve Bank of St. Louis, compares the United States' government's debt to household debt (private debt, personally held by the public) with both indexed for population.
From early 2007 onwards there were signs that economies were reaching the limit of their ability to absorb more borrowing. The growth-boosting potential of debt seemed to peter out. According to Leigh Skene of Lombard Street Research, each additional dollar of debt was associated with less and less growth (see chart 2).
The graph above tracks the total public debt since 1966. On January 1, 1980, the national debt was roughly $863 billion. By the end of the decade, December 31, 1989, the national debt was over $2.9 trillion.
The chart above compares the population of the United States and inflation as well as the federal government's tax revenues and expenditures. The red line indicates population growth, the green line indicates inflation, the blue line indicates federal tax receipts and the orange line indicates federal spending.
This chart by Mercatus Center Senior Research Fellow Veronique de Rugy illustrates the recent expansion of federal spending per American household, using household data from the United States Census Bureau and spending data from the Congressional Budget Office.
This chart by Veronique de Rugy pairs the changes in the statutory debt limit since 2000 with the corresponding debt subject to this statutory limit. Years in which the limit was raised a single time are noted by squares; years in which the limit was raised twice are noted by triangles.
Debt increased at every level, from consumers to companies to banks to whole countries. The effect varied from country to country, but a survey by the McKinsey Global Institute found that average total debt (private and public sector combined) in ten mature economies rose from 200% of GDP in 1995 to 300% in 2008 (see chart 1 for a breakdown by country).
That total - equal to $29,700 per American and $78,683 per household - is the amount as of Sept. 19 that the federal government has borrowed from the public as well as its own accounts such as the Social Security Trust Fund. If the government paid $1 billion a day toward the debt, it would take 25 years to pay off.
This chart by Mercatus Center Senior Research Fellow Veronique de Rugy examines likely options for the long-term cost of carrying the debt held by the public if investors begin to demand higher interest rates.
This chart by Mercatus Center Senior Research Fellow, Veronique de Rugy, compiles data from the United States Treasury to illustrate our nation’s total commitments – even if no new participants ever enroll in Medicare or Social Security.
These graphs show the proportion of government spending for various discretionary and non-discretionary purposes. As a result of increased debt, the proportion spent on interest payments is expected to significantly increase by 2015.
Figure 1 shows that spending rises more slowly over the next decade under Ryan’s plan than Obama’s plan. But spending rises substantially under both plans —between 2012 and 2021, spending rises 34 percent under Ryan and 55 percent under Obama.
This graph clearly shows that even if the US debt to GDP ratio is lower than it was at some previous point in history—the MAGNITUDE of the change is worth ... serious attention. Since the 1980s, the effects of a shift toward a dominant Keynesian view of economic policy are clear.
The chart above compares the President’s budget deficit projections to the Congressional Budget Office’s budget deficit projections under current law. In other words, the policy changes embodied in President Obama’s 2011 Budget puts our country $2.5 trillion deeper in debt by 2020 than it other wise would be if current law were left unchanged.
Do you remember back in April 2010, when the administration was trumpeting how much better the expected budget deficit for 2010 was going to be? When, magically, the White House’s Office of Management and Budget’s projection of the expected deficit dropped by just over $300 billion U.S. dollars from its originally forecast value of $1.6 trillion dollars to $1.29 trillion dollars?
As of March 2011, our gross federal debt amounts to $14.27 trillion. This debt is comprised of debt held by the public ($9.6 trillion) plus debt held in intragovernmental accounts ($4.6 trillion). In total, gross debt is 94.6% of estimated GDP for FY 2011. Debt held by the Federal Reserve—as a portion of public debt—increased 74% from 2010 to 2011.
"Using data from the Congressional Budget Office’s 2010 Long-Term Budget Outlook, this chart illustrates the harsh reality that if we do not deviate from our current path, the majority of future federal spending will be to finance the spending of the past."
If current policies continue, debt held by the public will nearly double in the next ten years. According to the Congressional Budget Office, this measure of debt, which does not include securities issued by the Treasury to federal trust funds and other government accounts, will reach $18.3 trillion by 2021.
"When we combine nonmortgage and mortgage debt, we find that the active reduction of debt continued in 2010 and 2011. We conclude that while nonmortgage debt rebounded somewhat in 2011, household deleveraging continued, primarily as homeowners continued to pay down their housing debt."
The above chart by Mercatus Center senior research fellow, Veronique de Rugy examines the fiscal year-over-fiscal year deficit effects of the final healthcare legislation, the Patient Protection and Affordable Care Act (PPACA), using Congressional Budget Office projections.
The chart shows how expenditures as a share of GDP spiked during World War II but were reduced rapidly and significantly. However, spending never returned to the pre-war level and has followed a general upward trend ever since.
"So somehow the world's two most indebted countries (recall that Japan is about to in total pass 1 quadrillion debt) are out there and buying up the biggest amount of US debt (after the Fed of course)?"
This represents the number of times Americans' annual personal income could pay off the national debt. For example, if the ratio is three, that means that Americans earned enough income during the year to have paid off the national debt three times. Put another way, the national debt amounted to one-third of total personal annual income.
The exceedingly low interest rates of the 21st century have allowed the U.S. Debt burden to stay much lower than it would be under more normal interest rates. According to this chart, even a 6% interest rate could dramatically increase the debt burden.
"Interestingly, the chart ... reveals that the trends are starkly different for various loan types; consumers actively reduced debt for consumption-related expenditures for both 2009 and 2010, but new borrowing for education was fairly constant throughout the period."
"The federal government's budget deficit for fiscal year 2011 was $1.3 trillion; at 8.7% of gross domestic product (GDP), that deficit was the third-largest shortfall in the past 40 years. (GDP is the sum of all income earned in the domestic production of goods and services. In 2011, it totaled $15.0 trillion.)"
"Back in January, we featured a post where we looked at who are the largest holders of the U.S. national debt. Since that time, the U.S. Treasury has revised their data, specifically to identify who the real foreign owners of the U.S. national debt are."
n light of the final debt ceiling kabuki theater, lets take a look at the historical government spending, via Jim Bianco of Bianco Research. Jim gives us this snapshot looking at total Federal government outlays as a percentage of GDP.
Under the Obama budget, interest would top 18% of revenue in 2018 and 20% in 2020, CBO projects. But under more adverse scenarios than the CBO considered, including higher interest rates, Moody's projects that debt service could hit 22.4% of revenue by 2013.
What we find is that even after adjusting for inflation, President Obama intends to permanently increase the federal government spending by an average of $576.4 billion during the years from 2010 through 2013. We also see that he doesn’t plan to stop there.
This paper presents evidence that public debts in the advanced economies have surged in recent years to levels not recorded since the end of World War II, surpassing the heights reached during the First World War and the Great Depression. At the same time, private debt levels, particularly those of financial institutions and households, are in uncharted territory and are (in varying degrees) a contingent liability of the public sector in many countries.
"This special report will argue that, for the developed world, the debt-financed model has reached its limit. Most of the options for dealing with the debt overhang are unpalatable. As has already been seen in Greece and Ireland, each government will have to find its own way of reducing the burden."
"The United States needs a defense budget worthy of its name, one that protects Americans rather than wasting vast sums embroiling us in controversies remote from our interests. This paper outlines such a defense strategy and the substantial cuts in military spending that it allows."
"Some things a person does owe to himself–intangibles like respect, integrity, responsibility. 'This above all, to thine own self be true.' But such duties to self are not a debt in the usual sense of a repayable loan or obligation."
"This paper explores the possibility of the U.S. experiencing a debt crisis in the medium run, meaning somewhere between 2015 and 2035. It is impossible to state precisely the trigger point for a crisis. At best, we can make guesses about some of the key parameters."
"President Bush signed a $152 billion stimulus bill in 2008 and President Obama signed a $787 billion stimulus bill early in 2009, and the ranks of unemployed continue to swell. Despite the paucity of results, some policymakers are suggesting the need for a third round of debt-financed spending."
"The title of my presentation [at the Nebraska Library Association annual conference, October 2011] 'Learning to Live Without a Statistical Abstract,' signals that our gathering this morning is something of a memorial. The Statistical Abstract, born in 1878 and published annually thereafter, may well be dead...."
"That sad experience should be raising red flags in the United States, where the unsustainable longer-run trajectory of the US public finances is now suggesting the real risk of either a destructive burst of inflation or an outright government debt default."
"As the debt grows, government’s interest burden grows with it. The more of our tax dollars consumed by interest, the fewer dollars available for discretionary spending. What’s worse, more pressure is then exerted to use tax increases to fund mandatory spending programs, such as Social Security, Medicare, and Medicaid."
"This article examines the political and economic implications of China's rising share of U.S. public debt, and asks whether foreign-held debt is a real threat to U.S. prosperity or an excuse for economic nationalism."
Imagine a team of doctors hovering over the bed of the U.S. economy. With charts in hand and apparatus all around them, the medical team confers about a patient that has been in intensive care since June of 2009, which is when the recession ended. While the patient listens, the senior physician makes a quick rundown.
"The specter of a credit downgrade looms, and it is frightful. A downgrade threatens to push interest rates higher, making it more difficult for consumers to borrow, for businesses to hire, and for the economy to grow."
"Households headed by older adults have made dramatic gains relative to those headed by younger adults in their economic well-being over the past quarter of a century, according to a new Pew Research Center analysis of a wide array of government data."
"Experience in Illinois indicated that our home state’s budgeting process regularly evaded the intent of our constitutional and statutory requirements for balanced budgets and sound accounting principles.
Now complete, our report discovered that the budgeting and accounting problems we first identified in Illinois are rampant in other states."
"For most individuals, maxing out one’s credit card is usually a sign of a spending problem—but not if you’re Congress. For the first time in history, the national debt has hit $12 trillion, and it will soon exceed the $12.1 trillion maximum amount of debt allowed by law."
This report looks at the federal government as if it were a business, with the goal of informing the debate about our nation's financial situation and outlook. In it, we examine USA Inc.'s income statement and balance sheet. We aim to interpret the underlying data and facts and illustrate patterns and trends in easy-to-understand ways.
"Keith Hennessey of Stanford University's Hoover Institution talks with EconTalk host Russ Roberts about the debt ceiling and the budget process. Hennessey, who worked for Senate Majority Leader Trent Lott on budget issues in the late 1990s, explains the politics of the debt ceiling and the budget process. Using his past experience as a staffer, Hennessey gives those of us on the outside a...
Using a penny as a visual aid to demonstrate one billion dollars, Bob Williams explains the massive growth in America's national debt in recent history. This video provides a brief, clear, and rather overwhelming example of the great financial burden that is piling up for future generations.
"Do you know what the national debt means to you? This video explores some of the most shocking facts about the current U.S. debt, including the whopping $125,000 each citizen would have to owe today if we had to pay off our country's debt."
"Huge budget deficits and record levels of national debt are getting a lot of attention, but this video explains that unfunded liabilities for entitlement programs are Americas real red-ink challenge. More important, this CF&P mini-documentary reveals that deficits and debt are symptoms of the real problem of an excessive burden of government spending."
"Dreamland" is a video created by Intellectual Takeout through its Momthink.org project. It is the first of several videos aimed to raise awareness with moms about the national debt and the perils America faces. The video is careful to point out that it is not just politicians and the government that have embraced debt, but also many Americans.
"The erosion of private property rights, a prodigious federal debt, and a nearly incomprehensible tax code are all part of an overweening administrative state that today threatens the liberty of all Americans.
The Second Constitution Town Hall on April 16, 2011, addressed these issues and took questions from a live audience. Congressman Mike Pence and Hillsdale College faculty and...
"The erosion of private property rights, a prodigious federal debt, and a nearly incomprehensible tax code are all part of an overweening administrative state that today threatens the liberty of all Americans. The Second Constitution Town Hall on April 16, 2011, addressed these issues and took questions from a live audience. Congressman Mike Pence and Hillsdale College faculty and leading...
"It's official, trillion is the new billion. No longer is government spending talked about in terms of a mere ten digits. With the recent flurry of government spending, we are going to need another three zeros to make sense of it all. One trillion dollars is a number that few people can comprehend, let alone your standard nine digit calculator. So what does one trillion dollars look like?"
Peter Schiff, a candidate for Senator in Connecticut, explains the economic crisis. Schiff argues that the economic collapse is not over. Because of our inability to allow markets to restructure, Schiff argues, the coming downturn will be much worse than expected.
"Joke-telling robots, expensive walking tunnels, Blackberries for smokers, and training American prostitutes to drink responsibly. What do these things have in common? They're all questionable government spending projects in a time when our economy is struggling and people can't get jobs....or, maybe we just made them up.
Put yourself to the test. See if you can outwit the Rebel...
"This video takes you to the United Estates--a gated community in sunny Florida--to help you understand the impact of Congress’ decision to annually raise our nation’s debt limit without addressing the out-of-control spending that keeps us buried in debt."
"The U.S. federal government collected $2.2 trillion and spent $3.8 trillion in 2011. At the same time, it was $14.6 trillion in debt. These numbers are too big to comprehend, so what if we scale it down to an average household's income level? If you spent the way the government does, you might be contemplating bankruptcy. What should be done to ensure the government gets its fiscal house in...
"On its current course, United States fiscal policy threatens to hobble the nation's prospects for economic growth. Economic theory suggests that an important source of the problem is the government's ability to purchase services for current voters with taxes levied on future generations. A balanced budget requirement, by "internalizing" both the costs and benefits of government services,...
"We begin a new year at a moment of continuing challenge for the American people. Even as we recover from crisis, millions of families are still feeling the pain of lost jobs and savings. Businesses are still struggling to find affordable loans to expand and hire workers. Our Nation is still experiencing the consequences of a deep and lasting recession, even as we...
"Over the past few years, U.S. government debt held by the public has grown rapidly—to the point that, compared with the total output of the economy, it is now higher than it has ever been except during the period around World War II. The recent increase in debt has been the result of three sets of factors: an imbalance between federal revenues and spending that...
"Once again the federal government has reached its 'debt ceiling,' and once again Congress is poised to authorize an increase in government borrowing. Between its ever-growing bureaucracies, expanding entitlements, and overseas military entanglements, the federal government is borrowing roughly one billion dollars every day to pay its bills...
"Is the United States bankrupt? Many would scoff at this notion. Others would argue that financial implosion is just around the corner. This paper explores these views from both partial and general equilibrium perspectives. It concludes that countries can go broke, that the United States is going broke, that remaining open to foreign investment can help stave off...
"As there is reason to believe that you are still in Congress, I refer you for the political state of affairs here to my public letters, which you will find long and particular.
I am a little apprehensive, as the great exertions of America during the last campaign have not produced correspondent events, that either relaxation or divisions may succeed. They are both to be dreaded, and...
"The excitement which grew out of the territorial controversy between the United States and Great Britain having in a great measure subsided, it is hoped that a favorable period is approaching for its final settlement. Both Governments must now be convinced of the dangers with which the question is fraught, and it must be their desire, as it is their interest, that this perpetual cause of...
This document provides the OMB's assessment of issues relating to the United States Budget. Among other things, this piece gives a variety of charts and graphs describing the national debt, budget deficits, and the many expenditures that...
"This report concerns a mechanism different from the Joint Committee sequester. The Budget Control Act put into place a set of discretionary spending caps. If the Congress spends more than these caps allow, a sequestration of discretionary spending ('discretionary sequester') is ordered. This report discusses whether, under the actions taken to date by each chamber of the Congress on...
This proposed amendment to the Constitution would require that expenditures of the Federal government not exceed receipts of the Federal government. There would be, however, exceptions to the rule. A three-fifths vote by both houses of congress could increase expenditures beyond receipts if for specific purposes.
According to Joe Weisenthal, this speech finds "Dallas Fed Chief Richard Fisher...warning of the impact of cash that's not being lent out, and what he sees is debt monetiziation -- the Federal Reserve financing the government's spending directly. ...
"Since the commencement of the term, for which I have been again called into office, no fit occasion has arisen for expressing to my fellow-citizens at large, the deep and respectful sense, which I feel, of the renewed testimony of public approbation. While, on the one hand, it awakened my gratitude for all those instances of affectionate partiality, with which I have been honored by my...
"Each January, CBO prepares 'baseline' budget projections spanning the next 10 years. Those projections are not a forecast of future events; rather, they are intended to provide a benchmark against which potential policy changes can be measured. Therefore, as specified in law, those projections generally incorporate the assumption that current laws are implemented.
"Throughout our nation’s history, Americans have found the courage to do right by our children’s future. Deep down, every American knows we face a moment of truth once again. We cannot play games or put off hard choices...
"The United States is facing significant and fundamental budgetary challenges. The federal government's budget deficit for fiscal year 2011 was $1.3 trillion; at 8.7% of gross domestic product (GDP), that deficit was the third-largest shortfall in the past 40 years. (GDP is the sum of all income earned in the domestic production of goods and services. In 2011, it totaled $15.0 trillion.)"
"I sit down to write to you without knowing by what occasion I shall send my letter. I do it because a subject comes into my head which I would wish to develope a little more than is practicable in the hurry of the moment of making up general despatches.
The question Whether one generation of men has a right to bind another, seems never to have been started either on this or our side of...
"A fully updated follow-up to Peter Schiff's bestselling financial survival guide-Crash Proof, which described the U.S. economy as a house of cards on the verge of collapse.
The economic and monetary disaster which seasoned Wall Street prognosticator Peter Schiff predicted is no longer hypothetical-it is here today. And nobody understands what to do in this situation better than the man...
"Like its current citizens, the United States was born in debt-a debt so deep that it threatened to destroy the young nation. Thomas Jefferson considered the national debt a monstrous fraud on posterity, while Alexander Hamilton believed debt would help America prosper. Both, as it turns out, were right.
"America's debt-in the trillions-is serious business. Although contemporary press coverage hovers over the story of annual budgets and the associated deficits (and rare surpluses), not much attention is given to the overall national debt and even less to the interest spent serving it. 'It's like worrying about the five dollars you borrowed last week and ignoring the mortgage you can't afford...
"Cavanaugh worked in the U.S. Department of the Treasury for more than 30 years and was the first U.S. 'pensions czar,' overseeing the federal employee pension trust fund as the inaugural head of the Federal Retirement Thrift Investment Board. Given the current election-year political posturing with regard to this country's budget deficit, Cavanaugh provides a...
"Throughout history, rich and poor countries alike have been lending, borrowing, crashing--and recovering--their way through an extraordinary range of financial crises. Each time, the experts have chimed, 'this time is different'--claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. This book...
"GovTrack.US takes you inside the legislative process on Capitol Hill. We have a team of paid reporters going where no one has taken you before inside Congress, and we combine those reports with nonpartisan reporting from other sources." This is a great resource for following proposed legislation relating to the...
"The Government Cost Calculator is a unique service from The Independent Institute that enables any American to clearly understand three aspects of federal government spending. First, the Calculator helps you determine how much you will pay for various federal...
"President Obama created the bipartisan National Commission on Fiscal Responsibility and Reform to address our nation's fiscal challenges. The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Specifically, the Commission shall propose recommendations designed to balance the budget,...
"OMB's predominant mission is to assist the President in overseeing the preparation of the federal budget and to supervise its administration in Executive Branch agencies. In helping to formulate the President's spending plans, OMB evaluates the effectiveness of agency programs, policies, and procedures, assesses competing funding demands among agencies, and sets funding priorities. OMB...
"The U.S. Government Accountability Office (GAO) is known as 'the investigative arm of Congress' and 'the congressional watchdog.' GAO supports the Congress in meeting its constitutional responsibilities and helps improve the performance and accountability of the federal government for the benefit of the American people."
"The purpose of US Debt Clock.org is to inform the public of the financial condition of the United States of America. We are dedicated to bringing to the public the most accurate up-to-date debt information possible. The numbers are laid out in such a way to give a complete real-time snapshot of the country's balance sheet. Although the numbers involved are enormous, it is still easy to see...
While it may seem like a distant problem, the reality is that until each one of us makes the debt an issue, the folks in D.C. aren’t going to deal with it. The only way they will deal with the debt is if the American people make it an issue.
And that’s why it’s critical that you spread the word about how serious dealing with the debt is for your future, your friends’ futures, your family’...
Do you have a great idea on how Intellectual Takeout or others can help raise awareness about the national debt? If so, we want to hear from you!
Simply comment below and if we think there's something there, we'll promote the idea on our site, Facebook, Twitter, and more. Be sure to leave your name and city/state if you'd like to get credit for the idea!
To: The President and the Congress of the United States of America
Whereas: Congress, the Department of the Treasury, and the Executive Branch have increased the United States’ national debt to over $14 trillion by 2011.
Whereas: The national debt doubled in less than ten years and is expected to double again in the next ten years.
Whereas: Each American’s share of the national debt is $45,684,...
At Intellectual Takeout, we think it's about time freedom went viral.
Before our generation is the opportunity to embrace freedom, to unleash each individual's potential, and to have a prosperous future. And yet it seems that almost everyone running our cities, states, and federal government is intent on destroying freedom and burying us in debt to pay for it.
If you, like us, believe that...
Okay, so your friends and family keep telling you to jump
on the social media bandwagon, but you have no idea what the fuzz is about.
Here’s the deal: The Internet gives liberty-loving folk like
us an opportunity we have never had before: to make the case for individual
liberty, limited government and free market economics instantly and globally.
But with the vast amounts of information...
In the genre of documentaries revealing the problems with public education, "Kids Aren't Cars" focuses on helping us understand how schools are modeled after a factory system and what we need to do to change them. Understandably, treating kids as if they are a product to be manufactured has had detrimental effects on children going through the system and the overall level of education in America...
"Many parents and taxpayers feel helpless because the problems can seem so monumental. 'Kids Aren't Cars' director Kyle Olson reviews what he learned in the filmmaking process and the small things individuals can do that will add up to make a big difference."
Here's Kyle being interviewed on a few things you can do and share with friends, family, and educators:
Part 1Part 2
We all know Facebook is awesome for keeping up with friends, sharing about your life, and even distributing ideas. One great new way to get people thinking is to take advantage of the new banner profile with the help of Intellectual Takeout. Here's what one of our banners looks like loaded up on a Facebook profile:
If you haven't changed your banner profile, than Facebook is likely ...
While many documentaries on the education system focus on various examples of failure, "Flunked" takes a bit different tack. While certainly acknowledging and exposing the failures of the system, "Flunked" also seeks out individuals and approaches that ARE working in education. The hope is that these points of hope may serve as examples for others working in education.
Here's the trailer:...
Okay, so your friends and family keep telling you to jump
on the social media bandwagon, but you have no idea what the fuzz is about.
Here’s the deal: The Internet gives liberty-loving folk like
us an opportunity we have never had before: to make the case for individual
liberty, limited government and free market economics instantly and globally.
But with the vast amounts of information...
Looking for an internship? If so, Intellectual Takeout has an opportunity for you.
We have plenty of work to do as well as ideas to spread, and we need your help to get it done.
If you're interested in an internship with Intellectual Takeout, you likely share our passion and you're excited about the possibility of working for a great cause. That said, you might have a few questions about what "...
The Association of American Educators (AAE) advances the teaching profession through personal growth, professional development, teacher advocacy and protection, as well as promoting excellence in education so that our members receive the respect, recognition and reward they deserve.
Are you concerned your child isn't getting the education necessary to compete in the global economy or even, perhaps, to carry on the lessons and learning of Western Civilization? If so, you have a number of choices. You could, of course, consider changing schools to a charter school, private school, or even homeschooling. If that's overwhelming for you right now, you can always supplement your...
Curiously, not a few individuals are realizing that their education (K-12 and even college) neglected to provide them with as much understanding of the world as they would like. At Intellectual Takeout, we believe that however you feel about your education, there is still much to be learned. To that end, we'd like to refer you to one book and a collection of "study guides" that serve as...
Sure, the idea of homeschooling is likely overwhelming. Indeed, homeschooling is a big commitment and a lot of work. That said, there's a reason why more and more parents are turning to homeschooling as the best option for their child(ren)'s education(s).
Perhaps you are starting to realize that the public school system has changed a lot since you last attended it. Maybe you can't afford private...
Let's face it, most of us love to watch TV and movies. A wonderful way to spread ideas is to embrace our love of the cinema by hosting a movie night with friends and family.
There are numerous documentaries that do a fantastic job of sharing the ideas of liberty. You can pull a small group of friends together at your house or even consider asking a local restaurant or tavern to let you...
While there are a variety of really good documentaries about the failing public school systems in America, "The Cartel" stands alone in its frontal assault on the teacher unions, particularly those in New Jersey. If you'd like to get an inside look into how some teacher unions operate and the effects they have on education, you'll want to watch "The Cartel."From the movie's website: "This movie...
Another movie that tells the story of the failing public school model in the United States is “The Lottery”. It takes its own unique look at the systems by focusing on the use of lotteries to choose which children will be plucked from failing public schools and put into more successful public charter schools.
Here’s the trailer:
You can watch the whole movie right now with the help of Hulu...
How often do you hear conservatives being called a bunch of knuckle-dragging Neanderthals?
Here's the reality: Conservatism, classical liberalism, and libertarianism have a rich, intellectual heritage reaching back many millennia. Our ideas are not just some historical relics from bygone eras; they are the very foundation of Western Civilization in general, amd the United States in particular....
Sadly (or happily for some), life goes on after college. So does the fight for freedom.
Building friendships, networking, and growing the movement is critical after college. If our ideas are to be preserved and promoted, you need to stay involved. Plus, in a time when the individual seems to be ever more isolated and adrift, these groups can help plug you into social networks you can use....
Okay, so we don't expect you to drive a wooden stake into your flat screen. Plus, we're total hypocrites since we watch some TV. But here's the point: People waste a ton of time watching TV. If you're cool with government taking over your future, than keep watching Dancing with the Stars. If you consider yourself to be a free man or woman and want to live in a free society, then watch what you...
A great way to make a difference on your campus by spreading the ideas of individual rights, limited government, and free markets is to tutor. Plus, you can occasionally make a little bit of money.
Depending on the subject matter, you will be discussing a variety of ideas, key thinkers, and theories. As anyone who has tutored knows, there are almost always opportunities to expand upon a topic....
We've built Intellectual Takeout to provide you with quick, easy access to information. In time, we hope to become your one-stop-shop for the ideas of freedom.
If your professor allows you to bring your laptop to class (if not, you can use an iPhone), we recommend keeping a tab open to Intellectual Takeout.
As we continue to generate new content on the site, you will be able to fact check the...
When it comes to campus life injustices, student fees rank high on any list. On most campuses across the country a mandatory student fee is assessed to each student at the beginning of the year. A portion of this fee, which may be several hundred dollars, will go toward funding various political, religious, and interest groups.
A college requiring you to support groups espousing ideas which...
you're not happy with the direction of the country and you want to take
back your future, at some point you will have to do something. It's not
enough to just know that we're going in the wrong direction. You
actually have to step out and get involved.
Most college campuses have conservative and libertarian student
groups. Find one of them to join.
Below is a list of some of the larger non-...
Now that you're at college and the initial excitement has worn off, maybe you're thinking that the course selection is a bit biased and you'd like some options.
So how do you (the consumer) get the college (the business) to change up its offerings? It certainly won't be easy. Nevertheless it's something that should be done--particularly since you're footing the bill.
A good, education in a free...
Whatever activism you choose to do on campus, you need to get your story out. A popular tactic used by the Left is to isolate and intimidate freedom-loving students. You're not alone and there are a lot of people in your city, state, and country that can probably support your efforts. They just need to know what is happening.
Whenever you can, record in-class bias, discrimination against...
The reality is that most students (and people for that matter) won't speak out. It's called human nature and it was recognized in the Declaration of Independence: "...all experience hath shewn that mankind are more disposed to suffer,
while evils are sufferable than to right themselves by abolishing the
forms to which they are accustomed."
While you might feel alone when debating a teacher,...
In the land of the free and the home of the brave, speech codes are a particularly odious example of politically correct repression on many a college campus. In some ways, college campuses are the least free places for thinking and speech in America.
Your best friend for fighting your school's repressive speech codes is the Foundation for Individual Rights in Education (FIRE). Here's a short clip...
Running for office isn't easy, even in college. Not everyone is cut
out for it, either. For those of you who are, this completely non-partisan section is for you.
If you are inclined to pursue student government,
we're not going to spend time on telling you how to get elected. A good
place to go for ideas and training is CampusReform.org. Rather, we want to help you in office, as a believer in...