US Government Debt
in Recent Decades
Government debt has been getting bigger.
Debt Steadily Increasing
Government debt in the United States has steadily increased
from $2 trillion in the mid 1980s to over $17 trillion today. But as a percent of
GDP it has grown from 55 percent to over 100 percent of GDP today.
Chart 4.11:
Government Debt in dollars
Government debt, including gross federal, state, and local, reached $3 trillion in 1987, and then breached
$4 trillion in the recession year of 1990. In the 1990s debt reached $5 trillion in 1992,
and $7 trillion at the peak of the business cycle in 2000. Debt breached $10 trillion in
2006 and $15 trillion in 2010. Gross debt, including all levels of government, will exceed
$20 trillion in 2013.
Chart 4.12:
Government Debt as Percent of GDP
Viewed as a percent of Gross Domestic Product (GDP) government debt shows a different aspect. At 56 percent of GDP in 1985, debt decreased as a percent of GDP until
the mid 1990s when it peaked at 81.4 percent of GDP in 1996. Then a steady decline
in debt as a percent of GDP set in for the rest of the 1990s, declining to 71.6 percent
of GDP in 2000. But debt resumed a climb in the 2000s reaching 81 percent of GDP at the
peak of the business cycle in 2007.
In the Crash of 2008 government debt increased sharply to bail out the banks and to
provide "stimulus" to the economy. Debt reached 104 percent of GDP in 2009.
But debt is expected to plateau at about 122 percent of GDP in the next few years.
Recent Debt by Government Level
Government debt as a percent of GDP has increased, mostly at the federal level.
Chart 4.13:
Government Debt by Level
Federal debt stood at 43.1 percent of GDP in 1985. State government
debt was 5 percent of GDP and local debt was 8.5 percent of GDP.
By the mid 1990s federal debt had inreased to 66 percent of GDP. State debt
had increased to 5.8 percent of GDP and local debt had increased to 9.4 percent of GDP.
By 2000 federal debt had decreased to 57 percent of GDP by 2007, state debt
was essentially level at 5.5 percent of GDP and local debt declined modestly to 9.2 percent of GDP. In the 2000s debt started to climb again, with federal debt reaching 64.1 percent of GDP
by 2007. State debt was 6.7 percent of GDP and local debt was 10.5 percent of GDP in 2007.
Chart Key:
- Federal debt
- State debt
- Local debt
Then came the Crash of 2008. By 2011 federal debt had exploded to 103 percent of GDP,
state debt stood at 6.9 percent of GDP and local debt increased modestly to
10.8 percent of GDP.
In the mid 2010s, federal debt is expected to stabilize at 105 percent of GDP, state
debt at 6.8 percent of GDP, and local debt at 10.7 percent of GDP.
Gross vs. Net Debt
The difference between gross and net is the amount of debt held
by the federal government
Chart 4.14:
Recent Federal Debt
As reported by the federal government in Historical Table 7.1 of the federal budget, the gross debt
of the general government is composed of three items: debt held by the Federal Reserve System
and therefore monetized, debt owed to government agencies (e.g., Social Security), and debt held by the public, including foreign governments.
In 1985, the Federal Reserve System held debt amounting to 4 percent of GDP. Federal debt
held by the federal government amounted to 7.4 percent of GDP and debt held by the public
amounted to 31.7 percent of GDP.
Chart Key:
- Debt held by Federal Reserve
- Debt held by federal government
- Debt held by public
Debt monetized by the Federal Reserve System increased to over 5 percent of GDP in 1994 and
slowly increased, reaching 5.6 percent of GDP before declining in 2008 to 3.4 percent of GDP.
In 2009 the debt held by the Federal Reserve System had increased back to 5.5 percent.
Debt held by the government, principally IOUs to the Social Security system, has climbed
steadily, exceeding 10 perent of GDP in 1988, 15 percent of GDP in 1991, and 20 perent in 1998.
Debt held by the government exceeded 25 percent of GDP in 2002 and 30 percent of GDP in 2009.
Debt held by the government is expected to decline in the future as a percent of GDP.
Debt held by the public (excluding the Federal Reserve System) amounted to 23 perent of GDP in 1985. It reached 40 percent of GDP in 1991 and peaked at 43.6 perent of GDP in 1995.
Debt held by the public declined to 29.4 perent of GDP by 2000 before settling at about 30
percent of GDP till 2007. with the Crash of 2008 debt held by the public started increasing
sharply, reaching 65 percent of GDP by 2011.
Recent Interest Payments
Chart 4.15:
Recent Interest Payments
The burden of interest rates has declined in recent decades. Running at a little under
4 percent of GDP in the mid 1980s, the cost of interest payments began an historic decline
that extended throught the boom of the late 1990s and the recession of 2000-01. The cost
of interest payments increased in the recovery of the mid 2000s, then declined back to 2
percent of GDP after the Crash of 2008. Interest payments as a percent of GDP are expected
to increase in the future.
Of course, the numbers don’t show the burden of interest payments from Government
Sponsored Enterprises like Fannie Mae and Freddie Mac.
