Wednesday, July 15, 2009

A Look at the Deficit and the National Debt

If you ask the average person the difference between the deficit and the national debt, you're likely to get a blank stare. While you are much smarter than the average Josephine, we'll go over that anyway, just in case you were asleep during that session of your Econ class.

The Deficit

The deficit is the amount of money we're spending THIS YEAR that exceeds the amount we brought in. The national debt is the sum total of all the deficits we've had. From 1749, we've had a total of about $6.3 trillion dollars in deficit spending. When you add interest paid on borrowing to pay that debt, it climbs to about $9.5 trillion. Since 1900, we've had 31 years where our income exceeded our expenses The other 79 years have had deficit spending. This year, the projected deficit is $407 billion. Last year, it was $410 billion.

For those who are politicizing current spending, here's a little perspective
  • 1999 - $125 billion surplus (Clinton)

  • 2000 - $236 billion surplus (Clinton)

  • 2001 - $128 billion surplus (Bush)

  • 2002 - $157 billion deficit (Bush)

  • 2003 - $377 billion deficit (Bush)

  • 2004 - $412 billion deficit (Bush)

  • 2005 - $318 billion deficit (Bush)

  • 2006 - $248 billion deficit (Bush)

  • 2007 - $162 billion deficit (Bush)

  • 2008 - $410 billion deficit (Bush)

  • 2009 - $407 billion deficit - projected (Obama)

While it is admittedly very large, the deficit this year is currently projected to be less than the deficit last year.

So, now we're hearing many pundits, talking heads and others screaming about the size of the deficit. Some of those people are saying that we simply cannot afford to spend money on programs such as the stimulus, health care reform, etc. because of the size of the deficit. Without commenting one way or the other, one wonders where those were voices last year, when the deficit was $3 billion larger.

The National Debt

Our national debt is fast approaching $10 trillion dollars. For those not familiar with very big numbers, that's ten thousand billion. It looks like this - $10,000,000,000,000. No doubt about it. That's one big number.

Again, as a matter of perspective, here is the cumulative amount of the national debt for the last decade.

  • 1999 - $5.605 billion (Clinton)

  • 2000 - $5.628 billion (Clinton)

  • 2001 - $5.769 billion (Bush)

  • 2002 - $6.198 billion (Bush)

  • 2003 - $6.760 billion (Bush)

  • 2004 - $7.354 billion (Bush)

  • 2005 - $7.905 billion (Bush)

  • 2006 - $8.451 billion (Bush)

  • 2007 - $8.950 billion (Bush)

  • 2008 - $9.654 billion (Bush)

  • 2009 - 10.413 billion (projected) (Obama)


The national debt is projected to rise by 7.8% this year. That is the same percentage it rose between 2007 and 2008. Again, without commenting one way or the other, where was the outrage last year? Why is the 7.8% rise this year so much worse than the 7.8% rise last year?

How Much Do I Owe?

Those who express outrage regarding the national debt sometimes express the debt in terms of the amount that is owed by every man, woman and child in the US. Currently, that amount is nearly $34 thousand. Again, to gain some perspective, let's look at a couple of facts.

In 1960, the national debt was $290 billion and the population was 179.3 million. Every American owed about $1620 - $5432 in today's dollars.

In 1970, the national debt was $380.9 billion and the population was 203.3 million. Every American owed $1873 - $4908 in today's dollars (less than the prior decade).

In 1980, the national debt was $909 billion and the population was 248.7 million. Every American owed $3665 - $7479 in today's dollars.

In 1990, the national debt was $3.206 billion and the population was 248.7 million. Every American owed $12,879 - $20,589 in today's dollars. Big jump.

In 2000, the national debt was $5.629 billion and the population was 281.4 million. Every American owed $20,002 - $24,980 in today's dollars.

In 2009, the national debt is projected to be $10.413 billion and the population is 306.9 million. Every American owes about $34,000. Big jump again, but not as big as it was from the '80s to the '90s.

Population information was obtained from

Debt as a Percentage of Gross Domestic Product

Realistically, the national debt will never actually be paid to zero. We've had debt since 1900. The way to evaluate debt is as a percentage of GDP.

  • 1970 - 8.9%
  • 1980 - 15.6%
  • 1990 - 40%
  • 2000 - 50.7%
  • 2009 - 73%

That is what is making people nervous. Let's put this in terms we can all relate to. Say that you have a mortgage that is $3500 per month, and your after-tax income is $4795 per month. After paying your mortgage, you will have about $1300 for everything you need. You're spending 73% of your income on your debt. Scary.

We can all agree that we're in a lot of debt. But let's not pretend that it happened this year. This problem has been mounting for a long time, exacerbated in the 1980's and in the current decade.

As always, I welcome your comments and suggestions.

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