All the debt is the result of borrowing to cover government expenditures. It is all made up of debt instruments like T-bills and treasury note. The difference in the figures is
to whom the debt is owed.
$4.6 trillion is owed to "the public" which includes individuals, corporations, and foreign countries, like our good friends Japan, China and Saudi Arabia, to whom our Government owes hundreds of billions of dollars it has borrowed to finance decades of deficits (which is a problem in itself because it makes us vulnerable to China and Saudi Arabia -- should they decide to dump dollars and stop lending our Govt money it would have a major negative impact on the economy).
The remaining balance, about $3.3 trillion, is money the Govt "borrowed" from other Govt entities and trust funds, like the Govt pension funds and the Social Security trust fund. The latter is the largest fund, and is owed about a trillion and a half dollars from our Govt. Why?
(And this actually has to do with your question) You have heard about the SS crisis? It is coming because hordes of baby boomers start retiring over the next 10-15 years, and there won't be enough workers to supprt them without a huge raise in taxes. But economists and politicians have known about this for
decades. And in 1983, they actually did something about it: They passed an law, raising SS rates higher than was necessary to pay current retirees. These excess, surplus payments were to be built up in a SS trust fund that would be worth trillions of dollars, to help pay for the boomers' retirement when they started retiring.
Amazing foresight for politicians, eh? So for two decades, we have all (those who work) been paying more SS taxes than we should have had to, to build up this trust fund. You can see these overpayments in the Congressional Budget Office data figures,
http://cbo.gov/showdoc.cfm?index=1821&sequence=0, Table 1. Last year, the surplus tax received from these extra high SS taxes was
$151.1 Billion dollars! Over $600 billion surplus tax payments have been collected since 2000!
(You remember when the president talked about surplus taxes belonging to the people and that is why we should have tax cuts? Apparently that logic didn't apply to people paying SS taxes, but that is another story.)
So far so good, right? So with all these hundreds of billions of surplus SS tax payments, why are they saying we have a SS crisis now? Why did President Bush a few month ago tell us there is nothing but a bunch of IOUs in the SS trust fund and that is why we need SS reform?
Because, about the same time the SS Reform Act was passed in 1983, the Reagan tax cuts and military build up kicked in and the government started running
huge deficits -- spending every year hundreds of billions more than it was taking in through taxes. Like any person, when the Govt spends more than it takes in, it has to borrow the difference. Since 1980, the Government has borrowed
$7 trillion dollars because of these deficits. [You can check that on the Treasury Department public debt page you cited]
But, rather than borrowing all that money from the public, our politicians thought, why not just take those surplus SS tax payments, and rather than put those in a trust fund, use those to help cover our deficits, and we will put our debt (IOUs, T-Bills) in the SS trust fund.
So what you say? Well, SS trust fund was not set up to be a gigantic pool for funding for the Govt to borrow from -- it was supposed to be an actual fund to help cover for SS costs when the boomers retired. The IOUs the Govt puts there are essentially meaningless, because the Govt has to pay
SS obligations anyways!
The net effect is, for 20 years, the Govt has been taking
OUR surplus SS taxes and
STEALING the money from OUR SS trust fund to pay for THEIR deficits! And it is still going on today! When the politicians tell you the deficit this year will only be $325 billion or so, what they don't tell you is that includes over $150 billion in SS surplus taxes they use as general revenues. The real deficits -- non-SS revenues less non-SS expenditures, is really more like $500 billion!
Again, you can confirm this on the CBO website: Look at Table 1, bottom line. You see total deficit: $412 billion. That is the figure you hear about, but it includes the SS surplus revenues -- nobody says that. Under the column they call "on-budget" is the
actual deficit from the Govt operations (and it is actually even worse than that because they figure they don't need to include things like the cost of the Iraq war in the budget).
And this has been going on for over 20 years. The politicians have stolen over $1.5 trillion from OUR SS trust fund to cover for THEIR stinking deficits!!
Unbelievable, when you think about it.
I'm sorry for ranting, but this is so outrageous and no one knows about it or cares about it or talks about it. But that explains the biggest chunk of the Govt debt that is not "to the public." Another big chunks is money owed is to the trust fund for Govt retirees -- same principle applies.
So back to your question -- and as I said, it is related to the SS thing. If you just look at the whole $8 trillion, the Govt debt, as of FY 2004, as a percentage of GDP is 62%, and is about as high as it has been since the 1960s. It got a little higher in the mid-90s but the deficits were coming down then, not getting worse. If you look at the Debt compared to total Govt revenues (including SS), the debt is 3.9x greater than income as of FY2004, worse than any other time since 1962, which is the earliest data published by the CBO. So by historical standards (at least since the 1960s) about the highest it has ever been. If you look at just the debt owed to the public as opposed to other government trust funds, the $4.6 trillion is a little more manageable, thought still high.
But here is the problem, back to the boomers. When they start retiring in 10-15 years, there will be humungous costs associated with their retirment and health care. The
unfunded liabilities (meaning not paid for with current tax rates) will be trillions and trillions of dollars - or the tens of trillions some estimate.
How are we going to pay for that? You think the boomers are going to eagerly vote away their SS benefits? If not, taxes are going to have to be raised to crushing levels on the next generation of workers.
This is going to be a major problem for the generation coming up.
The last thing they need on top of this is a huge Government debt!
Last year, gross interest on the debt was
$325 billion. This year is will be closer to $350B. (Also in the public debt page you cited.) If interest rates shoot up, that figure will too. That is a lot of money! Almost as much as we spend on defense!
If we (or more accurately, our government) were responsible at all, if we cared about our own future, much less our kids' future, we would be doing what we can to give them a debt free America. Even more, we would give them a surplus to help pay for the boomers' retirement, which was supposed to be happening with the SS trust fun. And in fact, as of 2000, we had miraculously balanced the budget, and in that year paid down the Debt $100 billion; and the nation was poised to pay the debt down by trillions of dollars over the next decade. But then we had the tax cuts, and the Iraq war, and the economy slowed down -- and instead of paying down the debt, the debt has [
B]increased[/B] by $2.4 TRILLION since 2000 - about 40%!
So to answer your question, with the obligations coming up,
any debt is too much debt, IMO. We should be saving money for the future, instead our Govt is piling up the debt as fast as we can. As a consequence, we are failing our children, our grandchildren, and ourselves.
History will know us, and our leaders, and the "pass the buck" generation.