Budget and Debt of USA

United States public debt

http://en.wikipedia.org/wiki/United_States_public_debt

Total Federal Funds: $2,650 billion  ($2.65 trillion)

with a total debt of $59,100 billion ($59.1 trillion)

Sen Russ Feingold: Gen Petraeus Iraq Surge Hearing:

"Osama Bin Laden stated goal in 2004 is to destroy US by bankrupting US "

And of course George Bush cooperated.

The United States total public debt, commonly called the national debt, or U.S. government debt, is the amount of money owed by the United States federal government to creditors who hold U.S. debt instruments. Debt held by the public is all federal debt held by states, corporations, individuals, and foreign governments, but does not include intragovernmental debt obligations or debt held for Social Security. Types of securities held by the public include, but are not limited to, Treasury Bills, Notes, Bonds, TIPS, United States Savings Bonds, and State and Local Government Series securities.^[1]

As of April 2008, the total U.S. federal debt was approximately $9.5 trillion^[2], about $79,000 in average for each American taxpayer. Of this amount, debt held by the public was roughly $5.3 trillion.^[3] If, in addition, unfunded Medicaid, Social Security, etc. promises are added, this figure rises to a total of $59.1 trillion.^[4] In 2007 the public debt was 36.8 percent of GDP ranking 65th in the world.^[5]

It is important to differentiate between public debt and external debt. The former is the amount owed by the government to its creditors, whether they are nationals or foreigners. The latter is the debt of all sectors of the economy (public and private), owed to foreigners. In the U.S., foreign ownership of the public debt is a significant part of the nation's external debt (see also below). The Bureau of the Public Debt, a division of the United States Department of the Treasury, calculates the amount of money owed by the national government on a daily basis.

 Risks to the U.S. dollar

By definition, international trade is the exchange of goods and services across national borders. Historically the currencies of nations involved were backed by precious metals (typically using some form of Gold Standard), which would cause a nation operating under a trade imbalance to send precious metals (economic goods in and of themselves) to correct any trade imbalances. In the current scheme of fiat money, the U.S. government is free to print all the money it wants. Consequentially, the government cannot technically go bankrupt as any debtor nation can just issue more money through a practice known as seigniorage.^[25]

If there is a gross imbalance between the amount of new money being brought into circulation and the amount of economic goods that are represented by an economy, then there is an unstable situation that can lead to hyperinflation.^[26] This has been observed in smaller nations such as Argentina in 1989; the International Monetary Fund and World Bank try to end such crises by working with the problem country to institute sound economic policies and restore faith in the international community that the country can again service its debt with a stable currency.^[27]

The interest rate offered on new bond issues is the one that clears the market. On December 13 2006, the U.S. 30-year treasury note had a rate of 5.375%. Were investors to become concerned about the future value of the US Dollar, they would demand a higher interest rate on US bonds to compensate them for the risk they are assuming.^[28]

In 2006, Professor Laurence Kotlikoff argued the United States must eventually choose between "bankruptcy," raising taxes, or cutting payouts. He assumes there will be ever-growing payment obligations from Medicare and Medicaid.^[29] Others who have attempted to bring this issue to the fore of America's attention range from Ross Perot in his 1992 Presidential bid, to Investment guru Robert Kiyosaki, David Walker, head of the Government Accountability Office, and most recently, 2008 Presidential Candidate Ron Paul.^[30][31]

 Amount of foreign ownership of U.S. debt

A traditional defense of the national debt is that we "owe the debt to ourselves", but that is increasingly not true. The US debt in the hands of foreign governments is 25% of the total^[32], virtually double the 1988 figure of 13%.^[33] Despite the declining willingness of foreign investors to continue investing in dollar denominated instruments as the US Dollar has fallen in 2007,^[34] the U.S. Treasury statistics indicate that, at the end of 2006, foreigners held 44% of federal debt held by the public.^[35] About 66% of that 44% was held by the central banks of other countries, in particular the central banks of Japan and China. In total, lenders from Japan and China held 47% of the foreign-owned debt.^[36] Some argue this exposes the United States to potential financial or political risk that either banks will stop buying Treasury securities or start selling them heavily. In fact, the debt held by Japan reached a maximum in August of 2004 and has fallen nearly 3% since then.^[37]

In 2006, the central banks of Italy, Russia, Sweden, and the United Arab Emirates announced they would reduce their dollar holdings slightly, with Sweden moving from a 90% dollar-based foreign reserve to 85%. ^[38] On May 20, 2007, Kuwait discontinued pegging its currency exclusively to the dollar, preferring to use the dollar in a basket of currencies.^[39] Syria made a similar announcement on June 4, 2007.^[40]

References