Chart: Debt-to-GDP Ratio Is Terrible, Worse Than Projected, and Deteriorating Rapidly

Over at National Review's The Corner, Reason Contributing Editor Veronique de Rugy draws lines that make all the b-boys scream:

Some de Rugian context:

In 2007, the CBO projected that public debt would equal up to half of total U.S. economic output by 2019. In reality, public-debt-to-GDP passed this milestone in 2009 — ten years ahead of the CBO's 2007 projection. This is not surprising considering the recession that started in 2007, the reduction in GDP and revenue that followed, and the increase in spending.

Since then, if the economy had recovered from the recession, we should have seen some positive changes to the debt-to-GDP outlook. We have not. 

Reason on public debt here.

Comments

[HazelMeade]

See, this is why Obama doesn't want to be President anymore.

[Rich]

Worse Than Projected

Yawn.

[BarryD]

Unexpectedly!

[Drave Robber]

For a nice TLA, it should be Worse Than Forecast.

[BarryD]

The fact that it's an election year makes the graph even scarier, since the number are undoubtedly being cooked downward as much as CBO can get away with.

Being fed pure bullshit about unemployment last week just makes that feeling even worst.

[Paul.]

The electorate doesn't look at graphs. They just see Big Bird.

[BarryD]

So Obama hopes.

[Palin's Buttplug]

The House CBO cooks numbers?

More CT bullshit.

[VG Zaytsev]

Do those figures include 6t of Fannie Freddie debt?

[Pro Libertate]

The cliff keeps getting closer. What can I do? Clearly, I cannot take my foot off of the accelerator, brake, or steer away. Wouldn't be prudent. What other options do I have?

[BarryD]

Keep pushing harder on the accelerator, while dialing up your attorney on your cell phone. When you go over the cliff, maybe you can sue Toyota.

[Pro Libertate]

Can this car go fast enough to just go straight into orbit?

[Rich]

Win The Future!

[Pro Libertate]

Whhhhheeeeeeeeee!

[Paul.]

The cliff is an illusion created by the most radical party of our generation. There is no cliff, there is only jobs, green energy, and free women's healthcare at the end of the road. The harder you push the pedal, the faster we get there.

[Pro Libertate]

That works until the car is airborne. Then the passengers quickly learn that gravity works, regardless of how much you hope it doesn't.

[VG Zaytsev]

Nuh huh

Haven't you ever seen a road runner cartoon?

You keep going in a straight line until you look down. That's when gravity hits.

So don't look down

/BO

[Paul.]

That works until the car is airborne. Then the passengers quickly learn that gravity works, regardless of how much you hope it doesn't.

To the Obama supporter, that feeling is weightlessness, a kind of euphoria! Plus rollercoasters are fun!

[Greg]

If we all had electric cars we could make that cliff jump easy

[CE]

Don't look down. We've already driven off the cliff.

[Paul.]

Don't look down.

I see what you did there.

[AlmightyJB]

Haven't you heard the new slogan? Forward! Actually when I heard that, a cliff was the first thing that popped into my mind.

[Drake]

Nobody makes the jump the first time.

[Pro Libertate]

First, assume a bridge.

[Corning]

How come that graph is hind projecting debt lower then what it was?

How come that graph is showing lower debt then we have today?

[Paul.]

It took into account Obama's deficit reduction efforts. Or something.

[R C Dean]

That's public debt, which doesn't count the debt held in the SocSec "trust" fund (and maybe some other intragovernmental holdings, too.

[Corning]

Why are we supposed to trust the CBO again?

Are we supposed to believe that the government did not spend the SocSec fund money?

Or the FED debt holdings to itself were not spent as well?

"Oh yeah that does not count. yes we spent the money but we borrowed that money from ourselves...you know we simply made up the money out of thin air and gave it to ourselves. See perfectly safe."

"Can you sell the paper on that debt?"

"Oh no cuz you know it isn't real debt...or something...that and it would destroy the bond market which is held up with stick glue and toothpicks"

[CE]

Ron Paul suggested just ripping up the debt held by the Social Security trust fund, for a quick and dirty one-time write off. People in Washington laughed at him -- apparently you can't just cancel that debt, but you don't have to count it either, even though real taxes will have to be collected to pay it back.

[Palin's Buttplug]

I believe he suggested canceling the debt held by the Fed, not SS.

[VG Zaytsev]

The fed will buy the SS trust fund debt as QE *

[Pound. Head. On. Desk.]

The fed will buy the SS trust fund debt as QE *

Then the Federal Reserve goes under... not the U.S. government. Huh. Who are you Bernie Madoff?

[R C Dean]

I suspect VG is right. There are only so many financial instruments the Fed can buy. They are already buying 75% of new Treasuries. They will run through the CMOs in short order at $40bb per month.

Then what? The trust fund could well be next.

[Tulpa Doom]

I wonder if they'll buy out my car loan. Is there a number I should call?

[Corning]

The article link to the article this article links to is actually better then the first two articles:

Lots and lots of papers* [The asterisk points to 21 peer-reviewed papers] have now studied this question and the evidence is rather clear: the types of austerity that are most-likely to a) cut the debt and b) not kill the economy are those that are heavily weighted toward spending reductions and not tax increases. I am aware of not one study that found the opposite.

http://neighborhoodeffects.mer.....esnt-work/

[R C Dean]

So, the Kochtopus has cooked up 21 studies that just happen to agree with their right-wing rethuglican agenda?

/shriek's buttplug OFF/

[Palin's Buttplug]

I would never use hackneyed terms like "Kochtopus" or "rethuglican".

I make up my own terms.

And since the Kochs are pro-ACLU I don't criticize them except for their rent-seeking.

[Paul.]

I make up my own terms.

Christfags!

[Corning]

Could be.

I would like to see the counter studies though.

Krugman talks a good game but he never seems to show actual economic studies to back up his bullshit.

And Reason rarely actually lists or quotes economic studies.

[CE]

You don't need studies when the theory is on your side.

[The Hammer]

Krugman actually buys his own bullshit, so he thinks anything he says is true just because he says it. He doesn't need studies, or evidence, or results. He's pretty much the Economics Police.

[califernian]

But this is all BUSH's fAULTZ I thought?

[Palin's Buttplug]

Mitt says it is NPR/PBS.

[BarryD]

No he doesn't.

[Palin's Buttplug]

What does Milt suggest cutting out of current spending?

Nothing - he favors increased entitlement and defense spending.

The debt would soar.

[sage]

Hey sockpuppet, get used to saying President Romney.

What's his name, Bitch?
Who's your daddy?

SAY IT!
SAY IT!
SAY IT!

[Paul.]

I have to confess, Sage, I don't want to get used to saying it. Or hearing it.

[sage]

Me neither. But this it's for the benefit of the sockpuppet.

[Corning]

Hey sockpuppet

I don"t understand this.

Are you saying Shrike is a libertarian with a 2nd account playing devil's advocate?

Is he Obama's sockpuppet?

I think I need a working definition of what a sockpuppet is.

[Pound. Head. On. Desk.]

Prepare a deep larder and solid means to defend it, keep quiet about it, and hope you didn't forget anything important. Sounds paranoid? You bet it does!

[CE]

We drove off the fiscal cliff four years ago.

The ratio we should be using is even worse, because GDP includes government spending (GDP = C + I + G + (X-M)), so the ratio is staying artificially low due to inflated government spending.

And even if the debt-to-GDP ratio were 1:1, it wouldn't be the same as a private individual having a 1:1 debt-to-income ratio. The government's "income" is about 20 percent of GDP, so the debt-to-income ratio is closer to 5:1.

And those who say the government isn't "broke" would definitely use that term for an individual who owed 5 years salary and had to borrow 6 months salary more every year, just to keep up spending and paying interest on the outstanding debt.

[Palin's Buttplug]

Good post.

I doubt govt income is even 20% of GDP though.

[Rights-Minimalist Autocrat]

It isn't. It's historically 18%.

[Paul.]

We drove off the fiscal cliff four years ago.

So what you're saying is as we're falling towards the ground, we've hit the afterburner?

[Corning]

Nitrous to make the wheels go faster!!!

[Lord Humungus]

right into the oncoming truck - I should know.

[Corning]

Road warrior takes its inspiration from slap stick and Warner Brothers cartoons more then anything else.

[Tulpa Doom]

Oh boy,I just looked up what the first Wile E. Coyote/Roadrunner cartoon short was titled. Kind of insensitive considering the native region of both creatures and recent BATFE history.

[Atanarjuat]

Heh heh heh. That's pretty good.

[Tulpa Doom]

Picture a roadrunner, stomping on a coyote's face... forever.

[Rasilio]

Actually it is far worse than that. Federal Governmental debt is only a tiny fraction of all debt, if the rest of the economy's balance sheet was clean a federal debt to gdp ratio of 125% wouldn't be much more than a relatively minor speed bump to overcome. However State and local debt are at soaring all time highs, personal debt is even higher, and corporate debt is high in historical terms meaning that there is really no where the government can go to work off that debt. If someone somewhere had a ready store of capital that could be accessed we could pretty quickly pay down the federal debt but with every sector of the economy bordering on insolvency then any attempts by the Feds to cut the debt either through spending cuts or tax increases runs the risk of triggering an economic collapse elsewhere.

The end game of course is to socialize growing portions of other debt through mechanism's like QE before the entire financial system comes crashing down.

[Tulpa Doom]

Well, GDP isn't like net worth, it's more analogous to income. Total national debt (including public and private debts) is still well below total national assets.

[Tulpa Doom]

For example, the household national wealth (that is, household and corporate assets minus liabilities) of the US is $57.4T in 2011q4, while the public debt is $15.2T as of March 2012. Since the government does also hold assets, we have over $40T total headroom left.

[toolkien]

But the accrual basis debt is much, MUCH more than 15.2T, so unless someone is changing the definition of unfunded liabilities, we're under water. In other words, more promises have been made than assets sunk to pay for them, than people have in equity, and the asshat politicians are dreaming up MORE unfunded entitlements. The only way out from under is increased productivity per person which isn't even close to making up the difference. So if Pols, in general, were making some headway against unfunded entitlements, there might be some room to breathe a LITTLE easier, but since both parties are hell bent on maintaining or increasing entitlements, the books don't balance, haven't balanced for years, and won't balance ever. We are not only over the cliff but have hit the ground. And unlike Wile E. Coyote, we're not going to accordion-walk our way from the fall.

Four to five years ago, former comptroller general Walker was doing his best to inform people of the imminent danger of terrible public policies and monetary policies. But no one listened. And we are 5 years further along, and $5,000,000,000,000 further in the red.

[toolkien]

Cont.

In other words, it's too late. We've dug ourselves a mess too big to fix without incivility. The unfunded entitlements are too large for people to just shrug their shoulders and say "oh well". There is going to be blood spilled before this is all over. Economic misallocations are too severe to just disappear in a puff of smoke. Someone is going to have to pay the price. And historically that ends up being the easiest minority to triangulate and scapegoat for all the problems. All we can do is cross our fingers and hope we're on the right side of the razor wire. And good luck for any of us with an individualistic bent in our philosophy.

[Rasilio]

Um, total national debt (public, private, corporate) is right about $60 Trillion dollars as of Jan 1 2012.

For a quick source go here...

http://grandfather-economic-re.....-table.htm

But it breaks down to
Federal - $15.22T
State Local - $3.01T
Household - $13.22T
Corporate Sector - $11.33T
Financal Sector - $13.6t
Total - $58.9T

All of this excludes Unfunded liabilities which if included would expand the number to $183 Trillion dollars at a minimum.

All this against a net worth of $57.4 Trillion.

I think it is safe to say we are already effectively bankrupt, we just havn't reached the tipping point crisis that causes the whole charade to crash down yet.

[R C Dean]

By my reckoning, it would take monetization of (very roughly) $30TT in debt to give us a shot of paying off the rest. Say, $15TT of government debt, $8T of financial sector debt, and $7TT of household debt (via the current CMO QE program).

The current fed balance sheet is right around $3TT, so we are talking about a ten-fold increase in the balance sheet, and a 90% reduction in the value of the dollar.

Imagine the inflationary disruption that will cause.

And that's not even counting the unfunded liabilities, or the constant increase, at the rate of over $1TT/year in government debt.

I don't see any way out.

[Rasilio]

Oh I see lots of ways out, just none of them good.

The best way is effectively a managed bankruptcy where huge swaths of debt are just wiped clean. Problem being that every debt is counted as an asset by someone which means a whole lot of people are gonna be real pissed when their wealth drops to near $0 and the rest of the world is gonna be REALLY pissed cause they're only going to see pennies on the dollar for their investments, given the strength of our military however there ain't really much they could do about it however.

If you did it right however you could keep the general earning capacity of the country going by keeping people working in the jobs they currently have and living in the homes they are in. The downside is it won't in any sense be fair or equitable, some people are going to get screwed and others will make out like bandits.

As far as other possible outcomes, well they pretty much all involve bloodshed somewhere along the line.

[Rasilio]

The real problem with the managed bankruptcy path is it requires admitting the problem before the economic system finally collapses, something no realistic politician would ever do. It would probably also require a declaration of Martial Law.

[tengfow]

That makes a lot of sense dude. Wow.
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