Table 18.2 Table 18.2 Federal government debt held by the public, 1970-2005 Debt Held Debt Held by the Public Fiscal the Public a percent Year (S billions) of GDP 1970 283 29.4 1980 709 7.8 1985 1,499 38.4 1990 2.410 44.6 2000 3,410 2002 3.540 34.3 2005* 4013 33.6 pRojection SOURCE: Congressional Budget Office, The Economic and Budget Outlook: Fiscal Years 2004-2013, January 2003. pp. xvi, 149
Table 18.2
Interpreting the Numbers The numbers above are clearly politically important a key problem is that the numbers above are probably not economically meaningful 12
12 Interpreting the Numbers • The numbers above are clearly politically important. • A key problem is that the numbers above are probably not economically meaningful
Interpreting the Numbers Government Debt Held by the Federal Reserve Bank FRB held s604 billion in government securities in 2002. This is counted as debt State and local government debt State and local debt was $1.37 trillion in 1999 13
13 Interpreting the Numbers • Government Debt Held by the Federal Reserve Bank – FRB held $604 billion in government securities in 2002. This is counted as debt. • State and Local Government Debt – State and local debt was $1.37 trillion in 1999
Interpreting the Numbers Inflation When prices change, so does the real value of the debt In 2002, the debt was $3.5 trillion, and inflation was 1.4%. Thus inflation reduced the real value of the federal debt by $49 billion(=$3.5 trillion X 0.014) This should be considered a receipt as a tax would 14
14 Interpreting the Numbers • Inflation – When prices change, so does the real value of the debt. – In 2002, the debt was $3.5 trillion, and inflation was 1.4%. Thus inflation reduced the real value of the federal debt by $49 billion (=$3.5 trillion x 0.014) – This should be considered a receipt as a tax would