In November 2019, the federal government's outstanding public debt surpassed $23 trillion for the first time in history. But what does public debt mean? And have you ever heard different numbers for how high the national debt is? That is because there are actually three different widely used measurements for the national debt. No matter which measurement you look at, the number is dangerously high, but there are important differences to understand.
Let’s break down each measurement used to calculate the national debt:
Debt Held by the Public
The U.S. Treasury borrows money from outside lenders via financial markets to support government activities. This debt is known as the debt held by the public. Debt held by the public is often regarded by economists as the most meaningful measure of debt because it focuses on cash raised in financial markets to support government activities.
The debt is held by individuals, businesses, pension and mutual funds, state and local governments, and foreign entities. This category does not include intragovernmental debt, which is used to track the cash flows of trust funds and other government accounts. Domestic creditors hold 61 percent of the outstanding debt held by the public. The remaining 39 percent is held by foreign creditors.
Debt held by the public is often expressed as a percentage of gross domestic product (GDP), which measures the capacity of the economy to support such borrowing. This is particularly useful in comparing debt levels over time and among countries of different sizes.
How much is the debt held by the public?
The United States’ debt to GDP ratio at the end of fiscal year 2019 was 79 percent. This figure is the highest since 1948 and is an increase from the ratio at the end of 2018 which was 78 percent. Under current law, debt held by the public is on track to approach the size of our annual GDP in the next decade.
In dollar terms, debt held by the public at the end of fiscal year 2019 was $16.8 trillion. The debt is issued in a range of maturities from 1-month bills to 30-year bonds. It also includes securities that are not traded in secondary markets, such as savings bonds and state and local government securities.
Gross Federal Debt
Gross federal debt is debt held by the public plus debt held by federal trust funds and other government accounts. Another way to think of gross federal debt is debt that the government owes to others plus debt that it owes to itself.
How much is the gross federal debt?
At the end of fiscal year 2019, the gross federal debt stood at $22.7 trillion. Here is the breakdown of the gross federal debt:
- Securities held by government accounts - $5.9 trillion. Social Security’s Old-Age and Survivors Insurance trust fund accounts for about half ($2.8 trillion) of the total.
- Debt held by the public - $16.8 trillion
Debt Subject to Limit
Debt subject to limit is very similar to gross federal debt. The main difference between the two measurements is that debt subject to limit excludes debt issued by agencies other than the Treasury, as well as debt issued by the Federal Financing Bank.
How much is the debt subject to limit?
Debt subject to limit at the end of fiscal year 2019 was $22.7 trillion. The debt limit is currently suspended through July 31, 2021.
Now is the Time to Take Action
It’s important to understand different measures of debt because they all provide useful insight into our nation’s fiscal condition. Regardless of the measurement, our debt is already historically high and this unsustainable trajectory threatens economic opportunities for the next generation.