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A lesson in measuring the federal debt

The many ways to calculate how much the U.S. federal government owes


What’s the debt level of the U.S. federal government? The answer isn’t as straightforward as it may seem. A quick search on FRED for “federal debt” delivers the graph above, which shows the total level of the federal debt, in millions of dollars, at a quarterly frequency since first quarter 1966. The latest figure, as of the writing of this post, corresponds to second quarter 2019 and amounts to over $22 trillion. We can also express the federal debt as a percentage of GDP, like so:

The federal debt reached 103% of GDP in second quarter 2019. These numbers, however, don’t properly reflect the amount owed by the federal government to private bondholders, since certain federal agencies (primarily, the Social Security trust funds) also hold federal debt. These agency bond holdings are liabilities the federal government owes to itself and therefore should be netted out. This adjustment is made in a series called “Federal Debt Held by the Public,” which FRED has both in millions of dollars and as a percentage of GDP. The latter is below:

As we can see, these adjusted amounts are substantially lower than the ones previously shown. Federal debt held by the public amounted to roughly $16 trillion or 76% of GDP in second quarter 2019. However, since the Federal Reserve Banks are actually private banks, they’re included in the government’s definition of “public.” Since Federal Reserve Banks remit their profits to the Treasury, any interest earned on their federal debt is rebated to the federal government. Thus, debt held by Federal Reserve Banks constitutes liabilities that the federal government owes to itself. FRED has a series called “Federal Debt Held by Federal Reserve Banks”:

If we deduct this value above from the federal debt level, we can create a more accurate series of federal debt held by the public, excluding the holdings by Federal Reserve Banks. (Simply subtract “Federal Debt Held by Federal Reserve Banks” from “Federal Debt Held by the Public” after making sure they’re both expressed in the same units.)

So, as of second quarter 2019, federal debt is $13.7 trillion or 64% of GDP, much smaller than the figures we started with before netting out the holdings of federal agencies and Federal Reserve Banks.

How these graphs were created: For all but the last one, search for the series name and click on the relevant result. For the last, take the next-to-last graph, click on “Edit Graph,” add a series by searching for “federal debt held by the public as percent of GDP,” and apply formula b-a.

Suggested by Fernando Martin.

View on FRED, series used in this post: FYGFGDQ188S, GFDEBTN, GFDEGDQ188S, HBFRGDQ188S


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