What The U.S. Really Owes

Concerns about government deficit and debt have dominated American politics and public discourse since the turn of the century. But an article in Al Jazeera puts it all into perspective, revealing that at best the issue is overblown, and at worst it is a cynical tool of political obfuscation.

Because we’re used to dealing with everyday amounts of money, $18 trillion sounds like a huge amount of debt. But simply reciting the number again and again does nothing to help us make sense of its size. In order to do that, we need to compare it with something. Consider: Corinthian 15 debt striker Tasha Courtright‘s $96,000 for-profit college education has left her with an unmanageable debt burden, while megabank JPMorgan Chase posted more than $2 billion in outstanding liabilities (debt) at the end of last year. Objectively, Courtright has less total debt than JPMorgan. So why is the college student underwater while the bankers are on a yacht?

This apparent paradox has a simple solution. To get a sense of the real burden of someone’s debt, compare it with that person’s assets. Every economic actor — whether an individual, a business, a municipality or a country — is in principle capable of keeping an account of its assets and liabilities. If, like JPMorgan, you have a big number in your asset column, you can handle a big number in your liabilities column. If, like Courtright, your asset figure is very low because you earn little and own practically nothing, even a small number in the liabilities column can crush you.

Sounds pretty straightforward: a debt of $100 is very different for a wealthy person than a poor one. Millions of dollars in debt sounds unfathomable to the average person, but, barring unusual circumstances, is perfectly manageable for someone with billions in assets.

So how does the U.S. government fare?

The U.S. federal government is the largest asset holder in the world. It owns 900,000 buildings and structures as well as 41 million acres of land, much of it rich in minerals. Its asset portfolio includes 4 million miles of public roads, 12,000 miles of commercial inland water channels and 650 dams. Estimating the full value of these assets is difficult, but Thomas Piketty and Gabriel Zucman put the figure at $17 trillion in 2010. When comparing assets and debt liabilities, it’s necessary to count only real debts. About 30 percent of the official federal debt is held by the government, with about half of that held by the Federal Reserve, which remits interest paid on its holdings right to the treasury. These intragovernmental debts help facilitate monetary policy and create accounting placeholders for programs like Social Security, but they are otherwise meaningless. When you exclude this debt that the federal government owes itself, the value of public assets in the U.S. exceeded public debt by nearly $3 trillion in 2010. In fact, since the founding of the country, the U.S. government has never had a negative net worth.

In short, the U.S. has plenty of valuable assets it can tap into to service its debt. U.S. debt is nowhere near as dire as it is for dozens of other countries around the world that lack any comparable economic and resource wealth.

Granted, this is not to suggest that America should fall back on selling off public infrastructure or lands, or that it will ever even come to that. But it is definitely food for thought, not that I will pretend to know the finer things about this complex and often arcane world of finance, debt, and the like.

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