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Public Debt

Public Debt



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Published by Jonahs gospel

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Published by: Jonahs gospel on Dec 05, 2008
Copyright:Attribution Non-commercial


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• Is government borrowing always bad?Are savings bonds debt or assets?• How are interest rates establishedon U.S.debt?What types of debt instruments areissued by the United States,andhow are they sold?
Public Debt:Private Asset
Government Debt and Its Role in the Economy
 Public Debt: Private Asset 
is oneof a series of essays adapted fromarticles in
On Reserve
, a newsletterfor economic educators published bythe Federal Reserve Bank of Chicago.The original article was written byKeith Feiler and this revision wasprepared by Tim Schilling.For additional copies of this essayor for information about
On Reserve
or other Federal Reserve Bank ofChicago publications on money andbanking, the financial system, theeconomy, consumer credit, and otherrelated topics, contact:
Public Information CenterFederal Reserve Bank of ChicagoP.O. Box 834Chicago, IL 60690-0834312-322-5111www.frbchi.org
In 1981, the United States reached adubious economic milestone—our federaldebt surpassed the $1 trillion mark for thefirst time. It took us more than 200 yearsto build up that much debt. The federaldebt doubled to $2 trillion by 1986, hit the$3 trillion level in 1990, and stands at anestimated $5.5 trillion for 1998.Looking at the growth of our federaldebt another way, it is estimated that1998 outstanding federal debt amountedto about two-thirds of our nationalincome, as measured by Gross DomesticProduct (GDP). Seventeen years earlier,in 1981, federal debt was only about35 percent of GDP. However,on theplus side, the percentage in 1998 shouldremain only slightly higher than it wasin 1991. Just as we might be concerned if ourpersonal indebtedness was growingfaster than our income, some economists,pundits and policy-makers are concernedabout the size of the public debt, notwith-standing the recent surplus achieved bythe Federal government. While some feelthat federal debt is not necessarily bad,others argue that it can place substantial burdens on the economy.To understand these concerns and the burdens of large deficits, we need first tounderstand the nature of debt itself andhow the government borrows money.
Total U.S.Debtas a Percentage of GDP
5 Trillion4 Trillion 3 Trillion 2 Trillion1 Trillion4.5 5.5  3.5  2.5 1.5 .5 
1976 1981 19861971 1991 1996 1998
* Data from
The Economic Report to the President
, February, 1998 * Data from
The Economic Report to the President
, February, 1998 
60.82% 34.58% 36.27%
Government Debt
(in dollars)

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