The difference between gross debt and net debt is an important distinction when assessing U.S. government debt

A key consideration in evaluating accurately the burden of  public sector debt is to understand the distinction between gross debt-often the headline number- and net debt the true measure of the debt burden.

Robert Eisner explained this well in his work on the debt.A large chunk of the the U.S. federal debt is held by various government agencies or government trust funds like for example the U.S. superannuation fund. So the first step in assessing the true size and burden of the debt is to exclude internally held intra governmental debt. Once we do this according to Eisner and U.S. government statisticians we arrive at gross federal debt held by the public. But because of a technicality we have next to subtract U.S. debt held by the Federal reserve which is counted as part of the ”public” which these days amounts to some 1.624 trillion dollars, a substantial sum. Interest owed on this debt is paid eventually to the U.S. treasury.

Finally we should subtract from the total the value of financial and other assets owned by the U.S. government and the value of interest and debt owed by the public to the U.S. treasury. With that done we arrive at a figure that is the U.S. net government debt.It is substantially smaller than the headline rate.

In 2010 for example, according to the Budget for fiscal Year 2011 as found in table S.1 of the summary tables p.146 total debt held by the public was 9.298 trillion dollars or 63.6 % of the GDP. If we subtract from this sum the value of financial assets held by the government we arrive at the figure of debts net of financial assets of 6.647 trillion or  58.8 % of the GDP. A large number but much smaller than the misleading headline number which focuses on gross debt. The number is even smaller once we deduct the 1.624 trillion held by the Federal Reserve.

In 2006 the gross debt was 8.451 trillion. Net debt after making most of these adjustments was substantially less 4.060 trillion 31.1 % of the GDP versus 64.7 %. (The budget for  2008, historical tables Table 7.1)


About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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2 Responses to The difference between gross debt and net debt is an important distinction when assessing U.S. government debt

  1. Reuben Swelt says:

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