Real Severity of US Federal Debt

All US Federal Debt vs Publicly Held Debt:  All US debt includes promises to pay within the US government, i.e. take from Social Security Fund to pay something else, while publicly held debt is all debt sold in the form of Treasuries.

While many downplay the severity of the US federal debt and its growth the last 7 years, usually by using a ratio comparing it to GDP, that masks a scary truth.  The amount of publicly held debt has absolutely exploded relative to all debt.  This means the real debt overhang of publicly held treasuries is at a severe record level by any and every measure.  Many point out how that the Fed holds a record amount of this debt, alluding that it isn't a big problem since the big change in the last seven years is held by the Fed and as long as they don't unwind their balance sheet it isn't problem.  However, the Fed only holds $2.5 trillion of the $8 trillion in the additional public debt issued since the end of fiscal 2008.  The chart clearly shows the scary growth in publicly held debt, and removing the $2.5T in Fed holdings does little to alter the picture.

Another way our federal government likes to mislead the public is with how the deficit is reported.  The official deficit ignores debt/interest payments and includes other accounting tricks.  Many like to show how the deficits were low and in some cases were surpluses in 1998-2001.  But what is clear is debt in one form or another actually rose every year.  Even in the years when publicly held debt was actually falling, total obligations were still rising.  Then the dot com bubble exploded, taking tax revenues along with it and all forms of debt exploded.

More recently 2014 and 2015 have been held up as great years since deficits fell to under $500 billion.  Still much higher levels than when we were fighting wars in the Middle East, but this is supposedly a win since it is much less than the $1-$2 trillion deficits in earlier years.  But what really is magical is the $439 billion deficit in 2015.   Even the all debt and publicly held debt change seems to confirm a low deficit for 2015.  But when we see the reporting for early 2016, it appears the low deficit in 2015 is an accounting trick, since the change in all debt has already exploded by over $1 trillion which is matched by a $720 billion explosion in publicly held debt.  A quick check has indicated this type of publicly held debt surge early in the year is not typical, and has not happened in any other recent year.  In other words it looks like some 2015 obligations have been pushed into 2016.