President Bush has nearly doubled the national debt during his eight years in the White House. As he prepares to return to Texas next month, Mr. Bush is on track to add $5 trillion to the $5.73 trillion national debt he inherited when he took office. According to Treasury Department data, the number was $10.66 trillion at the end of November, and it has been rising at an astronomical rate.
During fiscal 2008, which ended Sept. 30, the national debt increased by more than $1 trillion, breaking the previous fiscal year record of more than $600 billion. The national debt includes obligations held by the public as well as the intragovernmental debt in trust funds such as those operated by Medicare and Social Security.
The government’s debt situation is about to get worse.
“Federal debt should increase by $2 trillion in fiscal year 2009,” said Stan Collender, a longtime budget analyst who is the managing director at Qorvis Communications.
“We are in a situation where you do what you have to do to get the economy moving again,” said Mr. Collender, who then issued a warning about the consequences of the soaring debt level. “It will complicate federal-debt financing and fiscal policy for decades.”
For example, given an average interest rate of 4 percent, the $5 trillion in national debt that has accumulated so far during the Bush administration could require an additional $200 billion per year from taxpayers in interest on that debt - in perpetuity.
During October, the first month of fiscal 2009, the national debt increased by a staggering $549 billion. That was approximately three-quarters of $1 billion every hour of every day, or more than $12 million per minute and more than $200,000 per second.
Treasury borrowed a lot of money in October to give to the Federal Reserve, which needed the funds to lend to American International Group (AIG) and other financial firms and to finance an array of “liquidity facilities” into which the Fed has been pouring hundreds of billions of dollars in order to thaw the world’s frozen credit markets.
Much of this money should return to the Treasury eventually, Mr. Collender said.
“There is never a guarantee,” he said. “For example, what if AIG goes belly-up and the loans become worthless?”
Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, fears the “next big bubble” will be a “government debt bubble.”
Meanwhile, the budget deficit has been setting its own records. During October, the deficit totaled $237 billion.
The national debt increased more rapidly than the budget deficit in October because much of the Treasury’s borrowings were given to the Federal Reserve and, as such, were not part of the budget deficit. Also, as noted, increases in the national debt include trust fund debt, which is not part of the budget deficit.
Fueled by Treasury Secretary Henry M. Paulson Jr.’s $115 billion capital injection into the nation’s largest banks - the initial outlays from his $700 billion bailout plan - the October budget deficit amounted to more than four times the $57 billion deficit recorded in October 2007.
After adjusting all previous annual budget deficits for inflation, October’s deficit was higher than 27 of the 28 annual deficits from the end of World War II through 1980 - and, in nearly all cases, substantially higher.
The Bush administration now appears to be crossing another important threshold: the percentage of the federal government’s publicly held debt that is owed to foreigners. Publicly held debt is one of two components of the national debt, the other being intragovernmental trust-fund holdings.
In 1970, foreigners held 5 percent of U.S. publicly held debt, a situation that led many economists to argue that the national debt was not problematic because Americans owed it to themselves.
By 1980, before the debt level began to rise significantly, foreigners owned 17 percent of publicly held debt, which excludes the debt in government trust funds such as Social Security.
At the end of fiscal 2001, before the Bush administration’s fiscal policy went into action, foreigners owned 30.3 percent of the publicly held debt.
At the end of August, the latest month for which all data are available, foreigners held more than 50 percent of U.S. publicly held debt, which had increased 64 percent since Mr. Bush’s first budget went into effect.
In the three months since the end of August, publicly held debt has soared more than $900 billion. Thus, at the end of November, the publicly held debt had increased by nearly 90 percent since Mr. Bush’s first budget took effect in October 2001.