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Posted at 6:00 AM ET, 02/28/2011

Huckabee's inflated national debt figures

By Glenn Kessler

"For the first time in our history we're under water, we owe more than our entire annual GDP [gross domestic product].... We owe $15 trillion, just about. Our entire GDP for a whole year, everything we produce, make, earn collectively is less than that. We are under water."
--Former Arkansas Gov. Mike Huckabee, Feb. 25. 2011

An important sign of a country's economic health is how its overall debt load compares to the size of its economy, also known as the gross domestic product (GDP). When the debt level equals the size of the economy, that's a rather big warning light.

Once and possible future GOP presidential candidate Mike Huckabee says that the moment of truth has arrived--the size of the U.S. economy is now smaller than the size of the national debt. Is he right?

The Facts

Only three years in the history of the United States--1945, 1946, 1947--has the national debt exceeded the size of the economy, and the ratio quickly fell in the booming economy after World War II. The ratio of debt had more than doubled during the war--it was 45.4 percent in 1941, when the United States entered the war--but defeating the Germans and Japanese was a national imperative.

The ratio of debt to the economy has also soared during the recent recession--from 69 percent in 2008 to 93 percent in 2010--in part because the economy shrank but largely because of increased government spending designed to combat the recession. But it will probably be much harder for the United States to bring down the ratio this time because of the population is aging and the available pool of workers to retirees is shrinking. Also, social welfare programs such as Medicare have been introduced since World War II.

So Huckabee is raising a serious and economically profound issue. But he's gotten ahead of the facts.

As of Feb. 23, according to the Treasury Department debt meter, the national debt was nearly $14.13 trillion. But the gross domestic product, at of the end of 2010, was $14.86 trillion, according to the Commerce Department. That's a ratio of 95 percent, which is about as high as the ratio in 1949. (The ratio was 94 percent on Dec. 31, which is actually an apples-to-apples usage of the GDP figure.)

Still, President Obama's 2012 budget predicts that at some point this year, the boundary will be crossed and by the end of the fiscal year, Sept. 30, gross federal debt will be 102.6 percent of the GDP. The budget further predicts that the ratio will remain above 105 percent for at least five years after that. The ratio could be even worse if outside experts are correct and the economic forecasts in the budget are too rosy.

We used figures for gross federal debt for these calculations. Gross federal debt includes both bonds held by the public and bonds held by other federal accounts, such as the Social Security Administration. The ratio would drop to about 75 percent if bonds held by government accounts were not included. But that would be an incomplete figure.

Some politicians claim the securities held by federal programs such as Social Security and Medicare are "worthless IOUs" but they are wrong. An IOU is just another way of saying bond. These bonds are backed by the full faith and credit of the U.S. government. No president or Congress would risk defaulting on these bonds because it would ruin the nation's financial standing.

The bonds are a real asset to Social Security and Medicare, but they also represent an obligation by the rest of the government. Like any entity that issues debt, such as a corporation, the government will have to make good on its obligations, generally by taking the money out of revenue, reducing expenses or issuing new debt.

The action taken really depends on the resources available at the time, but one can't wave a wand and pretend that these obligations will disappear. So that's why it makes sense to include them in calculations about the nation's indebtedness.

The Pinocchio Test

The national debt figures are scary enough without needing to hype them. Huckabee clearly is an error when he says the United States has already passed the critical threshold of when the national debt exceeds the size of the economy. His figure for the current national debt was also off by nearly $1 trillion.

Still, we are kind of sorry to give him a Pinocchio because if he repeats the comment a few months from now, he may very well be right. Then he would have earned a rare Geppetto checkmark.

One Pinocchio

(About our rating scale).



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By Glenn Kessler  | February 28, 2011; 6:00 AM ET
Categories:  1 Pinocchio, Economy, Mike Huckabee  
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Next: Mitch Daniels's memory lapse on the budget surplus

Comments

No comment.

Posted by: bigmac1810 | February 28, 2011 6:39 AM | Report abuse

Republicans say a 3% tax increase for the wealthy is "socialism" and an 8% wage cut for the middle class is "doing your part."


Posted by: angie12106 | February 28, 2011 6:53 AM | Report abuse

Fact Checker has missed two major points. First, debt held by trust funds (i.e., Social Security) isn't borrowing even though bonds are issued. The government never had a transaction in a financial market for these bonds. It's only a promise to use future tax revenues for a particular purpose.

Second, "underwater" means debts are more than assets. Huckabee uses it to mean debts are more than income. Fact Checker should have called him on this and given him more Pinocchios.

Posted by: 51fordf2 | February 28, 2011 6:57 AM | Report abuse

Ever wonder why Social Security and Medicare are the only two government programs that "go broke" or are "bankrupt"?

Posted by: chucko2 | February 28, 2011 7:17 AM | Report abuse

I really wish Congresses past hadn't used my Social Security contributions to buy bombs and build aircraft carriers. When I need them back to buy food I fear future Congresses will view me as an impedement to future progress. Well at least I'll have my pension, I hope.

Posted by: wireman65 | February 28, 2011 7:39 AM | Report abuse

Thanks for clarifying for the public that the bonds issued to the Social Security Trust Fund are also backed by the federal government's "full, faith, and credit", which means that it will use its taxing authority, if necessary, to pay principal and interest. These bonds are "non-marketable bonds" as compared with "marketable" bonds in the public market and must be repaid to the Trust funds. The Washington Post should point out members of Congress who "knowingly" and erroneously say that the bonds issued to the Trust funds are "IOU's". They rely on the lack of knowledge by their constituents. Additionally, the Washington Post should have been focusing the public on the federal debt as it increased from approx. $5 trillion in 2001 to approx. $10 Trillion in 2008, i.e., the Bush years. Is America better off with the spending of the additional $5 Trillion during that period? What can we show for it? Not much!

Posted by: as554629 | February 28, 2011 8:11 AM | Report abuse

For a great many of us Social Security IS our pension. We've been paying into it our entire working lives. The return on investment can only be described as poor. Our "contributions" have gone into the general fund (buying bombs and aircraft carriers as cited by wireman65)rather than being responsibly managed to maintain, let alone increase, their value. Any talk of cutting SS benefits is unconscionable and scandalous. These pitiable returns are owed to us.

Posted by: rsh43 | February 28, 2011 8:18 AM | Report abuse

My question to Mr. Hukabee is, "If we are under water (which we aren't), who put us there?" The two presidents in my lifetime who added more to the deficit than all the rest of the presidents before them combined were Ronald Reagan and GW Bush. The only recent president to try to deal with the debt was Bill Clinton.

Maybe, after we have faced down the massive Bush-GOP-created recession, we'd do better reducing the debt with Democrats than with Republicans.

Posted by: tinyjab40 | February 28, 2011 8:19 AM | Report abuse

Only ONE? That seems a stretch. Your article indicated he was lying big time but your rating said "white lie". Today's check seems a bit political. SS and Medicare would not be in so much trouble if our politicians hadn't kept raiding them AND certain wealthy individuals hadn't defrauded Medicare so often.

Posted by: pjohn3 | February 28, 2011 8:48 AM | Report abuse

Thanks for pointing out that comparing our debt to GDP is only a sign of economic health. If compared to our revenues, the debt would be 630%.

Posted by: kitchendragon50 | February 28, 2011 9:54 AM | Report abuse

angie12106 .. Please name the Republican who made that statement.

Posted by: Hazmat77 | February 28, 2011 10:12 AM | Report abuse

I'm sorry, but I don't listen to Huckabee.

Posted by: jckdoors | February 28, 2011 11:08 AM | Report abuse

And just when do you expect these Gut-Government-Republicans would begin telling the truth?

Borrow and spend. Borrow and spend.

Fight wars without taxes. Borrow without end.

Posted by: kcbob | February 28, 2011 11:34 AM | Report abuse

Huckabee is an astounding affable liar, period.

I watched him on C-Span for an hour or so yesterday. He rambles on with a casual, friendly demeanor that puts a coat of sugar on his almost complete detachment from reality. He's a pure politician, mincing and slicing and ducking and taking cheap shots at Obama all along the way. He's useless.

Posted by: AIPACiswar | February 28, 2011 11:55 AM | Report abuse

Another deliberately misleading Republican. Are there any that tell the truth? Perhaps they are right about the 10 commandments being needed in public buildings? (If my memory is correct, "You shall not lie" is one.) The pattern is too pervasive to be mistakes.

Posted by: pbassjbass | February 28, 2011 12:06 PM | Report abuse

Mike Huckabee, jealous anyone? Chris Matthews would have a better chance at winning President of the United States in the White House than Mike Huckabee as Mayor of Las Vegas. Mike Huckabee has been doing Democrats a favor ever since he decide to become a TV personality. I don't know whether I pity Huckabee more or Sarah Palin after her ratings fall from grace? Huckabee even attacks Palin, when he would be wise to keep her as a friend. She might have helped him. Chris Matthews will continue after Palin and Huckabee have been forgotten many years from now. Neither have the stamina to carry an audience very far in this challenging political arena.


Thomas Chi
Author
PresidentSarah.Net

Posted by: ThomasChi | February 28, 2011 4:37 PM | Report abuse

Summary
Some senior Democrats are claiming that Social Security does not contribute "one penny" to the federal deficit. That’s not true. The fact is, the federal government had to borrow $37 billion last year to finance Social Security, and will need to borrow more this year. The red ink is projected to total well over half a trillion dollars in the coming decade.

President Barack Obama was closer to the mark than some of his Democratic allies when he said that Social Security is "not the huge contributor to the deficit that [Medicare and Medicaid] are." That’s correct: Medicare and Medicaid consume more borrowed funds than Social Security, and their costs are growing more rapidly. But Obama’s own budget director, Jacob Lew, was misleading when he wrote recently that "Social Security benefits are entirely self-financing." That’s not true, except in a very narrow, legalistic sense, and doesn’t change the fact that Social Security is now a small but growing drain on the government’s finances.

Payroll taxes exceeded benefit payments regularly until 2010. But the fact is that Social Security has now passed a tipping point, beyond which the Congressional Budget Office projects that it will permanently pay out more in benefits than it gathers from Social Security taxes. The imbalance is made even larger this year by a one-year "payroll tax holiday" that was enacted as part of last year’s compromise on extending the Bush tax cuts. The lost Social Security tax revenues are being made up with billions from general revenues that must all be borrowed. The combined effect is to add $130 billion to the deficit in the current fiscal year.

It’s important to note that benefit payments are not in immediate danger. Under current law, scheduled benefits can be paid until about 2037, according to the most recent projections. But keeping those benefits flowing is already requiring the use of funds borrowed from the public. So we judge the claim that Social Security is not currently contributing to the deficit to be false.

Analysis
As always, we take no position on whether Social Security should be changed, either to reduce the deficit or to shore up its troubled finances for future generations. Our job here is simply to establish facts and hold politicians accountable for any misinformation.

We’ll start with the basic numbers. The nonpartisan Congressional Budget Office issued its most recent projections for Social Security’s income and outgo Jan. 26, along with its twice-yearly "Budget and Economic Outlook." What those numbers show is that Social Security ran a $37 billion deficit last year, is projected to run a $45 billion deficit this year, and more red ink every year thereafter.


This is from factcheck.org

Posted by: zebra59 | February 28, 2011 4:57 PM | Report abuse

My question to Mr. Hukabee is, "If we are under water (which we aren't), who put us there?" The two presidents in my lifetime who added more to the deficit than all the rest of the presidents before them combined were Ronald Reagan and GW Bush. The only recent president to try to deal with the debt was Bill Clinton.

Maybe, after we have faced down the massive Bush-GOP-created recession, we'd do better reducing the debt with Democrats than with Republicans.

Posted by: tinyjab40 | February 28, 2011 8:19 AM | Report abuse

You forgot to add Obama who has increased out national debt more than anyone else in history. Please get your facts straight.

As to the so-called fact checker, anything that any Republican says or does is in error according to him. I have come to the conclusion that he is just another Democrat hick trying to pass himself off as an objective journalist.

Posted by: sales7 | February 28, 2011 6:22 PM | Report abuse

Huck, for one who claims to be a minister of Christ you should be ashamed. By using mis-leading and twisted data to promote your Presidential or political career is as you preach Mike: A SIN.

Tell the truth Mike! You are commanded to by a power much higher than all of us on earth as you so eloquently preach on Sundays.

But in case you stay a possessed sinner, failing to repent your lies, you should still not tell lies. As the old political cliché goes, "when you get caught (politically)in a lie, you die."

Posted by: Tell-the-Truth-Please | March 1, 2011 3:36 PM | Report abuse

Wow...
This is one of the few analysis articles I've ever read talking about the GDP and the National Debt where the writer knows and publishes the correct, current and most up-to-date numbers for them available.

Your analysis is also spot on!

This is a refreshing change from the drivel passed off as factual news that we normally get from the media these days.

Keep up the great work!

Posted by: azleader | March 4, 2011 12:23 PM | Report abuse

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