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Archive for the ‘Debt’ Category

Answer: The U.S. debt is more than $17 trillion. Most news headlines focus on how much the U.S. owes China. And, in fact, China is the largest foreign owner of U.S. debt. However, the biggest single owner of national debt is the Social Security Trust Fund, aka your retirement money. How does that work, and what does it mean?

The Debt Is in Two Categories

The U.S. Treasury manages the U.S. debt (among other things) through its Bureau of the Public Debt. The Bureau has broken out the debt into two main categories: Intragovernmental Holdings ($4.8 trillion) and Debt Held by the Public ($11.9 trillion).

Intragovernmental Holdings – Just under one-third of the Federal debt is owed to about 230 other Federal agencies. How does this happen? Some agencies, like the Social Security Trust Fund, take in more revenue from taxes than they need right now. Rather than stick this cash under a giant mattress, these agencies buy U.S. Treasuries with it.

This effectively transfers their excess cash to the general fund, where it can be spent. Of course, one day they will redeem their Treasury notes for cash. The Federal government will either need to raise taxes, or issue more debt, to give the agencies the cash they will need.

Which agencies own the most Treasuries? Social Security, by a long shot. Here’s the detailed breakdown:

Social Security (Social Security Trust Fund and Federal Disability Insurance Trust Fund) – $2.764 trillion
Office of Personnel Management (Federal Employees Retirement, Life Insurance, Hospital Insurance Trust Funds, Postal Service Retiree Contributions) – $826.8 billion
Military Retirement Fund – $419.5 billion.
Uniformed Services Retiree Health Care Fund – $189 billion.
Dept. of Health and Human Services (Federal Hospital Insurance Trust Fund, Federal Supplementary Medical Insurance Trust Fund) – $260 billion
Department of Energy – $54.8 billion.
Federal Deposit Insurance Corporation – $33 billion
Department of Labor (Unemployment Trust Fund) – $30 billion
Department of the Treasury (Exchange Stabilization Fund) – $26 billion
Other Programs and Funds – $260 billion. (Source: Treasury Bulletin, Monthly Treasury Statement, Table 6. Schedule D-Investments of Federal Government Accounts in Federal Securities, August 30, 2013)
Debt Held by the Public – Foreign governments and investors hold about half of the nation’s public debt. A little over one-fifth is held by other governmental entities, like the Federal Reserve and state and local governments. Fifteen percent is held by mutual funds, private pension funds, savings bonds or individual Treasury notes. The rest is held by businesses, like banks, and insurance companies and a mish-mash of trusts, businesses and investors. Here’s the breakout:
Foreign – $5.724 trillion
Federal Reserve – $1.794 trillion
State and Local Government, including their pension funds – $703.5 billion
Mutual Funds – $946.4 billion
Private Pension Funds – $457.7 billion
Banks – $341.4 billion
Insurance Companies – $263.3 billion
U.S. Savings Bonds – $181.7 billion
Other (individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors) – $1.497 trillion. (Sources: Federal Reserve, Factors Affecting Reserve Balance, March 28, 2013; Treasury Bulletin, Ownership of Federal Securities, Table OFS-2, as of March 2013)
This debt is not only Treasury bills, notes, and bonds but also TIPS, Savings Bonds, and State and Local Government Series securities.

As you can see, if you add up debt held by Social Security, and all the retirement and pension funds, nearly half of the U.S. Treasury debt is held in trust for people’s retirements. If the U.S. default on its debt, foreign investors would be angry, but the greatest harm would befall the average U.S. citizen.

Why Does the Federal Reserve Own Treasury Debt?

As the nation’s central bank, the Federal Reserve is in charge of the country’s credit, so it really doesn’t have a financial reason to own Treasury notes. So why did it double its holdings between 2007 and 2013? That’s when it began its program of Quantitative Easing. It stimulated the economy to escape the grips of the 2009 recession by purchasing more Treasury notes. This stoked demand for Treasuries and kept interest rates low.

The Fed’s been criticized for simply monetizing the debt. The Fed purchases Treasuries from its member banks, using credit it created out of thin air. This has the same effect as printing money. It keeps interest rates low, avoiding the high-interest rate penalty the Federal government would usually incur for excessive debt.

However, as the economy returns to normal, the Fed announced it will taper its $85 billion-a-month purchases of Treasuries sometime in the fall of 2013. As a result, interest rates on the benchmark 10-year Treasury note rose from a 200-year low of 1.442% in June 2012, to around 2.9% in the summer of 2013. For more, see Relationship Between Treasury Yields and Mortgage Rates.

What About Foreign Ownership of the Debt?

The breakout of foreign-held debt shows that China was the largest holder, at $1.276 trillion (as of June 2013). Japan came in second, at $1.108 trillion. The Caribbean Banking Centers have also increased their holdings in recent years, and are now third, holding $291 billion. The Bureau of International Settlements has stated that the Caribbean centers, Luxembourg (at $151 billion) and Belgium ($176 billion) are probably fronts for oil-exporting countries and hedge funds that don’t want to reveal their positions.

The oil exporting countries have increased their holdings, and edging up to become #4 at $256 billion. Brazil is the fifth largest holder, at $254 billion. The next largest holders are Taiwan, Switzerland, Russia, Hong Kong and the United Kingdom, holding between $124-$186 billion each. (Source: Foreign Holding of U.S. Treasury Securities, August 15, 2013; U.S. Treasury report ”Petrodollars and Global Imbalances”, February 2006)

China has increased its holdings, from $1.147 trillion, in the last year. It’s obviously not too concerned that the U.S. will default on its debt. China wants to keep the value of the dollar high. This makes its own currency, the yuan, relatively cheaper by comparison. That helps China’s exports to the U.S. seem more affordable, which helps its economy grow. That’s why, despite China’s occasional threats to sell its holdings, it’s happy to be America’s biggest banker, and largest foreign owner of U.S. debt. Article updated October 22, 2013


H.R. 2775 – Senate Amendment
Senate Amendment to H.R. 2775, Continuing Appropriations Resolution, 2014

Senate Vote: 81-18
House Vote: 285-144

A list of just some of the free goodies:

Sec. 115 – Ensures furloughed employees are compensated and ratifies obligations made during the shutdown similar to language used in past shutdowns

Sec. 116 – Compensates States and other Federal grantees for carrying out Federal programs or paying Federally-funded State employees

Sec.117 – Clarifies that spending under the Pay Our Military Act is charged to the applicable appropriation.

Sec. 118 – Provides that the effective date for this joint resolution is October 1, 2013

Sec. 119 – Continues restrictions and reporting requirements on federal employee training conferences and conventions (section 3003 of division G of PL 113-6)

Sec. 120 – Extends the authorization for section 408 of the Food for Peace Act

Sec. 121 – Provides apportionment authority for weather satellite programs

Sec. 122 – Extends authority for activities to counter Lord’s Resistance Army and non-conventional assisted recovery

Sec. 123 – Extends authorization for construction of Olmsted Locks and Dams included within the President’s FY 14 budget request, FY 14 House-passed and Senate-reported Energy and Water Appropriations bills and similar to language included in the Water Resources Development Act

Sec. 124 – Extends authority for the Appalachian Regional Commission

Sec. 125 –Provides a rate of operations for Judicial Services that includes an increase of $25 million to provide funding for court and probation operations

Sec. 126 – Provides a rate for operations of $1,012,000,000 for Judiciary, Defender Services (a $26 million increase) to address shortfalls in Federal Public Defender Offices

Sec. 127 – Authorizes use of DC local funds for entire year

Sec. 128 – Extends the Universal Service Fund exemption to the Anti-Deficiency Act through life of CR

Sec. 129 – Provision deleted. Provides an increase in the rate of operations of $1.7 million for the Office of Special Counsel because of a backlog in whistleblower cases.

Sec. 130 – Provides an increase in the rate of operations of $2.2 million for the Privacy and Civil Liberties Oversight Board, which is in the initial phases of operation

Sec. 131- Extends authority for the Chemical Facilities Anti-Terrorism Standards (CFATS) program

Sec. 132 – Extends authority for the Secret Service to apply proceeds from undercover investigations

Sec. 133 – Extends authority for “other transaction” contracting agreements for the Department of Homeland Security

Sec. 134 – Sustains CBP staffing and border security operations and ICE staffing and immigration enforcement functions, including the most recent modification to include air and marine activities

Sec. 135 – Extends authorization for recreation fees for one year for BLM, NPS, USFWS, Forest Service and Bureau of Reclamation

Sec. 136 – Provides an additional $36 million for Department of the Interior firefighting

Sec. 137 – Provides an additional $600 million for Forest Service firefighting

Sec. 138 – Extends stewardship contracting authority for the Forest Service

Sec. 139 – Extends authorization extension allowing the Eisenhower Commission to hold on to the site for the memorial added by the Senate, plus language prohibiting the Commission from construction added by the House

Sec. 140 – Provides funds for the continuation of the Temporary Assistance for Needy Families program

Sec. 141 – Provides the Mine Safety and Health Administration with discretionary authority to retain fees

Sec. 142 – Clarifies the LIHEAP formula for the distribution of funds to states to ensure funds are allocated consistent with previous years

Sec. 143 – Provides flexibility in the obligation rate for the Refugee and Entrant Assistance account

Sec. 144 – Provides transfer authority to permit continuation of funding for research and for salaries and expenses of the Biomedical Advanced Research and Development Agency that carries out these activities

Sec. 145 – Extends for 2 years authority for teachers working under alternative routes to certification to be considered highly qualified for purposes of complying with federal law

Sec. 146 – Provides a gratuity of $174,000 for the widow of Senator Lautenberg

Sec. 147 – Prohibits COLA for Members of Congress for FY 2014

Sec. 148 – Increases the appropriation for General Operating Expenses, Veterans Benefits Administration to $2,455,490,000 (a $294 million increase) to adequately fund disability claims processing

Sec. 149 – Extends the authorization of HUD’s Rental Assistance Demonstration program (carried in the FY 2012 THUD Act)

Sec. 150 – Sets an annual rate for Federal Aviation Administration $97 million higher than current rate to ensure FAA remains fully operational

Sec. 151 – Pushes back deadline requiring Washington Metropolitan Transit Administration to provide full wireless reception throughout underground system for life of CR

Sec. 152 – Increases rate of operation for MARAD’s Maritime Security Program for US Flagged ships to $186 million, an increase of $12 million

Sec. 153-155 – Extends authority for war risk insurance for civil/commercial aviation for the life of the CR

Sec. 156 – Raises ceiling on Highway Emergency Response Funds in the Sandy Supplemental for Colorado as a result of the recent floods

Sec. 158 – Requires DHS to submit a report/expenditure plan to HSGAC and the House Homeland Security Committee 14 days after the report is submitted to the Appropriations committees


Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

Prof. Kotlikoff says: “The IMF is saying that, to close this fiscal gap [by taxation] would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

“America’s fiscal gap is enormous – so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems – as well as military and other discretionary spending cuts.”

He cites earlier calculations by the Congressional Budget Office (CBO) that concluded that the United States would need to increase tax revenue by 12 percentage points of GDP to bring revenue into line with spending commitments. But the CBO calculations assumed that the growth of government programs (including Medicare) would be cut by one-third in the short term and by two-thirds in the long term. This assumption, Prof. Kotlikoff notes, is politically implausible – if not politically impossible.

One way or another, the fiscal gap must be closed. If not, the country’s spending will forever exceed its revenue growth, and no one’s real debt can increase faster than his real income forever.

Prof. Kotlikoff uses “fiscal gap,” not the accumulation of deficits, to define public debt. The fiscal gap is the difference between a government’s projected revenue (expressed in today’s dollar value) and its projected spending (also expressed in today’s dollar value). By this measure, the United States is in worse shape than Greece.

Prof. Kotlikoff is a noted economist. He is a research associate at the U.S. National Bureau of Economic Research. He is a former senior economist with then-president Ronald Reagan’s Council of Economic Advisers. He has served as a consultant with governments around the world. He is the author (or co-author) of 14 books: Jimmy Stewart Is Dead (2010), his most recent book, explains his recommendations for reform.

He says the U.S. cannot end its fiscal crisis by increasing taxes. He opposes further stimulus spending because it will simply increase the debt. But he does suggest reforms that would help – most of which would require a significant withering away of the state. He proposes that the government give every person an annual voucher for health care, provided that the total cost not exceed 10 per cent of GDP. (U.S. health care now consumes 16 per cent of GDP.) He suggests the replacement of all current federal taxes with a single consumption tax of 18 per cent. He calls for government-sponsored personal retirement accounts, with the government making contributions only for the poor, the unemployed and people with disabilities.

Without drastic reform, Prof. Kotlikoff says, the only alternative would be a massive printing of money by the U.S. Treasury – and hyperinflation.

As former president Bill Clinton once prematurely said, the era of big government is over. In the coming years, the U.S. will almost certainly be compelled to deconstruct its welfare state.

Prof. Kotlikoff doesn’t trust government accounting, or government regulation. The official vocabulary (deficit, debt, transfer payment, tax, borrowing), he says, is vulnerable to official manipulation and off-the-books deceit. He calls it “Enron accounting.” He also calls it a lie. Here is an economist who speaks plainly, as the legendary straight-shooting film star Jimmy Stewart did for an earlier generation.

Source: Globe and Mail

1 Countdown to US default looms
Time to cut the credit card off. $17,000,000,000,000 seems like enough debt for our great, great, great, great grandchildren to NOT payoff. Sorry Central banks; we ain’t got the cash to pay you and we never will. Debt slave no more.

2 Hundreds of thousands of federal employees on furlough
A one-time layoff of 800,000 people working for the USA, Inc would make these folks find a productive position in the real world.

3 Troops’ paychecks stopped
Why do we need 1,400,000 active duty troops anyway? Empire USA can stop and young boys and girls can come home alive.

4 Women and children’s nutrition program threatened
We can support struggling families locally with giant, bloated government taking a cut of the money. Come to our Church, we’ll feed you.

5 $85 billion in cuts to federal programs
$85,000,000,000 We need to put this behemoth by much more.

6 Housing loans halted
USA, Inc backed loans will stop. Good. Go get a mortgage without Uncle Sams useless guarantee.

7 Trade talks scuppered?
Trade usually means exporting American jobs. Glad to hear they will stop talking.

8 Visa delays likely
Sorry to tourists. They will have to wait until we reopen

9 Space program on hold
Good. Privitize space. Open to anyone that can get there.

10 National parks, museums and zoos would close to the public
Why does USA, Inc own giant swaths of America? Public land should be open, without gate keepers, to the public.

While reading an editorial today supporting the Post Office in its efforts to save money by eliminating Saturday delivery I saw another MASSIVE LIE perpetuated by the MSM and the government.

Here is the Orwellian statement:

“The U.S. Postal Service is an independent governmental agency that doesn’t take taxpayer funds.”

This is complete and utter bullshit. This statement also described Fannie Mae and Freddie Mac until 2008. They were just little old independent government agencies helping out the housing market – until the shit hit the fan!!! Then they became albatrosses around the necks of the American taxpayer. You own them now. They have lost $200 billion of your tax dollars, and will lose billions more before all is said and done.

You can access the U.S. Post Office financial statements online. Here is their December 2012 report:

The honesty of the people writing this report is refreshing. They essentially admit they are BANKRUPT and unable to meet their financial obligations. In other words, a truly INDEPENDENT entity admitting they can no longer operate. How is this for honesty:

“The Postal Service continues to suffer from a severe lack of liquidity. The Postal Service held total cash of $2.9 billion and $2.3 billion as of December 31, and September 30, 2012, respectively, and had no remaining borrowing capacity on its $15 billion debt facility (See Note 3, Debt, for additional information). The increase in cash balances for the quarter is largely attributable to the seasonal impact of holiday mailings, along with additional revenue resulting from this year’s political campaign and elections. Cash balances generally decline during the remainder of the fiscal year, as revenue is not as strong in the remaining quarters. By the end of this fiscal year, the Postal Service projects it will have a liquidity balance that will be less than its average weekly expenses of $1.3 billion. This low level of available cash means that the Postal Service will be unable to make the $5.6 billion legally-mandated prefunding of retiree health benefits due by September 30, 2013. Further, this level of cash could be insufficient to support operations in the event of another significant downturn in the U.S. economy.

Through the three months ended December 31, 2012, the Postal Service has suffered 5 quarters of consecutive net losses and net losses in 14 of the last 16 quarters. The net loss of $1.3 billion for the first quarter of the year included $1.4 billion of expense accrued for the legally-mandated prefunding payment for retiree health benefits. The requirement of the Postal Accountability and Enhancement Act, Public Law 109-435 (P.L. 109-435) to prefund its retiree health benefit obligations, a requirement not shared by other federal agencies or private sector businesses, plus the precipitous drop in mail volume caused by changes in consumers’ uses of mail, have been the two major factors contributing to Postal Service losses since the recession ended in 2009. Without structural change to the Postal Service’s business model, it will continue to be negatively impacted by these factors and, absent legislative change, it anticipates continuing quarterly losses for the remainder of 2013.”

The politicians that are mismanaging this country use governmental accounting fraud to cover-up the fact that the obligations of this bloated pig of an operation are going to be paid by YOU, the taxpayers of the United States. Today, none of the past, current, or future liabilities of this INDEPENDENT GOVERNMENT AGENCY are reflected in the Federal budget projections or the National Debt calculation.

Do YOU want to know how much YOU really owe? Brace yourself.

In the past six years they have lost $41 BILLION and they have a cumulative deficit of $36 billion. How many INDEPENDENT organizations can run up deficits of $36 billion without going out of business? YOU are on the hook for these accumulated deficits, just like you were on the hook for all of the Fannie and Freddie backed toxic mortgages.

The Post Office will lose another $10 to $15 billion this fiscal year. You will be on the hook for that too.

They have $15 billion of debt on their balance sheet, with $9.5 billion payable in the next 9 months. How will this INDEPENDENT government agency that is losing $16 billion per year pay off $9.5 billion? They won’t. The government drones will pass a bill in the middle of the night extending the terms with no cash flow requirements or expectation of repayment. I wonder if I can get a loan like that?
The really interesting stuff is buried on page 42 of their report. I wonder why it is all the way back there? In addition to their $15 billion of debt, they have another $70.5 BILLION of unfunded future obligations. The two biggest are:

$33.9 Billion of payments for pension and health benefits for retirees, all due within the next 5 years. It’s not cheap providing gold plated benefits to government workers.

$25 billion for workers compensation and sick leave payments. Yikes!!! It must be all that stress, because the mail never stops. It keeps coming and coming. It’s almost enough to make someone go postal, or at least file a stress related workers comp claim.

This really sounds like a promising story. Mail volumes continue to plummet. Someone should tell Congress the internet age has arrived. The Post Office has thousands of money losing, unneeded outlets. It has 637,000 employees when it only needs 300,000. Over 70% of Americans favor ending Saturday delivery, so Congress passes a law making that impossible to implement, ensuring $2 billion more losses per year. That’s par for the course. Over 70% of Americans were against passing TARP too. And according to your leaders in Washington, and parroted by the MSM, you are not on the hook for their losses.

It’s beyond laughable, but so is most of what is going on in this tragedy of a country, disguised as a comedy. The truth is that you are on the hook for the $36 billion of accumulated deficits, the $85 billion of debt and contractual obligations, and the annual $16 billion losses they continue to pile up. But what’s $120 to $150 billion among friends? Bennie can print that out of thin air in a few days. Why run an operation efficiently at a surplus, when you can keep hundreds of thousands of union government drones employed (until they go on workers comp) by sticking it to the working American taxpayer. I sure hope I don’t get a visit from the Postmaster General because of this article.

Source: Zero Hedge

Days before the March 1 deadline, Senate Republicans are circulating a draft bill that would cancel $85 billion in across-the-board spending cuts and instead turn over authority to President Barack Obama to achieve the same level of savings under a plan to be filed by March 8.

The five- page document, which has the tacit support of Senate GOP leaders, represents a remarkable shift for the party. Having railed against Senate Democrats for not passing a budget, Republicans are now proposing that Congress surrender an important piece of its Constitutional “power of the purse” for the last seven months of this fiscal year.

Read more: Politico

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