A defining element of the ongoing economic crisis has been an endless series of
large numbers. Everything seems to be measured in the billions, hundreds of
billions and trillions. So it is with large, global losses and bail-outs.
Contextualizing and making real such large numbers is rare. What follows is an
attempt to ground many of the leading US numbers bandied about of late. I have
used all publicly available numbers and divided them by the US population. The
idea is to give averages per person.
We are far from equal in our wealth, assets, income and risk exposure to
various programs and plans, but dividing these huge numbers by our population
offers a way to reduce the size of the
figures and hints at the average per person costs. Keep in mind that equal
burdens are not the order of the day. There is not equal benefit to our program
choices either. We need greater equality to achieve balance and emerge from
Why slog through all the numbers? Because they allow us to see where we are and
how much we are investing in one particular future. The size of the numbers
also gives us clues as to just how reliant we will be this year on the desires
of global investors. Understanding the extent of the gap and the efforts to
fill it offers a chance to ask the big questions. Is this money well spent?
Will it work? Are we investing in the kind of future we want? When we borrow
this much are we making policy or do we enter a series of policy compromises
with our various investors-foreign and domestic?
The US gross domestic product (GDP) is a good place to start. GDP attempts to
measure the dollar value of all legal final goods produced in the US. The 2009
Congressional Budget Office (CBO) GDP projection is US$14.057 trillion, or
$45,937.90 GDP per head. End 2008 Federal Reserve Z1 Table disposable personal
income was $10.652 trillion or $34,810.46 per head. We live in a $14 trillion
economy with average GDP per person of $45,937.
These very basic figures - huge though they are - allow us to place other huge
numbers in a context that makes them more manageable. All per-person figures
are based on the US census count of 306 million Americans as of April 1, 2009.
The 2008 CBO projection for government revenue is 2.524 trillion or $8,248.37
per head. Our taxes, fees and the government services we buy make up government
revenue. Added to this revenue is the money that our government borrows.
Outlays (government spending) are estimated at $2.983 trillion, or $9,748.37
per head. This gives us about $459 billion in official shortfall for 2008, or
$1,500 per citizen.
The 2009 deficit projection is $1.67 trillion, or $5,447.71 per head. This is
based on 2009 CBO Federal revenue estimates of $2.159 trillion, or $7,055 per
person. Outlay or spending estimates for 2009 are $4 trillion, or $13,804 per
We are talking about huge numbers well into the thousands of billions. At the
present time our national debt is $11.2 trillion, with $6.9 trillion
outstanding and publicly owned. The rest of the debt, $4.3 trillion, is held by
various government offices. Some of the national debt our government owes is
owned by various branches of government. Some of our debt is owned by American
firms, households and associations. Much of our debt is held by foreign central
$6.9 trillion in public debt breaks down to $22,549 per citizen. Foreign
entities held $3.07 trillion in Treasury debt at the end of January 2009, 45%
of the public holding. Foreign ownership will have to rise sharply this year.
Huge shortfalls mean massive borrowing. Our government will have to borrow much
of the money available in global markets this year. Across the course of 2009,
the US Treasury will borrow $2.25 trillion, or $7,352 per person. That amounts
to over 20% of average disposable personal income. Our plans are contingent on
massive and global demand for our debt despite the low interest rates we offer.
If there is a stumble on that front, it will not be pretty.
The Emergency Economic Stabilization Act authorized the US Treasury to buy or
insure $700 billion in troubled assets beginning in October 2008. That amounts
to $2,286.32 for each of America's 306 million citizens. Of the initial $700
billion, about $132 billion remains, that amounts to $431.37 per American.
About 81% of the funds have been spent or promised, with 19% remaining to be
allocated. The Troubled Assets Relief Program (TARP) is $241 billion more than
the projected 2008 budget deficit.
The majority of the programs aimed at banks come from the Federal Reserve and,
more lately, the Federal Deposit Insurance Corporation (FDIC). The TARP is a
very small slice of the aid made available to financial institutions.
The problem is debt, mountains of debt
The Federal Reserve keeps many numbers that allow us, with some delay, to track
the value of our assets and the value of our debts. ZI Tables give data on the
levels of assets, debts, and ownership. The total value of all household real
estate at the end of 2008 was $18.334 trillion, or $59,915.03 per person. The
total liability represented by all home mortgages was $10.453 trillion or
$34,162.42 per head.
This helps explain the sad and startling fact that the average American owns
only 43% of their home. This is down from 59% ownership in 2002.
The Fed does more than report the numbers. It moves markets, shifts polices and
has been growing its influence and activity very rapidly over the past 18
months. The Fed has been instrumental and taken a leadership position in
attempting to stabilize banks and financial markets. One way we see this is in
the massive growth in the Fed's balance sheet.
The Fed reports on its balance sheet every Thursday in its H.4.1 release. The
total value of the Federal Reserve balance sheet last Thursday was $2.09
trillion or $6,830.06 per capita. Over the past 12 months, between the second
week of April 2008 and the second week of April 2009, the Fed's balance sheet
expanded by $1.195 trillion, or $3,906.37 per capita. The Fed balance sheet has
more than doubled over the last year. More growth is assured by the tangle of
new programs announced over the past few months.
Last, but not least, the Federal Reserve releases information on consumer
credit. The G19 Total Outstanding Consumer Credit release reports on total
consumer debt. Total consumer debt - excluding mortgage debt - for February
2009 was $2.564 trillion, or $8,379.08 per head. This includes student loans,
credit card loans, auto loans and personal loans.
Reading through all these numbers, patterns emerge. We have household,
creditor/lender and government debt problems. We are responding to them by
borrowing large sums of money. This is in many cases necessary.
However, we have yet to ask how we got here? We have yet to debate if all the
spending is necessary and optimal. Is more debt the best answer to past debt?
What, if anything, are we doing to reduce our dependence on debt? What are we
doing to reduce our addiction to foreign credit? Sometimes the numbers help
make clear the swirl of accusations and opinions that dominate mainstream media
coverage of these issues.
We have been using Federal balance sheets to absorb bad debt. Most of the bad
debt we have been moving to government balance sheet comes from firms and
households. This means that we are committing future household earnings and
forgone spending to fix some of our present problems.
Some we don't fix. There is more pain to come from future problems with the
mountains of debt outlined above. The system we have set up offers help in a
hurky-jerky pattern to leading institutions that are in trouble and to some
classes of distressed debtors. We are leaving many high and dry.
Too little is being offered to the many hurt by the impact of the macroeconomic
downturn. This is creating a growing base of anger in the society. Often it
appears that an unhappy populace, in pain, lashes out and scans the headlines
for the culprit of the day. The reasons for this anger are clear and compelling
in many cases.
It is frightening and counter-productive to rush from scandal to scandal. There
will be no easy or rapid solution. Thus, we must find the root causes of the
debt problem and address them. We have done absolutely nothing on that front to
date. So far, we are balance-surfing and straining to get more credit at lower
cost to various borrowers. Some of this is necessary and wise. Much is done to
avoid the bigger deeper causes of the shifting, buckling debt mountain. This is
an investment in keeping the problems but shifting and softening symptoms.
You can see the problem with that strategy above. There is too much debt and
not enough broad benefit and coherence to the policies we are embracing. Given
the size of our commitments and the long-term costs of the efforts, we have to
We don't have limitless time or money. Look through the above numbers. Remember
that averages hide our inequalities. Inequality and imbalance are the true root
causes of the US and global meltdown. To fix our economy this must be
Max Fraad Wolff is a doctoral candidate in economics at the University of
Massachusetts, Amherst, and editor of the website GlobalMacroScope.