(Joint Economic Committee Report, November 15, 2004 contains the Source material for this Post. Thanks to Steve at Deinonychus antirrhopus for the link.)
The U.S. Treasury states the Federal Government has hit the statutery Debt limit of $7.384 trillion, and the Debit limit ceiling must be raised before Stop-gap temporary measures are used up. The U.S. Congress has always been quite willing to do this, and so the Ceiling causes no worries. The real worry is ability to pay off the Debt, along with the interim Interest on the Debt-servicing. This point brings on real entrance into the Twilight Zone.
The common Economic decision process calls for a Debt/GDP percentage ratio to determine the ability to pay. This practice holds certain demerits, especially escape from the reality that Tax revenues have to be garnered to provide Debt Service and final payment. Another convenient escape presents itself as the common practice of ignoring State and Local Debt levels in this Debt/GDP methodology. The total net general government Debt (Federal, State, and Local) is 44.4% of GDP. The Reader could ask why this stands as an important datum, and can be answered that Tax revenues need be raised from American Taxpayers to pay for all the Debt Service; it expands far beyond Federal taxes, to include State and Local taxes in procuring the necessary Tax revenues. The real issue in the discussion remains the Tax revenues which must be withdrawn from Economy, and what effect such a largesse of withdrawal will have on economic performance.
The Report makes much of the difference between Publicly-held Debt and Government Accounts Debt, the later being what the Federal Government owes other Government Trust funds--surpluses currently turned over to the General Budget by law; it stating that Publicly-held Debt is only $4.3 trillion, and that Government Accounts Debt can increase the total Federal Debt even when the Federal Government as a whole runs a surplus. The fallacy of this illusion remains the necessary Tax revenues which must be withdrawn from the Economy to pay for the added Totals. The Report also comments that net general government Debt (Federal, State, and Local) at 44.4% of GDP stands midway between most other nations. It does not consider the relatively important factor that Our economy might actually function better than Others, due to less Government spending per GDP levels. The Report, while precise and accurate, tends to remind of 'Smoke and Mirrors'. lgl