Pretty good op-ed piece in this morning’s WSJ by John Steele Gordon.
He opens the piece with some definitions (bold mine)…
So, a few definitions. The total national debt of the United States is the sum of all federal bills, notes and bonds that have been issued by the Treasury and not yet redeemed. The publicly held debt is the sum of the Treasury securities held by individuals, financial institutions and foreign governments. (That’s not just the Chinese, by the way. Both Great Britain and Japan are also major holders of U.S. debt, as are many other countries in lesser amounts.)
The intra-governmental debt is the sum of Treasury bonds held by agencies of the federal government, principally the so-called Social Security Trust Fund. The liabilities equal the future pensions, health care, Social Security payments, etc., that are promised under current legislation.
Then he makes the point that failure to pay Treasury securities would be a default but changing some laws (like adusting social security cost-of-living adjustments and retirement age) would shrink future liabilities significantly.
Gordon believes the debt focus should be on the debt-to-GDP ratio instead of on the exact amount of the debt. His recipe for handling our debt is to keep spending from increasing and grow the GDP.