Wednesday, June 1, 2011


Your tax dollars, I dunno, maybe they go to fight wars, or fund abortions or public radio or something. Mine are for the St. Louis Fed. My tax dollars proudly go to support the activities of FRED, the Federal Reserve Economic Data thingie. And, wow, do I get my money's worth.

FYGFD (I presume) stands for "Fiscal Year Gross Federal Debt". I'm sure about the Gross Federal Debt part. (And what else could "FY" be??)

Anyway, I've been looking at Gross Federal Debt in the context of TCMDO (Total Credit Market Debt Owed) and, in my "Limbo" series, in the context of "other" debt (where "other debt" is all the debt except the Gross Federal Debt: TCMDO minus FYGFD). Now I want to take a look at FYGFD, the Gross Federal Debt itself.
Mankiw says not to make up your own acronyms. These, I didn't make up. But I like using them because they are so precise. If we're talking about the federal debt, there may be dozens of different data sets that different people will use. But there is only one FYGFD.
So here is FYGFD as it comes by default from FRED:

Graph #1

This is the same as Graph #4 from my new look at debt. It's just raw numbers, raw debt accumulation. A much smaller chunk of debt than "other" debt, and a much smaller chunk than TCMDO, but a lot of debt nonetheless. Fourteen thousand billion dollars is fourteen trillion.

But I want to look at it in a few different ways. It's easy enough to do: FRED lets you pick different units, and gives a different picture for the new units.

Graph #2
Graph #2 shows each year's change in the Gross Federal Debt. Basically, this is like showing federal deficits, except it never goes below zero. You can see the anomalous decline from 1992-2001 on Graph #2, while the federal budget was approaching balance and briefly achieved a surplus. But when the budget is in surplus, you'd expect to see the annual increase in debt go negative. In this graph it doesn't. It approaches zero but never falls below that magic number.

That's okay. These are big numbers and complex accounts, and I see a trend I expect to see for 1992-2001, and it would be quibbling to demand to see the trend line fall below zero. And anyway, I don't really know why it doesn't. But I trust the numbers. Some things you just take on faith.

Anyway, the 1992-2001 downtrend anomaly is embedded within an anomalous uptrend that seems to begin around 1980, though there are hints of it in 1967 and 1970 and 1974-75. Then that anomalous uptrend ends with the shocking anomaly of federal debt growth in response to the Great Recession.

I guess some people will see a graph like this and conclude that the federal government is spending too much money. I don't. For one thing, I want to show another graph, so I'm not ready to reach conclusions yet. For another, debt is not caused by spending money. Debt is caused by using credit.

The graph shows a developing problem. First, the hints of it. Then the anomalous uptrend. Then a downtrend that proves unsustainable. Then, rapid return to the uptrend path by 2004. Then brief downtrend followed by eruption of crisis.

The picture is different if we look at the change in Federal debt as a percent change, rather than raw dollars:

Graph #3

The monster increase during World War Two makes all the other changes look small by comparison.

The growth of federal debt was minimal (near zero) and mild in the 1950s and '60s, though already in the mid-'60s fails to drop as it drops three times before, since 1950.

There appears to be an uptrend from the mid-'60s to the mid-'80s, and a downtrend from the early mid-'80s to 2001. This downtrend corresponds to the 1992-2001 decline  of deficits. But it is interesting that the downtrend seems to start by 1984.

The other interesting thing this graph shows is that the recent massive debt spike (on President Obama's watch) peaks lower than the 1984 debt peak. That is a remarkable and remarkably neglected fact.

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