The national debt is "larger than our entire annual economy."
Jim Jordan on Tuesday, March 19th, 2013 in a congressional hearing
Rep. Jim Jordan says the national debt is “larger than our entire annual economy.”
Budget-cutting is a favorite theme for Champaign County Rep. Jim Jordan, a former Republican Study Committee chairman with the most conservative voting record of any Ohio Congress member. Jordan has frequently opined that the controversial sequester budget cuts implemented on March 1 are a positive step toward reining in out-of-control government spending.
On March 19, the House Oversight and Government Reform Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending that Jordan chairs held a hearing on how several government departments decided where to make cuts required by the sequester. At the hearing, Republicans and Democrats blamed each other for the $85 billion in cuts to government programs that were implemented after Congress failed to agree on an alternative.
Eleanor Holmes Norton, the District of Columbia's representative to Congress, rattled off the list of cuts to agencies testifying before the hearing: $2 billion to the Agriculture Department, $551 million to the Commerce Department, and $17 million to the Federal Communication Commission and concluded: "This hearing really should be entitled: 'Sequestration Oversight; What Were House Republicans Thinking.'"
Jordan responded to her speech by saying: "The reason we support reducing spending in sequestration is because we have a debt larger than our entire annual economy. We do have to cut some spending around this place and we’re finally taking some modest first steps."
Jordan’s point about the national debt being larger than the entire U.S. annual economy is becoming a familiar GOP talking point. A few days before Jordan spoke at the hearing, House Budget Committee Chairman Paul Ryan made a virtually identical statement in a speech at Washington, D.C.’s Conservative Political Action Conference, saying "Our debt is already bigger than our economy."
PolitiFact has examined that statement and several other similar ones, noting that the politicians’ government debt tally included IOUs between government agencies, which don’t affect the wider economy and credit markets as much as publicly held debt, which totals 75 percent of GDP.
To find the size of the economy, PolitifFact national cited a Feb. 28, 2013 news release from The Bureau of Economic Analysis that put the GDP at just over $15.8 trillion. The government defines the GDP -- gross domestic product -- as the market value of the goods and services produced by labor and property within the country.
As for the debt, the U.S. Treasury is the go-to source. As of March 14, 2013, total outstanding public debt was $16,708,225,460,175.14. That’s broken down into two categories: debt held by the public and intragovernmental holdings.
Here are those dollar figures:
Debt held by the public: $11.9 trillion
Intragovernmental holdings: $4.8 trillion
To explain the difference, we’ll borrow from our PolitiFact Texas colleagues’ handiwork.
Intragovernmental debt refers to money owed by agencies within government to other agencies -- basically an internal accounting issue. An example: Social Security surpluses that the government uses for other federal operations. Such money will have to be repaid, it’s presumed, but the demand is less pressing right now and it doesn’t affect credit markets.
In contrast, public debt reflects money borrowed from outside sources -- giving it more of a connection to the economy, Josh Gordon, an analyst with the anti-deficit Concord Coalition, told PolitiFact Texas. "If your problem with the national debt is that you think it’s affecting the economy or interest rates or something like that, the only part of the national debt that affects the economy is the debt held by the public. That’s where the (U.S.) Treasury is borrowing money on the open market."
Paul Van de Water, an economist with the liberal Center on Budget and Policy Priorities, further explained why that matters.
"Debt held by the public is important because it reflects the extent to which the government goes
into private credit markets to borrow. Such borrowing draws on private national saving and
international saving and therefore competes with investment in the nongovernmental sector (for
factories and equipment, research and development, housing, and so forth). Large increases in such borrowing can also push up interest rates and increase the future interest payments the federal government must make to foreign lenders, which reduces Americans’ income. Achieving a stable debt-to-GDP ratio is a key test of fiscal sustainability," Van de Water wrote in a memo.
So, if we just consider debt held by the public -- which is what most affects the economy -- it totals about 75 percent of GDP -- which is not larger than the entire economy, as Ryan and Jordan stated.
But the pair aren’t entirely off-base, especially since partisans tend to disagree about the importance of intragovernmental holdings.
"When you dig a bit deeper, you hit a partisan debate about the portion of the debt not held by the public, most of which is held by the government in trust funds. Republicans say that the trust funds are filled with IOUs, which eventually will have to be redeemed with other funds. Democrats say that the trust funds represent binding promises that government has made to tens of millions of Americans. They’re both right," said William Galston, an expert with the Brookings Institution who was an adviser to President Bill Clinton.
When we asked Jordan’s press secretary if there was additional information that PolitiFact Ohio should consider in evaluating her boss’ assertion, she replied: "The facts are correct behind Rep. Jordan’s statement: economy - $15.8 trillion, debt - $16.7 trillion."
Jordan claimed "we have a debt larger than our entire annual economy." If you count debt held by the public and intragovernmental holdings, the debt is roughly 105 percent of the economy, which makes his statement accurate. But the debt held by the public is more relevant to discussions about federal spending and the economy.
With that clarification, we rate his statement Mostly True.