On the campaign trail President Obama says his economic policies are working. He says the economy is headed in the right direction but it isn’t growing fast enough. He says we still face “stiff headwinds”.
CNNMoney has produced a series of 13 statistical graphs called “Obama’s economy: A snapshot” that appear to support the president’s claims. Each is a plot of some aspect of the U.S. economy over the term of Obama’s presidency from 2009 to 2012.
Much could be said about each, but today’s focus is on just one – graph 12 – “National Debt (% of GDP)“.
National Debt Growth Error
CNNMoney makes a very subtle yet significant error presenting national debt data: It’s understated.
What CNN titles “national debt” isn’t really the total national debt. As of today the actual amount is 102.5% of GDP, not 72.5% as shown by CNN. If CNN had used the accurate higher figure then the U.S. would start looking to readers more like Europe. Europe is suffering from a severe debt crisis.
The correct percent derives from two places. The first is today’s $15.8 trillion national debt got from “The Daily History of the Debt Results” report put out by the U.S. Treasury. The second is from the $15.4 trillion 2012 Q1 GDP figure from the BEA.
The data CNN presents is accurate, it just isn’t accurate for the total national debt.
What CNN actually presents is U.S. sovereign debt growth, not total debt growth. It doesn’t look as bad.
Compounding the Error
Not only does CNN understate the true growth of total debt but doesn’t seem to grasp the meaning of what they did plot.
Ironically, CNN is sorta right and sorta wrong. Sovereign debt is, by far, the more significant subset of the total national debt.
Sovereign debt is the most important type of debt a nation has. The growth of sovereign debt is responsible for about a dozen governments falling in Europe since 2010, including Greece two times. It’s at the heart of the European debt crisis.
In CNN’s description of graph 12 it correctly says:
over the long run, debt is still projected to grow faster than the economy. Policymakers will have to address it soon, or risk not being able to fund everything Americans expect their government to do
– CNNMoney, Obama’s Economy: A snapshot, 6/22/2010.
What CNN fails to do is recognize that all growth is in sovereign debt and fails to recognize the geopolitical significance of it. The term “sovereign debt” isn’t even mentioned.
The day President Obama assumed office in 2009, U.S. sovereign debt stood at $6.3 trillion. Total national debt on that day was $10.6 trillion.
Today, U.S. sovereign debt stands at $11 trillion. It is over $400 billion more than the TOTAL national debt was in 2009! The national debt today is $15.8 trillion.
U.S. sovereign debt has grown 175% since the day President Obama assumed office. It is like a runaway freight train. This year, 2012, sovereign debt is growing faster than the national debt itself! We are on-track to reach a 90% debt-to-GDP ratio by the end of an Obama second term.
The importance of graph 12 is seriously understated by CNNMoney in its comments.
Not only does it imply that it is the total national debt growth; which it isn’t, but also masks that it is sovereign debt growth. Furthermore, CNN fails to put it into geopolitical context.
Sovereign debt growth in Europe is at the heart of their economic crisis. It now threatens the entire world economy.
For the U.S., the solution to Taxmageddon 2013 has to account for the accelerating growth of U.S. sovereign debt.
If it doesn’t, then nothing else we do will matter… we will follow in Europe’s footsteps.