We tabulate our national debt to the penny, but we never add up the nation’s assets. That understandably causes confusion. Take this reader, who recently asked, “I hear the United States called the world’s richest nation. How can that be when the federal government owes so much money?”
The question is a good one that has several answers. First, one needs to be clear about the meaning of “richest.” Do we mean income — the amount of money earned in a year? Or do we mean wealth, which is the value of our assets minus the value of our obligations?
Second, are we talking about private riches, the income or net worth of households, or that of government or, even more broadly, the riches of households, businesses, nonprofits and government lumped together? These all have different possible answers.
The reader asked specifically, however, about the riches of the federal government, and that is more straightforward.
Two financial statements commonly show the financial condition of private-sector households, businesses or nonprofits. An income statement shows income received and expenses paid. A balance sheet shows assets and liabilities. The difference between assets and liabilities is net worth.
The federal government publishes an income statement, albeit a very imperfect one. Federal data sources like the annual Economic Report of the President show what revenue and outlays were in any given fiscal year.
The government also tabulates one side of a balance sheet — the debts. These are the outstanding Treasury bonds to which the reader referred. Some are “debt owed to the public.” Some are the borrow-from-Peter-to-pay-Paul loans from the Federal Reserve or from “trust funds,” such as Social Security, to the U.S. Treasury general fund. This list of debt is imperfect, but it is a start. For one thing, it doesn’t list implicit obligations like future Social Security benefits people think they are promised.
We make no attempt to tabulate federal assets. The U.S. government owns a dozen big aircraft carriers and even more nuclear submarines. It owns tens of millions of acres of parks, forests, and grazing lands. It owns numerous locks, dams and waterways. It owns valuable land and large buildings in dozens of cities. The asset list goes on and on.
It is hard to estimate what these assets are worth, but almost certainly trillions of dollars and probably much more than the national debt. However, we just don’t make any effort to keep track of these or to calculate federal net worth.
Just as for households, the annual cost of servicing government debt can be a problem even when net worth is large. A higher share of taxes goes to paying interest on the national debt than before we began to run large peacetime deficits 25 years ago. Much more of that interest goes to foreign bondholders than even 10 years ago.
Those two considerations should not cause panic. We should not ignore them either. Nevertheless, that is what our president and Congress continue to do.
Economist Edward Lotterman teaches and writes in St. Paul, Minn. Write him at email@example.com