The U.S. debt overhang gets a lot of attention. And well it should, at roughly $15.88 trillion, the total public debt is bigger than the entire 2011 output of the economy. GDP was $15.094 trillion in 2011. (Although a hefty amount of the debt — $4.811 trillion — is actually owed by the government to itself, in the form of holdings in government trust funds that pay for stuff like social security.)
Not including the debt the government owes itself, the debt-to-GDP ratio is roughly 73%. But including the debt held in government accounts, the ratio is about 105%. Either way, it’s the biggest debt load the country has had since World War II. That’s due to both the shrinkage of the overall economy — because of the terrible financial crisis/recession — and the increases in Federal spending, aimed in part at supporting the economy. By way of comparison, Moody’s lists troubled European countries such as Italy and Spain as having debt-to-GDP ratios of 120% and 69% at the end of 2011, respectively.
But an interesting element to keep track of is the structure of our debt load. In general, debt loads are easier to handle if they are longer-term. It makes them less vulnerable to swings in market sentiment. (If you auctioned off $1 billion of 30-year debt at 3%, that rate is locked in for 30-years. If you sold the same amount of debt in three-month bills, you have to worry about how the market views you in three months, when you have to reauction — or roll over– the debt.)
On that count, the U.S. is making some progress extending the the maturity of its debt load — or how often it has to be rolled over and exposed to the opinion of the market. Check it out.
You can see in the chart above that the average maturity of the U.S. debt load has shot up since the worst of the crisis — when the government borrowed a bunch of short-term cash in a hurry. At the end of March it was roughly 63 months.
Also interesting, is how little it’s costing us to carry this debt load. The interest on the debt load is only costing us about 1.5% of GDP, thanks to the the record low interest rates that we’re paying out in the markets, thanks to the sluggish economy and fact that the Fed has been buying up large chunks of Treasurys. Today the 10-year yield is only 1.41% for instance. Obviously, the shrewd move for Uncle Sam to make right now is to lock in as much of these low rates as possible for as long as possible. And that’s what it seems that we’re trying to do.