Rethinking Federal Debt: What Do We Really Owe?
Abstract
Ever since the Federal Reserve began its series of Quantitative Easing Federal Reserve assets have increased fourfold. During this same period federal deficits have increased the level of publicly held debt by 260%. There is an important relation between these two seemingly independent events because increases in Federal Reserve asset holdings have a direct impact on the cost of servicing the federal debt as all Federal Reserve profits belong to the Treasury. The measured publicly held federal debt nets out debt held by government agencies. In these calculations the Federal Reserve is not considered a government agency even though all profits of the Federal Reserve, $97.7 billion in 2015, are transferred to the Treasury. The Federal Reserve is in a very important in sense owned by the United States Treasury, and this ownership must be accounted in the debt burden. There are two ways to account for this Treasury Federal Reserve connection as it applies to measuring the taxpayer burden of federal debt: (i) a flow or income statement approach and (ii) a stock or balance sheet approach. From an income statement perspective the Federal Reserve's 2015 transfer to the Treasury of $97.7 Billion reduces federal debt by just over 43%. From a balance sheet perspective, using all assets and liabilities of the Federal Reserve, the publicly held federal debt is reduced by 11%.
Description
Energy_Environment|PublicFinanceSubject
Federal DebtCollections
Citation
Saving, Thomas R. (2016). Rethinking Federal Debt: What Do We Really Owe?. Private Enterprise Research Center, Texas A&M University; Texas A&M University. Library. Available electronically from https : / /hdl .handle .net /1969 .1 /199283.