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The Retirement of the National Debt: Will It Increase the Economic Size of the Federal Government? , Record No.: RS20656, Date: August 17, 2000 1 (September 17, 2000)

handle is hein.tera/crser0111 and id is 1 raw text is: Order Code RS20656 August 17, 2000 The Retirement of the National Debt: Will It Increase the Economic Size of the Federal Government? Marc Labonte Economist Government and Finance Division Gail Makinen Specialist in Economic Policy Government and Finance Division Summary MleaIsuing11 thle economi11c Size Of the federal g-Ov ernmenICt can1 be an1 eIlusive goa0l. Ov er the paist 40 yecars, for- exampijle, the total ou~tlays of the federal g-ov ernmiient havme raniged betweeni 17%) and 23.5%)(' of Gross Domiestic Produict (GTDP). Yet, ani alterniativ e mieasuire based on- the g-ov ernmilent's con1sumpion110 of goods an-d serv Ices, suggY:estst a muchI sm-Ialler econ-oic size: for ov er the paist 40 y ears, thlis mleaIsure haS rangII:ed betwenll/ anid 13%)(' of GDP. The dispaity betw en thlese Wo0 meauesUV is accounted for by outlayS thlat tran17sferv in1comle froml somle Amiericanis to othier.Amiericanis. Onie miajlor tranisfIer is initerest onl the nlationial debt. The cuirren-t an-d priosp-ectiv e budc]get suirplutses sugg1(_est that thle puliHcly hletd debt CoutdC be effectively retiredC w\ith the Coing11 dlecadle. Th1is wNIll redcLIe (andI ev enItully eliminat,11e) fu~turIe iterest otlayis. The governmiienit is thien free to uised thiis saved rVeenue for- furlthler dlebt r-eduction,. other tranisfer pam ients, inicreased spien-dinig oni goods anid services, or tax cuits. If the spien-ding( op~tionI is chlosenl, it w\IlI inicrease the g-ov ernm11ent's conisumpiixti of goods anid serv ices, anid the shiare of GD)P acecoun-ted for by guovernmlient eveni thloughl thle ottlay s as a plercenitage of GD~P wNIll r'emini conistanlt. A tranisfer paym iient w\]] i hae beeni converted into an outLay that w\Ill in1crease the plercenitage of GDrP con1sumied by the federal g-ov ernmiien-t. Depiending on- whIichI mleasure- Of Size is uised, the econ-om-Iic size of the federal g:overnm11enlt coul]d icrease. Th-Iis rep~ort wNII il updtedl as ev ents w\arranlt. The Federal Government and the Economy During 1999, the total outlays, or spending, of the federal government were $1703 billion, equivalent in size to about 180% of Gross Domestic Product. Over the past 40 years these outlays, as shown in Figure 1, have varied between 1700 and 23.*5% of GDP. Whifle this is one measure of the economic size of government, economists are often Congressional Research Service f The Library of Congress CRS Report for Congress Received through the CRS Web

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