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1 Chris R. Edwards, Federal, State, and Local Debt Piles up 1 (1994)

handle is hein.taxfoundation/sreaxz0001 and id is 1 raw text is: TAX 11 ___
FOUNDATION
October 1994
Number 40

Federal, State, and Local Debt Piles Up
Government Debt Stands at $16,835 Per Person

By the end of 1993, federal, state, and lo-
cal governments in the United States owed
$4.4 trillion in credit market debt, an average
of $16,835 for each American. This total
means that governments are the largest bor-
rowers in the country-ahead of households,
which borrow for home mortgages and other
uses, and ahead of corporate and
noncorporate businesses, which borrow to fi-
nance investments in buildings, machines, and
other items (see Figure 1). Of the total, the
federal government owes $3.3 trillion while

Figure 1
Credit Market Debt Outstanding by Borrower, End of 1993

$4,500
$4,000
$3,5OO
$3,000
0
$2,500
0
$2,000
$1,500
$1,000
$500
$0

t   $BUE5E

Federal,
State, & Local
Governments
Source: Federal Reservc Board.

Households    Corporate
Business

Non-Corporate
Businesses

state and local governments owe $1.1 trillion.
At the federal level, debt has been rising
quickly as each annual deficit adds to the total
accumulated national debt. Any notion of ever
paying off the debt seems distant as the federal
budget has not been balanced since 1969-an
unprecedented 26-year string of budget short-
falls. The second worst string of unbalanced
budgets in U.S. history occurred during the
Great Depression and World War II when 16
budgets in a row went unbalanced.
While overshadowed by concern about
the national debt, state and local government
debt has been piling up quickly since the early
1980s as well. Factors contributing to rising
state and local debt levels are discussed start-
ing on page 4.
Trends in Federal Debt
The July Mid-Session Review from the
Office of Management and Budget (OMB)
projects that gross federal debt will rise to
$6.26 trillion by fiscal 1999-an addition to
the national debt of $1.59 trillion in just the
next five years (see Table 1). Even when mea-
sured in constant dollars, federal debt rises 16
percent by fiscal 1999, as shown in Figure 2.
As the federal debt rises, so do budget out-
lays required for interest payments. Interest
outlays totalled $204 billion in fiscal 1994 and
represented 13.8 percent of all federal outlays.
Interest outlays will increase to $282 billion, or
15.2 percent of all outlays, by fiscal 1999, ac-
cording to OMB projections.
The federal debt has become large enough
that interest payments are expected to con-
tinue moving upwards even as the deficit is
somewhat lower in the next few fiscal years
(see Figure 3). Since outlays for interest have

By Chris R. Edwards
Econonmist
Tax Foundation

$4,394

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