President Barack Obama could not remember how much the national debt was at the time he took office and said the debt was a long and medium-term problem, but not an issue in the short-term, in a Tuesday interview on CBS' "Late Show with David Letterman."
When David Letterman asked Obama about the national debt, Obama answered that the debt was the result of wars, tax cuts and a new Medicare prescription drug benefit passed during the George W. Bush administration, along with "emergency measures" passed during his first year in office to save the auto industry and "get the financial system back on track."
"Do you remember what that number was? Was it $10 trillion?" Letterman asked.
"No, I don't remember what that number was precisely," Obama answered.
"But see now, if this is me and I got the credit card guy calling me every day, I start to get scared. As Americans, shouldn't we be scared that we owe that kind of money? Who do we owe that money to?" Letterman responded.
Obama answered that most of the debt is owed to Americans themselves and it is not a problem in the short term because of low interest rates.
"But we don't have to worry about it short term. Right now interest rates are low because people still consider the United States the safest and greatest country on Earth, rightfully so. But it is a problem long term and even medium term. We're going to have to take care of this debt, this deficit, but we've got to do it in a balanced way," Obama said.
Letterman was close with his guess. The national debt was about $10.6 trillion when Obama took office. It recently surpassed $16 trillion. Obama is partly right when he says most of that is owed to Americans themselves. More specifically, a large portion of the debt is intragovernmental, meaning that one part of the government lends money to another part of the government.
Most of this intragovernmental debt comes in the form of the Social Security trust fund. Social Security used to raise more in payroll taxes than it paid in benefits and administrative costs. When this happened (Social Security stopped running a surplus and began running a cash deficit in 2010), the program bought treasury bonds with the surplus, effectively allowing the surplus to be used as general revenue.
According to the U.S. Treasury Department, as of Tuesday, intragovernmental debt was almost $4.8 trillion and non-intragovernmental debt, also called the public debt, was over $11 trillion.
Of the non-intragovernmental debt, over half is now held by foreigners. In 2011, 54 percent of public debt was owed to foreigners, notes The Concord Coalition. According to the U.S. Treasury Department, as of July 2012, the foreign country that held the most U.S. debt was China ($1.2 trillion), followed by Japan ($1.1 trillion) and a host of oil-exporting nations ($262 billion).
Mara Liasson, national political correspondent for National Public Radio and a Fox News contributor, argued Wednesday that Obama's remarks on Letterman could harm his ability to attract votes from independents who have deep concerns about the national debt.
"If short term means in the next six months, then I guess I agree with him," Liasson said on Fox News' "Special Report." "I think the debt and the deficit is the number one reason, in addition to the economy, why the president has, at this point, only a small lead instead of a healthy lead. I mean this is the thing that has made independent voters more than any other voters sour on the president. They're concerned about this."
With the 2012 fiscal year almost over, usdebtclock.org on Thursday shows federal revenue at almost $2.4 trillion and federal spending at almost $3.6 trillion, which leaves a 2012 deficit of about $1.2 trillion. Total unfunded liabilities are nearly $120.7 trillion.
To gain some perspective on these numbers, it is helpful to cut off that last seven zeros and imagine what they would be like for a family. Total family income would be $240,000. The family spent $360,000 over the past year and added $120,000 to their debt, which was already $1,600,000. The family has also promised to pay $12,070,000 more than what it is projected to make in future revenue.