Many people think the national debt is their personal debt—and we mostly just let them

I came across a clip the other day, from the 1992 presidential debate, in which George H. W. Bush is asked a question about the national debt. It's short if you want to take a look.

Most of the media commentary focused on the then-president's response performance—the moment where he checks his watch, his bumbling answer—but what struck me was the question itself.

Her initial question was about how the national debt affects Bush specifically. As he tried to get her to clarify it, it became clear (though possibly nor clear to Bush) that she was not actually asking about the national debt at all, but about the national problem of personal indebtedness. She pretty clearly believed that the national debt, in the sense used by politicians and media, was definitionally everyone's personal debt combined. Take a moment to think about that.

The point here is not to make fun of this person for not knowing what the national debt is. People absorb what's been repeated to them. What's interesting is why she might have thought of that. My guess? Nearly everyone who talks about the national debt in public—elected officials (of both parties!), watchdog organizations, newspapers, TV news, etc—talks about it as if it is your debt. (And they've been doing so since well before 1992 when this clip was filmed.) They say things like "your share of the national debt", and "a burden on our children and grandchildren", something that you or someone close to you will have to "pay off". This is the framing and phrasing that we're used to using when we talk about our personal debt.

I can't help but imagine that many people walk around thinking that the national debt is literally the sum of all personal debt. In reality they are two different things entirely. I say some things in this newsletter that contradict mainstream ideas, so I just want to highlight that this isn't one of them: no economist or informed policymaker uses a definition of the national debt that is based on summing personal debt or private sector debt or any such thing. The national debt is a summary statistic of the quantity of certain classes of government liabilities outstanding. The US for example uses a definition that includes the face value of most (but not all) Treasury securities and excludes coins, paper cash, and all Federal Reserve liabilities. Other countries use slightly different classifications. When speaking more abstractly, economists sometimes use a definition that is essentially the amount by which a government's expenditures have exceeded its receipts over the course of its existence, which is to say its cumulative net spending. The two definitions tend to come out to very similar numbers. Regardless, the point is that no definition of the national debt involves summing the private debt of individuals.

I think this particular person's misunderstanding is reflective of the negligence with which our leaders have communicated about this topic. The rhetoric used is designed to evoke emotions rather to inform. The "your share of the national debt" framing, is very much intended to make individuals believe, incorrectly, that the national debt is their debt. It is only a small step from there to believing that the national debt either literally is or is somehow related to the actual personal debts that they have.

We'd all do well to throw away what we know or think we know about the national debt and start from a clean sheet of paper. For a country like the US that does not issue debt in foreign currency, the thing we call the national debt is a monetary aggregate statistic that measures the total amount of local currency the government has ever deposited into people's accounts that it hasn't yet taxed back—in other words all the past government spending that's still out there. Government spending and taxation policy has real and consequential economic effects on things like growth, inflation, unemployment, inequality, financial fragility, and so on, so it's an important statistic. But it's nothing like personal debt or corporate debt, and if you want a really, really simple and reductive way to think about it, you're probably better off thinking of the "national debt" not as "debt" at all, but as "money".