Country Half Full: An Optimistic Take On Our National Debt Nightmare

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It’s rare that a United Nations report can engender optimism about anything, let alone America’s finances. But a recently issued (and mostly overlooked) study from the global body’s International Human Dimensions Program might just turn the trick, at least when it comes to U.S. federal indebtedness. It turns out that, at least from one angle, we’re not in as deep of a hole as we think! Blandly labeled the Inclusive Wealth Report 2012, this impressive research project, which is super fun to explore, is the first serious attempt to measure the total wealth of the planet’s richest countries. Not income, mind you, which is what Gross Domestic Product (GDP) refers to, but rather total wealth, i.e., the comprehensive value of the physical assets (buildings + roads+ equipment + railroad tracks + etc.), human capital (population + education + skills + earning potential + life expectancy) and natural resources (land+ trees + minerals + fossil fuels). As you , the winner, by a long shot, is the United States, with an inclusive wealth figure of roughly $118 trillion (in 2000 dollars). That’s more than double the total of  the next wealthiest country, Japan ($55 trillion), and almost six times the cumulative value of all the tea plus everything else in China ($20 trillion).

Japan, to give credit where it’s due, tops the ranking of per capita inclusive wealth, at better than $435,000 per person. The U.S. was No. 2, at a little more than $386,000.

So all Americans are pretty rich, by at least one measure. Just don’t expect to borrow against it.

But more on that later.

For now, let’s focus on this potentially cheering reality: The value of all measurable U.S. assets is more than seven times the total of the federal debt, which is fast approaching $16 trillion. When you look at our collective national borrowing in this (admittedly refracted) light, our federal debt picture suddenly starts to look a little  brighter. That is, if we use the aforementioned amounts to calculate our country’s debt/equity ratio—a classic measure of financial health—we’re not doing too shabby. While debt/equity ratios can be measured in any number of ways, it’s generally accepted that a company with a ratio of less than 3 to 1 is doing okay. (This will vary from one industry to another. Capital-intensive industries like automaking typically have higher ratios.)

(MORE: Is the Housing Market about to Take Off?)

So what is America’s debt to equity ratio, using the U.N.’s inclusive wealth figure? Why it’s a paltry 0.13 to 1! Heck, even if you count the sum total of  all U.S. debt—just shy of $57 trillion (gulp) when you include federal, state and local governments, home mortgages and student loans and a few other IOUs—you will still come up with a debt/equity ratio of less than 0.5 to 1.

To be sure, this cup-half-full view of our national ledger has some serious flaws, not least these :

1. We’re leaking resources. Like all but three of the 20 countries measured, the U.S. experienced a decrease in natural capital from 1990 through 2008 (the years examined in the study). It was a slight decrease in percentage terms, from just less than $6.9 trillion to slightly more than $6.6 trillion, but it was a drop nonetheless. (We need to start planting more forests—or discovering more gold and natural gas reserves.)

2. We’ve got a liquidity problem. Companies can sell assets to pay down debt. But it’s difficult to imagine us reaching a national consensus on which National Park we should unload to pay off China. That said, some countries have sold valuable lands in the past to raise funds. (See: Purchase, Louisiana.) And other countries  have nationalized specific industries as a way to generate revenue. (See: America, South and Latin.) Now that’s a prospect that could make a lot of guests at the 2012 Oil Barons Ball nervous!

(MORE: U.S. Authorities Ramp Up War Against Offshore Tax Havens)

3. We’re mostly rich in people. Even if we did decide to hold a national garage sale to eliminate some IOUs—Who wants to buy a really grand canyon?—we don’t have as much upside as one might hope. That’s because human capital accounts for about three of every four dollars of total U.S. wealth, according to the U.N. Most of what we’re worth is who we are (and what we will produce in the future). That’s a great thought for a yoga retreat but a less-than-deal asset class.

Still, even if our country’s debt/equity ratio doesn’t provide an easy or practical way out of our national hole, it’s comforting to know that our balance sheet is still relatively healthy, at least as measured by a research team sponsored by a global body that isn’t on the U.S. Chamber of Commerce’s speed dial.

More to the point, and despite what you might hear during this year’s election cycle, more traditional measures of indebtedness are actually telling a positive story. Last quarter, public and private debt as a share of the national economy dropped for the first time in about three years, from 3.73 times GDP to 3.36 times GDP.  We have a long way to go, but as a country we have actually been “de-leveraging”—paying down debt—which is one of the reasons the economy has been sputtering. It’s an ugly and painful process, but it’s necessary and working.

It’s also a lot better than selling Rhode Island to the highest bidder.

MORE: What the U.S. Debt Deal Means for the Global Economy

32 comments
VincentJoy
VincentJoy

Leave it to the very Left-Wing TIME & Gary Belsky to make the case for taking on even more debt. And you idiots wonder why the media is held in even lower esteem than Congress. Belsky is just another Left-Wing writer who makes excuses for Big Government!

metropika
metropika

An estimated 87, 897,000 people, some of whom are not actively looking for work?

An estimated national debt of somewhere in the range of $57.25 trillion?

And some American boosters actually think that the glass is half full? 

Someone's been drinking the Kool-Aid again.

sickofthisnonsense
sickofthisnonsense

Awesome.  The UN is now measuring us like assets in a corporation.  Feel like a slave yet?

amendment_9
amendment_9

"The value of all measurable U.S. assets is more than seven times the total of the federal debt" ... so if we'd have to pawn off 1/7th of our nation to cover the debt. 

You're trying, but it's not sounding any better.

BalanceZero
BalanceZero

The economic equation is simple really.

Spend less money outside the U.S. and more in it.

We've become excellent at making many countries worldwide very rich at our own citizens expense.

Time for it to stop.

First thing to do is to rid Washington of every Congressman that has recieved foreign donations.

RaziHassan
RaziHassan

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happydayfortennis
happydayfortennis

"As you, the winner, by a long shot, is the United States, with an inclusive wealth figure of roughly $118 trillion (in 2000 dollars)."

Normally I don't judge an article by its awkward sentence structure, but where are your editors on this one? It's genuinely distracting.

Ashley
Ashley

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Ashley
Ashley

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MaryWaterton
MaryWaterton

The funny thing about assets is that they are only worth what another person is willing to pay for them. Up until 2007 you might have thought your home was worth $500K, but in 2012 it's only worth $300K. The UN estimate of "wealth" is built upon such notions as these. So to say that the United States is worth $118 trillion, Japan is worth $55 trillion, and China is worth $20 trillion is really quite relative and meaningless.

The problem with US debt is that we are borrowing for frivolous reasons: wars that don't really need to be fought, free healthcare for everyone (including illegal immigrants), "stimulus" for the sake of "stimulus", etc, etc, etc, etc, etc, etc, etc, etc, etc, etc, etc, etc, etc, etc, etc, etc, etc. That's a trajectory toward poverty and self-destruction.

BigEd
BigEd

This article is so full of ignorant statements as to be less than worthless. 

A government with its own currency (like the USA) is not like a household or a business. It never has to 'pay off' or even pay down its national debt.  There is no reason why it must or should even try.  If it did try during  this time of underutilized workers and capital (a recession) it would only cause the economy to ratchet down another notch.

The USA national debt is no 'nightmare'.  At most it may be an accounting embarrassment of NO significance to the real economy.  China (nor any other holder of USG debt instruments) can never 'foreclose' or force the USA to sell it anything.  If China no longer wants to hold USG debt it can sell it on the open market; and if it does it will receive US dollars in return.  What then will it do with the US $$? . . . . . buy more US-sourced goods, or make capital investments in the USA. 

The debt instruments of the USG are the strongest investments in the world.  Why do you think interest rates on USG debt are a record lows??   And the price of CDS swaps are the lowest of any significant country??  - - - - lower than any of the so-called AAA countries; Germany, Netherlands, Switzerland, Singapore, HK, etc.

Time should do much better than this, and show it has some understanding of national macro financing.

NoFoolJule
NoFoolJule

Life expectancy in the US is lower than other western style democracies - fact.

drorbenami
drorbenami

Wall street is responsible for the crash in 2007, but the american people are 100% responsible for the mess they are  in now. if they had elected hilary president, she would have brought her husband with her into the white house and his economic team....they would not have wasted time on a healthcare plan, but would have immediately gotten to work healing the economy.

the american people, however, wanted "change" and now they got it .....unfortunately this "change" is called "poverty"..... 

David Laidig
David Laidig

Print it and forget it. We have been counterfeiting  legally  for years.   Sheesh

Starshiprarity
Starshiprarity

Read it like one of the skits by the guest comedians on John Stewart. Its an askward but amusing  style.

Leilageq
Leilageq

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Barack_O_Drama
Barack_O_Drama

if you knew much about economics, you would know that we borrow because we as a nation consume (and spend) more than we produce domestically. This necessitates borrowing to account for our trade deficit. As a nation we have four options to adjust for this trade imbalance and reduce our debt: increase savings, increase taxes, reduce investments, and/or reduce government spending. Increasing taxes in conjunction with reductions in government spending would be the most effective means without risking a decrease in GDP growth. But good luck making it politically viable in a nation of gridlock. 

Ashley
Ashley

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Reythia
Reythia

"The problem with US debt is that we are borrowing for frivolous reasons:

wars that don't really need to be fought, free healthcare for everyone

(including illegal immigrants), "stimulus" for the sake of "stimulus"..."

1.)  I'll willingly grant you Iraq, but as for Afghanistan, please remember that some of the folks there flew an airplane into one of our larger buildings and killed a whole lot of people.  And then wanted to do it again.  I'm okay spending money to prevent that.

2.)  Nothing in the ACA gives free health care for illegal immigrants.  That's an outright lie.  We ARE giving free health care for illegal immigrants NOW, by treating them for free in ERs.  But would you really want a doctor treating you who refused to save the life of a 10-year-old just because his parents brought him here illegally?  What would that say about the doctor's morals?

3.)  The stimulus actually worked.  The money extended to businesses has been repaid.  The banking system did not fail.  And during the time of the stimulus (which has ended, please note), the overall economic condition of the country went from falling rapidly to a slow increase.  An increase which never sped up, possibly because the stimulus stopped.

So while I'll agree with you that the numbers stated in this article need to be taken with a BIG grain of salt, every single bit of "evidence" against them that you state is untrue. 

Ashley
Ashley

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Ashley
Ashley

true i agree ,

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Reythia
Reythia

Please note that with health care costs rising as quickly as they are, one of the major drags on businesses is paying health insurance costs for employees.  Perhaps dealing with health care (especially if it had been done in a more effective manner) was actually a step at fixing the long-term economy also.  Also, consider how many people end up in debt or bankrupt because of paying the costs for severe illnesses.  I don't claim that health care is the most important thing to look at when considering the economy, but it's not as trivial as you're implying, either.

Cthulhu Shrugged
Cthulhu Shrugged

Please tell me you are not dumb enough to not remember one of the signature proposals of the Clinton administration.... something the GOP liked to call HillaryCare...

Please, please tell me it was just momentary lapse in your otherwise non-idiotic judgement...

amendment_9
amendment_9

 So pay it off while robbing everyone of the value of their money... looks like it's true, there's no such thing as free lunch.

drorbenami
drorbenami

(there was no reply button to your 2nd comment)

no, not really.....

drorbenami
drorbenami

 Oh really ?  you mean I wasn't able to concisely analyze the entire economic situation in the ubited states with a 500 word comment.....gee I'm shocked...

drorbenami
drorbenami

 (there was no reply button to your second comment)

that's wrong.....hilary sits in the state department and does not get involved in finance.....second, hilary is not the expert i was referring to.....what i said was that she would probably have brought with her most of the members of her husband's experienced and successful team....

she would not have saved the economy by herself....

my understanding is that the financial team obama assembled,  almost immediately, was considered to be not such a good one....i.e the wrong people for this type of problem...

you are focusing too much on hilary herself....a victory for hilary would have re=established the entire, well seasoned,  clinton administration....

drorbenami
drorbenami

 hilary care was in 1993, the country was not on the verge of economic meltdown....the point is if hilary had been elected she would have brought in with her a team with 8 years of experience successfully managing the economy (extremely successfully) AND she would have had the advise of her husband who had successfully managed to work with republicans who did not like him....

I like Obama  (I like him very much) and I think for a new president he has done a good job, but this is precisely my point: he was a new president and in 2009 americans would have been better served by following the advise of coach George Allen in 1971 who used ONLY experienced players to rebuilt a losing team and made it a supper bowl contender within  one season.....

Starshiprarity
Starshiprarity

You don't take constructive criticism well, do you?

Starshiprarity
Starshiprarity

Suddenly football- what? And its not like Obama is acting alone up there. He's got hillary as his second in command and bill is only a text message away.