From the U.S. Government Accountability Office, www.gao.gov Transcript for: What is the Federal Debt? Description: An overview of what the federal debt is, and what it isn't. Released: November 2013 [ Music ] [ Title Screen ] GAO Fiscal Outlook & The Debt logo [ First Scene ] Pie chart of debt held by government accounts (smaller left wedge) compared to publically-held debt (larger right wedge). Debt held by government accounts is illustrated with federal buildings. Publically-held debt is illustrated with people. The people are holding stacks of money that flows into a government building. [ Narrator: ] The federal debt, also known as the gross debt, has two very different components. Debt held by government accounts is money the federal government owes another part of the federal government. This is composed mostly of trust funds, such as social security and Medicare. Debt held by the public is federal debt held by investors outside of the government.When you buy a savings bond, or when your retirement account invests in U.S. Treasury Securities, you've lent money to the federal government. [ Second Scene ] Bar graph of debt held by the public, dollars in trillions, from 1997 to 2012. The bars steadily rise over time zooming in on the years 2003 to 2012. [ Narrator: ] In the last 15 years, debt held by the public has nearly doubled. But it is the long-term future growth that raises the most concern. Such a growing debt burden will reduce the government's flexibility to respond to new or unexpected challenges. [ Third Scene ] Percentage signs floating in space and rising, followed by an army tank, a college graduation cap, and an industrial cityscape. [ Narrator: ] And if interest rates rise, those payments will use up a growing part of the federal budget, putting a squeeze on federal spending in areas such as national defense, education, and infrastructure. [ Fourth Scene ] A conveyor belt of a variety of goods (computer, coffee cup, gas station, camera, car, cellphone) that are being loaded into a truck. [ Narrator: ] As a whole, debt can really only be understood compared to the wealth available to carry it. We measure debt compared to gross domestic product, or GDP, which is the value of the goods and services produced in the United States. [ Fifth Scene ] A line chart showing debt as a percentage of GDP from 1797 to the present, zooming in to show spikes for World War I in 1918, World War II in 1945, and the present day of 2012, and zoomimng back out to show the debt falling after those earlier events. [ Narrator: ] But what makes the debt rise and fall? If we look at federal debt held by the public as a share of GDP, we see debt peak historically as a result of budget deficits during wars and recessions, falling again after those events. [ Sixth Scene ] A line chart showing future debt as a percentage of GDP under two scenarios. The alternative scenario (line 1) hits the historical high of 109% sooner. The baseline extended scenario (line 2) hits the historical high of 109% later and rises unsustainably. [ Narrator: ] Is today's debt burden too high? The real issue is the path we're on. Debt was higher than what our economy produced in 1946, but that was the overhang from fighting in World War II. Today we see that unless there are policy changes, debt will grow faster than our economy. This is not sustainable. [ Seventh Scene ] Three bulls-eye targets. An arrow flies towards them and lands in the center of one bulls-eye. [ Narrator: ] The federal government will need to make tough choices to set priorities and ensure that the resources it expends lead to the results it wants. [ Eighth Scene ] Multiple federal buildings representing the federal government, and floating dollar bills represent tax dollars & revenue. [ Narrator: ] GAO has identified numerous opportunities for the federal government to save tax dollars and enhance revenue. [Closing Screen] GAO logo and person at computer. [ Narrator: ] Explore more about what the federal debt is, and what it isn't, in the Fiscal Outlook section of gao.gov.