The National Debt Clock was stopped and taken down in early September. Erected in Manhattan, not far from Times Square, the clock showed the national debt and "Your family's share" in figures. Created in 1989 when the debt was a mere $2.8 trillion, the clock rolled up debt faster and faster through the nineties. At one time it was advancing so fast that the mechanism broke down.

According to news reports, the clock was stopped at $5.7 trillion or $73,733 per family.

The clock was taken down because it had become something of a problem. Created to dramatize the increase in public debt, it had slowed dramatically in 1998. There were periods, earlier this year, when the clock starting running backward, indicating that the national debt was declining, not expanding.

So the clock had become passe and had to go.

Indeed, only a few weeks after the clock was taken down President Clinton announced that the federal budget surplus for fiscal 2000 was going to be at least $230 billion, more than $100 billion larger than the $122.7 billion surplus we had in fiscal 1999.

As a result, President Clinton explained, the national debt had been reduced by $360 billion over the last three years, with $223 billion of it in the last year. It was, he said, "the largest one-year debt reduction in the history of the United States."

Or was it?

It turns out that the removal of the clock was premature. While there is much self-congratulation in Washington about government surpluses, a closer look at government data shows that the national debt is still rising. In spite of two years of record budget surplus and a year of nominal break-even, the national debt is higher today than it was three years ago.

Even in Washington $360 billion qualifies as more than pocket change. Indeed, it is enough to run the entire Health and Human Services department for a year. It's also enough to run the entire defense department for a year with nearly $100 billion left over.

But don't take my word for it.

You can get up to the minute public debt figures by visiting the website maintained by the Bureau of Public Debt. There, you will find that the total public debt at the end of fiscal 2000 was some $5,674 billion, up $261 billion over the same three-year period during which President Clinton has claimed that it fell by $360 billion.

How can this be? How do you have a surplus and still need to borrow more?

The answer can be found in an unsettling vagary of government accounting. When the Social Security program runs at a surplus--- as it has since 1983--- something has to happen with the actual cash. Until recently, it was traded for U.S. Treasury securities and the actual money was spent on other government activities.

Now, with the Social Security program and the rest of government running at a surplus, cash has been used to redeem marketable federal debt--- the paper held by the investing public.

Over the last three fiscal years, for instance, government debt held by the public has declined by $385 billion. Government debt held by government (various trust funds, the largest being Social Security) has increased by $645 billion. Of that amount, about $158 billion is accrued interest that magically appears in the Social Security trust fund in the form of new Treasury obligations, representing the annual interest on the Treasury obligations already in the trust fund. Altogether, government debt increased by $261 billion.

The figures are shown in the table below.
The Changing Composition of Federal Debt (all $ figures in billions)
Fiscal Year Ending Held by the Government Owed to the Public Total
9/29/2000 $2,268 $3,405 $5,674
9/30/1999 $2,020 $3,636 $5,656
9/30/1998 $1,792 $3,733 $5,526
9/30/1997 $1,623 $3,789 $5,413
Change= Up $645 Down $384 Up $261
Source: Bureau of Public Debt
What does it all mean?

Simply this: in a period of surplus, government debt may not decline but who owns the debt can change very fast.

By the next election, our governments' biggest creditor will be the Social Security trust funds.