The U.S. balance sheet includes billions in 'old debt'

WASHINGTON  A closer look at the nation's balance sheet shows that the United States already is billions of dollars over the current debt limit — a debt that includes bonds that date back to the administration of George Washington.

The federal debt ceiling is $14.294 trillion, set to be reached by Aug. 2 if Congress and the president don't reach a deal to extend it.

As of the most recent accounting, however, the United States has $14.343 trillion in debt — $48.9 billion more than the debt limit. That's because Congress, over the years, has exempted certain kinds of debt from the ceiling.

One such category: old debt. When Congress first established a debt limit as part of the World War I-era Second Liberty Bond Act of 1917, the limit applied only to new debt. Ninety-four years later, the government still owes $55,757 from its first bond issue in 1790, which was used to pay off the states' Revolutionary War debt.

According to a Treasury accounting, pre-1917 debt now stands at $1.3 million — mere pennies compared with the current $14 trillion tab.

Even so, it has caused accounting headaches for the Treasury Department since at least the mid-19th century.

"It's not debt that we couldn't have paid off," said Robert E. Wright, a financial historian and author of One Nation Under Debt: Hamilton, Jefferson and the History of What We Owe. Indeed, he said, President Jackson was the first to eliminate the national debt in 1834, putting the nation in the black for the first time after a debt that once exceeded $127 million for the American Revolution, the Louisiana Purchase and the War of 1812.

Rather, a part of that debt still exists because some of the bondholders — for whatever reason — haven't redeemed the bonds. They could be lost, destroyed or tucked away in attics or archives.

"The government, being very — what's the word? —punctilious about its debt, won't take it off the books," Wright said. ("Punctilious" being a good word for the government's strict adherence to the full faith and credit of its debt.)

All told, more than $16 billion in unredeemed Savings Bonds are circulating and no longer earning interest. That's one reason the Bureau of the Public Debt announced last week that it's eliminating paper bonds next year and moving to electronic bonds that are automatically redeemed when they mature.

A slightly more consequential category of debt not included in the debt limit is the $488 million in old currency the Treasury counts as debt. That's because from 1862 to 1971, paper currency in circulation had the legal status of a no-interest loan from the government to the holder.

Congress also has created new debt that it exempted from the limits. Most recently, the 2008 Housing and Economic Recovery Act allowed the federal government to borrow up to $300 billion to guarantee mortgages for homeowners at risk of foreclosure. Only about $500 million of those bonds are outstanding, however.

Brent Jones. For publication consideration in the newspaper, send comments to For more information about reprints & permissions , visit our FAQ's. To report corrections and clarifications, contact Standards Editor. For publication consideration in the newspaper, send comments to letters@usatoday.com . Include name, phone number, city and state for verification. To view our corrections, go to corrections.usatoday.com