Romer Lies

Bruce Krasting's picture

Romer Lies


Christina Romer is one on the leading liberal economist in the nation. She’s no dummy. Valedictorian from Princeton, PHD from MIT, former Chairperson of the Council of Obama’s council of Economic Advisors and now she is a professor of economics at U.C. Berkley. She’s also a liar.

Ms Romer penned a piece for the NYT over the weekend. This was her plea for, guess what, more fiscal and monetary stimulus.

Romer acknowledges that US public sector debt is already too high. But she argues that we are nowhere near the levels that were reached post WWII. Her words:

At the end of World War II, that ratio hit 109 percentone and a half times as high as it is now.

One and a half times Ms Romer? (This equates to a debt to GDP of 72%) Where does that number come from? A few facts:

First, total debt is now $14.588 Trillion. From Treasury Direct:

GDP as measured by the BLS was running a tad over $15b as of the most recent read. From BLS:

Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 3.7 percent, or $136.0 billion, in the second quarter to a level of $15,003.8 billion.

Put the two together and the actual debt to GDP is currently at 97.25% (and rapidly rising). We will exceed the 100% barrier over the next six months.

What Ms Romer has done to spin her number is to exclude all of the debt ($4.7 Trillion) of the nation that is held by the Intergovernmental Accounts ("IG"). This is fast and loose economics. Ms. Romer knows that. But she elects to mislead the public with a totally false claim.

Does Romer think the debts owed to Social Security, Medicare, Military Pensions and Federal employees pension funds don’t count? If she takes that position, she is flat wrong. I maintain that the Intergovernmental debts are much more toxic to the economy than the debt held by the public.

The simple reason is that the Intergovernmental accounts have to be paid back in full. The process of running down the intergovernmental accounts has already started. It will accelerate very rapidly for the next decade. Every penny of the draw down of these accounts MUST result in an increase in debt held by the public.

The US has a huge outstanding of debt to the public. But neither the interest on that debt or the principal has to be paid back. This debt can be rolled over to a new maturity and a new investor. That happens virtually every single day. That is not the case with the Intergovernmental account. All of those Special Issue Treasury notes held by the various government agencies are going to come due over the next 20 years. When that happens it will result in a dollar for dollar increase in Debt to Public. Exactly the worst possible outcome.

Ignoring the IG debt and only focusing on the debt held by the public is a dangerous thing to do. It is the worst form of denial. To ignore the IG account is equivalent of ignoring the crisis in Medicare and Social Security. But that is precisely what Romer would have our policy makers do.

It’s true that the US economy is running at a pace that is too slow to create enough jobs. I think this is a structural issue. We have a rapidly aging population. We have, for years, been losing our manufacturing base. We have outsourced ourselves to high unemployment and a soft economy. That problem will take years of hard work (and sacrifice) to reverse. Insane levels of deficit spending and an (equally) insane monetary policy that just steals from savers and promotes inflation are not going to address our fundamental weakness.

Ms Romer is one of the Deep Water economists (either coast) who are pushing for more and more debt and more and more spending. She is entitled to her opinion, but she in not entitled to lie about it.


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Don Levit's picture


You wrote that the $200 trillion of debt owed to intragovernmental accounts is irrelevant, because the interest paid from the Treasury can be borrowed back again from the Treasury.

When interest is redeemed from the Social Security trust fund, the mechanism is the same as when the Treasury pays the interest on debt held by the public  -  there is an immediate budget impact of paying that interest.

The idea of borrowing back the interest paid is certainly a creative one, but I have not seem in any reputable literature that the government is actually able to do this.

From a paper entitled "Long-Range Fiscal Policy Brief No. 5" published by the CBO:

Page 2 "The receipts themselves are deposited in the Treasury, and program expenditures are made from the Treasury.  So while trust fund programs' sources of spending authority and accounting may differ from those of other federal activities, the programs affect the overall financial condition of the government in the same manner as all other programs  -  through the income and expenditures of the Treasury.

Even Social Security, largely supported by taxes on employees and employers, is credited with substantial amounts of intragovernmental income, the largest being 'intertest' accrued on its holdings of federal securities.  But no public or outside entity pays that interest; it is a credit from the governmenyt's general fund to the Social Security trust funds.

Page 3  "For the next 10 years, trust fund programs overall are projected to run a cumulative surplus of $3.4 trillion.  However, with intragovernmental transfers  excluded, the funds' activities are expected to generate a cumulative 10-year deficit of $1.2 trillion.  And those deficits only grow larger as one looks farther out."

And, even if the interest and principal is paid with debt rather than cash, it becomes debt held by the public and competes with the private sector for funding  In a paper entitled "Financial Audit Bureau of the Public Debt's Fiscal Years 2009 and 2008 Schedules of Federal Debt," published by the GAO:

Page 2  "This intragovernmental debt and related interest represent a claim on future resources and hence a burden on future taxpayers and the future economy.  Specifically, when trust funds redeem Treasury securities to obtain cash to fund expenditures, Treasury usually borrows from the public to finance these redemptions.  Such borrowings result in competition for funds with the private sector and thus an effect on the economy."

Don Levit


moneymutt's picture

either there is or there isnt....if there isnt, then there is no debt just like Romer problem is having it both ways...ignoring trust fund when it comes time to pay benes it was designed to build surplus for, but paying very close attention to it when talking about US overwhelming debt...its not hard to be clear:

There is a trust fund, FICA collected a surplus for three decades to be flush with saved cash when baby boomer wage earners that paid in retired and took out in disproprotianate rate due to their population bulge. US is fairly obligated to pay bonds to Soc Sec trust fund. However, US can easily change benefits, and thus make trust fund solvent for longer, and take out less cash now. The trust fund exists, by various manuevers it can be essentially bypassed. But that does not change to fact the wage earners and the employers paid into a system thru heavy FICA taxes for 30 years, to make solvent thru 2036, and that money, needed to be set aside for boomers retirment, was lent to govt. The rest of the govt operations did not tax enough or cut enough to stay balance, unlike FICA which taxed in excess of its current needs, DoD etc spend for more than it had coming in tax revenue, so Fed govt needed to borrow. So it borrowed from Soc Sec trust fund. Now that boomers are retiring, and retiring earlier due to recession, Soc Sec is no longer lending, and is actually cashing in bonds to pay for boomers, as trust fund was intended. Fed govt could afford its spending on DoD etc when Soc Sec was lending to it, it really cant afford it now that Soc Sec is asking for some its money back. So the trust fund may be gutted, promised benes may be taken, but it does not mean it did not exist. It is one line item in Fed budget that was properly taxed to  cover the anticipated costs, while all other Fed spending was far in excess of tax revenues...if we saw 2 wars were necessary and wanted to pay for them, we could have rescinded W tax cuts, instead, wars were unfunded. So the one program in Fed budget that had balls to raised taxes to make sure benes there, gets raided by all the other programs that spent way to much and never asked people to pay their share of the spending

juwes's picture

I'm pretty neutral on everyone having their own version of the truth, but I like to ask questions that force a commentator to speak plain english to explain themselves.  That way you get past the talking points and into their minds where they can't trick viewers.  I'm also biased against the concept of profit above all legitimate human needs (profit itself doesn't feed more than a few people unless you share it with employees and the community through infrastructure buildout).

SO...  If anyone on Zero Hedge wants to join me (or connect me with someone you know who knows video production/editing), I'm looking for people who know how to create good production values on a zerohedge slanted news program to be broadcast on the internets.  It's going to be more daily show in its seriousness than the self important faux news/cnn etc crowd's style.

I think if there were constant and repeated video messages about who the people can unite against, the conversation can be moved towards a populist, artisan, creator heavy society.

I've come up with what we'll have in the in-between segments and other splash screen moments.  Simple, one sentence lines that tell a truth that leads people to be less ignorant.  So instead of "FOX NEWS, FAIR AND BALANCED", we'll replace the fair and balanced with:

"Watching television leads to obesity."


"The difference between a slave and a wage slave employee is that only one KNOWS he's a slave"


"Save money, enslave people in Asia, Wal-Mart."

the grateful unemployed's picture

There's already a a great deal of counter-culture information. The viewer is in the position of the blind men and the elephant, each one has a piece of the puzzle, but without a view of the entire animal.

Probes or questions, would be more interesting than facts, or statistics.

You have to probe the elephant. This article is annoying (by example) because it disregards the way a President establishes a corporate hierarchy of informaton. It was really Bush who first said he would run the WH like a corporation, and Obama does the same thing. In a corporation you don't want anyone going rogue, you have to keep everyone on message.  It's not hard to figure it out, the day after one of their meetings everyone is repeating the same line.

I recall when Bernanke testified to Congress, that "the dollar was not his problem." A week later he was backtracking, but so were all the other cabinet members whose job was economically sensitive. This is not to say Bernanke has nothing to contribute. he is more like a COO, and Obamas advisors are the policy wonks, Goolsbee, etc. If Goolsbee says lets try this, and Bernanke says, "No that will cause another Depression..." then you have some conflict, but in that case it's between operations and strategy. Very corporate.

Now the Daily Show does a pretty good job of pointing at the men behind the curtain. So where are you going with this? A bit deeper into these relationships, and obviously as the new CEO of the CSA, that's Corporate States of America, you aren't going to change the mission of the company, which is to protect Americas interests abroad, for instance, even it runs counter to all the things you said in your campaign, as an individual espousing the notion he represents the ideals of the nation, and not the corporate leadership.

Once he is elected he is that leadership, and therefore has a obligation to the mission. If it all sounds a bit militaristic, it is, but defined in the broadest use of the term, meaning a society culture or economy undergoing rapid change, usually due to technology. The apparent contradiction built in between the individual as candidate and the candidate as elected official is an expression of the political system. This is why it doesn't matter who you elect.

You need someone who will examine the organization, (which by definition means anti-government- the Tea Party is not anti-government, its anti-corporate system, or pretends to be, one suspects that the party has the quality of any single candidate and it would be folded into the corporate model of governance pretty quickly)

good luck these ideas are free, for what they're worth, think about them and hope you come up with something, although most people tend to respond to the problem in rote fashion, your'e either for us or against us. (explain the term us?)

Bob's picture

Oh, please feature a mute Mr. Market sock puppet and his talking sidekick Mr. Finance who speaks for him to interpret everything under the sun in terms of "Mr. Market is saying" . . . he could even throw power lunch play dates where other puppets in the neighborhood (Bernanke, Obama, etc.) come in to pin other self-serving bullshit on him.  

Sorry, can't help with the video production, though. 


Hubbs's picture

After WWII, USA was the only show in town (left standing) and poised for real growth, so that even Keynesin  strategies would work and handle the amount of debt. Now that the boom has run its course and we have cashed in, we couldn't pay back the money owed to the little girls at the lemonade stand.

SheepDog-One's picture

Right, these lunatics will never admit theyre wrong. Just yesterday Krugman was talking about aliens (from outter space, yea those aliens) and how an alien attack on the world would be good for our economy.

MFL8240's picture

Another American twinkie lover, ...boy is she hot!!

Spigot's picture

Ladies and Gentlemen, please retake your seats! Nothing has occured here to justify this violent outburst. When you are calm we will proceed with the remainder of the program. Now, please relax and enjoy the rest of the show...

The people who are in these "leadership" positions are sociopaths and psychopaths. They are perpetual liars and frauds.

When they speak it is all about the agenda. Everything they say publicly is an articulation of the agenda. There is no need to go further than that. Romer is articulating the agenda.

More deficit the agenda. It will happen. There is no question that it will happen. She is a front for the agenda, as they all are.

You had better find an escape route for yourselves, because this nation is being destoyed by its leadership. You will not want to be in any way dependent on anything these people have control over...


moneymutt's picture

BK, even crusty fiscal conservative Mish, your admirer, btw, is willing to to consider Soc Sec debt differently than debt to outsiders, given it can be messed least he is consistent, he does not respect the Soc owed debt both when considering what govt debt is and also when considering paying benefits, so he is more clear and consistent than most on this topic

moneymutt's picture

When we are discussing future benefits or possible default, Soc Sec is never considered a debt that we are obligated to, it is just considered a instant in time transfer payment from young to old, the trust fund may as well not exist in most people's minds, as little as anyone seems to know about it.

But then suddenly when we talk how ends ted the US is, then Peterson Fnd and most media etc, want to count it as a debt owed. Which is it?

Even BK makes this slippery shift...tho more clear than most.

I want it counted as debt, because there is a trust fund that all wage earners paid with their taxes for last decades to build up to pay for baby boomers...but that policy obligation gets ignored, until it's time to talk hoe big debt is

Escapeclaws's picture

Thanks for pointing out the inconsistencies, MM. There seems to be a regular jihad against social security. You would almost imagine that various thrones and dominions sense that there is something of value there that they can get their hands on, in spite of their claims that SS is bankrupt. Anything except honor the pledge to the people who were forced to pay in. Perhaps the solution would be to turn the funds over to the military to administer. They have an excellent track record for financial probity. That's why talk about the military is off the table.

alpha60's picture

"I want it counted as debt, because there is a trust fund that all wage earners paid with their taxes for last decades to build up to pay for baby boomers...but that policy obligation gets ignored, until it's time to talk hoe big debt is"


you believe that there is a trust fund for soc sec benefits? (snicker)

moneymutt's picture

Wow, here at ZH, where commentary is a bit smarter than most, and in response to a BK post, pretty numbers oriented stuff typically, there is a bunch of sexist and racist postings (in Obama rantings that don't even fit because his admin ignored Romer and she is gone and BKs rant is directed towards Liberal economists). People rip on Bernanke all the time here, but it rarely has anything to do with his gender, sexual habits or skin color, but a woman is criticized and the misogynists go nuts.

I hope most or this is just trolls paid to sling personal mud....but if all the sexism and racism is organic even at ZH, hard to see how we can solve any serious problems in this country.

Fuh Querada's picture

Who would you rather spend the night with: her or AMurkle?

Clowns on Acid's picture

Lies Romer told us ? Firstly why is this a surprise at all? When the left wuing facsist US Lame Stream Media elected Barry the Kenyan had to know it was going to be Alice in Wonderland from a policy and promotion perspective.

The lines are drawn....swords are not.... yet....but months away....prepare.


Crisismode's picture

The woman is brain dead.



What more can one say?

alexwest's picture

there's movie DUMB/DUMBER.. there's scene when they found briefcase full of money , they spent and put notes saying good for 'xxx $$$'.

this is exactly what US goverment do w/ SS money..


tony bonn's picture

who in god's green earth would think that romer would be anything but a liar??....her former boss, the indonesian-liar-in-chief has lied about his birth certificate since day 1.

so naturally she would immitate her boss...and since he was hired by the rockefeller-rothschild axis of evil to pedal lies about voodoo economics, we would expect him to hire someone who would lie any time her lips were flapping..,

we receded into the dark ages of eonomics when the fraud keynes emerged to envelop the world in a twisted web of economic horsehit sprinked with skittles and neon glitter....

bharat's picture

I have decided to enter the presidential race. If an Indonesian can get elected as President, why not me? I am Indian and as the U.S. constitution does not allow discrimination based on national origin, I have decided to offer my services. I am confident I can do a much better job than any of the so called "American" candidates, with the exception of Ron Paul (if he doesn't become the President, we would be honored to have him here as our Prime minister).

Element's picture

Mahatir Mohommad has always had a direct way of putting US deficits and debt into perspective. He said rather loudly in Sept 2008 that the US deficit (the still unexpanded then final Bush deficit of $1.04 trill pre Lehman's) was already much too big for the USA to survive the outcomes and implications down the road ... and to prepared for that result.

Since then that deficit has expanded enormously - contrary to Obama's core election promise in Oct 2008 (... and about those pesky earmarks).

Romer is not the only liar ... she's just a part of that "total-scum" kulture endemic to the White House

the grateful unemployed's picture

perhaps you get it. gee I am the CFO of GE, and i make a public statement that we could probably pay a bit more in taxes than we already do? hello asst mgr at Del Taco. the USG works the same way. Get over it! who does Obama take money from? (besides what Bernanke steals from widows and orphans) Wall Street.

GoingLoonie's picture

We need a law that makes lying by any public employee, elected official or bureacrat, a criminal offense.  This would solve 100% of our problems in this Country.  100%.

ejhickey's picture

It is a federal crime for an individual to lie to an agent of the US government even though not technically under oath.  Martha Stewart was convicted of this a few years ago.   However not a crime for a federal employee to lie to the general public.

sun tzu's picture

It won't matter. Do you think Holder would prosecute them?

DavidC's picture

Same here in the UK. There was a programme on Channel 4 a while ago where some politicians were asked if they knew what the UK's total debt was. Some had no idea (errm, you'll need to ask my secretary/economist about that), some thought it was $150-160 billion (that's the ANNUAL budget deficit).

NOT ONE one quoted the figure at the time of either £800-odd billion (the total current debt) or nearly £4 trillion (total including unfunded liabilities).

Not that most people understand the SIZE of these amounts anyway.


Don Levit's picture


Intragovernmental debt is considered inferior to debt held by the oublic by many economists.

Intragovernmental debt is what the government owes itself.

Debt held by the public is debt owed to an outside entity.

It is believed by these economists that outside debt is more important to be repaid than the right hand paying the left hand.

In addition, the federal government views debt held by the public as an explicit liability, a level one obligation, the strongest obligation to fulfull.

Intragovernmental debt is considered an implicit promise, a level 4 obligation, the weakest obligation to fuilfill.

Future Social Security and Medicare payments are not even viewed as liabilities, for the programs can be changed at any time.


Debt held by the public has an immediate cost, for debt is paid in cash, with an immediate budget impact.

Intragovernmental debt interest is crtedited via Treasury debt, with no immediate budget impact.

When the interest of the Social Security trust fund is redeemed (as has been done the last 2 years to make up for the cash deficit to pay benefits), it is paid in cash, with an immediate budget impact.  If paid with debt (which I believe to be unconstitiutional, for how can debt be redeemed with debt), then intragovernmental debt reduces, debt held by the public increases, and total debt remains the same.

I can support my statements with reputable government links, for those who are interested.

Don Levit

moneymutt's picture

Good post, I think it's just a matter of clarity, that no public figures in this debate seem to be interested in providing...Simply saying this much is owed to Medicare and Soc Sec trust fund If we maintain benefits at current level could be a clear simple way to say this in shorthand.

Also, fact that Soc Sec debt that could sort of be ignored is now on the books now that it is being paid back. so big part of mushrooming debt is because some of soft debt is now "real" debt and Soc Sec lendings to govt are no longer available, so more of deficit spending is nos suddenly "real" debt according to govt. If Soc trust fund treated as real debt all along, W tax cuts thru to unfunded wars would have looked as crazy as the were (also wars were not part of budget according to govt)

hardcleareye's picture

Excellent post, next time just put in the links.  Thanks

steve from virginia's picture


I noticed another commenter mentioned 1933-34 and what amounted to US default and devaluation.

Romer forgets her history.

40 years of stimulus and the establishment wonders why it doesn't have any more traction.

Sad ...

masterinchancery's picture

Romer also forgot the 7 trillion in Agency debt, which the treasury has guaranteed. She also forgot the 100 trillion + entitlement debt. And she also forgot that US GDP in 1946 was mostly real, while a huge percentage of our current "gdp" is paper shuffling and government salaries and benefits.

AR15AU's picture

Thanks, Bruce...  we all know they are lying, but its so important for the well respected bloggers such as your self to shine the light on it when it happens.  You are the tip of our spear.

sbenard's picture

I've noticed this same phenomena elsewhere. Progressives ignore the IG and then seek to deceive people about the true magnitude of debt. They're liars. Period. It's who they are! Is it any wonder this kind of stuff comes from the Deceiver in Chief?

I remember a recent article also here on ZH that included all the liabilities that would be required if a corporation were accounting for all their liabilities. Those would include, in today's dollars, future Social Security and Medicare liabilities, potetential losses from Fannie and Freddie, and all the potential losses from the Fed also. The truth is this: US debt and unfunded liabilities now amount for more that the entire GDP of PLANET EARTH! THere is no escaping it, and there is no painless way out of it!

We've created a black hole of debt! It's going to destroy us one day, and that day is quickly approaching -- SOON!

Boilermaker's picture

Bruce, here's some shocking news....they are ALL lying to us.

Mr Lennon Hendrix's picture

I am convinced she is Adolf Hitler's offspring.

nmewn's picture

Gruppenfuhrer Romer..kinda rolls off the tongue ;-)

Don Levit's picture


I believe Tom is correct in stating that intragovernmental debt is not as important as debt held by the public.

At least, that's the way most economists seem to view it.  In addition, the federal government itself puts debt held by the public as an explicit liability, the highest obligation to fulfill of all our debts.

Interest is paid in cash on debt held by the public, or at least, is supposed to be paid in cash, with an immediate budget impact.

Intragovernmental debt, such as future Social Security and Medicare benefits, are not even considered as liabilities, for they can be changed at any time.

They are considered as level 4 debt, implicit promises, the lowest of 4 "levels' of debt recognized by the federal government.

in addition, the interest is paid to the trust fund in debt, not cash, with no impact on the current budget.  (unlike debt held by the public, in which interest is an immediate expense, with an immediate impact on the budget).

When the interest on Social Sevurity has been redeemed the last 2 years, in order to make up for the cash flow shortage for current benefits, that did have an immediate budget impact  -  in the form of incraesed revenues, decreased expenses, or increase in debt held by the public.

I'll take what's behind door 3, thank you.

Rememeber, though, that when intrafgovernmental debt is redeemed, it reduces by a like amount, so the total debt remains the same.

I can provide governmental links to support my statements.

Don Levit

Anonymouse's picture

I see you have been posting this same comment around the web for about a year, Don.

But in the FAQ document ( you linked to last week, that 2004 GAO document expressly states "Debt held by government accounts (intragovernmental debt)—about $2.9 trillion at the end of fiscal year 2003—represents balances in the federal government’s accounts, primarily trust funds, that accumulate surpluses.5 Thebalances are invested in special, nonmarketable U.S. Treasury securities that, like debt held by the public, are guaranteed for principal and interest by the full faith and credit of the U.S. government."

So it it has full faith and credit, it seems to me it must be paid pari passu with what you term "Level 1 debt".

This is not the same as PV of unfunded liabilities.  This debt represents SS taxes that have been paid and diverted to government debt to cover current non-SS spending. I should think if there were a shortage, the SS program might be canceled, but this debt would have to be repaid to SS "trust fund" then disposed.  I know there is no legal right to SS, but not even considering the politics of cancelation, those monies have been paid for a specific purpose (SS) and have been diverted.  Given that they have a specific "color of money" as we used to call it in USAF, and carry FF&C, I don't think they can be treated so cavalierly.

Why would a court (or the bond market for that matter) not consider this debt to be the same as debt held by public?

Bruce Krasting's picture

The SI bonds held by the Trust Funds are Parri Passu (equal) to marketable securities. I am sure that if a court looked at the facts and history behind this they would confirm this.

They won't default on the SI bonds. That means they have to slow down the drain of these trust funds.

moneymutt's picture

Yes, they will pay bonds, but promised benes will no doubt be messed it's an obligation but the time of redemption, as you say, can be made flexible by changing benefits or be increasing revenues into trust fund

hardcleareye's picture

  "..but this debt would have to be repaid to SS "trust fund" then disposed."

I don't agree with your statement.  I think a valid argument in a court could be made that it doesn't have to be repaid.  Bond market might view this different, but maybe not.

moneymutt's picture

You can argue anything in court but path of least resistance would be to on face honor debt tom trust fund but make it so trust fund asks for little of this debt back...simply by making Soc Sec more like the transfer most people think of it as....raise FiCa taxes on current workers, decrease benes paid to retired workers and trust fund is not drawn down. In essence ignore fact that a trust fund paid by boomers while worker to pay for boomers when retired never existed (I exaggerate, as we have already paid some of debt in last two years) but I think ignoring trust fund obligations will be done this way rather then by outright defaut.

Anonymouse's picture

So what does "full faith & credit" mean to you?  I'm not arguing about the future of SS, but the requirement to repay bonds noted as FF&C.

The Alarmist's picture

Romer lied, the economy died!