Common Myths About the Net Worth of the US Government in 2018
The net worth of the US government in 2018 became a battleground for oversimplification, where complex fiscal realities were distilled into soundbites. One persistent myth was that the government’s assets—its physical property, cash reserves, and sovereign wealth—outweighed its liabilities, rendering it effectively insolvent only in a technical sense. Proponents of this view cited the Federal Reserve’s holdings of Treasury securities and the value of federal real estate, arguing that these resources could be liquidated to cover debt. What this myth ignored was the practical impossibility of monetizing such assets without causing economic disruption. The Federal Reserve’s balance sheet, for instance, was a tool of monetary policy, not a slush fund; selling off its holdings would destabilize markets and trigger inflation. Meanwhile, federal land and infrastructure—valued at hundreds of billions—were illiquid and often encumbered by environmental regulations or public trust obligations. Another widespread misconception was that the net worth of the US government in 2018 could be accurately measured using standard corporate accounting. Critics of this approach noted that governments don’t operate like businesses: they don’t seek to maximize shareholder value but instead aim to provide public goods, which may not generate immediate revenue. The CBO’s Budget and Economic Outlook for 2018 highlighted this discrepancy, stating that traditional balance sheets failed to account for the "going concern" value of the federal government—its ability to continue operating indefinitely by issuing debt. This distinction mattered because it framed the debt not as a liability to be repaid in full, but as a tool to finance future obligations. Yet, for the average observer, the distinction between debt and net worth remained blurred, fueling the perception that the government was either flush with cash or on the brink of collapse. A third myth treated the net worth of the US government in 2018 as a static figure, unaffected by economic cycles or policy changes. In reality, the government’s financial position was highly sensitive to interest rates, inflation, and global investor sentiment. When rates rose in 2018, the cost of servicing the debt climbed, narrowing the fiscal headroom available for discretionary spending. The Treasury’s semiannual debt report that year showed that interest payments alone consumed nearly $350 billion—more than the budgets for key agencies like Education or Transportation. This dynamic aspect of the government’s net worth was often overlooked in political rhetoric, where debt was framed as either a moral failing or an inevitable consequence of economic growth, rather than a variable that could be managed—or mismanaged—through policy.Myth 1: The government’s assets (like cash reserves) make it solvent
The argument that the net worth of the US government in 2018 was positive because of its cash reserves overlooked a fundamental truth: liquidity does not equal solvency. The Federal Reserve’s holdings of Treasury securities—often cited as a backstop—were not free money but rather the result of quantitative easing policies designed to stabilize financial markets after 2008. Selling these assets would require unwinding years of monetary policy, potentially triggering a liquidity crisis. Even the Treasury’s reported "cash balance" was misleading; much of it was held in trust funds (e.g., Social Security) that could not be redirected without violating statutory mandates. The CBO estimated that if the government were to treat these reserves as available funds, it would still face a structural deficit, as revenues would not cover mandatory spending plus interest payments. The confusion stemmed from conflating the government’s book net worth with its economic net worth. On paper, the federal government’s assets—including land, buildings, and intellectual property—might have exceeded its liabilities if all items were marked to market. However, these assets were not fungible. Federal land, for example, was often held for conservation or public use; selling it would require legislative approval and could provoke political backlash. The net worth of the US government in 2018 was therefore less about what it owned and more about what it could realistically convert into cash without causing systemic harm. Economists like Peter Orszag, former director of the CBO, warned that treating these assets as liquid was akin to valuing a museum’s art collection as if it could be sold to pay the electricity bill.Myth 2: The debt-to-GDP ratio tells the whole story
The debt-to-GDP ratio—a common shorthand for assessing fiscal health—was a useful but incomplete measure of the net worth of the US government in 2018. By this metric, the ratio stood at around 105% in 2018, a figure that triggered alarm bells in some quarters but was historically modest compared to peers like Japan or Italy. The problem was that the ratio ignored the composition of the debt. Much of the US debt was held internally—by American investors, the Federal Reserve, and state pension funds—meaning the government was essentially borrowing from itself. This reduced the risk of a sudden debt crisis but did not eliminate the need for future tax revenue to service the obligations. The CBO’s long-term projections showed that even if the ratio stabilized, rising healthcare costs for an aging population would pressure the budget, making it harder to maintain current service levels. Critics of the ratio also pointed to its failure to account for contingent liabilities—obligations that might arise under certain conditions, such as bank bailouts or future wars. In 2018, the Federal Deposit Insurance Corporation’s (FDIC) guarantee fund was underfunded, and the government’s exposure to Troubled Asset Relief Program (TARP) remnants remained uncertain. These off-balance-sheet risks were not captured in the debt-to-GDP ratio but could materialize if economic conditions deteriorated. The net worth of the US government in 2018 was therefore a moving target, dependent not just on current spending but on future shocks that standard metrics failed to anticipate.Myth 3: The government’s net worth is irrelevant because it can print money
The idea that the US government’s ability to issue currency rendered its net worth meaningless was a half-truth with dangerous implications. While it was true that the Federal Reserve could create money to pay debts—via quantitative easing or direct monetization—this power came with severe consequences. Printing money to cover deficits risked inflation, eroding the value of existing debt and destabilizing the dollar’s role as the world’s reserve currency. The net worth of the US government in 2018 was not just about assets and liabilities but about credibility. If investors lost faith in the government’s ability to repay debts in nominal terms, borrowing costs would spike, forcing austerity or default. The CBO’s analysis of historical episodes—such as the 1970s stagflation or the 1997 Asian financial crisis—showed that monetary financing, while possible, was a last resort with high economic costs. Moreover, the government’s monetary tools were not infinite. The Fed’s balance sheet had limits, and aggressive money printing could trigger capital flight or currency devaluation. The net worth of the US government in 2018 was thus a function of both its balance sheet and its reputational capital. Markets reacted not just to numbers but to signals—such as whether the government was committed to fiscal discipline or whether it would monetize debt without regard for inflation. The 2018 tax cuts, which added to the deficit, tested this credibility, as investors monitored whether the government would follow through with spending restraint or rely on future borrowing. The net worth, in this sense, was as much about perception as it was about hard assets.
What Holds Up to Scrutiny
At its core, the net worth of the US government in 2018 was defined by two irreconcilable truths: the government could always borrow more, but doing so would eventually require higher taxes, spending cuts, or inflation to restore balance. The CBO’s Fiscal Sustainability Report for 2018 provided the most rigorous framework for understanding this tension. It distinguished between short-term solvency—the ability to meet current obligations—and long-term sustainability—the capacity to avoid unsustainable debt growth. On the short-term front, the government’s cash flow was healthy in 2018, with tax revenues covering most operating expenses. The challenge lay in the long term, where demographic trends and healthcare costs threatened to outpace revenue growth. The report estimated that under current policies, federal debt would rise to 143% of GDP by 2048, a level that would require corrective action to avoid a crisis. What the evidence confirmed was that the net worth of the US government in 2018 was not a binary question of "rich" or "broke" but a spectrum of risks. The government’s assets—such as its stock of infrastructure, human capital (e.g., the military), and intellectual property (e.g., patents)—had intrinsic value, but they were not easily monetizable. The Treasury’s Financial Report of the United States Government for FY 2018 attempted to quantify these assets, valuing federal real estate at $2.3 trillion and other property at $300 billion. Yet, as the report itself noted, these figures were notional; selling off the Grand Canyon or the National Mall would be politically and economically catastrophic. The net worth, therefore, was less about what the government could liquidate and more about its ability to generate future revenue through growth, productivity, and responsible borrowing."Government balance sheets are not like corporate balance sheets. They reflect the ability to tax and borrow, not the value of physical assets. The net worth of the US government in 2018 was a function of its capacity to maintain investor confidence, not its liquidity." — Peter Orszag, former director of the Congressional Budget Office
| Common Belief | What the Evidence Says |
|---|---|
| The government’s cash reserves make it solvent. | Most reserves are held in trust funds or are illiquid (e.g., Federal Reserve holdings tied to monetary policy). |
| The debt-to-GDP ratio is the only metric that matters. | It ignores contingent liabilities (e.g., bank guarantees) and the composition of debt (e.g., internally held vs. foreign). |
| The government can print money to pay its debts without consequences. | Monetizing debt risks inflation, capital flight, and loss of investor confidence in the dollar. |
| Federal assets (land, buildings) can be sold to cover deficits. | Most assets are encumbered by public use mandates or environmental protections; liquidation would require legislative action. |
| The net worth of the US government in 2018 was negative. | It was indeterminate under standard accounting, as liabilities (debt) and assets (future tax revenue, infrastructure) are not directly comparable. |
Why the Confusion Persists
The net worth of the US government in 2018 remained a moving target because the tools used to measure it were inherently political. The Treasury’s Financial Report employed fair-value accounting for assets but amortized-cost accounting for liabilities, creating an asymmetry that favored understating obligations. This inconsistency reflected a deliberate choice: policymakers preferred to highlight assets (e.g., land) that could be valued optimistically while downplaying liabilities (e.g., unfunded Medicare costs) that required difficult trade-offs. The CBO’s alternative fiscal measures—such as the primary deficit (excluding interest payments) or debt subject to limit—were often sidelined in favor of simpler, more sensational metrics like gross debt. The media also played a role in obscuring clarity. Headlines about the "national debt" or "government bankruptcy" relied on attention-grabbing shorthand that ignored context. The net worth of the US government in 2018 was not a single number but a distribution of risks across time, and journalists frequently reduced this complexity to binary frames. Economists like Larry Summers argued that the focus on debt levels distracted from the more pressing issue: whether the government could sustain its promises to retirees and future generations without triggering a fiscal meltdown. The confusion persisted because the debate was not just about numbers but about values—how much Americans were willing to tax themselves today to avoid higher costs tomorrow.
Conclusion
The net worth of the US government in 2018 was a Rorschach test, revealing as much about the observer’s priorities as it did about the government’s actual financial position. For markets, the key metric was the government’s ability to roll over debt without a spike in interest rates—a function of credibility, not assets. For policymakers, the focus was on whether spending trajectories were sustainable given demographic trends. And for the public, the debate often boiled down to whether the government was "broken" or merely mismanaged. The truth lay in the tension between these perspectives: the government could borrow today, but the costs of that borrowing would fall on future taxpayers, either through higher taxes, reduced services, or inflation. The CBO’s projections made it clear that without reforms to entitlement programs or revenue increases, the net worth of the US government in 2018 would become a liability rather than an asset by mid-century. What 2018 also made clear was that the net worth of the US government was not a static concept but a dynamic equilibrium between borrowing, growth, and political will. The tax cuts of that year demonstrated how fiscal policy could temporarily improve short-term net worth (by boosting GDP) while worsening long-term sustainability (by increasing deficits). The challenge for policymakers was to navigate this trade-off without triggering a crisis. The net worth, in this sense, was less about the balance sheet and more about the institutions that could manage the debt—Congress, the Fed, and the public’s willingness to accept the trade-offs required to maintain stability. The numbers in 2018 were not the end of the story but a snapshot of a system that could either adapt or collapse under the weight of its own promises.Comprehensive FAQs
Q: Did the US government have a negative net worth in 2018?
A: No, but the concept of net worth was misleading. The Treasury’s Financial Report showed assets exceeding liabilities on paper, but these assets were largely illiquid or encumbered. The CBO argued that a true measure of fiscal health required looking at unfunded liabilities (e.g., Social Security, Medicare), which dwarfed reported net worth when accounted for properly. The answer depends on how you define "net worth"—if it includes only marketable assets, the figure was negative; if it includes future tax revenue, it was indeterminate.
Q: How did the Federal Reserve’s balance sheet affect the net worth of the US government in 2018?
A: The Fed’s holdings of Treasury securities—part of its quantitative easing program—were a form of monetary financing, where the government borrowed from the central bank rather than the public. This reduced the need to issue new debt but created a dependency on the Fed’s ability to manage liquidity. The net worth of the US government in 2018 was indirectly supported by the Fed’s balance sheet, but this was not a sustainable long-term solution, as it risked inflation or a loss of investor confidence if unwound abruptly.
Q: Were there any assets the government could have sold to reduce debt in 2018?
A: Technically, yes—but practically, no. The government owned vast amounts of real estate (e.g., federal buildings, land), but selling these would require legislative approval and could trigger legal challenges (e.g., environmental reviews, public land use restrictions). The Treasury’s Financial Report valued federal assets at over $2.5 trillion in 2018, but liquidating even a fraction would have required years of political negotiation and could destabilize markets. The net worth of the US government in 2018 was therefore more about paper value than usable capital.
Q: How did the 2018 tax cuts impact the net worth of the US government?
A: The Tax Cuts and Jobs Act of 2017 reduced revenue, widening the deficit and increasing the debt-to-GDP ratio. While the cuts temporarily boosted GDP growth, they also raised the long-term cost of servicing the debt. The CBO estimated that the tax cuts would add $1.9 trillion to the deficit over a decade, reducing the government’s fiscal flexibility. The net worth of the US government in 2018 was thus a trade-off: short-term stimulus at the cost of long-term sustainability.
Q: What role did foreign holders of US debt play in 2018?
A: Foreign ownership of US Treasury securities—held by countries like China and Japan—accounted for about $6.1 trillion in 2018, or roughly 30% of total debt. This dependency created a vulnerability: if foreign investors lost confidence, they could sell holdings, forcing the government to borrow from domestic sources at higher rates. The net worth of the US government in 2018 was partly secured by global demand for dollars, but this reliance also meant that geopolitical risks (e.g., trade wars) could destabilize the government’s borrowing capacity.
Q: Did the government’s net worth improve or decline between 2017 and 2018?
A: The gross debt increased from $20 trillion to $21 trillion, but the primary deficit (excluding interest) narrowed slightly due to stronger economic growth. The net worth of the US government in 2018 was not a single figure but a mix of improving short-term metrics (higher revenues) and worsening long-term ones (rising healthcare costs). The CBO’s Budget Outlook noted that while the economy was growing, the structural deficit remained a concern, meaning the government’s net worth was stable but not improving meaningfully.
Q: How did the government’s net worth compare to other advanced economies in 2018?
A: The US had a lower debt-to-GDP ratio than Japan (~230%) or Italy (~130%) but higher than Germany (~60%) or Canada (~90%). However, the comparison was imperfect because other countries had different fiscal rules and demographic profiles. The net worth of the US government in 2018 was stronger in relative terms (compared to peers) but weaker in absolute terms when accounting for unfunded liabilities. The IMF’s Fiscal Monitor ranked the US as having moderate fiscal risks—better than Japan but worse than Nordic countries, which had stronger revenue bases.
Q: Can the government ever truly go bankrupt?
A: In a technical sense, no—the US government can always print dollars to meet obligations. However, fiscal bankruptcy (where the government can no longer borrow at sustainable rates) is a real risk. The net worth of the US government in 2018 was secure as long as investors believed in its ability to repay debts. If confidence eroded—due to hyperinflation, a loss of dollar dominance, or a debt crisis—the government could face a scenario where it could no longer borrow, forcing drastic austerity or monetization of debt. The CBO’s worst-case scenarios suggested this could happen if debt exceeded 150% of GDP without reforms.
