In his book “American Theocracy”, economist Kevin Phillips compares this decade with that of the Depression. In 1929, the total of government, corporate, financial and household debt was 287% of GDP. In 2004, it was 304% of GDP. At the end of the first quarter of 2009, the Federal Reserve estimates that we had almost $34T in debt. With an estimated annual GDP of $14T, we have a debt load about 2.5 times GDP. That sounds better, huh? Not quite.

In 1929, there was no Social Security trust fund for the federal government to borrow from because Social Security would not be set up for another four years. Because Social Security pay outs have been less than Social Security receipts in the past several decades, largely due to the large number of working payers in the boomer generation, the Federal government has been borrowing this extra money. By borrowing from the Social Security trust fund, the federal government does not have to borrow from other countries like China, but the easy availability of this money has allowed politicians on both sides of the political aisle to fund a lot of programs through the years by borrowing against the future – our future and our children’s future.

The Federal Reserve does not include this “intergovernmental” debt in its calculation of total debt, estimated at $4.3 trillion. Add that to the total debt load of $34T and the total comes to more than $38T of debt or a percentage of total debt to GDP that is close to that of the depression.

The good news is that Americans have been reducing their debt load. The bad news is that we still have some ways to go to get healthy. It will be a slow recovery as reduced consumption continues to dampen production.