The collective output of the U.S. has increased modestly in the most recent quarter, as Reuters reports:

Gross domestic product expanded at a 2 percent annual rate, the Commerce Department said on Friday in its first estimate of the third quarter, a pick up from the second quarter’s 1.3 percent pace.

This is positive news, but did the economy really expand? Or is it possible that the government just issued more debt that flowed into the economy and was picked up as “growth”? More reporting from Reuters:

The report was a bit better than economists had expected, in part because of a surge in government defense spending that was not expected to last. Defense spending rose at its fastest pace in three years, combining with the rise in household consumption and a jump in home building to strengthen domestic demand.

You can see in the chart above that the amount of U.S. debt issuance far exceeds the dollar amount of growth for the national economy. Part of the debt issuance is used to repay old bonds that reach maturity and must be repaid. According to the Treasury Borrowing Advisory Committee, which is chaired by Matthew Zames of JPMorgan, $276 billion of third quarter 2012 debt issuance was “new money,” beyond what was needed to pay off old bonds. The real dollar growth in the GDP was $190 billion, much less than the amount of “new money” debt issuance. Treasury bond issuance seems to have financed all the growth in GDP.