The current US public debt to gross domestic product debt GDP is 122% up from from 58% in 2000.
It would seem the USA is quite adept at spending money it doesn’t have while adverse to raising taxes for what citizens say they want or politicians tell them they are entitled to.
How much is one generation entitled to that it does not pay for?
Here is how we stack up with the world. Only Japan is in worse shape.
Yes, a high debt-to-GDP ratio can be a significant risk for a country’s economy. Here’s why:
- Higher default risk: When a country has a lot of debt relative to the size of its economy, it becomes more likely that it will default on its loans. This can spook investors and lead to financial panic.
- Limited response to crises: Countries with high debt levels may be unable to borrow more money to stimulate the economy during a recession. This can make economic downturns worse and hinder recovery.
- Crowding out investment: High government debt can compete with private businesses for loanable funds. This can lead to higher interest rates and discourage investment, hindering long-term economic growth.
- Financial system instability: If a government defaults or struggles to repay its debt, it can cause problems for banks and other financial institutions that hold that debt. This can lead to a financial crisis.
There’s no one-size-fits-all answer to how high is “too high” for a debt-to-GDP ratio. However, many economists believe that a ratio above 60% is cause for concern. The specific risks will also depend on factors like the composition of the debt (domestic vs foreign currency) and the strength of the overall economy.
Will the US face all these possibilities? Let’s hope not, but keep in mind all the debt a country uses must be purchased by someone or some country. Is that demand endless, will investors demand higher returns?
Many people believe we can cut spending to solve our problems, cut fraud and waste and even social programs.
Is that what Americans want? Let’s see the details!
In the meantime the demand for more from government is endless.
QUINNSCOMMENTARY 
Why is the term “don’t spend more than what you have” difficult for people?
Educating people about finances and the economy are useless as titz on a bull if we just keep raising taxes to keep up with our spending!
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“The life-cycle hypothesis (LCH) is an economic theory that describes the spending and saving habits of people over the course of a lifetime. The theory states that individuals seek to smooth consumption throughout their lifetime by borrowing when their income is low and saving when their income is high.
The concept was developed by economists Franco Modigliani and his student Richard Brumberg in the early 1950s.”
There is likely a similar version of the hypothesis for countries also, or businesses (it takes money to make money?)
My Dad said* credit is what made this country great. Imagine not being able to buy a car until you saved up enough cash. He had a corollary theory, to reduce traffic congestion; you can buy a car on installments, but can’t register or drive it until it is paid off.
There are numerous reasons to spend more than you have, within reason.
*Farm hand, never finished high school, probably “borrowed” this theory from somewhere.
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The post was about government spending not some 74 year old theory about personal borrowing. Borrowing which by the way is at an all time historical high in 2024.
The government’s inability to spend just what they have should not be fixed by simply raising taxes!
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And yet, debt is not intrinsically bad, within reason, and in some cases useful or necessary, even vital. If we are, in fact, one of the lowest taxed of all developed countries (we are), perhaps increasing taxes to meet our needs, and reduce our deficit, is the correct path. Government spending, either per capita or as a percentage of GDP in the U.S. is about average for OECD countries. It is the taxation that is lower.
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Sleepy-time Joe should just wave his magic wand and erase the debt. He’s good at that!
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I think the hard concept is paying for it all.
No, the hard concept is is who should pay, not what it costs. It is in overcoming the tendency for folks to want more, and more, and more and to have someone else pay, and pay, and pay.
Here’s the crap – since the turn of the Century, we have increased federal income and employment taxes from about $2 Trillion to more than $5 Trillion. At the same time, we have increased spending from $2 Trillion to over $7 Trillion. The idiots in charge continue to buy your votes with more spending – they propose to add $1.5 – $2+ Trillion a year in annual deficits for the next ten years, and, unless change occurs, the CBO recently predicted that the debt ratio will be 172% of GDP, or $146 Trillion in 2054 (30 years).
Americans need stewardship education starting in grade school, high school, post-secondary and annual (at the polls, as well as when filing your tax return – everyone should be required to file a tax return, even those who owe no taxes). For the young, it is the bounty that they inherited by the efforts of those who came before, as well as the $100,000 in indebtedness. As people get older, annual updates on whether they have reduced that indebtedness, as a steward for generations to come – developing a stewardship mentality – where you take responsibility for yourself, as well as those you will someday leave behind (whether or not related by blood). We all inherited from many who were not related by blood …
No more looking for someone else to pay. No more idiots like Trump claiming Mexico will pay for the wall. No more super idiots like Pocahontas and Bernie claiming those with the highest income (millionaires and billionaires) aren’t paying their “fair share” – when the top 10% of earners are shouldering 2/3rds or more of federal taxation.
That is the mentality one of my siblings used to have – ‘we are a rich nation, we can afford to do more’. It is the mentality when Congress/President Biden sends $80+ Billion elsewhere, as they did earlier this week/last week, but not one dime in new taxes to pay for it.
That sibling now has children and grandchildren and it has been at least that long since I have heard such talk.
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What folks want is a free lunch–why cut spending when you can single out a small group of people and convince the populous to take more money from them to pay for what you want. Why should you pay for it?
James 2 has sensible ways to approach the problem but be careful with that green spending as we will all be dead by 2033 according to some unless we act NOW.
You know not too many years ago folks would say credibly that we can grow our way out of the deficit problem much like the Clinton years. Now, even with very strong growth, we can’t make a dent as spending is sacrosanct.
If you can’t defund NPR for the small amount they get then nothing seems possible. The communication world has drastically changed over the past 40-50 years so there is no need to subsidize this group. Start with small cuts like NPR and work your way up–show that we are serious and progress can be made.
We are not under taxed–federal/state/local/property/sales/excise/fees–we just spend too much.
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The chart doesn’t look so bad in comparison. The existing debt can be managed if the annual deficits can be brought under control. We don’t have a high default risk and the dollar is used around the world for trading purposes. The problem is annual deficits going forward. No need to use an axe, just pruning shears. Social Security? A cola minus 1%. Put off planned spending on the green transition for a longer period. Military spending can be frozen. You get the idea, stop blasting dollars through a fire hose and use a garden hose.
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