U.S. National Debt: How Bad Is It?
U.S. National Debt since 1930, and the presidents responsible for it.
The U.S. National Debt has grown at an astounding rate since 2000. Skeptics warn of its dangers (especially inflation) while proponents note that our GDP has also grown. This post will explore how today's debt compares with historical levels— and what it means.
| The Gross National Debt |
It climbs by the minute. But (except recently) so does our GDP. In economic terms, it's the ratio of debt to GDP that suggests a country's liklihood of paying the debt back. It's like a credit score for the nation.
(Source: sdi.gov)
This graph shows that the Debt to GDP ratio was highest right after WWII, when we'd spent four years fighting a major conflict on two fronts and lost over 400,000 men in the process. We'd also helped our allies finance their war efforts. Much of this debt was in the form of war bonds, which were paid back relatively quickly— and decades of prosperity helped to lower the debt-to-GDP ratio as well.
Here's another chart showing the debt-to-GDP ratio into the current decade. Note that it hit its highest level since WWII during the Reagan/Bush years, declined during Clinton's administration, and rising again after 9/11. It's not as high as it was in 1990 (42%)— but it's close.These numbers suggest that in comparison to GDP, our national debt is not at its worst. (Total debt, which includes consumer credit cards, is another story.) Still, we're not making progress: as our economy grows, we continue to increase debt and interest payments, limiting the benefit of economic growth. And if our economy stops growing, as it may this quarter— well, since debt continues to increase, the debt-to-GDP ratio will increase as well.
The national-debt-to-GDP ratio does not (by itself at least) suggest the doomsday scenario predicted by some. But it is troubling, since national debt promotes inflation. And we haven't seen any of that lately, though, have we?
great overview
it doesn,t take into account :-
1. pyramid building (should save in good times for the bad times) the USA has NO savings
2. reduction in working population (reduced earnings while debt rises means trouble)
3. Health care is out of control with no plan to control it means trouble
4. 80% of all money borrowed in the world goes to America, when other countries have problems they stop lending, so borrowing will not be an option
5. inflation rising fast will cause great pain for those that have to pay the debt but had no say in it,s increase
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I agree with your forst four points. However, consistent with classic macroeconomic theory, inflation makes it easier to pay down debt, because the dollars you;re paying with are worth less than the dolars you borrowed. Let's say you borrowed a trillion dollars, then inflated the currency by 50%. The trillion dollars you repay is now only worth half a trillion! That's why governments love inflation when they're in debt.
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