In the classic movie “Network,” there was a point when people began to
shout, “I’m mad as hell and I’m not gonna take it anymore.” I feel a
similar sentiment brewing in America regarding our national debt which
has exploded in recent years. In this article, we’ll look at a few of
the reasons for the debt increase and discuss what the future may hold,
especially if politicians continue to kick the ‘proverbial’ can down the
road. Let’s begin with a little perspective.
America has the largest debt burden in the world. There were some precipitating events which contributed greatly. For the sake of perspective, consider this. Japan, the world’s fourth largest economy (as measured by GDP), has a debt-to-GDP ratio of 227%. This is the highest such ratio in the world. The U.S. has a debt-to-GDP ratio of 101% which seems rather modest in comparison. Modest perhaps, but in absolute terms, our debt is rapidly approaching $18 trillion . Japan’s debt is approximately $13.4 trillion, however, its economy is only one-fourth the size of America’s.
How did our debt grow so large? Why does it continue to rise? We’ll look at these issues. But first, to be perfectly clear, when our federal government spends more than it collects, the result is a “deficit” which is added to the debt. Therefore, debt expansion is a result of fiscal deficits or if you prefer, overspending. We’ll examine this more closely in a moment. First, let’s look at the average percentage change in the public debt during various periods.
The greatest period of debt expansion occurred from 1980 to 1991 at 13.4% (measured by average percentage). The next largest increase was during the period from 1974 to 1979 and was 10.9%. Surprisingly, even though the debt has exploded since 2008, the period from 2008 through the end of 2013 ranks third at an average of 10% per year.
The economic boom, from 1982 until the housing bubble burst and the stock market collapsed, was predicated on debt. This debt deluge led to the worst financial crisis since the Great Depression of the 1930s. In the wake of the 2008 recession, our fiscal deficits exceeded $1 trillion for several years. More recently, the deficit has been improving, but is still greater than $550 billion per fiscal year. Hence, the debt continues to rise, albeit at a slower pace.
Note EU-Digest : Bottom line - there’s a storm brewing on the horizon. There are red flags visible to those who are inclined to educate themselves on this issue. You should, however also beware of the conspiracy theorists.
Read more: The U.S. Debt: Why It Will Continue To Rise
America has the largest debt burden in the world. There were some precipitating events which contributed greatly. For the sake of perspective, consider this. Japan, the world’s fourth largest economy (as measured by GDP), has a debt-to-GDP ratio of 227%. This is the highest such ratio in the world. The U.S. has a debt-to-GDP ratio of 101% which seems rather modest in comparison. Modest perhaps, but in absolute terms, our debt is rapidly approaching $18 trillion . Japan’s debt is approximately $13.4 trillion, however, its economy is only one-fourth the size of America’s.
How did our debt grow so large? Why does it continue to rise? We’ll look at these issues. But first, to be perfectly clear, when our federal government spends more than it collects, the result is a “deficit” which is added to the debt. Therefore, debt expansion is a result of fiscal deficits or if you prefer, overspending. We’ll examine this more closely in a moment. First, let’s look at the average percentage change in the public debt during various periods.
The greatest period of debt expansion occurred from 1980 to 1991 at 13.4% (measured by average percentage). The next largest increase was during the period from 1974 to 1979 and was 10.9%. Surprisingly, even though the debt has exploded since 2008, the period from 2008 through the end of 2013 ranks third at an average of 10% per year.
The economic boom, from 1982 until the housing bubble burst and the stock market collapsed, was predicated on debt. This debt deluge led to the worst financial crisis since the Great Depression of the 1930s. In the wake of the 2008 recession, our fiscal deficits exceeded $1 trillion for several years. More recently, the deficit has been improving, but is still greater than $550 billion per fiscal year. Hence, the debt continues to rise, albeit at a slower pace.
Note EU-Digest : Bottom line - there’s a storm brewing on the horizon. There are red flags visible to those who are inclined to educate themselves on this issue. You should, however also beware of the conspiracy theorists.
Read more: The U.S. Debt: Why It Will Continue To Rise
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