A Look at US Debt Levels as a Percentage of GDP

We consistently hear about record US government debt levels, but we rarely hear them in context. Since both inflation and economic growth have been consistently positive over the years, it's only natural that nominal debt would be higher than ever. What really counts is the debt level as a percentage of GDP. This tells us how serviceable current debt is from a historical perspective.

Here's a look at US debt levels as a percentage of GDP:

Surprisingly (considering the alarm bells we hear from the media), US debt as a percentage of GDP is actually lower now than it was in the early 90s! Over time, we can see from the chart that debt levels were most cumbersome as a result of World War II. Since then, while annual deficits have often been higher both in frequency and magnitude than surpluses, GDP growth has made debts more manageable.

There is, however, a major caveat to this chart. Gross debt levels are actually much higher than what is presented, but the amounts in the chart are public debt. This is an important distinction since public debt does not include the Social Security Account. Social Security obligations continue to balloon, and something will have to be done to solve this problem which is currently simply being postponed.

Comments

[pochovilla:]

Let's see the chart with gross debt levels.

2008 Sep 15 04:21 AM

[govtcritic:]

The problem with this ratio is that the government has been lying about the TRUE debt, which is now approximately $54 trillion. This figure includes all contingencies that we have guaranteed or underwritten by law, and is sure to grow in the near future as we dump corporate fiascoes like Lehman on the hapless taxpayers. We
're in serious trouble, as evidenced by the fact that politicians think that the solution is to CUT taxes!!

2008 Sep 15 08:53 AM

[whidbey:]

Yes SSec is left off the chart, as is Medicare in all of its parts, as is the sums now payable to citizens contributing to the two social programs.It totals about 40 Trillion dollars, if you want to see the whole. Then you fail to mention that the capacity to pay taxes is seriously limited by the personal debt levels in America. The average family has debts of all kinds totaling about 7K, not including mortgages or car loans. The point is, the capacity to pay taxes is decreased by the amount of free cash flow each household has available. In general there is NO free cash flow for added taxes, or even current taxes. We will see more handouts, tax forgiveness and denuding of the savers over the next decade. In the end we will be a rogue state in the world economy and poor, very poor.

2008 Sep 15 11:20 AM

[unimpressed...:]

Hell, the government lies about everything! Look how it distorts true inflation with its core inflation basket that eliminates the basis for inflation in our economy, oil and food.

We the People should demand that the inflation numbers reflect reality not some politician/bureaucrat manipulation of the truth. We can start this process in November by tossing out he Democrats and keeping the pressure on the Republicans to establish truth in government or get tossed out on their backsides. Enough changes of Congressional membership over the next two or three election cycles will help to drive this point deep into the concrete that passes for a politician’s gray matter.

Perhaps a better solution is to stop electing the least qualified to public office, all levels. Right!

2008 Sep 15 12:10 PM

[joes:]

The position that there is something wrong with Social Security and Medicare is misguided, the problem is political not fiscal, there are plenty of studies that show that SS is more solvent than most Government programs. Medicare is a victim of our phony "market-based health care system that has resulted in Americans paying 2-3X the rest of the developed world for lower quality health care. Both candidates know this and plan on making changes.

The money for our future is in the Defense Department budgets (over $1 Trillion a year and 12 criminals still knocked the towers down), once enough Americans crawl out from under their desks in Kansas and the rest of America they will see the light, impossible where there heads are positioned currently.

2008 Sep 15 12:29 PM

[xsuddensam:]

Unimpressedpragmatist says:

"We can start this process in November by tossing out he Democrats and keeping the pressure on the Republicans to establish truth in government or get tossed out on their backsides."

You can't be serious. The Republican banking industry through its greedy and fraudulent financial schemes has created the credit crises. The Democrats certainly don't have a corner on dishonesty. You have to be naive to think there's any difference between a Republican and a Democrat. They all need to be tossed out with the rest of the garbage.

2008 Sep 15 01:32 PM

[hanumanj:]

Not sure where you get your data, but a simple search finds that the US National debt is $9 trillion (not counting this year's $500 billion), which is closer to 70% of GDP

2008 Sep 15 05:29 PM

[Saj Karsan:]

Hi Hanumanj,

The data is from the historical tables of the 2009 budget (www.whitehouse.gov/omb...). The article clearly states this chart is for public debt, while I believe you are quoting gross debt.

2008 Sep 16 02:43 AM

[hahhaaa:]

that's funny... you left out social security debt!

Mar 08 01:28 PM