Debt rises and falls with wars and changes in the economy. The projected levels of future debt would be unprecedented
June 02, 2012
SOURCES: Data from the Congressional Budget Office, The 2012 Long-Term Budget Outlook, June 2012. Compiled by PGPF.NOTE: Data through 1939 are based on debt at end of the calendar year; data for 1940 and later are based on debt at end of the fiscal year. Debt held by the public refers to all federal debt held by individuals, corporations, state or local governments, and foreign entities.
There are many ways to measure a country's fiscal health, but the best overall gauge is federal debt relative to the size of our economy (gross domestic product, or GDP). Debt rises during times of economic stress and falls during times of economic prosperity. Since 1800, the largest increases in debt have come from wars, but then debt as a share of the economy has fallen as peacetime prosperity returned. Currently, excluding the various governmental trust funds, our public debt is more than $10 trillion, which is about 70 percent of GDP. That's already high, but the real threat is right in front of us: If we do not change our current policies, official projections show that our debt is on an explosive trajectory. The Congressional Budget Office has projected that federal debt would soar to over 200 percent of GDP in less than 30 years. Studies show that economic growth slows if debt stays above 90 percent of GDP for very long. An economic crisis is likely to occur long before debt gets anywhere near 200 percent, which makes our current path unsustainable.
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