Record-breaking total US debt figures surpass the US economy.
It would be quite surprising for you to know that the level of debt in the US has equaled the US economy. In other words, the total debts have reached a point to rings the alarm bells. Studies say that the amount of debt that the federal government owes to its creditors has already surpassed the $15.23 trillion mark as of now. The debts include the IOUs to the federal retirement and various other programs. The latest debt amount that the US government owes is equal in value to all the goods and services produced by the US government annually. It is visible that not a lot of people can take advantage of the debt consolidation programs. This is worsening the debt situation further and putting a mountain of pressure on the shoulders of the people of this country.
A look at the data
The latest projections show that the economy is going to grow to $15.3 trillion by the month of December 2012. Well, the total debt amount is expected to reach that level anytime soon. According to Steve Bell of the Bipartisan Policy Center, the debt mark equaling the total production of a country is not good news at all for the country’s economy.
Projections made with the future in view reveal that the pressure of debts is going to increase over the years. Surprisingly, the rate of growth is going to be faster than the country’s economic growth rate. Now, the country’s economy needs to maintain a healthy growth rate of 6% to stay ahead of the climbing debts.
Knowing the right amount of debt
The 2012 budget by President Obama says that the debts are going to surpass the $26 trillion mark after a decade. The best that last summer’s reductions in deficit could do was keep it at $24 trillion. William Gale at the Brookings Institution says that debts can be better measured when calculated in terms of the sum of money that the government owes to its creditors. It is important not to consider the amount owed to the Social Security and other beneficiaries registered with the government. This brings a better picture. The total debt amount is now almost 70% of the value of the economy. The new estimates put the total debt at $10.5 trillion.
Well, the debts sans the amount owed to the Social Security and other beneficiaries are still quite high as per the historic standards. As per the records, the total debt for the US surpassed its economy for 3 years during World War II. The situation didn’t see much improvement anytime soon after World War II. The year 1981 saw the total debts fall to 32.5% of the country’s economy. The debts have continued to maintain a steady rise steadily since the year 1981 under the presidential rule of Ronald Reagan. The rise in debts continued for the next 12 years, since the year 1981. As if the existing debts were not enough, recession and other external stimuli caused them to attain record-breaking figures under President Barack Obama.
Debts in the advanced economies
There are only a handful of advanced economies that have debts larger than their economies. The countries include Greece, Ireland, Iceland, Japan, Portugal, and Italy. The European debt crisis can be mostly attributed to countries like Italy, Greece, Portugal, and Ireland. All the countries, except Italy, have been bailed out by the European Central Banks The International Monetary Fund monitors Italy’s fund books as of now. A lot better debt solutions are needed to address the severe debt situation in the world.
