The latest Treasury report shows that national U.S. debt will exceed the size of the economy in 2011, for the first time since World War II.
What is notable is the sheer deterioration. One year ago the Treasury had estimated that record would not be reached until 2014.
Current expectations of total debt to GDP are 102%+ this year (from 96.4% last year)..
The two biggest factors:
1. White House's 2011 GDP estimate is $219 billion lower today than it was a year ago. So debt as percentage of a lower number will always look higher.
2. The debt grew larger because of a tax cut deal brokered by President Obama and Republicans last December. That deal will add an estimated $858 billion to the deficits over a decade -- $410 billion of it in 2011 alone, according to the Congressional Budget Office.
Tax cuts would drive most of the debt under Obama's 2012 budget proposal, according to CBO.
That's why deficit hawks on the left and the right advocate letting the tax cuts expire or paying for any further extension. At this point, the debt is so big, whether it is just below or just above GDP isn't really a huge distinction.
"After examining data from dozens of countries over two centuries, economists Ken Rogoff and Carmen Reinhart found that when a nation's gross debt reaches 90 percent of its economy, it often loses about one percentage point of growth a year". Chicago Tribune
Wednesday, June 8, 2011
U.S. Debt Now Exceeds 102% of Size of Economy, 3 Years Ahead of Estimates
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