As the United States inches closer to its current $14.3 trillion
debt ceiling, policymakers are renewing the
public debate over government borrowing and spending. Earlier this
year, White House economic adviser Austan Goolsbee
warned that, if the ceiling is not raised, "The impact on the
economy would be catastrophic.
I mean, that would be a worse financial economic crisis than
anything we saw in 2008." Many top Republicans, meanwhile, are more cautious about
such an increase. South Carolina Republican Sen. Lindsey Graham has expressed cautious support
for raising the ceiling, but also has advocated for decreasing
government spending to 2010 levels.
South Carolina's junior Republican senator, Jim DeMint, is even more hawkish on the subject,
calling for the passage of a balanced budget amendment. [See a slide show of the 10 countries with the most
debt.]
Even accounting for inflation, the total U.S. public debt--the
amount of treasury securities held outside the government, plus
federal obligations for programs like Social Security--has
increased more than fourfold since 1990, when it stood at just over
$3 trillion. [See the 10 states with the largest budget
shortfalls.]
While the United States total public debt is indeed the largest
in the world, a broader context shows that other countries face
even more dire debt situations. One way to put debt in perspective
is to compare it to gross domestic product, or GDP.
The debt-to-GDP ratio is one primary indicator of a country's
economic health; a lower ratio is generally seen as more favorable,
as it shows that a country is producing enough to eventually be
able to repay its debts. According to figures from the
International Monetary Fund, Japan has the largest debt-to-GDP
ratio in the world, with government debt more than twice the size
of its GDP.
Also notable are Greece and Iceland, which have both suffered
major recent financial crises and both have government debts that
exceed their annual GDPs. The U.S. ratio of 92.7 percent is nearly
20 percentage points away from inclusion in the top 10 countries
with the worst debt-to-GDP ratios, listed below:
Country Debt as Percent of GDP (2010 est.)
Japan 225.9
St. Kitts and Nevis 196.3
Lebanon 139.0
Jamaica 135.7
Greece 130.2
Eritrea 129.7
Grenada 119.1
Italy 118.4
Iceland 115.6
Barbados 111.6
Of course, many countries with such high ratios, such as the
Caribbean nations of Jamaica, and Barbados, are not among the
world's economic powerhouses. A more apples-to-apples comparison is
to look at the United States debt situation within the context of
the other largest world economies.
Among the 10 countries with the largest GDPs, the U.S. ranks
third in terms of debt as a percentage of GDP, behind Japan and
Italy. One major outlier on the list is China, whose 2010 GDP is
estimated to be the world's second-largest, at roughly $5.7
trillion. The country's debts, however, only equal 19.1 percent of
its GDP--well below the rates of nearly all other major world
economies.
Country GDP (2010 est., USD) Debt as Percent of GDP
(2010 est.)
United States $14.6 trillion 92.7
China $5.7 trillion 19.1
Japan $5.4 trillion 225.9
Germany $3.3 trillion 75.3
France $2.6 trillion 84.2
United Kingdom $2.3 trillion 76.7
Italy $2.0 trillion 118.4
Brazil $2.0 trillion 66.8
Canada $1.6 trillion 81.7
Russia $1.5 trillion 11.1
Source: IMF World Economic Outlook Database, October
2010
