The U.S. debt just passed $30 trillion.
There are several ways we can decide if we should worry.
Below, you can compare government debt in two ways. We can look at individual debt to GDP ratios and then we can compare different countries:
Inside the country: Debt to GDP Ratios
Above, the percents in this wonderful graphic from HowMuch represent debt to GDP ratios. When we compare debt to GDP, it is sort of like using your income to determine the size that your mortgage should be. For most of us, a million dollar mortgage would be too large when we compare it to our income. However, for a Bill Gates or Elon Musk, it would be tiny.
Similarly, we can decide if government debt is too much by comparing it to the GDP. We just need to think of the debt as what you borrow for a mortgage and the GDP, as the value of goods and services produced in a year, rather like your income.
The percents in the HowMuch graphic display each country’s debt (numerator) to GDP (denominator) ratio. Meanwhile, with red above 50 percent and green below it, color also illustrates a debt/GDP ratio.
Outside the country: Comparing Different Ratios
The HowMuch ratios range from 257 percent to 1 percent. At 257 percent, Japan is in the above 200 percent category with two other nations. Then, moving downward to increasingly smaller images and a lighter red, at 133 percent, the U.S. and 31 other countries are in the 100-200 percent category. And finally, leaping to the green perimeter with the tiniest images, we find the countries with a debt to GDP ratio below 50 percent. Several, including Saudi Arabia, Kuwait, and Norway have bountiful oil reserves.
Our Bottom Line: Should We Worry?
While the U.S. debt to GDP ratio is at an all time high, economists are not exceedingly worried. They say low interest rates (we pay less to borrow) and a healthy economy make it a more affordable debt. In addition, at present levels, government borrowing has not crowded out the private sector. (By crowding out we just mean pushing interest rates so high that businesses and households can no longer afford loans.)
So, should we worry? Not necessarily now, but soon, maybe yes.
My sources and more: Always my go-to website for budget info, the Concord Coalition alerted me to the debt milestone. Then, also a handy source, David Wessel at Brookings had some debt analysis. I also found it interesting to trace the daily debt at this Treasury website. After we surpassed $30 trillion, we slipped below it.