ratio debt gdp
Debt to GDP ratio in USA, a problem?
Is the US debt becoming unmanagable? I am having trouble finding statistics on what % of US tax revenue goes to paying just the Interest on the US debt.
There are additional problems associated with a high US debt level. The largest problem is that creditors (people and countries that we owe money to) will eventually view us as less and less credit worthy. They will likely demand higher rates of interest if they are going to continue funding our spending. This higher rate of interest that we have to pay to continue borrowing will usually negatively impact the economy by forcing a slowdown in investment and consumption.
One side note – the US will virtually always be able to make the interest payments on its debt because the US dollar is a fiat currency, that is, the US dollar is not secured by any real asset such as gold. This essentially means that we can continue to print money (not physically though, this happens electronically through the Federal Reserve) to pay back the interest owed on yesterday’s debt. However, if the supply of dollars outpaces demand for dollars (as it probably would if we keep increasing money supply to pay back debt), then the value of the dollar will decrease. Everything being equal, this basically means a rise in prices of everything including energy, goods, foreign currencies, etc. In the end, any holders of US dollars and US denominated assets (bonds, etc.) will be poorer as a result.
I’m not an economist, so the above may not be 100% correct and may be subject to various conflicting cases. The above is simply my take on one very likely scenario, albeit simplified to my understanding of economics.
