The United States’ national debt is the highest of any nation in the world, standing at $36.22 trillion, according to the Senate Joint Economic Committee.
Put another way, the U.S. national debt now stands at 121 percent of GDP, the highest it has since WWII and one of the highest levels of any advanced economy. While U.S. GDP growth has been strong, nearly tripling since 2000, it has not kept pace with the ballooning debt, which has increased nearly sevenfold over the same period.
As this burden mounts, pressure on federal budgets has as well. Federal outlays for servicing debt this year have surpassed defense spending for the first time in history and may soon surpass non-defense discretionary spending as well. This would make debt servicing the largest single non-entitlement expenditure of the federal government, spending from which the country receives no future benefit aside from maintaining the federal credit rating.
Going forward, a rising debt burden will further unbalance the federal account sheet if there is not a strategy in place either to raise revenues significantly or to cut expenditures dramatically, leaving open the worrying possibility of a debt spiral for the world’s largest debtor. While taking on debt to invest in productive infrastructure and long-term research that will yield future gains is sound fiscal strategy, it must be done prudently. That is why one of the recommendations from the Council’s report, Competing in the Next Economy: Innovating in the Age of Disruption and Discontinuity, is to reduce the deficit from the current seven percent of GDP to the historically sustainable 3.7 percent, allowing gains in GDP to offset debt growth.
