Rising Debt, but A Rising Income & Economy, Too

Economists differ about how to measure the “burden” of the debt. The most common way to assess the “burden” of the debt is to compare the debt to GDP. GDP represents a nation’s total income (production) each year.
- This is like when a bank compares your current income to your total personal debt to see if you are good “credit risk” and whether you can make the interest payments on the debt.
The U.S. national debt-as-%-of-GDP reached a peak in World War II (large debt – small GDP). As GDP grew in 50’s-70’s, debt-to-GDP declined. In the 1980’s federal deficits have grown and debt-to-GDP grew. GDP growth in Clinton years helped reduce the ratio. In recent years, the war spending combined with weak GDP growth has seen ratio climb again.

Economists differ about how to measure the “burden” of the debt. The most common way to assess the “burden” of the debt is to compare the debt to GDP. GDP represents a nation’s total income (production) each year.