Boulder is a Stoopid Place

And the United States’ economy is so large that the seemingly titanic sum of $9.6 trillion is only 60.8 percent of American GDP. The national debts of France and Canada are similar, with France at 68.1 percent of GDP and Canada at 63.8 percent. Italy’s debt, in contrast, is over 100 percent of its GDP, while Japan’s is a staggering 173 percent. The world’s two emerging economic giants, India and China, have sharply different debt loads. India’s national debt is 61.3 percent of its rapidly rising GDP, while China’s is a mere 16.2 percent.

So the United States’ national debt is not out of line with those of other major countries and has been much higher in the past. At the end of World War II, the debt was nearly 130 percent of GDP.

The bad news is that the debt is rapidly rising, both in absolute terms and relative to GDP, thanks to the current recession, the stimulus effort to end that recession, and the bailout of the country’s financial system. The budget deficit for fiscal 2009 is estimated to be a staggering $1.6 trillion, larger than the entire national debt as recently as 1984. It is the largest peacetime deficit (measured as a percentage of federal revenues) since 1936, when the country was still in the throes of a far worse economic downturn. The deficit will cause the ratio of debt to GDP to rise to over 80 percent by the end of fiscal 2009. That will be the highest it has been since 1950.

Worse, the Obama administration is projecting unprecedented annual deficits over the next ten years if its political agenda of cap and trade, universal healthcare, and other expensive programs is enacted. According to the non-partisan Congressional Budget Office, these programs will average more than 4 percent of GDP each year and total $9.3 trillion over the decade. That would mean a doubling of the national debt in absolute terms and at least a 50 percentage point rise in the ratio of debt to GDP, taking us back nearly to where the debt was at the end of World War II.