How serious is the US federal debt
Based on data from usgovernmentrevenue.com:
Forget all the graphs you've seen. This is the one that matters: it charts the ratio of the federal debt to the federal income. It is easy to see that the debt level only went over 700% in 1932 and in 1940. WWII allowed the US government to double in size (income-wise), which is why the fiscal picture improved.
Note also that the data past 2010 is projected. The 2011 debt number is probably not far off, but the recovery in 2012 is speculative.
A more optimistic view is given by looking at the total government debt - which is dominated by the federal debt - and the total government income - which is dominated by state and local government income. To wit, the total US government debt is 18 trillion, the total US government income is 5.5 trillion (2011 estimates), so the debt is only about 320% of income. Regrettably, local authorities provide only the bare essential services, and are already cutting them to the bone. It's not likely that they can help service the federal debt - in fact the money flows the other way.
An interesting sidenote is that US government income is already 35% of US GDP - twice what it was in 1930. Considering that much of the GDP is not really taxable income (like the 10% of GDP that comes from counting the "rent" that people "pay" to themselves to live in their own houses), it's clear that the US government can't expand all that easily. Certainly it cannot double in size the way it did during WWII - not without nationalizing almost everything.
Forget all the graphs you've seen. This is the one that matters: it charts the ratio of the federal debt to the federal income. It is easy to see that the debt level only went over 700% in 1932 and in 1940. WWII allowed the US government to double in size (income-wise), which is why the fiscal picture improved.
Note also that the data past 2010 is projected. The 2011 debt number is probably not far off, but the recovery in 2012 is speculative.
A more optimistic view is given by looking at the total government debt - which is dominated by the federal debt - and the total government income - which is dominated by state and local government income. To wit, the total US government debt is 18 trillion, the total US government income is 5.5 trillion (2011 estimates), so the debt is only about 320% of income. Regrettably, local authorities provide only the bare essential services, and are already cutting them to the bone. It's not likely that they can help service the federal debt - in fact the money flows the other way.
An interesting sidenote is that US government income is already 35% of US GDP - twice what it was in 1930. Considering that much of the GDP is not really taxable income (like the 10% of GDP that comes from counting the "rent" that people "pay" to themselves to live in their own houses), it's clear that the US government can't expand all that easily. Certainly it cannot double in size the way it did during WWII - not without nationalizing almost everything.
posted by Endorendil at 13:28
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