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Tuesday, 28 January 2020

US debt shoots up to 100 per cent of GDP

Lifting of the debt ceiling agreed on Tuesday has put the country's debt above its annual level of production for the first time in more than 60 years

Ahram Online and agencies, Thursday 4 Aug 2011
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US debt shot up US$238 billion to reach 100 per cent of gross domestic product after the government's debt ceiling was lifted, Treasury figures showed on Wednesday.

After signing the bill for the increase on Tuesday, US debt exceeded the annual level of production of the national economy for the first time since just after the end of World War II in 1947.   
 
The new borrowing took total public debt to $14.58 trillion, over end-2010 GDP of $14.53 trillion. 
 
Before Tuesday the official cap was $14.29 trillion. The official limit climbed by $400 billion after the agreement and will see further staged increases over the coming 18 months.
 
More than $200 billion in spending commitments were added immediately after President Barack Obama signed the increase into law. The liabilities had been temporarily taken off the federal government's balance sheet since 16 May, when the Treasury reached the official cap.
 
Recent borrowing practices have placed the US among the group of countries with mounting public debts that exceed their GDP; including Japan, Greece and Italy whose debts are 229 per cent, 152 per cent and 120 per cent respectively.
 
Credit rating agencies have warned the country to downsize its now colossal debt-to-GDP ratio quickly, or its long-time AAA debt rating might be at stake.
 
Despite confirmations from both rating agencies, Moody’s and Fitch, on their AAA rating of US debt after the debt plan deal was struck, Moody’s said on Tuesday that the ratio of debt-to-GDP needed to be stabilized at 73 per cent by 2015 by the US government. 
 
Moody’s explained that this fiscal discipline was “to ensure that the long-run fiscal trajectory remains compatible with a triple A rating.”  
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