National Debt Around the World

National Debt, Around the World

The U.S. national debt stood at $31.4 trillion before the Congress acted with legislation to avoid a default on the debt. That number is so huge that it is hard to comprehend. An easier way to think about it is to compare the debt to the economy that must support it. The International Monetary Fund has provided the data on the debts of nations over time, which is quite interesting (see International Monetary Fund).

In 1950 the U.S. national debt amounted to 78.2% of the nation’s Gross Domestic Product (GDP). The very high costs of World War II were still being paid down. The debt declined over time, reaching 27.51% of GDP in 1974, the modern low point. It rose slowly, reaching 57.39% of GDP in 1993, at the beginning of the Clinton administration. Through a combination of spending control and increased tax revenue, the debt fell to 41.38% of GDP by the end of the Clinton years. 

Interestingly, the war on terror after 9/11 was not accompanied by a major increase in the national debt, in terms of the GDP, despite increased military spending. In 2007, it was still only 45.17% of GDP. The onset of the Great Recession in 2008 marked a dramatic change, as the debt grew steadily faster than the economy as a whole through 2019, when it reached 93.11% of GDP. Then we had the pandemic, and massive government spending offset the economic effects that ensued. In 2020, we reached the modern high of 119.37% of GDP, before dipping to 115.28% in 2021 (latest data available).

When interest rates are low, the cost of paying the interest on the national debt is also low.  However, as interest rates have risen to put a damper on inflation, the cost of debt service has risen as well, now coming to roughly the same as the amount spent on the defense department.  As rates go higher, the problem that Congress will have to wrestle with is whether other discretionary spending will be crowded out.

The U.S.A. is far from having the highest national debt as a percentage of GDP in the world, but we are in the top tier. For example, Japan’s national debt comes to 221.32% of its GDP!  In contrast, Germany’s debt is 46.27% of its GDP, Sweden’s is 39.31%, and Norway just 15.75%.  The table below reports the national debts of several other countries.

Country by country, national debt as a percentage of GDP

Source: IMF Datamapper (2021 data)

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