How’s the public debt looking? Not bad!

CBPP debt to GDP ratio

Less alarming than the alternative! (Center on Budget and Policy Priorities)

A couple years ago, the growth curve on the U.S.'s debt-to-GDP ratio looked pretty apocalyptic, skyrocketing up to 200 percent by 2040. But thanks to health-care reform slowing the rise of Medicare spending, low interest rates, cuts in discretionary spending and higher tax rates on the wealthy, the Center on Budget and Policy Priorities projects a much more gradual increase.

Now, we're not as panicky about high debt-to-GDP ratios these days, since the key scholarly work asserting a negative effect on economic growth at the 90 percent threshold has been called into question. But even if the causality runs the other way -- that slow economic growth boosts debt -- it's still not a happy indicator. And there's another benefit to slower debt growth projections: It makes a permanent fix potentially easier to stomach.

"The world doesn't come to an end if one for extended periods of time we have 80  percent debt-to-GDP ratios. But it would be better to be lower, for a variety of reasons," says CBPP President Robert Greenstein. "The fact that debt ratios are not exploding means that one could put together a long-term deficit reduction package that does not need to contain as big changes on revenues or programs as it would if we were at 200 percent debt-to-GDP, which makes it easier to get to agreement. Although we're at a period of gridlock at the moment, we hope that the fact that it's more doable at this point would help lead to action."

Much more in the actual paper here.

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