We all knew it was going to happen eventually, and now the moment has arrived. Just two days after the debt ceiling increase was signed into law, the United States’ debt reached 100% of GDP, or how much the economy is annually worth. The debt over the last two days rose $238 billion to bring the total to $14.58 trillion, $50 billion more than the total value of the US economy in 2010. This makes America the newest member of the 100% debt club, joining fiscally periled nations like Italy, Belgium, and Greece, who have become symbols of fiscal incompetence since the worldwide economic crash began.
The last time the United States was this much in debt was 1947, but that was due to the massive spending brought on by World War II, which went away once the war ended and the bonds were paid off. This time, the debt has been the result of huge revenue losses and spending increases, which are not easily repaired. Senate Minority Leader Mitch McConnell (R-Kentucky) said that the next time we have a debt ceiling debate — which would probably be sometime in early 2013 — it should be as “fierce” as this one.
It should be noted as well that while the ratings agency Moody’s did not downgrade us this time, they stated that the goal should be to reduce the debt to 73% of GDP within the next 5 years to preserve the country’s AAA rating, so there is an incentive to have another strong debate. However, maybe the next debate will yield solutions that match the level of rhetoric that both sides spent the better part of three months firing at each other (well, a man can dream can’t he?).Published in