IOUSA
Critical Analysis
The national debt as share of GDP or the national debt-to-GDP ratio is the metric comparing a country's public debt to its gross domestic product (GDP). By comparing what a country owes with what it produces, the debt-to-GDP ratio reliably indicates that particular country’s ability to pay back its debts. According to the data from the chart above, what was the debt (what the US owed) to GDP (what the US had) ration in 1940?
According to the data from the chart above, what was the debt-to-GDP ratio in 2020?
Describe the trend in the ration of debt to GDP over the past 80 years.
Why do you think that is?
What is one consequence of this trend?
In the chart above, notice what happened to the ratio of debt to GDP during the presidents of Reagan (R), Obama (D), and Trump (R). Make a claim about who is to blame for the current level of debt in the US.
In Federalist No. 51, James Madison wrote, “But what is government itself, but the greatest of all reflections on human nature?” Based on the current debt level and Madison’s quote, what do you think James Freaking Madison would say about our current national level of debt?
The debt limit or debt ceiling is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. In other words, it’s our ability to pay off debts the country already owes. What happens if a country (a person or business, for that matter) decides to NOT repay the debts it owes?
The use of the debt ceiling as a legislative hostage started in earnest in 2011, when a divided government in Washington refused to increase the debt ceiling and nearly caused a debt default. Then, Republicans refused to back an increase in the debt ceiling unless then-President Barack Obama agreed to budget cuts, and they also refused to raise taxes as part of a bipartisan bargain. A last-minute agreement followed, but the delay still led to a downgrade in the country’s credit rating. Yet we’ve seen continued clashes over the cap ever since. This year we have seen our country again come to the brink of not raising the debt limit (ceiling) and thus defaulting on our debts. Does the risk of default seem like a good negotiating tactic?
Failing to raise the debt limit would result in a default on U.S. debt, which could cripple the economy and cause terrible repercussions for everyday Americans. Yet there will be another showdown in December about whether we should pay the bills we already owe. Why do Americans allow this constant threat of national financial ruin.
Learning Extension
Read this FiveThirtyEight article: The Debt Ceiling is Dangerous
Action Extension
Call or email your U.S. Senator and let them know what you think about the debt ceiling.