econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 11 January 2017

How The U.S. Debt-to-GDP Ratio Has Changed

from the St Louis Fed

-- this post authored by William Dupor

The new incoming president and Congress will likely engage in vigorous discussions about economic policies, including ones that will impact the national debt. This post will give a thumbnail report on the recent history of this important macroeconomic indicator.

Economists typically measure the size of the national debt as the ratio of the total publicly held federal debt to the current level of the gross domestic product (GDP). By looking at only publicly held debt, the measure excludes government bonds owned by the government itself, such as those in the Social Security Administration's portfolio. In scaling the debt by GDP, the resulting ratio accounts for the fact that a larger economy may more easily sustain a larger debt.

In the six or so years preceding the most recent recession, the debt-to-GDP ratio was relatively constant, around 34 percent. Although stable, it still sat relatively close to its post-World War II era peak experienced in the mid-1990s.

This stability was upset dramatically with the onset of the recession. The federal debt increased largely because falling incomes led to lower tax receipts. Also, unemployment and poverty rose, which increased the cost of social insurance programs such as Medicaid and unemployment insurance. The figure below shows average increases in the debt-to-GDP ratio for the past 10 years. (Each year is as of the second quarter.)

debt gdp ratio

In the two years containing the 2007-09 recession, the debt-to-GDP ratio grew by about 16 percentage points. By the second quarter of 2009, this ratio equaled 50 percent.

Following the recession, there was no (at least successful) effort to bring this ratio down. Instead, a number of factors, including the implementation of the $840 billion American Recovery and Reinvestment Act, caused the debt-to-GDP ratio to increase at a rapid pace. Between 2009:Q2 and 2012:Q2, the ratio increased by 6.2 percentage points on average per year.

In the following three years, a dramatic slowdown in the growth rate of the debt-to-GDP ratio returned. It grew by 1.4 percentage points on average per year over that period.

This relatively slow pace of increase seems to have quickened over the past year. Between 2015:Q2 and 2016:Q2, the ratio increased by 2.9 percentage points. During that one-year period, the debt-to-GDP ratio crossed the 75 percent level for the first time in most Americans' lifetimes. 2016 put the ratio at its highest value since the WWII drawdown.1

Notes and References

1 Some of the causes for the recent increase in the federal debt are discussed in the Congressional Budget Office's "The Budget and Economic Outlook: 2016 to 2026" report.

Additional Resources

Source

https://www.stlouisfed.org/on-the-economy/2017/january/how-us-debt-gdp-ratio-changed

Disclaimer

Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Contributors


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
The Surprising Pevalence of Surprises in Export Specialisation
The Destruction of the Existing Workforce
News Blog
Best Ways To Protect Yourself Online
Richmond Fed Manufacturing Survey Improves In January 2017.
December 2016 Headline Existing Home Sales Hampered By Historically Low Inventory Levels
A New Order Of The Ages
How Bond Investors Were Fooled Twice
Infographic Of The Day: Crowdfunding
Early Headlines: Asia Stocks Mixed, Dollar Down, Oil Up, China May Replace US In TPP, Trump Freezes Feds' Hiring, Trump Files 'Secret' Transfer Papers, May To Visit China And More
January 23, 2017 Weather and Climate Report - NOAA Continues ENSO Neutral Denial
Documentary Of The Week: China's Wealth, Collapse, And Environmental Nightmare
Where Trump Stands On Twitter
Is This Really The Final Word On Whether Calorie-restricted Diets Make You Live Longer?
Electric Mobility Has A Long Way To Go
Average Gasoline Prices for Week Ending 23 January 2017 Fell Over 3 cents
Investing Blog
Netflix And Co. Surpass DVD And Blu-ray Sales
The Future Of Online Sales
Opinion Blog
Bill Maher 2017 Season Premier
Trumping World Trade
Precious Metals Blog
A Slow Start For The Week Would Be Constructive For Gold
Live Markets
24Jan2017 Market Update: Wall Street Enjoying A Very Positive Session, Trump Effect Pushing Back On Bearish Analysts
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government































 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved