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What is National Debt?

What happens when the US National Debt is greater than the GDP?

  • The national debt is almost 12 TRILLION and the GDP is 13 TRILLION. What happens when the national debt becomes greater than the GDP? http://www.brillig.com/debt_clock/ http://en.wikipedia.org/wiki/United_States_public_debt

  • Answer:

    The 11.7 trillion debt total is still somewhat misleading with regards to your concerns, as 4.3 trillion of that exists as the Social Security Trust fund and similar funds (intragovernmental debt). The Debt:GDP ratio was above 100% during and after World War II, I believe -- and that was all actual public debt, not intragovernmental debt. The answer to your question though is, nothing special will happen when debt exceeds GDP. But, regardless of that, the higher the debt, the more money the government must spend on annual interest, and also there may be added pressure pushing up interest rates in the bond market and on newly issued U.S. bonds.

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It would only be a problem if our creditors expected repayment in one year.

Bob Smith

Nothing in particular. All it means is that we couldn't pay off the debt in one year even if we taxed everything at 100% (and for some reason people kept doing stuff with a 100% tax rate). To be clear, it would still be a huge debt, but it's not a magic "at this debt level the debt becomes a lot worse than before". Being in a lot of debt is bad, but being in debt 101% of your annual income is not that much worse than being in debt 99% of your annual income. This is true for countries as well as people.

Michael T

Maybe what happens is, we finally wake up and realize free trade is destroying our economy, and we should do what the EU did and put tariffs on imports from China. How much longer does the "giant sucking sound of jobs leaving the country" have to continue before we finally figure this out?

gws35

Nothing happens, except interest on the debt increases a bit. If you earn $13K a year, there is not much difference whether you have $12K in debt or $14K

Bored Goblin

I was thinking the same thing. I assume we can't keep on giveing out meaningless credit to buy things. i think the people in charge are scared but they don't show it.

George A

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