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How can the United States be both the
richest nation in the world and the biggest
borrower?
Part of the answer lies in how you look at
borrowing.
Generally, a nation's public debt is considered
along with the size of its economy in terms of the
gross domestic product. The G.D.P. represents the
value of all goods and services produced within a
territory in a year.
The United States debt is the world's largest: more
than eight and one-half million million dollars. But
so is the G.D.P.: more than twelve million million
dollars.
Economists often look at public debt as a percentage
of gross domestic product. Measured this way, the
United States had the thirty-fifth largest debt last
year, about sixty-five percent of G.D.P.
That was less than Canada, Germany or France -- and
a lot less compared to Japan and Italy. Both have
public debts larger than their G.D.P. So, in this
way, the United States debt is not considered
oversized compared to other developed nations.
Still, many experts remain concerned about federal
budget deficits. The historical average is a little
more than two percent of G.D.P. The White House
Office of Management and Budget reported a deficit
of just over three and one-half percent in two
thousand four.
Since then the deficit has fallen. But there are
concerns that future costs could grow sharply, in
part because of the Iraq war and federal programs
for older people. At the same time, the economy has
slowed. Increased borrowing in times of slow growth
can quickly add to the debt.
In the past, the government borrowed mostly from
Americans. Today, foreign countries -- especially
China and Japan -- have been willing to buy huge
amounts of American debt even at low interest rates.
Americans have been hearing a lot lately about the
economic risks should that willingness ever change.
But the issues involved, including international
trade, are more complex than that.
Foreign direct investment in the United States
continues at record levels. The Congressional Budget
Office says America's foreign investments add up to
almost ten million million dollars. And that is more
than the size of its debt. |
