Should we be worried about America’s growing national debt, now at $22 trillion? That figure represents a debt-to-gross domestic product (GDP) ratio of 106 percent. By historical standards, that’s a level not seen since the end of World War II, when the 1946 ratio reached 119 percent.
Budget hawks predict doom given today’s figures, while the White House and Wall Street sound like Mad Magazine’s Alfred E. Neuman: “What, me worry?” The doves contend that other nations, notably Japan, have far higher debt ratios, and they seem OK. Who’s right?
Our national debt exceeds more than we produce annually as a nation. In 1946, we’d just spent nearly six years fighting fascism in Europe and Asia. Thereafter came what the French call the “Thirty Glorious Years,” which brought rapid economic growth and rising prosperity, innovation and productivity gains, plus relative peace, notwithstanding a Cold War.
The U.S. emerged as the dominant economic and political power, with the U.S. dollar becoming the main global reserve currency. Our debt-to-GDP ratios subsequently fell to postwar lows of 31 percent in 1974, 1979, and 1981. Thereafter, they resumed an upward trajectory that many today consider dangerously unsustainable.