New Findings Reveal Significant Negative Impact of Government Debt Buildup on Economic Growth
“The sharp run-up in public sector debt will likely prove one of the most enduring legacies of the 2007-2009 financial crisis in the United States and elsewhere,"
“The sharp run-up in public sector debt will likely prove one of the most enduring legacies of the 2007-2009 financial crisis in the United States and elsewhere.”
A recent study presented at the American Economic Association contains some very important findings on the negative impact of large government debt buildups on economic growth.
Data spanning 200 years and 44 countries reveals that countries with very high gross government debt (classified as 90 percent or more of GDP) experienced median growth rates one percentage point below countries with lower gross debt, and average growth rates a full four percentage points below countries with lower gross debt.
The recent explosion in government debt resulting from the financial crisis will cause U.S. gross debt to surpass 90 percent of GDP this year, and to approach 100 percent of GDP by the end of the decade. Very high, sustained debt levels could seriously harm economic growth in the U.S.
The authors caution that, “seldom do countries simply ‘grow’ their way out of deep debt burdens.” Serious and comprehensive action will need to be taken in the U.S. to reduce annual budget deficits and bring down the debt level to prevent a sustained period of below-potential economic growth.
A recent study presented at the American Economic Association contains some very important findings on the negative impact of large government debt buildups on economic growth.
Data spanning 200 years and 44 countries reveals that countries with very high gross government debt (classified as 90 percent or more of GDP) experienced median growth rates one percentage point below countries with lower gross debt, and average growth rates a full four percentage points below countries with lower gross debt.
The recent explosion in government debt resulting from the financial crisis will cause U.S. gross debt to surpass 90 percent of GDP this year, and to approach 100 percent of GDP by the end of the decade. Very high, sustained debt levels could seriously harm economic growth in the U.S.
The authors caution that, “seldom do countries simply ‘grow’ their way out of deep debt burdens.” Serious and comprehensive action will need to be taken in the U.S. to reduce annual budget deficits and bring down the debt level to prevent a sustained period of below-potential economic growth.
