The U.S. National Debt
An Elephant in the Room
“A national debt, if it is not excessive, will be to use a national blessing.”
– Alexander Hamilton
Executive Summary
• Low on the priority list in the last election cycle was any serious discussion of the national debt, which has grown to over $28 trillion, or 99% of U.S. Gross Domestic Product (GDP).1
• Debt levels above 100% of GDP have proven problematic for other nations, but large economies with a prominent reserve currency may have latitude to near 200% of GDP.
• Deficits and rising debt balances have recently led to credit rating reductions, but U.S. interest rates remain at levels consistent with a strong investment-grade credit.
• While it is unclear exactly where the red line is for U.S. borrowing, each year of delay pushes the U.S. closer to that line and makes the solution more difficult.
• The U.S. still has time to establish a plan to gradually reduce deficits by an amount modest enough so as no t to be an insurmountable headwind to economic growth.