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How bad are US debt levels?

Source: http://www.bbc.co.uk/news/business-24541140...

From BBC website

But context is needed - after all, debt is not necessarily a problem if you have the income to cover it.

That is why the two most common measures used to gauge a nation's indebtedness are:

  • total debt, as expressed as a percentage of total economic output (GDP)
  • budget deficit, the amount by which a government's expenses exceed its income, expressed as a percentage of GDP

Some governments actually run a surplus - in other words their income exceeds their expenses. Running a surplus is one of the best ways to reduce overall levels of debt.

Looking at debt-to-GDP tells us that total US debt is roughly equivalent to its annual economic output. It is by far the largest economy in the world, and has the largest debt pile.

Japan is the world's third largest economy, but its huge pile of debt is more than double its GDP. The only other country whose debts outstrip economic output is Italy, although a number of others come close - namely the UK, France and Canada.

Even Germany, traditionally seen as fiscally responsible, has a debt-to-GDP ratio of more than 80%.

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