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1 Gregory S. Leong, A Nation in Debt 1 (1991)

handle is hein.taxfoundation/srfxz0001 and id is 1 raw text is: IA V 9~~~ A Nation in Debt Total U.S. Debt Burden Hits $10.6 Trillion, Nearly Double GNP By Gregory S. Leong As the nation struggles to work its way out of recession, Americans are feeling the pinch of the $10.6 trillion total U.S. debt. Fueled by record spending at all levels of government, highly leveraged financing by corporations, and record consumer credit card spending, the debt currently amounts to a $42,277 IOU for every man, woman, and child in the U.S. In the past decade, total U.S. debt from the government, corporate non-financial business and household sectors has nearly tripled, jumping from $3.9 to $10.6 trillion (see figure 1 and table 1). Households and non-financial businesses hold the largest shares of total debt, $3.7 trillion and $3.5 trillion respectively (see figure 2). These amounts are more than double their 1980 levels. Yet their percentage shares of total debt have actually fallen slightly due to the Figure 1 Total U.S. Debt by Sector Selected Calendar Years 1960-1990 12 10 8 $Trillions 6 4 2 1 .1 W. - I 0 /7 1960 1965 1970 * Non-Financial U Households El State/Local * Federal Business Governments Government Source: Tax Foundation 1975 1980 1985 1990 even more rapid increase of the federal government's debt. The federal government has been on a spending spree, more than tripling its debt from $743 billion in 1980 to $2.6 trillion in 1990, increasing the federal slice of the total debt from 19 to 24 percent. State and local government debt has grown less rapidly, but nevertheless, it has more than doubled during the decade. Is U.S. Debt Really Too Large? Comparing an economy's total debt to its total income, or GNP, reveals how well it can support its debt level. As total income increases, so does an economy's ability to take on a larger amount of debt. The total current U.S. debt burden of $10.6 trillion is almost twice the nation's $5.4 trillion GNP. Figure 3 shows the growth in total debt consistently outpacing total na- tional output throughout the past decade. This is true for all categories of public and private debt, and by this measure as well, the federal government is racing into in- debtedness faster than any other sector of the economy. The federal debt, more commonly known as the public debt, is the accumu- lated amount of money and interest costs the federal government has borrowed throughout the years to fund budget short- falls. Between 1981 and 1991, federal gov- ernment debt almost doubled as a percent- age of GNP, increasing from 27 to 47 percent of GNP. Non-financial business debt rose 11 percentage points from 52 to 63 percent of GNP, and during that same time period, Gregory S. Leong is Director of Special Studies at the Tax Foundation. 4 i i

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