US debt is projected to breach its authorized $14.294 trillion debt ceiling this coming spring, but history shows neither the size of our current debt nor the debt ceiling encroachment is necessarily a cause for worry.
Those who fear Congress won't raise the debt limit likely needn't worry—an increase is almost guaranteed.
Today's high debt doesn't seem unmanageable if you look at debt as a percentage of GDP, and our interest costs on federal debt as a percent of GDP are non-alarming by historic standards.
Some see debt as an ugly word. So it may be unpleasant to learn US debt is projected to breach its authorized $14.294 trillion debt ceiling this coming spring. But history shows neither the size of our current debt nor the debt ceiling encroachment is necessarily a cause for worry.
Hitting the debt ceiling sounds scary, but it's hardly a concrete "ceiling." Those who fear Congress won't raise the debt limit likely needn't worry—an increase is almost guaranteed. After all, Congress has voted to increase the debt ceiling 75 times since 1962, the last time in February 2010. Indeed, the whole idea of a debt ceiling seems like a burdensome legacy.
There are those who oppose raising the limit again—fearing the US is overextending itself. But is a sudden halt to any new debt such a grand idea? At its extreme, it could mean draconian austerity or defaulting on debt obligations. Neither are great options—or even necessary. Republicans suffered politically the last time they failed to raise the debt ceiling when needed (and only for a few months), so they aren't likely to repeat that mistake today.
The truth is, though the numbers are indeed massive, today's high debt doesn't seem unmanageable if you look at debt as a percentage of GDP. Though our debt is bigger today, it's still lower relative to GDP than what was witnessed in the 1940s and 1950s. But of primary importance is our ability to afford the debt. And our interest costs on federal debt as a percent of GDP are non-alarming by historic standards and lower than the entirety of the 1980s and 1990s—not known as times of ongoing strife. Plus, continued economic growth (GDP has grown for the past six quarters, with Q4 real GDP eclipsing its pre-recession peak) can help shrink the debt load relatively, and the relative size is what matters most.
The most recent recession and its aftermath saw a number of new federal programs introduced. But a number of bailout programs are dwindling (and even turning profits for the government), and the Treasury is even able to borrow less. That, tied to ongoing growth, could mean relative debt increases slowing or even begin reversing. (Though in our view, the debt isn't the immediate problem many believe. But if you disagree, you can certainly feel free to make a donation to remedy the situation.)
Being fans of keeping more money in the hands of the private sector, we wouldn't mind seeing the government cut spending. And an ever-increasing debt as a percentage of GDP isn't sustainable. But debt needn't be a taboo four-letter word. After all, though current debt levels may be hitting the (adjustable) ceiling, they're certainly not hitting the fan.