U.S. Debt and Size of Economy

by San Antonio Attorney

The total amount of U.S. government debts, including borrowed funds from government retirement and Social Security Trust Fund, now crosses $16 trillion.

That is more than the worth of all the goods and services the country produces in one full year, which is $15.17 trillion as of this month. Private sectors’ forecasts show the economy will probably increase to around $15.3 trillion by the end of the year.

Long-term forecasts indicate the debt will keep on growing more rapidly than the U.S. economy, requiring an expansion by 6 percent or more annually to maintain pace.

The 2012 budget indicates the debt leaping over $26 trillion in the next 10 years. A deficit reduction agreement last summer could lessen that to $24 trillion.

Many experts say that a more suitable way of measuring the federal debt is the amount the government has to repay creditors, excluding $4.7 trillion payable to future recipients of Social Security and other beneficiaries of government. With that measure, the federal debt is approximately 70 percent the size of the economy.

The level of debt is high by historical benchmarks. The U.S. debt exceeded the size of its economy during and after the Second World War. It fell to 32.5 percent by 1981, and then started a gradual ascend under President Reagan, doubling within the next 12 years. The mixture of stimulus spending and recession triggered it to climb again under the Obama administration.

Among the developed countries, only Portugal, Greece, Ireland, Iceland, Italy, and Japan have debts bigger than their economies. Greece, Italy, Portugal, and Ireland are the biggest concerns in the European debt crisis. The International Monetary Fund is monitoring Italy’s books, while Greece, Ireland, and Portugal needed bailout funds from the European central banks.

In August, the White House and Congress had a deal to slash around $1 trillion from national agencies budget over a decade. Another $1.2 trillion in spending cut is imminent in January if Congress is unable to agree on an alternative plan.

 

-  Not all debt is bad debt. But if you have too much debt it can be hard to enjoy life. Two common solutions to fix this problem is through bankruptcy or debt settlement. Prior to committing to either option, you should discuss your situation with a San Antonio Bankruptcy attorney so you will know the advantages and disadvantages of using one over the other to ease your financial troubles.

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