Kevin Graham wrote:Yes, if the US is Ok in a global economy with a GDP to debt ratio of about 1:1, then clearly it's no problem for it to be 2.5:1. Hell, let's make it 7:1. After all, if one level of debt is no problem, then no levels of debt are a problem.
And yet, Japan's debt is a whopping
229% of GDP. Instead of inflation
we now see deflation.
By the time we reach $50 trillion in debt our GDP will likely be much higher, bringing that ratio down further from the 2.5:1 you mentioned. I just don't see a lot of merit behind these doomsday predictions. I've been hearing it year after year since forever it seems. It sounds more like political posturing than anything else, mostly because the Right never said a word about it as debt skyrocketed while a Republican was President. Put a Democrat in office and suddenly the debt is going to cause hyperinflation and we're all going to be speaking Chinese soon.
Japan hasn't made a deep effort to reduce its debt through increasing currency supply or monetizing their debt, so you wouldn't expect there to be inflation. So we need to reform your question. Why is it that Japan is able to continue to issue bonds at acceptable interest rates while sustaining such a high debt? Isn't this like giving a guy who makes 25k a year a 400k loan? Why aren't investors pulling out or trying to increase the price of loans to off-set risk? That's a reasonable question.
Since you looked this up somewhere, you probably also saw that Japan is a unique outlier both in terms of the size of its debt and in its ability for that debt not to cripple them. To understand why they are able to maintain that debt ratio for the time being, which should've struck you as a fact in want of explanation, the standard answer is that a huge % of it is an accounting mirage with government agencies owing each other. Further still, within the public debt an atypically large % is owned by citizen small investors that tend not to be as demanding of interest. This is what is allowing them to maintain credit despite debt levels that have sunk other countries. And even after you take that into account, they're still on the precipice of having a very serious problem. Their high debt was incurred through a perpetual cycle of stimulus spending and recession/anemic growth following their financial collapse. Because of population issues, they're going to have a tough time growing out of their debt ratio. If they cannot, it is going to force them either to significantly increase taxes - and badly hurt their economy - or explore loose monetary policy and badly hurt their economy through inflation. Or they could just default . (They could also radically cut services while increasing taxes a little, but that option probably is not politically tenable.)
Regarding your comment on partisan politics, it does not matter one wit if Republicans or Democrats are hypocritical on fiscal responsibility. The reality isn't determined by who is in charge. I distinctly recall criticizing the Bush administration for being irresponsible with the budget surplus it was handed only to be rebuffed by some poster named Kevin Graham who was a huge fan of that administration. If the accusation is that I'm not consistent on the issue, that's obviously untrue. If the accusation is that partisan hacks are - yep - but that has nothing to do with whether it is a actually a problem.
"The right" did complain about Bush's government spending in his lame duck session a fair amount. In fact, discontent with it formed the political turmoil in the ranks that was successfully astroturfed into what evolved into the Tea Party. "The Right" if it also includes ideological groups have continued to make this an issue through both Republican and Democrat administrations. You'll have no problem finding CATO institute pieces on the issue from the Bush era.