U.S. Debt Is Set to Exceed the GDP: A Grim Milestone

The U.S. debt is about to exceed the size of the country’s GDP, which highlights the economic impact of the COVID-19 pandemic. The coronavirus pandemic has slowed economic activity and reduced tax revenue. At the same time, the government’s borrowing has increased, which drives up the national debt. 

As the government continues to spend on programs to prevent the economy from falling into a recession due to the COVID-19 crisis, the federal budget deficit is forecast to hit $3.3 trillion in 2020, which marks an increase of more than three times the 2019 deficit. 

Currently, the U.S. national debt is more than $23.3 trillion. The debt was at $20.5 trillion at the end of June and $17.7 trillion at the end of March. The national debt has risen quickly in 2020 due to the government’s economic stimulus program, which includes direct transfers to households and special loans for businesses.

The White House and Congress are exploring more economic stimulus measures, which would drive government spending and increase the budget deficit. As the fiscal deficit widens, the U.S. debt will only continue to swell. 

According to the Congressional Budget Office, the U.S. debt will reach 98 percent of the GDP in 2020 and exceed 100 percent of the GDP in 2021. That would mark the first time since 1946 that the U.S. debt exceeds the size of the economy. The U.S. national debt reached 106 percent of the GDP in 1946 due to the country’s huge military spending to end World War II. The country’s national debt could reach 109 percent of the GDP by 2030.

Although the U.S. debt is swelling rapidly, the U.S. isn’t the most indebted developed economy in the world. Japan takes that crown. Japan’s debt is more than 250 percent of its GDP, while Italy’s debt is more than 150 percent of its economy. The national debts in Canada, France, and Spain are also huge at 100 percent or more of their GDP.

Over at least the past century, every U.S. president has increased the country’s debt load. President Trump has added about $3.0 trillion to the U.S. national debt since taking office. President Barack Obama added more than $8.3 trillion to the U.S. debt during his two terms, which left the debt at more than $202 trillion when he left office in 2017. President George Bush added more than $6.1 trillion to the country’s debt load, which drove the total to nearly $12 trillion by the time he left office.

The COVID-19 pandemic has clouded the U.S. economic outlook. This week, a Federal Reserve report shows that the U.S. economy is recovering. However, the report notes that the economic recovery is slow and uneven. For example, the Fed report points out a notable surging recovering in sectors like residential real estate and manufacturing due to consumer spending that keeps rising. 

However, the rebound in sectors like agriculture and construction remains sluggish. COVID-19 hotspots that have affected the reopening of businesses in some regions explain the slow and uneven economic recovery.