For the first time since World War II, national debt is expected to exceed the size of economy this year, according to a report by the U.S. Department of Treasury. The total debt to GDP ratio is expected to reach 102% this year, well above earlier estimates of 96.4%.
Not helping the figures is the fact that this year’s GDP estimate is now $219 billion below what it was a year ago, which in itself would raise the debt to GDP ratio. On top of that, national debt increased because last year’s tax cuts — extensions of the 2001 and 2003 Bush tax cuts — which are expected to add approximately $858 billion to the deficit over the next 10 years, with nearly half of that deficit falling in 2011.
Since the GOP publicly refuse to even consider raising taxes in order to alleviate the problem, balance will have to be struck by reduction in government spending. Obama has been criticized for too much spending, leading the nation further into debt, but it is in fact the Republican tax cuts that account for the majority of the debt written into Obama’s 2012 budget proposal.
While suggested solutions might tip the scales back in favor of GDP, data shows that, historically, nations in which debt reaches 90% of GDP (a point the U.S. is well past), it often loses one percentage point of growth each year.