Due to this cultural fear of the debt that has manifested itself over the past few years, this will likely come as a surprise. Even more, the notion of owing 16 trillion dollars as an issue of little importance will seem outlandish.
Currently, the United States has a public debt, as a percentage of GDP, of 73 percent. While somewhat larger than typical, since 1940 our public debt percentage has continually hovered around 40 percent, with the greatest amount being 113 percent during World War II, and the lowest amount being 24.6 percent in 1974.
This low point of 24.6 percent was during the third worst economic crisis in the last 100 years. Meanwhile, during the economic boom of the Clinton presidency, debt varied between 49.5 percent and 34.5 percent. The notion that having a large amount of debt is inherently bad for the economy or that lowering the debt will improve the economy is a fallacy.
Public debt also shows that, compared to the rest of the world, we are by no means in an extreme situation. In fact, we are not even in the top 30 nations with the highest public debt as a percentage of GDP....
Economists also are not sold on the belief that the national debt is the most crucial of problems. One such individual is Nobel Prize winning economist and New York Times columnist Paul Krugman. In a January 1 article, he stated his belief that the nation can outgrow the debt:
…First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation…So the debt didn’t make postwar America poorer. In particular, the debt didn’t prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation’s history.Krugman is joined by individuals such as economist Dean Baker, Mother Jone’s Kevin Drum, economist Zachary Karabell, and many others who also feel that the debt crisis is not all that it is made out to be.