Debt Politics

It's a problem because I say so.

"We've got trouble, right here in River City." -- The Music Man

   We hear a lot of warning talk about a dangerously high national debt, and because it's so high it's essential that the country use austere measures to reduce it. Let's take a look at some numbers.
   Using a ratio of debt to GDP is one way to measure the significance of a nation's debt, and whether it's a problem. In the U.S., the ratio has risen from 35 percent in 2000 to 60 percent in 2009, and now is heading towards 75 percent. Is this a problem? During a recession, no, because government borrows to stimulate the economy for the benefit of its citizens.
   Meanwhile, other countries have even higher ratios of debt to GDP. The ratio in Canada, for example, is 84 percent. In France, 86 percent; Germany, 82 percent; and the UK, 86 percent. Throughout the European Union, the number is 82 percent, even as the recommended ratio is 60 percent, according to Eurostat, which deals with data for Europe. Some nations, admittedly those with serious fiscal issues, have even higher ratios. Ireland's debt to GDP ratio is 108 percent; Greece posts a 165 percent mark; and Japan, a soaring 208 percent. Spain, however, has a debt to GDP ratio of 69 percent, below that of the U.S. Booming China reports a ratio of just 43 percent, while Mexico lists 37 percent.
   (Statistics are gathered by Eurostat and the CIA, and are posted on the Wikipedia web site.)
   Given that wide a range of numbers in major nations, from 37 percent in Mexico to more than 200 percent in Japan, why all the fuss? Does it mean that America is about to topple under the weight of its debt, even though healthy Germany owes more, relative to its output, than the U.S.? Or that Japan, which owes twice as much as it produces, is about to fall apart? And does it mean that Mexico, which is in debt to the tune of only 37 percent of its GDP, is healthy?

   Think on it. There are too many other factors involved for any one data point to be as significant as some politicians claim.