President Obama projects that the gross federal debt will top $15 trillion this year, officially equalling the size of the entire U.S. economy, and will jump to nearly than $21 trillion in five years’ time. Amid the other staggering numbers in the budget Mr. Obama sent to Congress on Monday, the debt stands out — both because Congress will need to vote to raise the debt limit later this year, and because the numbers are so large.
Mr. Obama‘s budget said 2011 will see the biggest one-year jump in debt in history, or nearly $2 trillion in a single year. And the administration says it will reach $15.476 trillion by Sept. 30, the end of the fiscal year, to reach 102.6 percent of gross domestic product (GDP) — the first time since World War II that dubious figure has been reached.
In one often-cited study, two economists have argued that when gross debt passes 90 percent it hinders overall economic growth.
The president’s budget said debt as a percentage of GDP will top out at 106 percent in 2013, but only if the economy booms.
“I still don’t see a sense of urgency from the president about the massive federal debt,” said Sen. Lamar Alexander, Tennessee Republican. “His budget calls for too much government borrowing – even though the debt is already at a level that makes it harder to create private-sector jobs.”
Speaking on MSNBC on Monday, Jacob “Jack” Lew, the White House budget director, said their long-term plan to lower deficits will stabilize the debt.
“When we came into office, when President Obama took office, the deficit was climbing to over 10 percent of the economy. We have a plan that would bring it down to 3 percent,” he said. “That is the most rapid reduction in the deficit in history. It is what we have to do to be able to say we’re paying our bills and we’re not adding to the debt.”
The administration said debt as a percentage of GDP will stabilize at about 105 percent in the middle of this decade, though those calculations assume economic growth levels significantly above projections of the non-partisan Congressional Budget Office.
The government measures debt several ways. Debt held by the public includes the money borrowed from Social Security’s trust fund.
Actual debt held by the public will reach 72 percent of GDP in 2011 and will climb as the Social Security trust fund’s finances continue to deteriorate.
