US National Debt to Surpass GDP Next Year... First Time Since World War II

Increase in Debt Due to COVID-19 Response and Decrease in GDP
Zero Interest Rate Impact Also Seen as Easing Government Burden

[Asia Economy New York=Correspondent Baek Jong-min] Next year, the United States' national debt is expected to surpass its Gross Domestic Product (GDP) for the first time since World War II.

[Image source=Reuters Yonhap News]

According to Bloomberg News, the Congressional Budget Office (CBO) projected on the 2nd (local time) that the federal government debt for the 2021 fiscal year, from October this year to September next year, will reach $21.9 trillion, amounting to 104.4% of GDP.

The ratio of U.S. government debt to GDP exceeded 100% in the second quarter, when the COVID-19 pandemic was at its peak, but has since decreased, and is expected to record 98.2% for the entire current fiscal year.

The U.S. government debt exceeding GDP is the first time in over 70 years since 1946, right after World War II, when it was 106%.

This is analyzed to be due to increased government spending to respond to COVID-19, while tax revenues decreased due to the economic recession. The delayed economic recovery, which caused a decline in GDP, is also cited as a reason.

As of the end of June, the total U.S. government debt was $20.5 trillion, a 16% surge in just three months compared to $17.7 trillion at the end of March. Meanwhile, GDP in the second quarter decreased by 9.5%.

However, since the current situation arose as part of the crisis response and the benchmark interest rate has fallen to near zero, the U.S. government's interest burden has actually decreased compared to before the COVID-19 crisis, so there is a view that there is no need for major concern.

The Wall Street Journal even stated that the U.S. government has more capacity to borrow money.

This content was produced with the assistance of AI translation services.