In a recent article, The Economist wrote: “For most of the past century, rich countries have had simple rules for sharing prosperity: raise money mostly by taxing work and consumption, sprinkle in some borrowing and hand out the proceeds.”
There is something odd about that sentence. The words “rich” and “prosperity” seem misplaced in it because they are being used in reference to countries that have to “sprinkle in some borrowing” before they can provide services and social welfare to their citizens.
Today, the vast majority of nations are indebted, some heavily. Ironically, many countries that are considered “rich” also happen to be some of the ones with the most onerous debt burdens. With a national debt approaching $40 trillion, the U.S. is the worst example—in terms of absolute numbers.
When considering whether a country’s debt is overly burdensome or unsustainable, economists don’t simply look at absolute numbers the way average people like me do. Experts take into account a variety of factors, one of which is debt size relative to GDP. Recent IMF data show that even by that measure, the picture for the U.S. is unflattering. America’s central government debt-to-GDP ratio was 103 percent in 2024.
Rate of economic growth is another important metric that economists like to focus on. Some people say that the nature of the American economy, with its dynamism and high-growth potential, gives the U.S. a unique ability to grow its way out of debt. Others are not so sure.
The Peterson Foundation says that “[America’s] growing debt is caused by a structural mismatch between spending and revenues.” In plain English, it means we have been living beyond our means.
Borrowing is a necessity at various stages of life, for both individuals and governments. Most people who attend college take out loans to pay for tuition and living expenses. The vast majority of families have housing mortgages. Likewise, governments borrow to fund education and various programs, and to build infrastructure.
In America, college students and families generally do a good job repaying their loans and becoming debt-free over time. It’s been a completely different story with the U.S. federal government, which hasn’t been able to balance its budget for nearly three decades. It has kept borrowing throughout that time to plug the gaps.
We wouldn’t have such a massive debt problem if the government had only been “sprinkling in some borrowing.” It is much worse than that. Because of ever-widening budget deficits, the federal government has been forced to borrow heavily and continuously. The explosive increase of the debt pile over the last 15 years paints a sobering picture. Is this sustainable? Even the most optimistic economists are unlikely to answer in the affirmative.
As we try to figure out how to get out of this mess, one of the things we perhaps should stop doing is referring to ourselves as rich and prosperous. I don’t know of any wealthy people who have this much trouble meeting their expenses. Those misleading adjectives must be lulling us into a false sense of security and encouraging us to spend money we don’t have.