A new paper by the Brookings Institute has highlighted reasons for concern around the growing US debt pile, and the dynamics that could affect the level of expected risk. Authored by directors Wendy Edelberg, Benjamin Harris, and Louise Sheiner, it flags the unsustainable direction of debt growth today, based upon projections that took it to 98% of gross domestic product in 2024, with the highest ever level having been hit post-WWII in 1946 at 106% of GDP driven for the most part by persistent primary deficits.
“We recognise there is great uncertainty about the repercussions of debt as a share of gross domestic product (GDP) rising to levels far exceeding historical precedents, and an analysis benchmarked to historical relationships in the macroeconomy may understate the risks of a fiscal crisis,” write the authors. “That said, our analysis suggests that, so long as the US…
