illustrate the implications of future policy choices, the committee selected a widely used metric as a reasonable (albeit not the only possible) indicator of fiscal prudence: the size of the government’s debt as a percentage of the nation’s gross domestic product (GDP). The key concern undergirding the committee’s analysis is that under a continuation of current policies this ratio would continue to rise in the years ahead, with potentially harmful effects on current and future generations.

There is no magic number for the ratio of government debt to GDP; a smaller debt is always more manageable and gives a nation more ability to absorb unexpected shocks. A higher debt limits its choices and flexibility. The committee believes that the debt that will result if the United States continues with current tax and spending policies will be at a level that poses too great a risk to the economic welfare of the current generation and would impose an unfair and crushing burden on future generations. (The debt, which was about 40 percent of GDP just 2 years ago, is now above 50 percent and rising rapidly.) This is a judgment based on the committee’s deliberations over the best available data, literature, understanding of economic policy and history, and analysis of possible scenarios. Given the additional risk of carrying a higher debt burden, the committee believes that the growth in this ratio must soon be limited, as shown in Figure S-2.

More specifically, the committee believes that some combination of revenue increases and spending restraints should be implemented soon to constrain the growth of federal debt as a percentage of GDP within a decade to a level that provides an appropriate balance between the risks as-

FIGURE S-2 Debt savings from stabilizing the debt-to-GDP ratio in 12 years.

FIGURE S-2 Debt savings from stabilizing the debt-to-GDP ratio in 12 years.



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