Public debt in the USA and the EU
is the subject of Constantin T. Gurdgiev’s article at TCS, A Pivotal Year for the European Left. Prof. Gurdiev looks at three items, finding that:
- Publicly Held US Debt as percent of GDP: the US debt is less than 66% of GDP (the EU Stability & Growth Pact (SGP) limit is 60%, while current EU15 average is 63.2%)
- Public Debt, per cent of potential GDP: the real measure of the public debt burden, i.e. the ratio of publicly held government debt to potential GDP is lower in the US than in Canada, France, Italy and Japan<.li>
- Net Government Lending as percentage of potential GDP: The difference in correlation between the deficit and the private savings rate between the US and the European economies arises from greater capacity of the American economy to absorb added spending into productive economic activity, contrasted by the general inability of the welfare-focused European public spending to generate private sector growth effects.
“In the debate about debt and deficits, the ultimate determinant of the public acceptance of higher spending is not the amount spent, but the growth opportunities created.”