The major focus in the economy in recent years has been on growth — particularly on creating jobs and reducing unemployment. But what’s happened to the national debt? Is it still an issue? And where is it headed? NC State University economist Mike Walden answers.
“Well, of course, we heard a lot about the national debt and the increase in the national debt during the Great Recession. Of course what happened during the Great Recession was tax revenues to the federal government went down, federal government tried to improve the economy through stimulus spending, so we had more government spending, less tax revenues, obviously an increase in borrowing and debt by the federal government. In fact the national debt held by the public as a percent of the economy — one of the most common measures — went from 30 percent up to 60 percent. So a doubling.
“Now as the economy has recovered tax revenues to the federal government have gone way up. The stimulus program has ended. So debt as a percent of the economy actually has not been rising in recent years. But most economists think this happy circumstance is simply temporary.
“As we look ahead, and we know that the country is going to age, federal spending on things like Medicare, Medicaid, Social Security will rise dramatically, we think the debt will begin to grow again.
“In fact, the latest estimate from the Congressional Budget Office is that by 2050 that percent of the debt held by the public as a percent of the economy is going to go from today’s 60 percent up to 120 percent. So we still have a long-run debt issue.”