What is U.S. Debt? – P2: Comparing Debt to GDP

When the United States needs more money than
it has, the U. S. Treasury will raise that money by issuing securities which are basically
a promise that if you give us money now we’ll pay you back plus some interest in the future.
In other words, debt. Most of our debt is owned domestically but some of it is owned
by foreigners and even other countries. This is called our public debt which is currently
around $10 trillion and growing. Now there’s another $5 trillion of debt that the U.S.
owes itself. You see when the U. S. collects revenue for
specific programs like Social Security that it will need for later, it doesn’t save or
invest that money, instead if gives that money towards other budget items and we just promise
to pay that money back in the future for the rightful program. If you add up the public
and intra-governmental debt you get what’s called the Gross Public Debt. Now the trillion
dollar question is how much debt is too much? And interestingly the best way to answer that
question isn’t just to add up all the debt and say dang, that’s a big number, but instead
to compare it to our Gross Domestic Product. So what’s that? Well you get the Gross Domestic
Product of a country by adding up all the goods and services produced in that country
each year. Now when GDP grows it means our economy is growing and we’re creating more
jobs and more tax revenue. So economists like to look at debt by comparing it to GDP and
that gives you a percentage. Now you can look at the percentage of debt to GDP over the
course of U. S. history and you’ll find that since 2001 our debt to GDP ratio has been
rapidly growing and shows little signs of stopping. So the real question is how much
debt to GDP is too much? Recently a team of economists performed a
comprehensive study looking at this very question. The study found that with anything below 90%
debt to GDP there was no observable effect on the country’s economic growth. But when
a country gets above 90% suddenly the economy begins to suffer.
Currently the U.S. is somewhere above 100% debt to GDP and these same economists have
concluded that our current debt trajectories are a risk to our long term growth and stability
as a country. So almost everyone agrees that we have to solve this debt problem but the
question is when do we solve it and how.

72 comments on “What is U.S. Debt? – P2: Comparing Debt to GDP”

  1. Xixzzable says:

    1 st

  2. Balazs Galsi says:

    Great Video

  3. Daniel Silverstein says:

    wheres part 1?

  4. Daniel Silverstein says:

    and this was awesome!

  5. Daniel Silverstein says:

    @epipheo yeay

  6. McD419 says:

    u deserve more views

  7. Eric Sztanyo says:

    Fix it!

  8. thegreatninjaman says:

    less war more tax

  9. NeroDesignz says:

    @epipheo I was searching for part 2 for a long time.. BEFORE it even came out 🙁

  10. Lemonnater says:

    Get rid of the Federal reserve and let the governement ultimatly control the printing of its money.

  11. Ben Robinov says:

    good video, great channel

  12. /??tHe.P5.4..IL9E8.20..15.D..11LoW!Cq??/ says:

    do not use on damn idiotic things

  13. Voiceoftheunheard says:

    Elect Ron Paul; he'll cut a trillion dollars year one!

  14. Wafflezombies1964 says:

    Well you could drill for all the oil the usa has- usa is a rich country trouble is they have shut off the oil drilling and other deals- How Canada got out of trouble drilled for oil- USA Has things backwards its like it is going Insane

  15. fakemadereal says:

    Well thanks guy. You now have all of us depressed, and have offered no solution. You failed to mention Japan, which has a two hundred percent debt.

  16. KOOL35T says:

    upsıdǝ doʍn ʇǝxʇ ıɥ oʎ

  17. Young Progressive says:

    This was a really good video

  18. moises garip says:

    Dude I love your videos, they explain things so perfectly, and the conclusion to part 1 made me click the link immediately.

  19. John says:

    @Voiceoftheunheard That would be possible…if people would just be PATIENT I swear if I ran for president my campaign slogan would be "Patience, young padawans"

  20. Kiah Lyons says:

    woaahhh, with each video, I become more and more amazed!!! You guys are SO AMAZING!

  21. Ethan says:

    @GUKingOfHeart if we do that think about all the cr

  22. Ethan says:

    @GUKingOfHeart if we do that think of what would happen!

  23. Daniel Kim says:

    So when an American makes fun if you since your foreign say "Shut up and pay up your debt" <– Pwned

  24. Gtorres12PS3 says:

    15trillion? isnt that just 45millions? not million. millions?

  25. Taufik Marasabessy says:

    The US also need to control the population growth. The number of birth is way bigger than number of death. The advance development on health care has help to repress the number of death, on the other hand there's nothing of significant can repress the number of birth. Therefore, your government has to spend more from its treasury to follow up with population growth.

  26. queenbloxar says:

    this is how to solve it… SOCILISM
    (great untill you run out of other peoples mony…oh wait we already are)

  27. SirSovietSquid says:

    THE ANSWER IS SOCIALISM:China is a socialist country,and its economy will probably overtake the U.S sometime in 2016…

  28. PieRo3712 says:

    just make cannabis legal..

  29. Kayla R-P says:

    No…there are 15 million 1 millions in 15 trillion.

  30. Gtorres12PS3 says:

    so everything after a trillillion is like 4 trillion 5 trillion etc?

  31. Gtorres12PS3 says:

    sorry my grammer

  32. thechucknorrisofNSMB says:

    Just noticed we're comparing GPD to GDP here.

  33. northstar789 says:

    I highly recommend looking up 'monetary sovereignty' or 'modern monetary theory'. You seem to have left out of your explanation the fact that the United States is a monetarily sovereign nation, in control of the world's most important currency. This makes a HUGE difference in how the economy works. If more citizens understood this, there would be much less fear of the 'deficit' and a realization that there can be enough money to make life better for more Americans.

  34. geographymathmaster says:

    Dang! That's a big number.

  35. /??tHe.P5.4..IL9E8.20..15.D..11LoW!Cq??/ says:

    If we made things here then sold it at other countries we could make more money

  36. MRcrazyJs says:

    too bad that a huge amount of things that make your life able to be lived as it is now, comes from other country's…. also if you nuke a certain place then those things in said certain place gets destroyed with it… gonna take some rubble? don't think so. don't feel bad about your stupidity… your just an american…

  37. Thunder says:

    Dude! How do you make your awesome Animations/Cartoons?

  38. Juan B says:

    Dude, what's with our military spending!! What are we afraid of anyways!?

  39. eowbvrwjer says:

    part 3

  40. shaochia vang says:

    Cut defense spending, legalize drugs, tax the rich. There I just solved our problems.

  41. shaochia vang says:

    @Scoinsoffaterocks The soviet union and red china plus the 20 member of the Taliban and algeda

  42. YuuzahnDragon says:

    Gross Domestic Product…..hahahahaha
    I rarely see any products produced in the U.S
    Sure this country has great innovators but if you want to mass-produce something, you have to have cheap labor. Where do we get ours, from other countries mostly. And I think it will take at least 5 or more generations to "pay off" this insane debt if we continue to have this kind of national income. This is quite sad!!

  43. Salvatore Mammoliti says:

    That was just a great explanation.

  44. Ewingert25 says:

    i dont see how we ever get out of this mess. this is an equation for economic callapse. get ready america. and vote obama out of office. not garanteeing romney will get it done, but obama is the main culprit. bush being the second culprit

  45. schackproffset says:

    How about going to casinos with all our tax money

  46. sirellyn says:

    Don't look at debt to GDP, the calculations for GDP change YEARLY. For example see how high it was in 1947? Well if they calculated GDP in 1947 the way we do today, it would have been less than 1/3rd that amount.

    Which means our debt to GDP ratio if calculated the same today would be well over 100%.

    Unemployment numbers are the same, they were calculated MUCH differently during the great depression, and we actually have depression level unemployment.

    Apples to apples if you must compare.

  47. sirellyn says:

    Neither would get it done. The US will have to default and revalue it's currency OR issue new currency eventually (or have someone else issue new currency like the IMF)

    The revalue is the best of those bad options, and the longer it takes for it to occur the larger the instant jump of prices when it does.

  48. regfregf says:

    When i win the lottery, which is sometime soon I hope. Im giving you a lot, this needs to be your fulltime job. FOREVER.

  49. World to Win says:

    Debt is a sin

  50. Nova Byzantine says:

    The US has a 110% debt to GDP

  51. Milian Violet says:

    I wish you guys taught all of my college courses.

  52. mark says:

    I wonder when part 3 comes out…..

  53. UltraGaivalas says:

    sin is shit

  54. theMOCmaster says:

    Military isn't 35%, it's around 13%…

  55. IronPriest82 says:

    Nicely done, thank you.

  56. Glitchy Gamer says:

    Don't make iou's

  57. koolhanddavey says:

    uh oh, Reinhart and Rogoffs study was not academically vetted, in fact was said to have partly resulted from an xcel spreadsheet error…

  58. mr mcgridle says:

    Below me … why would you wanna cut our military thats a stupid move

  59. theevilcupcake says:

    This is so good. I think I get it now.

  60. Roy Long says:

    Japan debt-to-GDP ration in the 1990s was about 200%, and Japan came out of its recession w/ spending.

  61. robertomasymas says:

    this is good. there's another number, which is 60%, which the european union uses. this marks the threshold at which known free market controls can resolve debt (ie, without using non-free market manipulation, like bailing out banks).

  62. 92axelmaster says:

    to bad that that study was proven to be total and utter Bullshit. not to mention that the capacity for a Nation to handle Dept is dependent on how much Tax revenue it gets, not on GDP/Dept Ratio.

  63. Atom Bigod says:

    So Americans produced 16.8 Trillion in 2013, GDP/GNP. But we don't own the coin in our pocket. To pay off the Nat'l debt, we'd have to give all the money in existence back to the fed, plus interest. So we in fact work for nothing, year after year, only building debt for our labor. You idiots make me sick. The GDP should be how much money is created to circulate each year, owned without debt. Slaves, wake up. And Moses said, "Let my People Go"

  64. navylaks2 says:

    cut spending raise taxes
    it's the only way

  65. Analog Fox says:

    I made a special facebook group where people can say no to war.

  66. ohisrg dfgdfg says:


  67. ceehak 94 says:

    The Reinhart and Rogoff paper isn't a great one to cite even though it's so popular. The 90% cutoff point was proven to be wrong as they used incorrect data when calculating their model. However, it has already been observed that lower growth is correlated with increasing debt-to-gdp. The big caveat being that economists have not determined whether this CORRELATION is CAUSATION or if the relationship runs the other way i.e. do we observe higher debt as a result of lower growth due to lower taxes being collected etc…. ?

  68. Matt Williams says:

    We as a nation have to make some fixes. When you look at where the vast majority of our tax dollars are spent each year they are in social security, healthcare, and defense. We can do several things to turn this around. One, a huge amount of our healthcare expenses are in hospice care interestingly enough. Let dying people die rather than keeping them alive until the bitter end. Everyone freaked out at the idea of putting granny down. Well if granny isn't getting back up it would be kinder to let her go. 2nd, Social Security needs to be improved. Not cut. Think we have a lot of sick people now? Try slashing Social Security 50% or some insane number that Republicans have come up with. Granny will be dying in the streets if that happens. 3rd, we spend something like 500 billion dollars a year on defense. Russia spends about 1/10th of what we do, per year and they are perfectly capable of projecting power. In short, we overspend an incredible amount on defense. Most of that comes in the form of getting ripped off by defense contractors. Way to negotiate, government. 4th, we view ourselves as the global police. It's about time we start demanding a return for our protection. If nations don't want our protection then let them defend themselves while spending 1% of their GDP on defense. Good luck with that. 5th, in today's technological age we must accept that nations with people highly educated in computer science, engineering and medicine will be the leaders of the future. An emphasis needs to be placed on these fields in education. All children need technology and 3D imaging at their fingertips from the time they are in preK so that they will dominate the next generation instead of India. 6th, the private capital market has little incentive to pour money into nuclear fusion research. The government must take this role just as we did with NASA during the space race. Imagine in 20 years a nation that is completely energy independent on mostly clean energy. We could solve climate change and a future energy war in one fell swoop.

  69. MrJohndoe845 says:

    damn this is so ignorant. Debt to GDP ratio is not relevant to anything

  70. GateCrashers says:

    where is the solution ?

  71. S.A. B says:

    look at how the debt Skyrocketed under President Obama.

  72. Brad Jon says:

    Any amount of debt is to much because its unconstitutional.

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