help me understand our debt crisis

[Anonymous]

Anonymous wrote:So back to my original post, am I to believe our country is in debt or not? Did Bush ruin the country or is Obama full of @#$!, It can not be both. Either the United States if broke or we are not. All I here is how broke this country is, how much debt we owe to _________, not sure who we owe money. Haiti was just an example, I am not against helping any one at all, just want to know how we justify sending money any where if we are really that broke.

Here is a graph showing US debt as a percentage of US gross domestic product (i.e. the value of everything made in the US in one year):

http://zfacts.com/p/318.html

To answer your questions: Bush's economic policies were damaging to the US because they led to a significant increase in the debt/GDP ratio when the economy was actually growing. Under normal circumstances you would have expected debt levels to have fallen significantly during over the course of his presidency, since apart from the first and last year GDP grew. In fact, as the graph shows, debt rose substantially, since the Republicans decided to spend the money on tax cuts for the rich rather than paying down the national debt.

Under Obama, the debt levels will inevitably rise, since balancing the budget during a severe recession is not only very difficult, but very damaging to the economy. If the government cuts back at the same time as the private sector, the recession becomes much worse. So you would expect a significant increase in the debt ratios for the next couple of years.

As to whether the US is broke, debt ratios are high, but still much lower than after the second world war. So the situation is potentially sustainable, but much will depend on what choices Congress makes over the next few years.

[Anonymous]

On the same topic. Assuming OP is actually interested in hearing answers to his/her question.

http://www.nytimes.com/2010/02/22/opinion/22krugman.htm

[Anonymous]

Also, on the subject of who the money is owed to, the answer is that over half is owed to US residents, that is, most of the debt is owed to Americans.

The rest is owed to foreign governments (China, Japan being the two largest) and the foreign individuals and corporations (UK, Germany being among the largest).

[Anonymous]

thanks