The Consequences of the U.S. Government’s “Unprecedented Spending Spree”
If the U.S. government spends and borrows as currently planned, the likely result would be a debt-to-GDP ratio which exceeds the levels following World War II.
Here’s an excerpt from an August 6 Forbes article:
America is engaging in an unprecedented spending spree. The Committee for a Responsible Federal Budget estimates that the infrastructure proposal and the proposed $3.5 trillion reconciliation spending plan will result in $2.9 trillion (about $8,900 per person) of additional government borrowing over the next decade. This debt will not solve our problems. America needs more private sector innovation to solve our biggest challenges–uplifting the poor, healing the sick, and protecting the planet–not more government spending and top-down regulation.
If all this proposed spending occurs, the federal debt is likely to hit 109% of GDP by 2031 but could get as high as 125%. This would surpass the debt-to-GDP ratio in the years immediately following World War II.
Elliott Wave International’s recently published August Global Market Perspective shows that the debt-to-GDP ratio in 20 advanced economies is already around the percentage levels of World War II. Here’s a chart and commentary:
According to the graph above, debt-to-GDP ratios across 20 advanced economies are testing the high-water mark that dates back to the 1940s, when global economies were borrowing massive amounts of money to fund the World War II effort. Incidentally, the ratio has also traced out five waves up since 1975, implying a nearby reversal.