Friday, September 29, 2006

How indebted is the U.S. government?

Here is a good graph from yesterday's congressional testimony of CEA chair Eddie Lazear (click on the graph to enlarge). The bottom line: The level of U.S. government debt, either now or in the near future, is not unusually high by historical or international standards.

The looming problem with fiscal policy is the longer-term outlook, which will unfold over the next several decades as the baby-boom generation retires and starts collecting Social Security and Medicare. At that point, this series will start rising rapidly unless taxes are raised or spending is reduced compared with benefits promised under current law.