Over at EconLog Bryan Caplan makes some very interesting and important observations on “How I Was Wrong About Government Debt.”
Most economists when gauging the impact of the massive government debt on the economy compare Debt to GDP, but per Caplan:
The right comparison is government debt relative to annual tax revenue. By this correct measure, the U.S. is indeed in irresponsible territory. Take 2011: With government debt at 67.7% of GDP, and government revenue at 15.4% of GDP, the U.S. debt/income ratio was already about 440%.
He adds, “Now I’m actually worried.”
The real issue is not the debt but the size and impact of the government at all levels.
