Here in the UK, politicians are obsessed with the level of national debt.
They are concerned that 100% of the UK's gross domestic product (GDP) is currently affected. They incorporate them into their fiscal rules, forcing them to lower them (even if in practice they rarely succeed).
So you may be surprised to learn that while UK public debt is expected to decline in the coming years, the equivalent amount in the US is projected to rise to completely unprecedented levels.
In fact, while UK and American sovereign debt levels have moved closer together in recent decades (as a percentage of GDP, they were both in the mid-30s before the financial crisis, in the 70s and 80% after Covid), they will soon be they vary significantly.
So at least suggest the latest forecasts from the Congressional Budget Office and the UK Office for Budget Responsibility (OBR). They show that while both the UK and the US will have net debt levels of less than 100% this year, by the middle of the next decade in America it will rise to 125%, while in the UK it will fall to 91%.
These are, of course, only projections based on the assumption that each country follows the current plans set out by the relevant administration. These plans may very well change. But still – this difference would be the largest discrepancy in post-war history.
There are many reasons: The United States is raising less taxes, thanks in part to a series of tax cuts and exemptions that began under Donald Trump but continued for some recipients under Joe Biden.
In part, that's because it's spending more, both on discretionary measures like the Inflation Reduction Act (a series of subsidies for green tech companies) and non-discretionary programs like Medicare.
Either way, the United States will borrow more in the coming years than in any comparable period in recent memory. The result is a seemingly continuous increase in federal debt, to a record high of 125% of GDP.
The question arises: what do the candidates in this election plan to do about it? The short answer is: not much.
Indeed, according to the latest analysis by the nonpartisan Commission for a Responsible Federal Budget, based on the promises of Kamala Harris and Donald Trump, the gap will only get wider – regardless of which party wins the election.
Read more
US officials threaten to break up Google
Analysis: Trump returns to the place where he was shot
It found that Ms. Harris' campaign plans, which call for significantly more spending, would see the federal debt rise to a record 133% of GDP.
Perhaps unsurprisingly, the real shocker of the analysis is that it shows Trump's plans are on an even steeper upward trajectory as he cuts taxes on a range of households and businesses and continues some of his existing spending plans. While Republicans are traditionally viewed as the party of fiscal prudence, a second Trump administration would push the federal debt to 142% of GDP.
Stay up to date with the latest news from the UK and around the world by following Sky News
Click here
👉 Click here to follow Ian King's Business Podcast wherever you get your podcasts 👈
All of these numbers would be record numbers. And for some economists, this raises an important question: At what point do investors in British government debt – and the dollar more broadly – oppose these spending and borrowing plans?
Because the U.S. dollar remains the world's reserve currency, it is often said that Washington enjoys “extraordinary privilege” that allows the government to avoid the constraints of many other countries. But as the federal debt hurtles toward unprecedented levels — regardless of which candidate wins — the nation's economic history is entering uncharted territory.
