US borrowing tops 100% of GDP: Treasury

The US Capitol is reflected in the water surrounding
the skylight of the Capitol Visitor Center on Capitol Hill
© AFP/Getty Images/File Alex Wong

AFP

WASHINGTON (AFP) – US gross debt shot up $238 billion to reach 100 percent of gross domestic product after the government’s debt ceiling was lifted, Treasury figures showed.

On Tuesday, the Treasury had to add more than $200 billion of commitments immediately after President Barack Obama signed into law an increase in the debt ceiling.

The liabilities had been temporarily taken off the federal government’s balance sheet since May 16, when the Treasury reached the $14.29 trillion official cap.

It then used extraordinary measures to remain under the legal limit while deeply polarized Republicans and Democrats battled over raising the debt ceiling and reining in the country’s massive deficit.

The new borrowing took total public debt to $14.58 trillion, over end-2010 GDP of $14.53 trillion, putting the United States in a league with highly indebted countries like Italy and Belgium.

Public debt subject to the official debt limit — a slightly tighter definition — was $14.53 trillion as of the end of Tuesday, rising from the previous official cap of $14.29 trillion a day earlier.

The official limit was hiked $400 billion on Tuesday and will be increased in stages over the next 18 months.

With the latest borrowing, the United States joined a small group of countries whose public debt exceeds GDP, including Japan (229 percent), Greece (152 percent), Jamaica (137 percent), Lebanon (134 percent), Italy (120 percent), Ireland (114 percent) and Iceland (103 percent), according to figures provided by the International Monetary Fund.

The last time US debt exceeded its annual economy was in 1947 just after World War II. By 1981 it had fallen to 32.5 percent.

Ratings agencies have warned the country to reduce its net debt-to-GDP ratio quickly or facing losing its coveted AAA debt rating.

Moody’s said Tuesday that the government needed to stabilize the ratio at 73 percent by 2015 “to ensure that the long-run fiscal trajectory remains compatible with a AAA rating.”

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