3
National Debt (Historical)
European Finances Improve, Brexit Presents Problems, China Slows and the
U.S. National Debt Grows
The European “Financial Crisis” continued to improve in 2017
with most of the EU remaining out of recession. The Chinese
economy slowed in 2017 to 6.6 percent GDP growth while
Japan grew at 1.7 percent and the European Union grew to
2.4 percent. Aside from minor sources of revenue like oil and
mineral rights from government lands, over 96 percent of
western governments derive the dollars they spend annually
from taxation, borrowing, and/or inflation. The European
debt crisis continued to improve in 2017 but is still burdened
by countries like Greece and Italy, which have national debts
greater than 125 percent of GDP, respectively. The European
Union continues to favor a more expansionary monetary policy
as a solution to stimulate economic growth. However, the real
threat to the European economy moving forward is that the
implementation of necessary spending cuts is leaving many
to believe that tax increases on the wealthy and businesses
are needed. If implemented, tax increases will ensure slow
economic growth in Europe in 2018 and the great debate of
how to handle Great Britain and the Brexit vote continues.
European GDP growth in 2018 is expected to slow with GDP
growth estimated to be 2.1 percent for the year.
The U.S. national debt as of April 2018 was 21.16 trillion dollars
or roughly 105.5 percent of U.S. GDP in nominal dollars (see
chart). In 2018, roughly 18 percent of U.S. federal spending will
come from either borrowing or inflationary dollars created by the
U.S. Federal Reserve Bank. The U.S. government spent more
than 474 billion dollars in 2017 just to pay the gross interest cost
of funding our national debt. It is also troubling that government
spending at all levels in the United States has gone from less
than 8 percent of GDP in 1900 to 39 percent today.
This summary was prepared by Dr. Timothy G. Nash, Senior
Vice President and Director of the McNair Center for the
Advancement of Free Enterprise and Entrepreneurship at
Northwood University.
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