The Federal Debt Clock Live. Business & Marketing Essay

Impacts of a High Debt-to-GDP Ratio
Student Name
Institutional Affiliation
Impacts of a High Debt-to-GDP Ratio
The debt-to-GDP ratio of the United States has grown from 53.29% in 1960 to 106.70% currently. This means that the country’s public debt is higher than its GDP, and thus suggests that the U.S currently lacks the capacity to pay back its debts. It also has negative impacts on the economy as it slows down growth and growth of businesses, and prompts the government to invest more on its citizens.
One of the impacts of a high debt-to-GDP ratio is feed back into debt levels, mainly through lowering of revenue, increased in interest spending, as well as reducing the GDP levels (Cloyne, Ferreira, & Surico, 2020). Reduction in the GDP would also translate to slow economic growth, reduced government revenue, as well as reduced income among the citizens. It would also increase government and individual spending since the per capita GNP would also drop.
Increased interest spending would also crowd out the remaining part of the budget. The interest rates would return to more normal levels form the low levels as the debt continues growing (Cloyne, Ferreira, & Surico, 2020). This will also translate in the federal payments increasing rapidly. This means that interest will take up more of the budget and thus less will remain for the other progra...