"The Congressional Budget Office released a new report this week showing that the federal government’s publicly held debt would top 101% of GDP by 2021, more than the value of everything produced in this country over the course of a year. Think of it like owing more on your credit cards than your entire family income. By 2035, the publicly held debt, CBO says, could top an almost unfathomable 190% of GDP.
And that was the good news.
The federal government actually has three different types of debt. Debt held by the public, which generated the headlines in the CBO report, is the type of government bonds that you — or the Chinese government — might own. Economists worry a lot about this type of debt because the government has to borrow the money from private credit markets. The government borrowing competes with investment in the nongovernmental sector, leaving less money available for private investment in such things as factories and equipment, research and development, housing, and so on. Growing levels of publicly held debt can drive up interest rates in the long-run, and may already be choking off interbank lending"..........READ MORE
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