The US Debt Crisis Explained


The US has the highest level of debt in the world, but on a per capita basis debt (at 95 percent of GDP) it’s a long way behind Greece (nearly 150 percent of GDP) and others in Europe.

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says debt is an issue, but it’s not out of control. In this edition of BTalk he says the problem is really politicians failing to agree on the need to raise the debt ceiling, a control measure that is unique to the US.

Hence, the crisis. If agreement is not reached by August 2nd, the US will not be able to borrow further, because of internal controls, not because of a shortage of available lenders.

It seems there is no choice but to raise the debt ceiling, but the need to reach agreement provides an opportunity for the Republicans to push for public spending cuts. So Medicare could suffer.

Meanwhile the share market is taking a hit, money is shifting to the gold market and the IMF is saying the global economy could pay the price. It sounds like a classic case of politicians holding the country (or the world) to ransom if they don’t get their way.

First published on CBS News 

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