Question

• With the US debt now at about $18 trillion, do you see any lessons from the European Debt Crisis to which the US should pay attention?

Answer 1

Now US debt has reached the limit of 20 trillion which is close to 108 % of GDP. Most of the economists issuing a warning against the rising debt level. The debt crisis ruined many European countries and crises in Europe led to domino effects across the world.

The debt crisis in the USA could spell disastrous outcomes for other countries. Thus, it is the right time to control the debt level. The debt level of Germany is 79 % of GDP and hence it performing well. Further Greece debt level is 180 % of GDP which is performing worst.

If would be difficult for the government to address any future crisis if the debt level does not fall. During the high growth time, the level of debt should be low. So that government has sufficient leeway to increase debt if crisis hits economy. Reduction in taxes for corporate is not right policy for economy. it would further reduce the revenue sources of government and debt might inch further.