What is U.S. Debt? - P2: Comparing Debt to GDP

View Part 1: Intro to Debt -- http://www.youtube.com/watch?v=82uXr4znILw

It is easy to look at the trillions of dollars that the U.S. owes and think, "Geez, that's a lot of money." And it is. But is it too much money? To decide this, a lot of economists like to look at debt and compare it to our Gross Domestic Product (GDP). 

A few economists recently looked at the data on debt and economic growth from 44 countries over 200 years. These economists found that when a country's debt is below 90% of its GDP, the debt doesn't seem to effect the country's economy at all. But when it gets over 90%, suddenly that country begins to suffer a 1% decline in economic growth. 

Today, the U.S. debt is over 100% of its GDP. The same economists have warned that we need to start correcting course now so that our mountain of debt doesn't fight against our economic recovery.

Popular Article: http://blogs.wsj.com/economics/2010/01/04/reinhart-and-rogoff-higher-debt-may-stunt-economic-growth/
Scholarly Article: http://www.nber.org/papers/w15639