UK’s public debt is about to exceed that of the US for the first time

The USA is about to have a lower public debt than the UK, for the first time; Cormac Hollingsworth looks at why that may have happened.

 

For the last ten years of the Labour government, the UK’s debt burden was lower than that of the US government. Even in the face of the collapse of the global banking system, the Labour government managed to keep UK debt levels below that of the US.

Now, the coalition’s contractionary policies mean that that record will hold no longer: the UK is about to have a higher debt than the recently downgraded US.

Graph 1:


The Congressional Budget Office (CBO) – the equivalent of our Office of Budget Responsibility (OBR) – last night published its forecast that the US deficit would fall by a massive two per cent of GDP to seven per cent of GDP this year. Here in the UK we’re hoping that the OBR is right that the stagnating UK’s deficit shrink by a fraction of that, 0.8 per cent, if at all.

But even worse for the coalition, given that the US’s recent credit rating cut, the CBO is predicting that the US’s borrowing will start falling rapidly through the next few years as the US economy continues to grow.

The contrast of the last quarter’s growth could not be more stark: the US raced ahead, growing at an annual rate of 2.8 per cent; the UK is back in recession, shrinking at an annual rate of two per cent.

With this growth, the CBO now predicts that the US debt burden will peak in 2013 and start falling. The UK’s stagnation means that the US’s debt burden will fall below ours (see graph).

As we’ve been saying, this is all policy driven, and once again this emphasises our point.

Unlike Obama’s insistence to continue the stimulus, the coalition promised in June 2010 that even though they were about to savagely cut spending and undermine demand, debt would peak in 2014. That peak has been postponed a year to 2015 in the most recent OBR forecast.

As the peak in UK debt disappears into the future and the peak in US debt is brought nearer by its accelerating growth, one wonders what S&P will do.

See also:

Introducing George’s Marvellous Deficit Calculator – Daniel Elton, January 20th 2012

Osborne set to borrow billions more than Darling was projected to – Daniel Elton, November 16th 2011

Cameron’s central argument on debt is wrong; Labour needs to find a way to say so – Asher Dresner, October 6th 2011

Crisis caused by Cable’s “right-wing US nutters” is welcomed by Tory backbenches – Daniel Elton, July 25th 2011

Obama’s deficit reduction plan is three times slower than Osborne’s – Will Straw, April 14th 2011

46 Responses to “UK’s public debt is about to exceed that of the US for the first time”

  1. Anonymous

    Still ignoring the big debts.

    What about the civil service pensions? Not a debt – good. We won’t pay them,

    State pension? Not a debt. Er, not so good. The majority want their state pension, and are reliant on them.

    State second pension? Cash taken, debt created. Not on your list either.

    It’s a fraud. You’re part of that fraud.

  2. Christian Wilcox

    Where are those Private Sector jobs your party promised @GavinBarwellMP?: http://t.co/qfszka2y. Hurry the hell up! #Croydon #Labour

  3. Christian Wilcox

    Where are those Private Sector jobs your party promised @GavinBarwellMP?: http://t.co/qfszka2y. Hurry the hell up! #Croydon #Labour

  4. Christian Wilcox

    Where are those Private Sector jobs your party promised @GavinBarwellMP?: http://t.co/qfszka2y. Hurry the hell up! #Croydon #Labour

  5. Murray Rothbard

    @leftfootfwd Ignores the fact that Debt/GDP rose from 35% to 65% under Labour, blames coalition for what might happen! http://t.co/V3obedyO

  6. Murray Rothbard

    @leftfootfwd Ignores the fact that Debt/GDP rose from 35% to 65% under Labour, blames coalition for what might happen! http://t.co/V3obedyO

  7. Political Planet

    UK’s public debt is about to exceed that of the US for the first time: The USA is about to have a lower public d… http://t.co/4fgTbLCr

  8. Political Planet

    UK’s public debt is about to exceed that of the US for the first time: The USA is about to have a lower public d… http://t.co/4fgTbLCr

  9. Murray Rothbard

    Ignore the fact that under labour Debt/GDP rose from 35% to 65% and blame the coalition for what might happen based on an economic forecast! LMAO

  10. Patron Press - #P2

    #UK : UK’s public debt is about to exceed that of the US for the first time http://t.co/51dvZI84

  11. Patron Press - #P2

    #UK : UK’s public debt is about to exceed that of the US for the first time http://t.co/51dvZI84

  12. CAROLE JONES

    #UK : UK’s public debt is about to exceed that of the US for the first time http://t.co/51dvZI84

  13. CAROLE JONES

    #UK : UK’s public debt is about to exceed that of the US for the first time http://t.co/51dvZI84

  14. NonnyMouse

    Nice try.

    Total US debt is >100% of GDP. It passed that limit in 2011. http://www.zerohedge.com/news/its-official-us-debtgdp-passes-100

    I believe you are comparing US debt held by the public, not the total debt. It does not include intragovernmental debt.

    America is borrowing $1 trillion a year (and has every year that Obama has been president). They have a huge deficit and their debt to GDP ratio is rising, not falling.

  15. leftlinks

    Left Foot Forward – UK’s public debt is about to exceed that of the US for the first time http://t.co/ugtvMdz9

  16. leftlinks

    Left Foot Forward – UK’s public debt is about to exceed that of the US for the first time http://t.co/ugtvMdz9

  17. Anonymous

    As the peak in UK debt disappears into the future and the peak in US debt is brought nearer by its accelerating growth, one wonders what S&P will do.

    ===========

    And since its Labour policy that government has to keep pumping money in to five a day coordinators, you’re the primary cheerleader for more and more debt.

  18. Ed's Talking Balls

    It’s also Labour policy to oppose a benefits cap.

    Electable? Not quite.

  19. Maura Pavalow

    #UK : UK’s public debt is about to exceed that of the US for the first time http://t.co/51dvZI84

  20. Maura Pavalow

    #UK : UK’s public debt is about to exceed that of the US for the first time http://t.co/51dvZI84

  21. sitosplit

    #UK : UK’s public debt is about to exceed that of the US for the first time http://t.co/51dvZI84

  22. sitosplit

    #UK : UK’s public debt is about to exceed that of the US for the first time http://t.co/51dvZI84

  23. MustBeRead

    Via @leftfootfwd: The UK’s public debt is about to exceed that of the US for the first time – http://t.co/o5MdPvAa

  24. MustBeRead

    Via @leftfootfwd: The UK’s public debt is about to exceed that of the US for the first time – http://t.co/o5MdPvAa

  25. Newsbot9

    Oh yes, gotta have unhealthy people costing the NHS more. YOU support the debt.

    Hint: Your support for shrinking the economy means the % debt will go up. You, once more, support the debt. And you can ONLY send it upwards.

  26. Newsbot9

    Oh really?

    Nope, the debt was higher under Major. You’re a typical liar from the right. How many million do YOU want to kill, for reference?

  27. Newsbot9

    Of course you support lying and stripping people of their pensions.

    You’re the fraud. You’re the enemy of Humanity. 1%er.

  28. RobertM

    it is still 2 years before your (dubiously reliable) statistics can be shown to be correct or otherwise. It is perhaps slightly premature to be making such assertive propositions as these and unfounded faithlessness such as this serves only to damage this country’s recovery further. This prediction is about as useful as the Mayans’.

  29. I M

    Who is paying you to write this crap?

  30. roger watts

    UK’s public debt is about to exceed that of the US for the first time http://t.co/Jnavtyme via @zite

  31. roger watts

    UK’s public debt is about to exceed that of the US for the first time http://t.co/Jnavtyme via @zite

  32. Mr. Sensible

    Austerity obviously isn’t working.

    And since we’re talking about the benefits cap, I’m afraid the issue is a bit more complex than the tabloid media would have you believe.

  33. Ed's Talking Balls

    Of course, the vast majority of people in this country (mere proles, not lofty, “progressive” Guardianistas) must have been hoodwinked by the tabloid media. Just like we had the wool pulled over our eyes when we comprehensively rejected AV….

    Or, alternatively, your condescension is rubbish. People strongly resent paying punitive rates of tax to fund London rents for those who don’t work. The man on the street is, just occasionally, worth listening to rather than dismissing. Labour ought to try it some time, but I don’t think it’s too likely, what with their Shadow Cabinet of millionaires.

  34. BevR

    RT @leftfootfwd UK’s public debt is about to exceed that of the US for the first time http://t.co/cNhMjtz3 #spartacusreport #wrb #unum #atos

  35. Cormac Hollingsworth

    @anthonypainter I look at debt burden, because neglecting GDP growth neglects increased ability to pay back. http://t.co/9pr7r3OG

  36. The coalition will pile on more debt than any modern government | Left Foot Forward

    […] See also: • UK’s public debt is about to exceed that of the US for the first time 1 Feb […]

  37. John Regan

    Th UK has led the way in pro-austerity measures – and now our debt is heavier than the more stimulus-leaning US's http://t.co/DXskP8Dc #pmqs

  38. Martin Steel

    Th UK has led the way in pro-austerity measures – and now our debt is heavier than the more stimulus-leaning US's http://t.co/DXskP8Dc #pmqs

  39. Karen Buck MP

    Th UK has led the way in pro-austerity measures – and now our debt is heavier than the more stimulus-leaning US's http://t.co/DXskP8Dc #pmqs

  40. nigel thompson

    Th UK has led the way in pro-austerity measures – and now our debt is heavier than the more stimulus-leaning US's http://t.co/DXskP8Dc #pmqs

  41. Pucci D

    Th UK has led the way in pro-austerity measures – and now our debt is heavier than the more stimulus-leaning US's http://t.co/DXskP8Dc #pmqs

  42. Peter Marshall

    Th UK has led the way in pro-austerity measures – and now our debt is heavier than the more stimulus-leaning US's http://t.co/DXskP8Dc #pmqs

  43. Lukey Stanger

    Th UK has led the way in pro-austerity measures – and now our debt is heavier than the more stimulus-leaning US's http://t.co/DXskP8Dc #pmqs

  44. Lukey Stanger

    http://t.co/I2Us1DaV in tiems of austerity, depht always increases

  45. Inna Mood

    UK led the way in pro-austerity measures – and now our debt is heavier than the more stimulus-leaning US's http://t.co/g5MsFSbY @leftfootfwd

  46. Deborah George

    UK led the way in pro-austerity measures – and now our debt is heavier than the more stimulus-leaning US's http://t.co/g5MsFSbY @leftfootfwd

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