Congress’ recent moves to cut taxes and and boost spending is helping push the United States to new worldwide heights in terms of debt, according to a report released Wednesday.
The U.S. now has the dubious distinction of being the lone “advanced economy” country out of 35 nations that’s projected to have a higher gross debt-to-GDP ratio five years from now, according to the report from the International Monetary Fund.
“For advanced economies, debt ratios will be declining in almost all,” Vitor Gaspar, director of the IMF’s Fiscal Affairs Department, said in prepared remarks. “But one country stands out as an exception.”
The recent tax cuts and two-year budget agreement will provide a short-term boost to the U.S. economy — but will also help send the United States’ debt-to-GDP ratio from 108 percent in 2018 to 117 percent by 2023, the report said.
The debt-to-GDP ratios of the other 34 “advanced economy” countries in the report are all projected to either decline or remain flat over that period — though the U.S. would still be behind Japan’s 230 percent ratio and Greece’s 165 percent mark.
The report said that on average, the debt ratio in advanced economies is approaching World War II-era levels of 105 percent, and that countries need to take advantage of generally expanding economies to start preparing for leaner times.
“In the United States — where a fiscal stimulus is happening when the economy is close to full employment, keeping overall deficits above $1 trillion (5 percent of GDP) over the next three years — fiscal policy should be recalibrated to ensure that the government debt-to-GDP ratio declines over the medium term,” it said.
Other major countries like China and Brazil are also projected to see an increase, but their per capita income levels and other requirements put them into the IMF’s category of “emerging market” economies.
China alone has contributed to 43 percent of the increase in global debt since 2007, the report said.
In 2016, global debt hit a new record high of $164 trillion, or almost 225 percent of global GDP, it said.
“We urge policymakers to avoid pro-cyclical policy actions that provide unnecessary stimulus when economic activity is already pacing up,” Mr. Gaspar said. “There is no room for complacency.”
The IMF report follows recent projections from the Congressional Budget Office that the tax cuts and $1.3 trillion spending bill will help push federal deficits above $1 trillion starting in 2020 and continuing for the foreseeable future.