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Debt Burden Weighs On Developed Nations
- Economists at the International Monetary Fund project that the amount of government debt held in the world's advanced economies will soon be so great that it surpasses the value of what they produce in a year.
- In the United States, where the federal government's debt has reached 84 percent of GDP, Federal Reserve Chairman Ben S. Bernanke spelled out the risks in a speech this week calling for restraint of public spending on entitlement programs.
- But the same discourse is being heard across the world's mature economies, and IMF officials have begun to spell out the options -- tax hikes that might amount to as much as 3 percent of total economic output, a cap on increases in health and retirement benefits, and restrictions on spending on all other government programs.
- Economists disagree on the level at which government debt becomes a problem. Even the amounts currently forecast -- an average of 118 percent of GDP among the world's top developed economies by 2014 -- might be sustained if countries were willing to pay the price of high interest costs and slower growth. Some see 90 percent of GDP as a point at which government debt begins to influence growth. Read more.