By Jennifer DePaul

The Fiscal Times

Aug. 5, 2011

The last time U.S. public debt exceeded the economy was when it reached unprecedented heights during World War II and peaked at almost 109 percent of GDP in 1946. It eventually fell to 32.5 percent in 1981 and averaged 37 percent of GDP from 1960 to 2000. But now, the debt is growing faster than the economy, said Steve Bell, senior director at the Bipartisan Policy Center.

In an economic slowdown, the federal government loses potential revenues because of the high number of unemployed persons not paying taxes, Bell said. On top of that, the government pays out more for automatic stabilizers—unemployment insurance, Social Security, and child nutrition programs—as a way to soften the blow of the economic downturn.

“It’s a double whammy,” Bell said. If the government doesn’t drastically change the way it operates, the U.S. economy will be headed for 200 percent of gross public debt of GDP in about 10 to 15 years, he warned. “If you look at the debt path, it’s the same as looking at the path of an airplane headed for a mountainside,” Bell said.

Bell also noted that the new deficit “super committee” tasked with finding an additional $1.5 trillion in savings over 10 years will likely have little to no impact on the net debt increase. The economy is performing more poorly than expected and the debt will likely be higher than forecast over the next decade.

Read the full article here

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Economic Policy Project