Benjamin WolfWhat I always a find fascinating is the proportion of deficit to government income.
In the case of the US 🇺🇸, the deficit amounts to a full 28% of federal revenue.
As a proportion to GDP, it's obviously much smaller (about 5.5% in 2022).
In comparison, the EZ deficit in 2022 stood at 3.5% of GDP.
But that's only around 8% of EZ government revenues.
The difference to European countries in particular is stark, simply because their overall tax and spending level is so much higher.
I wonder in what light the fiscal position of countries would be seen if deficit / gov revenue would be the standard, instead of deficit / GDP.
Same for debt levels.
The list would look *very* different.
For example, the *debt to government revenue ratio* stands:
- at about 310% in Italy 🇮🇹
- yet at about 775% in the US 🇺🇸
Italy has a significantly higher debt to GDP ratio (about 150% by now) than the US (about 120%) - but since Italy’s regular government revenue is so much higher than that of the US, the ratio balloons if you look at it that way.
In fact, the US 🇺🇸 has probably among the highest debt to gov revenue ratio among advanced economies by now - other than Japan 🇯🇵, few come close.
Does that matter?
Well, yes and no.
For the US 🇺🇸, it matters much less than for the others, since America is the global hegemon.
As it is the center of the world economy, everyone wants and needs US assets and dollars.
Plus, the US economy is very productive.
But it is good to keep in mind when taking about relative debt levels or the challenge of balancing the budget.
European high tax states are actually not so far away from achieving that, if they need to.
The US (and a few others) are very far away.
Sometimes that does matter.
This new perspective doesn't tell us much about US debt sustainability - due to the strength and centrality of the US economy, that's ensured anyway.
But it does tell us that the debt sustainability of other states is better than it may seem with the classical debt to GDP ratio.
Let’s do some debt to gov revenue stats (approx.), just for the fun of it:
🇩🇰 DK: 60%
🇸🇪 SW: 88%
🇨🇿 CZ: 112%
🇨🇭CH: 135%
🇩🇪 DE: 180%
🇦🇹 AT: 190%
🇫🇷 FR: 220%
🇮🇹 IT: 310%
🇬🇧 UK: 310%
🇬🇷 GR: 400%
🇺🇸 US: 770%
🇯🇵 JP: 900%