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What Drives Long-Term National Debt Growth?

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What Drives Long-Term National Debt Growth?

What Drives Long-Term National Debt Growth?

With the current 106% debt-to-GDP ratio, there’s no doubt that today’s government debt is high. The last time the United States reached this mark, it was during the aftermath of WWII in the late 1940s.

But despite nearly historic debt levels, it does not seem that the national debt is a key issue for most citizens and groups. What drives this accumulation of debt in the long run, and at what point does the debt level become so high that it becomes an undeniable and critical issue for the country?

Today’s infographic comes from the Peter G. Peterson Foundation, a NYC-based group that focuses on educating people about the fiscal challenges of growing government debt. The graphic illustrates the main factors driving the debt upwards, as well as the potential impact down the road.

Rising Temperatures

The trouble with debt is that it delays today’s challenges well into the future, making it a tempting short-term solution when other things aren’t working. However, over time, that burden increases steadily, and the situation quickly represents the “frog and boiling water” parable.

So what’s raising the temperature of that water?

Right now, the aging of the Baby Boomers is a key factor, and the amount of people receiving social security benefits will swell from 62 million to 88 million people by 2035. At the same time, Medicare’s hospital trust fund will run out of money by 2029, and the program will only remain solvent until 2034.

Whether it’s the growing enrollment in these programs or the rapidly escalating costs of healthcare itself, more money will be put towards Social Security and healthcare over the coming years.

By about 2045, government spending on major health programs will nearly double in size to greater than 9% of GDP.

Boiling Water

Today, interest on the debt is equal to about 1.4% of GDP.

However, if the projected pace is maintained, it’s anticipated that interest payments could be equal to 6.2% of GDP by 2047 – this is roughly 2x the average annual amount the federal government spends on education, infrastructure, and R&D combined.

As economists will point out, the government controls the monetary supply and can easily “print” money to make these payments. This is absolutely true, but it also creates an array of other problems such as inflation and increasing distrust in the monetary system.

Though this boiling point looms further down the road, having a plan to cool the temperature (or to jump out of the water) could be a prudent one to keep in our back pockets.

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Mapped: The World’s Least Affordable Housing Markets in 2024

See which housing markets are considered ‘impossibly unaffordable’ according to their median price-to-income ratio.

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The World’s Least Affordable Housing Markets in 2024

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

Many cities around the world have become very expensive to buy a home in, but which ones are the absolute most unattainable?

In this graphic, we highlight a number of housing markets that are deemed to be “impossibly unaffordable” in 2024, ranked by their median price-to-income ratio.

This data comes from the Demographia International Housing Affordability Report, which is produced by the Chapman University Center for Demographics and Policy.

Data and Key Takeaway

The median price-to-income ratio compares median house price to median household income within each market. A higher ratio (higher prices relative to incomes) means a city is less affordable.

See the following table for all of the data we used to create this graphic. Note that this analysis covers 94 markets across eight countries: Australia, Canada, China, Ireland, New Zealand, Singapore, the United Kingdom, and the United States.

RankMetropolitan MarketCountryMedian price-to-income
ratio
1Hong Kong (SAR)🇨🇳 China16.7
2Sydney🇦🇺 Australia13.8
3Vancouver🇨🇦 Canada12.3
4San Jose🇺🇸 U.S.11.9
5Los Angeles🇺🇸 U.S.10.9
6Honolulu🇺🇸 U.S.10.5
7Melbourne🇦🇺 Australia9.8
8San Francisco🇺🇸 U.S.9.7
9Adelaide🇦🇺 Australia9.7
10San Diego🇺🇸 U.S.9.5
11Toronto🇨🇦 Canada9.3
12Auckland🇳🇿 New Zealand8.2

According to the Demographia report, cities with a median price-to-income ratio of over 9.0 are considered “impossibly unaffordable”.

We can see that the top city in this ranking, Hong Kong, has a ratio of 16.7. This means that the median price of a home is 16.7 times greater than the median income.

Which Cities are More Affordable?

On the flipside, here are the top 12 most affordable cities that were analyzed in the Demographia report.

RankMetropolitan MarketCountryMedian price-to-income
ratio
1Pittsburgh🇺🇸 U.S.3.1
2Rochester🇺🇸 U.S.3.4
2St. Louis🇺🇸 U.S.3.4
4Cleveland🇺🇸 U.S.3.5
5Edmonton🇨🇦 Canada3.6
5Buffalo🇺🇸 U.S.3.6
5Detroit🇺🇸 U.S.3.6
5Oklahoma City🇺🇸 U.S.3.6
9Cincinnati🇺🇸 U.S.3.7
9Louisville🇺🇸 U.S.3.7
11Singapore🇸🇬 Singapore3.8
12Blackpool & Lancashire🇬🇧 U.K.3.9

Cities with a median price-to-income ratio of less than 3.0 are considered “affordable”, while those between 3.1 and 4.0 are considered “moderately unaffordable”.

See More Real Estate Content From Visual Capitalist

If you enjoyed this post, be sure to check out Ranked: The Most Valuable Housing Markets in America.

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