You can’t use your GDP to pay off debts. Wouldn’t it be better if we used how much % of a goverments budget goes towards servicing debts?
It’s a better way to compare countries apples to apples. Two countries with similar economies may have drastic different tax policy.
Measuring it as you suggest is absolutely done and is helpful to research policy inside a country, but between countries, it’d be a poor metric.
And I am trying to get the reason from Orginal commenter
I don’t think he is interested in discussion beyond what him restating generic talking point
Besides being an insult the capacity and curiosity of the working class, your comment is anti-intellectual.
Because the people utilizing debt want to measure it against the largest number they can find… also because, in an extreme situation, the GDP is essentially the value that a government could surrender to creditors.
The government has the force to seize that if they so choose… it’s unthinkable in America because of our liberties but it isn’t in other nations.
Edit: I don’t know why this is being downvoted - it’s called nationalization and it can and has happened with or without monetary compensation to business owners in various times through history… I’m not suggesting uncompensated unilateral nationalization but it has been used for debt relief in the past.
Government debt is not like your debt. It’s a monetary control tool more than anything. So the revenue in a lot of ways doesn’t matter, especially for countries with a lot of power in their currency.
The deficit totals $1.6 trillion in fiscal year 2024, grows to $1.8 trillion in 2025, and then returns to $1.6 trillion by 2027. Thereafter, deficits steadily mount, reaching $2.6 trillion in 2034. Measured in relation to gross domestic product (GDP), the deficit amounts to 5.6 percent in 2024, grows to 6.1 percent in 2025, and then shrinks to 5.2 percent in 2027 and 2028. After 2028, deficits climb as a percentage of GDP, returning to 6.1 percent in 2034. Since the Great Depression, deficits have exceeded that level only during and shortly after World War II, the 2007–2009 financial crisis, and the coronavirus pandemic.
https://www.cbo.gov/publication/59946
The federal government collected $4.47 trillion in revenue during the 2023 fiscal year.
https://usafacts.org/articles/how-much-revenue-does-the-federal-government-collect/
33T in national debt https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/
1.6/4.5=35% of revenue is spent on debt service and nothing to show for it… no healthcare, no education, no housing, no maternity leave, no child care, no infrastructure…
at what point are people going to start asking questions where the money went?
Tried to answer, but it got very convoluted, here it is anyway as I typed it out…
Because that’s a less useful metric basically, to change their budget a government can:
- increase existing taxes
- add completely new taxes
- print money (depending on the level of government)
This means that a budget can swing quite a bit in value quite quickly if needed (or if something goes wrong). This means the % could swing quite widely.
GDP on the other hand is effectively the value of the economy, so moves slower and is a better metric to compare different countries with different economies and tax systems (assuming they tell the truth about their GDP…)
Ultimately, if a government needs more money, most of the time it can get it… But whatever they do will have side effects. But those side effects depend on the size of the economy, the bigger the economy (measured by GDP) the more can be done/taken without causing a large effect.
Both of these fail to highlight countries that already have a high tax load though, so in practice a wide range of metrics will be used.
I think it is measured and professionals who work in areas where this was relevant probably track this number among many others. I think the real question you are asking is why it is always framed as a % of GDP in public discussion and news reporting. Some people here point out how % of GDP can be more useful for comparing across countries with vastly different sized economies but I think we all know the real answer has more to do with how people perceive the value differently by using the larger number. Framing government debt as a % of GDP serves the zeitgeist, whatever that is.
