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September 2012 Sudeep Reddy The Wall Street Journal wsj.com/economics Twitter: @Reddy
Gross domestic product = total value of goods and services produced in an economy
GDP = consumer spending + business investment + government spending + net exports
Annual U.S. GDP = $15+ trillion Current annual growth rate = 1.5% to 2% Long-run trend growth = 2.5% to 3%
(depends on population, productivity, investment, education, technological change, etc.)
U.S. GDP
U.S. gross debt = $16 trillion (almost 100% of GDP) Debt held by the public = $11.3 trillion (72% of GDP)
Unsustainably high debt can lead to slower growth, as borrowing costs rise across the economy. Reinhart/Rogoff: 90% debt-to-GDP suggests higher risks to an economy. Median growth slows by 1% annually. (Among the caveats: Correlation does not equal causation. This isnt a red line for a bond-market revolt. The U.S., with a reserve currency, is a very special case.)
Also: Cuts in Medicare payment rates for physicians higher-earner investment tax hikes under ACA higher estate taxes