America’s fiscal exceptionalism is all too real

A POPULAR rebuttal of the idea that the United States ought to worry about its surging public debt is, “What about Japan?”. America’s taxpayers are currently on the hook for 123 per cent of gross domestic product, exceeding the previous record of 118 per cent in the aftermath of World War II, and the number is going up. That does sound bad – but sceptics point out that Japan’s public debt stands at 250 per cent of GDP, a level that has held steady in recent years, with no sign of fiscal collapse.

So a debt ratio of 250 per cent seems both affordable and (in the sense that it isn’t exploding) sustainable. Will fiscal masochists please stop wringing their hands about rising US debt?

Unfortunately, various fallacies are packed into that comparison.