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National Debts vs National Revenues

Thursday October 8th, 2015   •   Posted by Craig Eyermann at 6:32am PDT   •  

42022852_S Not long ago, we featured a creative visualization of data developed by Jeff Desjardins of Visual Capitalist showing how all the money owed by all the governments of the world is broken up between them.

Desjardins has surpassed himself with a new world debt infographic, which digs into the ability of the world’s nations to pay back their debts. It makes for a lot of scrolling, but it’s genuinely rich in information.

What he’s done is to rank the world’s nations according to three different measures, each of which is linked to the ability of each nation to pay off its national debt. The first is the Debt-to-GDP ratio, which shows the size of each nation’s total public debt outstanding, at the national level, with respect to its national income, or rather, the size of its economy.

The second measure then digs deeper, adding in the debts owed by each nation’s regional, state or local governments to the national level debt, and then calculating the ratio that total government debt with a government’s total tax revenues collected. This measure perhaps provides the best indication of how capable the governments within a nation are of paying off all their debts.

The third measure recalculates each nation’s ratio of total debt to government revenue, but without the tax revenues collected by each nation’s regional, state or local levels of government, so it’s really the nation’s total debt to national tax revenue ratio.

This latter measure of a nation’s burden of debt then gives an indication of a national government’s ability to pay off both its debt and also the debts of all the other governmental entities within the nation, which is something that would matter if those lower levels of governments were to default on their own debts. The U.S. territory of Puerto Rico, for instance, represents a current day example where that measure has become relevant, although there’s quite a lot of speculation that the state of Illinois may soon join it in needing a bailout by the federal government.

debt to revenue-visualization

As you can see, the United States ranks 7th in the world based on the national debt-to-GDP ratio (at 103%), and rises to 4th overall once the ratio of total government debts to total government tax collections is calculated (406%).

But if the U.S. federal government ever needs to completely pay off both its debts and those of its states, territories, and other government entities, then it will find itself ranked second in the world overall, at 979%, behind only the economic debt time bomb that is Japan.

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October 2015