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National debt: Will the U.S. be like Japan?
Key Excerpts from Article on Website of CNN


CNN, May 24, 2012
Posted: June 12th, 2012
http://money.cnn.com/2012/05/24/news/economy/national-debt-u...

Political gridlock. High national debt. Rock-bottom bond rates. An aging population. Warnings about more downgrades. Sound like the United States? Indeed. But those characteristics also describe Japan -- the country that fiscal experts often point to as a cautionary tale about the risk of carrying too much national debt for too long. Ever since a stock market crash and banking crisis more than 20 years ago, Japan has suffered from anemic growth for much of that time and its debt has soared. The country's debt is projected to be 239% of the size of its economy by the end of this year. U.S. gross debt, by contrast, is a little over 100% of GDP. On almost every economic and demographic measure, U.S. fiscal problems are still less urgent than the ones facing Japan today, said Nariman Behravesh, chief economist at IHS Global Insight. In his view, the biggest debt-related problem facing Americans today is gridlock in Washington. "We have a political crisis in the United States," he said. There are plenty of ideas for how Washington could curb the growth in debt without undermining the economy. For example, lawmakers could phase in tax increases and spending cuts over time. They could agree on a credible plan that puts off serious fiscal restraint until the economy is stronger. What's missing though is political cooperation. But, Behravesh said, "If we're careful, we can resolve this sensibly."

Note: For an alternative analysis by Paul Craig Roberts, click here. He notes that "Unlike Japan, whose national debt is the largest of all, Americans do not own their own public debt. Much of US debt is owned abroad, especially by China, Japan, and OPEC, the oil exporting countries. This places the US economy in foreign hands." Roberts is a former Assistant Secretary of the US Treasury, Associate Editor of the Wall Street Journal, columnist for Business Week, and professor of economics.


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