'Til debt do us part

As Congress heads for a showdown on the debt ceiling, it should note a study that shows industrialized nations with lower debt did better during the Great Recession. The winner? Canada.

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Before Congress so easily raises the debt ceiling by a couple trillion dollars, it should weigh this latest factoid: Countries with the highest debt levels as a percentage of their economy fared the worst during the Great Recession.

And those debt levels include state and local debt, as well as private debt.

The direct correlation between debt and economic endurance during the recent global downturn was discovered by a Massachusetts-based think tank, the American Institute for Economic Research.

The AIER study looked at industrialized nations, and found this:

"Those countries with the highest levels of debt as a percentage of gross domestic product – including Japan (whose total domestic debt equaled 572% of GDP at the end of 2007) and the 16 countries in the Eurozone (388% of GDP) – fared the worst, the analysis shows. The United States (329% of GDP) did slightly better, while the Canadian economy (233%) did the best.

"Japan’s GDP fell 10% during the recession. The 16 European countries saw GDP tumble 5.4%. The U.S. economy declined by 4.1%. And Canada’s economy slid 3.4%."

Within the European Union, the two nations with the largest debt, Greece and Ireland, saw the biggest drops in output.

The upshot is this: The United States is setting itself up for an even steeper decline in the next recession by taking on more debt.

If Congress were to agree on any deficit targets, then it should try to best Canada's debt level. Eh?

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