Ticking off another $1-million (U.S.) every 10 seconds, or $8.6-billion every 24 hours, The Economist magazine's online global debt clock relentlessly documents that the rise in worldwide government debt is topping $40-trillion, a milestone that will take global "public debt" to two dollars for every three dollars of global GDP. Strictly by coincidence, the clock approaches this milestone as the United States approaches the second anniversary of Barack Obama's election as president. Since Mr. Obama's election, however coincidentally, global public debt has risen by 25 per cent: $8-trillion.
Could this increase in debt matter? Yes, it could. "When debt rises faster than economic output," The Economist observes, "higher government debt implies more state interference in the economy and higher taxes in the future."
Further, the accumulated debt must be rolled over at regular intervals, possibly at higher rates of interest: "This creates a recurring popularity test for individual governments, rather as reality TV show contestants...," the magazine notes. "Fail that vote, as the Greek government did in early 2010, and the country can be plunged into imminent crisis." This risk of imminent crisis, however calculated, now applies to many of the world's most affluent countries.
In fact, The Economist's global debt clock significantly understates the degree to which the world's governments have put planet into hock. Economists use a number of methods to calculate national debt. The Economist counts only "public debt," government debt that is directly held by the public. Thus it clocks U.S. debt at only $8.5-trillion - ignoring more than $5-trillion in debt that different branches of the government owe to other branches of the government.
Incidentally, New York's "Times Square debt clock" (6th Avenue and West 44th Street) runs slow, too. This clock is the most famous of the electronic billboard clocks that track national debt around the world. Strategically located on a wall next door to the Manhattan offices of the Internal Revenue Service, it counts only U.S. federal debt: $11-trillion.
The Times Square debt clock has been maintained since 1989 (when U.S. debt hit $2-trillion) by Durst Co., a real estate firm. Two years ago, when U.S. public debt hit $10-trillion, Durst sacrificed the dollar sign to make room for the 13th zero. The company has reportedly considered building a new clock capable of counting quadrillions.
The Economist's clock registers Canada's public debt (federal, provincial and municipal) at $1.2-trillion (or 82 per cent of GDP). The magazine puts Canada's per capita debt at $36,990 - a full $10,000 more than the comparable debt in the United States. Count the debt that the U.S. government shuffles internally, though, and Americans move ahead (with debt equal to 61.7 per cent of GDP). And the U.S. is now adding debt at a faster pace - an increase of 20.5 per cent in the past year compared with a Canadian increase of 9.7 per cent.
The Canadian Taxpayers Federation maintains a debt clock of its own on its website, as The Economist does, but it, too, tracks only federal debt: $544-billion (Canadian), or $16,037 per person - less than half the country's debt level when you count provincial and municipal debt.
Not all governments have borrowed money as enthusiastically as the U.S. and Canada. With public debt of $2.3-trillion (U.S.) (and per capita debt of $27,730), Germany cut its debt by 7.3 per cent last year, according to The Economist clock. With public debt of $192-billion (and per capita debt of $24,537), Switzerland cut its debt by 8.9 per cent. It is not apparent that these economies took greater hits than countries, such as Canada and the U.S., which tried to finance recoveries with borrowed money.
Governments' "public debt" is ultimately personal debt. Add all Canadian debt together - government debt and private debt, mortgage debt and consumer debt and business debt - and Canadian debt equals 250 per cent of GDP, or $3.3-trillion (Canadian): a debt of $100,000 for every man, woman and child in the country.
Some debt, of course, is legitimate. One person's sound dollar of debt is another person's solid financial asset. But it's folly to go deeply into debt when your income is shrinking and your expenses are going up. Most people know this. Many governments, alas, don't. The Economist is right to warn that massive public debt constitutes "a gathering, global storm."