Reason Foundation

Reason Foundation

US Debt Following Japan Towards Downgrade

Anthony Randazzo
May 27, 2011, 11:15am

The Atlantic's Daniel Indiviglo posted an enlightening chart on his blog earlier this week showing how US debt is trending towards Japan's and has even passed the point where Japan's debt was downgraded. 

Note that Japan's debt was downgraded from AAA to AA+ in 2001, and that the US passed that point in 2010 (the dark blue bar). 

Back in March we noted that, based on S&P's language regarding assessing debt threats, that America might be downgraded as early as 2015 without some significant changes in fiscal responsibility. This position certainly has more than a few naysayers in opposition, and I doubt this additional data will be overwhelming evidence. But it certainly helps build the case. 

To be fair, Indiviglo, also points out there are differences between the US and Japan, which gives us more room and doesn't make a downgrade inevitable. A few of these are:

But there are also striking similarities, as we pointed out a while ago in our 2008 article and 2009 Reason magazine piece warning of an American "Lost Decade." At best these indicators just mean we have more room, which is why we weren't downgraded at the same debt level as Japan, but that it could eventually happen. Which was the main thesis of our Downgradopocalypse 2015 piece anyway. 

Anthony Randazzo is Director of Economic Research

Print This