FIGURE 2.1 General government debt (2015) – total debt as a percentage of GDP
Source: OECD (2018) General government debt (indicator), doi: 10.1787 /a0528cc2-en (accessed 5 February 2018)
Bad leadership hides bad news
How on earth have our leaders allowed such a situation to occur? Well, because we incentivized them to do it. First, our political systems, especially democracies, do not incentivize their leaders for the long term. What is the point of making difficult decisions that will benefit another incumbent in the next term? Second, if politicians impose austerity to balance the books, they become unpopular and are voted out. The political moral of the story sounds the clarion call of Chapter 8 – embrace the paradox – only vote for politicians who are prepared and principled enough to be unpopular.
Consider how US debt is expected to jump in 2018 according to the US Treasury.28 In Figure 2.2 we see a chart that reflects the US Treasury’s expectations for 2018. They have assessed the current trajectory of spending and extrapolated the probable outcome as we see in the figure.