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Misleading Statistic of the Day

February 26, 2010 – Comments (5)

The honor goes to Jack Cafferty of CNN. In an article titled "Single Most Serious Problem Facing US Today," Jack tells us:

"By 2019, it's estimated the national debt will rise to about $23 trillion dollars - that's more than one-third of the gross domestic product of the entire world"

National debt will haunt us viciously. Let's get that out of the way. But this statistic is horribly misleading.  

Nevermind that he's comparing 2019's debt projection's with 2010's global GDP, which makes no sense. 

The U.S's current national debt is 20% of global GDP ($12 trillion over $60 trillion). The IMF estimates real global GDP growth will average 3.3% over the next decade. Add in 2% inflation, and that's 5.3% nominal growth. So take $60 trillion, compound it at 5.3% for a decade, and you get $101 trillion, which is probably where global GDP will be in 10 years. 

Now take the debt estimate, $23 trillion, and divide it by the nominal gdp estimate, $101 trillion, and you get 22%. Up from 20% today. 

So rather than scaring the bejeezus out of everyone on CNN, an appropriate way for Cafferty to phrase the statistic would be, "In 10 years, US debt as a percentage of global GDP will probably be about where it is today." 

That, though, doesn't make as many headlines.