Why Has Government Debt Increased?

Abstract

Government debt rises because expenditures exceed revenues. Expenditures are the result of government consumption and transfers. In this chapter the development of public expenditure and consumption in the traditional OECD countries in the postwar period is traced. Also shown is the annual growth rate of GDP. In most countries the growth rate was higher before the mid-1970s than later, which facilitated growth in public expenditures. In most countries public consumption has grown more slowly since the mid-1970s. Countries with the highest government debt are typically not those with the highest GDP per capita, nor the ones with the largest government expenditures or consumption.