When Is Public Debt Too High? A Comparative Analysis of Debt Sustainability in the United States, Japan, Italy, and Germany (2015–2026)

This paper examines whether a high public debt-to-GDP ratio necessarily indicates a high risk of economic instability. Using the United States, Japan, Italy, and Germany as case studies, I compare changes in public debt between 2015 and 2026 and analyze how interest rates, nominal GDP growth, and primary fiscal balances affect debt sustainability. The paper applies a standard debt-dynamics model and uses IMF data to conduct a numerical sensitivity analysis under different interest-rate scenarios. The comparison shows that there is no single debt-to-GDP threshold that can determine whether a country is financially vulnerable. Instead, the sustainability of public debt depends on the interaction between the size of existing debt, economic growth, borrowing costs, fiscal policy, and the structure of the country's financial system. The main purpose of this research is to understand why countries with very different debt levels can experience very different fiscal outcomes, and to explore what factors make high public debt manageable or risky.