Quote Originally Posted by ynot2k View Post
Seems like the numbers are happy days for them, the club et al. As you point out it shows not much doing in terms of debt to gdp until 1985. It was just slogging along at under 40%. I mean what fun is that if you are the one printing all, and spending much or most, of it?

But yes the days are pleasant when not only is the gdp is up but you now get 125% of the magic juice. And cherry on the top... well the top is covered with them... is you never have to pay it back. Bring it, where do I sign up?

I may still be digesting your post brutus2 but the second read did have more light. Thanks again.
From Geoge Mason University (Virginia) Mercatus Center. - Their studies on what high debt/GDP ratio does to economy.
This was from 04/15/2020 just before the explosion of debt and Feds balance sheet. Man did they nail it in 3rd paragraph, remember if published in April 20230 much of research is before that. 2022 and 2023 and probably after, falls right into reality after the debt/GDP exploded.


"A large majority of studies on the debt-growth relationship find a threshold somewhere between 75 and 100 percent of GDP. More importantly, every study except two finds a negative relationship between high levels of government debt and economic growth. This is true even for studies that find no common threshold. The empirical evidence overwhelmingly supports the view that a large amount of government debt has a negative impact on economic growth potential, and in many cases that impact gets more pronounced as debt increases. The current fiscal trajectory of the United States means that in the coming 30-year period, the effects of a large and growing public debt ratio on economic growth could amount to a loss of $4 trillion or $5 trillion in real GDP, or as much as $13,000 per capita, by 2049.

Why Would a Large Federal Debt Have Negative Effects on the Economy?
Before delving into the existing literature on the relationship between government debt and economic growth, it is useful to briefly explore the economic explanations for why a large and growing debt burden could drag down the growth potential of the US economy. Economists have long noted several macroeconomic channels through which debt can adversely impact medium- and long-run economic growth. More recent observations suggest that large increases in the debt-to-GDP ratio could lead to much higher taxes, lower future incomes, and intergenerational inequity.

High public debt can negatively affect capital stock accumulation and economic growth via heightened long-term interest rates, higher distortionary tax rates, inflation, and a general constraint on countercyclical fiscal policies, which may lead to increased volatility and lower growth rates. Studies on the channels through which debt adversely impacts growth also find that when the debt-to-GDP ratio reaches elevated levels, the private sector seems to start dissaving. These findings contradict the Ricardian equivalence hypothesis, which holds that households are forward looking and increase their saving in response to increases in government borrowing.

As America’s federal debt burden continues to grow, the government must increase borrowing in order to fund its expansive spending programs. This increased government borrowing competes for funds in the nation’s capital markets, which in turn raises interest rates and crowds out private investment. With entrepreneurs in the private sector facing higher costs of capital, innovation and productivity are stifled, which reduces the growth potential of the economy. If the government’s debt trajectory spirals upward persistently, investors may start to question the government’s ability to repay debt and may therefore demand even higher interest rates. Over time, this pattern of crowding out private investment coupled with higher rates of interest will drive down business confidence and investment, which drags productivity and growth down even further.

A further cost resulting from increased government borrowing is the crowding out of public investment as growing interest payments consume an ever larger portion of the federal budget, leaving lesser amounts of public investment for research and development, infrastructure, and education. In fact, the Congressional Budget Office (CBO) predicts that by 2049, the cost of paying the interest on the nation’s debt will be the third-largest budgetary item after Social Security and Medicare, constituting almost 6 percent of GDP. The combination of reduced private investment and crowding out of public investment will have negative effects on social mobility as Americans find it harder to buy a home, finance a car, or pay for college. Reduced investment, lower productivity, and declining social mobility will continue to drive down the growth potential of the economy.

Finding the Tipping Point
“Growth in a Time of Debt” is the cornerstone study on the subject of debt and growth over the past decade. In order to determine the effects of government debt on growth, the authors compiled data covering 1946 to 2009 from the International Monetary Fund (IMF), the World Bank, and the Organisation for Economic Co-operation and Development (OECD) for 44 countries. The study finds that across both advanced and emerging economies, high debt-to-GDP levels (90 percent and greater) are associated with notably less growth. Countries with debt-to-GDP ratios greater than 90 percent have median growth roughly 1.5 percent lower than that of the less-debt-burdened groups and mean growth almost 3 percent lower."