We have been here before.After WWII debt was well over 100% of GDP Some think that the following sharp decline in the debt to GDP ratio over the next few decades meant that we paid down that old war debt, but we actually never didSo, how did the ratio fall?  The denominator of the ratio, GDP, grewOne way to visualize this is to think of our debt as a mortgage and GDP as a houseIf you bought a home 50 yrs ago and paid 20,000 for it, at first, your mortgage (debt) to the value of the home (GDP) was likely 100% or 20,000/20,000 = 100%However, even if you only payed the interest on the mortgage, 50 years later, the house (GDP) may be worth 200,000 or far more. Thus, your debt (mortgage) to GDP (House) is now 20,000/200,000 or now only 10%!  The debt was not paid, but is now small by comparison to everything else.This is what happened after WWII. We grew the denominator of the debt to GDP ratio, GDP.After WWII, we invested in the economy "the house" and it grew. This was done by investing in infrastructure and a GI bill that helped with home ownership and education and along with unions this all created a large middle class that had a great deal of purchasing power. This also drove business growth. Taxes were very high on the wealthy during this time.In contrast, cutting spending actually shrinks the value of the "home" or GDP, and a shrinking GDP also decimates revenues and increases deficits and debt making the ratio worse.The GOP have it all backwards!

We have been here before.After WWII debt was well over 100% of GDP Some think that the following sharp decline in the debt to GDP ratio over the next few decades meant that we paid down that old war debt, but we actually never didSo, how did the ratio fall?  The denominator of the ratio, GDP, grewOne way to visualize this is to think of our debt as a mortgage and GDP as a houseIf you bought a home 50 yrs ago and paid 20,000 for it, at first, your mortgage (debt) to the value of the home (GDP) was likely 100% or 20,000/20,000 = 100%However, even if you only payed the interest on the mortgage, 50 years later, the house (GDP) may be worth 200,000 or far more. Thus, your debt (mortgage) to GDP (House) is now 20,000/200,000 or now only 10%!  The debt was not paid, but is now small by comparison to everything else.This is what happened after WWII. We grew the denominator of the debt to GDP ratio, GDP.After WWII, we invested in the economy "the house" and it grew. This was done by investing in infrastructure and a GI bill that helped with home ownership and education and along with unions this all created a large middle class that had a great deal of purchasing power. This also drove business growth. Taxes were very high on the wealthy during this time.In contrast, cutting spending actually shrinks the value of the "home" or GDP, and a shrinking GDP also decimates revenues and increases deficits and debt making the ratio worse.The GOP have it all backwards!

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