Reply #7: debt to GDP is misleading. Here's why: [View All]

[thoughtanarchist]

GDP calculation includes the amount the govt spends. That means that when a govt is on a deficit spending spree that amount increases the GDP, keeping the ratio suppressed and adding to the appearance of "growth".

When the US begins to operate on a balanced budget you can expect our debt as a percentage of GDP to go up due to the decrease in deficit spending.

on edit:

that is, if economic growth from the private sector does not make up for the decrease in deficit spending, the gdp will be lower; temporarily showing up as an increase in debt/GDP.