I don’t care your political leaning—left, right, center, libertarian, green, or even French socialist—everyone agrees America has big debt. And most everyone agrees the big debt is terrible and a drag on our economy—possibly forever.
If you’re a debt hater like most folks, 2009 likely made you apoplectic as massive stimulus efforts to kick-start the economy added hugely to America’s debt. We can quibble about whether the fiscal stimulus was the right response, and whether stimulus programs are well run and the money spent efficiently (they aren’t and it wasn’t—government spending is always a mess—but when trying to kick-start an economy, there are times when it is better to spend stupidly than not at all). But either way, there’s no denying that, at the end of 2009, our net public debt totaled about 53 percent of GDP1 and was elevated compared to very recent history.

A Long History of Big Debt

But is that so bad? Figure 45.1 shows US net public debt (i.e., debt held by the public and not other branches of the federal government, which is what matters—see Bunk 47) relative to GDP. Debt, though elevated, isn’t much higher than anytime from 1991 to 1998—a time of overall economic vibrancy and fine stock returns.
And debt was higher from 1943 to 1955, reaching 109 percent of GDP in the aftermath of World War II. Yes, that was war-related debt. And folks often feel better about war-related debt than peacetime debt—thinking we had to create the ...

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