[Pontiac]

What do you say to the report that if the model included Denmark, Canada, Belgium, Austria, and Australia, and made a few other adjustments, countries, even with a debt-to-GDP ratio of 90% or higher see average growth rate of 2.2%?

The period in which these countries had a debt-to-GDP ratio of 90% or higher average growth rate of 2.2% was immediately after the Second World War.

This debt was due to the consequences of the war namely war debt and the cost of rebuilding after the war. The debt was not wasteful social welfare programs that stifle worker productivity.

The major error in this study could be exactly that it does not specify governments that incure debt due to social welfare state spending and other government debt.

[1010RD]

This is the correct answer and analysis, Pontiac. All debt isn’t the same. So to categorically state that 90% debt to GDP ratios lead to negative or slowed growth is nonsense on it’s face.

The trouble with GDP calculatons is that government spending, as a result of that debt, is included in the GDP print. This then pumps up GDP. But not all debt is the same.

Governments can invest in any number of “good” or “bad” schemes. At best you’ll find a correlation, not causation. You have to analyze the spending that the debt is used for.