There's Really Only One Way To Reduce Debt-To-GDP, And It's Probably Not In The Cards For The US

Two charts from a UBS research report on public sector debt provide some nice insight into what deficit reduction looks like.

First of all, they note that there really aren’t that many countries that have successfully gone through periods of reducing debt-to-GDP.

chart

And even there, there wasn’t actually any debt reduction.

chart

In other words, reducing debt-to-GDP is about expanding GDP (the denominator), rather than shrinking the numerator.

So unless you think the US is actually going to step on the GDP accelerators sometime soon (and given our maturity and demographics, that seems unlikely) don’t expect us to go the way of these countries.

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