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Stephen
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Not all spending is not created equal. We had much higher debt to GDP ratio in WWII, but the spending was temporary. Entitlement and debt service spending are as close as you can get to permanent spending commitments. The greater a percentage of the budget we devote to this type of spending, the less flexibility we have to reduce in when the economy retracts. Simply concerning ourselves with the ratio ignores this reality. Of course we should grow the denominator, but that's not always that easy to do, and some of this taxing and spending 'crowds out' other form of economic activity that would be more conducive to growth. So, while the debt ceiling raw number is indeed relative, the percent of debt/GDP becomes less and less controllable the more we commit to spending that is next to impossible to reduce when needed.
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Jan 13, 2011