Reader Bruce Hall notes the extreme jump in debt-to-GDP in 2020 was attributable in part to the public health economic lockdowns, to wit:
But the economic shutdowns certainly affected the equation’s denominator in 2020.
I note that using the counterfactual potential GDP as estimated by CBO does not change the picture substantively – I add the red line to the blue line shown in the previous post.
Figure 1: Year-on-Year percentage point change in Federal debt held by public to GDP ratio (blue). Year-on-Year percentage point change in Federal debt held by public to potential GDP ratio (red). NBER defined peak-to-trough recession dates shaded gray. Orange dashed lines at beginning ond end of Trump administration, dated 2017Q1, 2020Q4. Source: US Treasury via FRED, BEA, CBO (February 2024), NBER, and author’s calculations.
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