The accumulation of Debt, at its very essence, is simply borrowing consumption from the future. And this is true on any level of debt, be it either public or private. Just as savings is deferred consumption, the exact opposite is true for debt. Therefore, it can only be beneficial in the long-term if it leads to an expansion of productivity in the present. If the funds borrowed do not improve output per unit of labor it is much more difficult to pay back that debt and any perceived benefit ends up being nothing more than an ephemeral illusion.

This is the reason why public debt is the most pernicious variety. The problem with government spending is that it mostly amounts to little more than hole-digging and filling. Borrowing money to pay people to empty the ocean onto the beach may temporarily increase employment and demand in the economy. But since this is merely state directed busy work, it does not grow the economy and expand productivity. Thus, the result is a rise in the debt to GDP ratio.

The 2008 financial crisis led to the passage of the Troubled Asset Relief Program, referred to as TARP, the American Recovery and Reinvestment Act and a rapid increase in government transfer payments, which produced multiple years of record deficits. The accumulation of those deficits sent the U.S. National debt to GDP ratio leaping from 64% in 2007 to over 104% today.

Likewise, the nominal level of government debt soared from below $10 trillion to over $20 trillion in just a handful of years. The Keynesians promised us that all this debt would eventually lead to robust and sustainable growth. However, what predictably occurred was the first recovery since World War II where yearly GDP growth hasn’t gone over 3%.

According to the Congressional Budget Office, the U.S. budget deficit for the fiscal year 2016 ending in September will be $588 billion, or one-third greater than last year. This was a result of spending that rose by $168 billion to $3.9 trillion. However, real GDP for the third quarter of 2016, as modeled by the Atlanta Fed, is set to come in at just 2.0%. This is historically a very sub-par growth rate. With the second quarter of 2016 GDP coming in at 1.4% and the first quarter print a measly 0.8%, it appears years’ worth of government “investment spending” has yielded GDP growth that is slowly faltering.