Tuesday, June 19, 2018
Politics

PolitiFact: Comment comparing debt to post-World War II mostly true

The statement

"The only time in our history when the debt has been higher than this was the end of World War II."

David Cote, president of Honeywell International and a member of the president's debt commission

The ruling

In hard dollars, there's little question that the debt is higher than ever before. On Feb. 11, the day of the event where Cote made the claim, the debt stood at $16.49 trillion — nearly $10 trillion more than in 2002 and almost four times as much as 10 years before that, according to Treasury records.

However, economists rarely use hard dollars to measure the size of the debt. Rather, they compare the debt total to the country's gross domestic product — the value of all goods and services produced in the U.S. in a year — to get a better picture of the true scale of the debt.

In his remarks, Cote referenced the debt-to-GDP ratio several times and it was clear he wasn't talking about raw dollars.

Currently, the $16 trillion debt makes up about 73 percent of GDP, Cote said, citing the nonpartisan Congressional Budget Office to support his claim.

So, does that number rate as the second-highest in history?

As part of its annual Long-Term Budget Outlook, CBO officials list the debt-to-GDP ratio going back to 1790, the year after the Constitution took effect.

That year, the nation held a debt of $71 million, which reflected about 30 percent of GDP, according to records.

The debt ratio rose and fell over the coming years, in line with the wars.

During the Civil War, the ratio rose from 2 percent in 1860, the year before the war began, to 35 percent, a record at the time, in 1865, when the war ended.

Nearly 60 years later, the debt ratio jumped once again during World War I, rising from 3 percent in 1916, the year before the United States entered the war, to 33 percent in 1919, when the war ended.

The debt ratio began to fall in the aftermath of World War I. But in 1929, the stock market crash launched the Great Depression, which then led to increases in government spending under the New Deal, and the debt ratio rose sharply to 44 percent, a record at the time, in 1940.

But World War II led to unprecedented growth, both in national spending and debt accumulation. By the end of the war, the ratio rose to 106 percent in 1945 and 109 percent in 1946.

"American manufacturing made a killing (during the war), but the government debt to pay for everything was huge," said Ron Haskins, a senior fellow with the Brookings Institution.

The debt ratio remained high following the war — higher than the current 73 percent ratio. By 1951, it dipped to 67 percent, and despite some peaks and valleys, it did not reach the 70 percent threshold again until 2012.

In hard dollars, it's not even close. The current $16.49 trillion debt is larger than at any point in U.S. history. But, the debt-to-GDP ratio tells a different story.

We rate the claim Mostly True.

Edited for print. Read the full version at PolitiFact.com.

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