Back in the 1950s and 1960s, the US economy had a (mostly-) free enterprise system. Real family income grew and the ratio of income to the debt divided by family households remained stable while income grew:
The blue shade is family income in 2020$ using the Consumer Price Index. It almost doubles in this 25-year period with free enterprise. The total nonfinancial debt divided into each family household also almost doubles over these 25 years — but the ratio of household share of all debt, to mean household income, remained near 2.6.
After progressives infiltrated U.S. government though, a policy of interventionism prevailed and government grew and began to make a greater share of all of the decisions regarding resource allocation. But this stunted income growth and vastly expanded debt, harming the financial health of the nation:
In these recent 25 years, real mean income hardly grows, but debt divided into households doubles — resulting in a ratio of household share of all debt, to mean household income, of 6.8 in 2021, improving slightly in 2022. With $800,000 debt per U.S. family, it has the effect of shortening the horizon of opportunity for Americans.
Here’s the full-data evolution of real median income to real debt per family household:
And here is the projection of just the government portion of the non-financial debt going forward without a policy change:
Notice how just the government portion of the debt passes 500% of GDP before 2090. But in reality, it won’t be the case that government debt really does pass over 500% of GDP and continues rising. That’s because the U.S. dollar, and economy, will collapse before reaching that point.
There is a marginal productivity of debt — such that by going an extra dollar into debt you may get, say, an extra 20 or maybe 30 cents of GDP — but it drops as debt goes up, eventually reaching zero, and then going negative (where new debt actively destroys existing wealth).
And besides the diminishing marginal productivity of debt, a sovereign debt crisis will take hold before the USA crosses a government debt that is worth 500% of GDP. The progressives got us into this mess, but the free market capitalists could get us out of it — though that would require returning to the small government of the past.
Reference
[report on the fiscal gap going forward] — Executive Summary to the Fiscal Year 2022 Financial Report of U.S. Government: An Unsustainable Fiscal Path. https://www.fiscal.treasury.gov/reports-statements/financial-report/unsustainable-fiscal-path.html