This was the lowest debt ratio since the economy began slipping into the Great Depression in the early 1930s. Even today's ratio of 47% is lower than any year from 1934 through 1964. And, one may remember, the period from the end of World War II through the mid 1960s, when the debt-to-GNP ratio averaged 74%, was known for high rates of economic growth, low inflation and low interest rates.

What are the consequences of the current peacetime growth of the debt ratio? Just as no individual or firm can forever borrow and accumulate debt at a rate greater than the growth of its income, the government cannot forever accumulate debt at a rate greater than the growth of its total output of goods and services, or its GNP. If Congress and the President fail to take action on the prospective excess growth of debt, current and future deficits would increasingly burden our economy with higher taxes that would be required to pay the rising interest-now approaching $150 billion a year-on the debt.

Modern governments possess the ability to escape this crushing burden: They just print money to pay the debt. Since our national debt is denominated in dollars, the government can reduce the real burden of its bond obligations by increasing monetary growth and engineering inflation. This policy will raise nominal-or non-inflation-adjusted-GNP and halt the rise in the debt-to-income ratio.