See how Federal deficits in Australia surged during both world wars, as did the ratio of outstanding debt to GDP. For example, the (Federal) deficit to GDP ratio peaked in 1944 at 20%. The debt to GDP ratio peaked two years later. The debt to GDP ratio didn't fall because the Federal government ran a surplus (though there was a small one in 1949) but because the denominator in the equation. Debt / GDP grew. Debt to GDP was high in all post-war belligerent economies, not just Australia. But they understood the thesis that Keynes had made, which was that raising taxes and cutting expenditure to repay debt was counter-productive, because these actions reduced economic activity, so although the deficits naturally reduced as war ended, they didn't attempt to create fiscal surpluses as had been done after WW1. The truth of Keunes's theory was conclusively demonstrated during the Euro crisis of 2011, when forced deficit reduction led to a "double-dip" recession.
Once again, governments are running large fiscal deficits, to keep economies afloat during the covid crash. And it will be interesting to see whether "austerity", which has been discredited again and again, will be introduced after the recession is over to pay back sharply higher debt levels, or whether they'll do as most economies did after the war, and allow the ratio of debt to GDP to fall as a result of economic growth.
There is in any case a difference between debt incurred to fund the construction of capital goods (railways, roads, schools, housing, factories) and debt incurred to fund current expenditure (wages and salaries, running costs, etc.) It makes sense to fund, say, a railay with bonds, repayable over 25 or 30 years. However, only in the rarest circumstances, borrowing to fund current expenditures is unwise. This is one of those rare circumstances.
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