We develop a simple theoretical growth model to deal with long term public debt, in accordance to stylized facts. We study the effect of a permanent increase in public debt on economic growth, and show that these effects, always negative (or neutral), depend in their magnitude on the adjustment variable to the increase of the debt burden in the Government constraint. Finally, we show that, contrary to economic growth effects, the welfare effects of a permanent increase in the debt burden may be positive. We thus emphasize the existence of an optimal public debt to GDP ratio.
