It seems that you can only pay down one sector's debt to GDP at the expense of increasing another's -- that is, except for mass defaults. This chart omits a few sectors, such as farm debt, and nonfarm non-corporate business debt, but the sum of non-financial private sector debt/GDP + the sum of government debt/GDP has always been growing, too -- ever since "Fed Independence Day", when the U.S. stopped forcing the Fed to monetize whenever treasury yields rose above a certain level.
In particular, the chart suggests that the paydown of Federal debt that occurred in the post-war period came at the expense of an increase in household debt, and to a lesser degree business debt. The current miniscule drop in household debt is coming at the expense of a significant increase in Federal debt, and to a lesser extent, (corporate) business debt. The source is The Federal Reserve's Flow of Funds, and the time period is from Q1 1952 to Q1 2009.
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