DemoCoder said:
Natoma said:
What's telling is that it took 6 years for the deficit to go from $5 Trillion to $6 Trillion, and only 2 years for it to go from $6 Trillion to $7 Trillion. If you look at the figures from the increases in the deficit, it was rather static from 1950-1980, exploded under Reagan/Bush I's 12 years, slowed down dramatically and began to reverse slightly under Clinton, and exploded again under Bush II.
I see you're guilty of fudging numbers again. The debt started to grow in late 1974. Historically, it only changed appreciatably due to wars or recessions. If you look at a graph from the civil war era until today of the national debt, it was static until WWII, ballooned big time (until it exceeded GDP) during WWII/New Deal, then remained static until about 1974. Even Vietnam added little. Even in 1981, the government ran a structural surplus instead of deficit. (Economists look at the structural deficits, which allows you to remove the effect of economic performance, and see the deficit that is due to fiscal policy)
The debt did in fact balloon under Reagan, but the upward trend curiously started in Ford/Carter. In 1970, the debt was $392 billion, in 1974, it was $494 billion. By 1980, it was $930 billion. Only part of this can be blamed on OPEC, Inflation, and the recession (cyclical deficits). Actual structural deficits increased in 1975-1980, and I don't know why. Something in the government's fiscal policy changed, or perhaps some non-discretionary programs ballooned, I was too young to remember much from Carter era.
Real Dollar Values:
Adjusted for Inflation:
There's no fudging of the numbers at all. The debt did stay rather static until roughly 1980, when between 1980 and 1992, it increased 400%. Between 1970 and 1980, the debt increased from roughly 25%. An upward trend during the Ford/Carter era is significantly different than what happened during the Reagan/Bush era.
The problems during the Ford/Carter era were, as you stated, inflation, OPEC, and the severe recessions of 1974 and 1978. Don't underestimate the cost to the world of OPECs decisions in the 70s wrt oil deprivation, as well as the inflation rate which hit 14%, compared to today's inflation rate of 1%, and the historical 3-4% inflation rate since WWII.
DemoCoder said:
Maybe L233 can explain why the US, with a debt/GDP ratio of 66.0 in 2004 is supposed to be in such poor shape, compared to Germany with a ratio of 66.7, France with 72.0, Greece with 100.9, Italy with 116.7, and Japan with an astounding 161.2% of GDP. The whole Euro area has a 73% debt ratio. And of course, the structural non-discretionary deficits are much higher as well.
As for the debt/GDP ratio, the reason why our nation is in far better condition than Germany, France, Greece, Italy, Japan, et al, is because of the structure of our economy. It is far more open to innovation and market forces than those other nations you mentioned. It's easier and cheaper to start businesses, and make a profit from those businesses. I'm sure if one looked into the type of debt owed by each nation, our debt would be in the private sector whereas the debts owed by those other nations would be in the federal sector. That puts a different kind of strain on the economics at play.
DemoCoder said:
I'm with Natoma, I'd like to run a surplus, keep our debt low, and shrink government spending (he might not be with me on this one). That said, there is too much myth about the public deficit.
I'm not for surplus or deficits per se. I'm for a long term balanced budget. I'm for all the government spending in the world, if we can sustain it effectively. However, if our government spending is not in line with government income, then I am sorely against it. If we want missile defense, homeland security, medicare prescription drugs, no child left behind, etc, then it is my belief that taxes need to be increased to sustain those programs.
Basically, if we want a lot of government spending, we should be prepared to pay a lot of taxes. If we don't want a lot of government spending, then we can decrease taxes. But the current Bush doctrine of spend-spend-spend-while-reducing-taxes just doesn't stick well with me at all.
DemoCoder said:
It is simply *not* like a private debt run by a consumer, or even like a corporation. The government has a much longer lifespan than the average person, so can roll over debt in perpetuity, it has the power the print money, and awesome powers to raise revenues through taxes that we do not. The only part of the debt that concerns me is that held by foreigners, since that means interest payments don't go to my grandchildren, future americans, but go to others. However, foreigners should be concerned too, because their financial holdings and debts are in dollars, and as the dollar weakens, and the treasury prints more, the value of their assets decreases, while the value of US held assets abroad grows.
That's why if we're not careful over the coming years, we could have a problem. If the dollar continues to fall as it has, propping up our export market and our economy in the short term process, countries such as Japan and China, two of the largest purchasers of US treasuries in the world (if not the largest), will have no incentive to continue buying, and the dollar will go into free fall. This is especially dangerous if China decides to revalue the yuan and peg it to the Euro, as has been rumored over the past couple of months.
Of course, it wouldn't be in the interest of the world to see our economy falter too badly. Whatever they think of us, the world economy is still chugging along because of one engine. The US Economy.
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