I hope the data shown above will dispel some of the smoke clouds from our cold civil war. Of course data is data and interpretations will vary, but can't we tell that the steepest declines in debt Vs. GDP occurred, like economic expansion, during years when top marginal brackets were over 50% and as high as 90%? Doesn't it appear that the alleged expansion during Reagan's years was really only a manifestation of surging debt ratios? Doesn't it also look like anything one might call growth during W's terms was simply exploding debt which caused so much liquidity, so many dollars flowing into hot air derivatives and overpriced real estate and unregulated, over valued securities that the worst boom/bust cycle since the 1920's blew up in our face? Isn't it obvious that any apparent prosperity under Reagan fell hopelessly short of offsetting his profligacy in running up the debt? Isn't it obvious that the market boom under W. was the result of people like me having more money than they know what to do with and pumping up the markets to the point of the biggest bang in 14.7 billion years?
Isn't it hard, seeing the upward momentum to expect anything the current president could do would cause a 180 degree reversal in the time he's been in office?
This chart is a little misleading in that it charts the debt in relation to gross domestic product. Can't remember where I was reading this last week--Krugman maybe?--but the author pointed out that the main reason the debt appeared to drop so significantly during the Truman/Eisenhower/Kennedy/LBJ years is that GDP was growing so significantly at that time. Our GDP is not growing at that rate any longer, hasn't since the 1980s, energy being a primary reason.
ReplyDeleteIf we got off the oil tit and started looking at domestic, alternative energy sources instead of buying our energy from foreign sources like Canada and Saudi Arabia we'd see that line start to go back down again.
"it charts the debt in relation to gross domestic product."
ReplyDeleteThat's the point though.Debt actually isirrelevant, it's the percentage it represents that's important. The apparent prosperity of certain periods is shown to be illusory. It's incomplete to say government revenues are up when they're up because the government borrowed them. Did Reagan make us more prosperous or were we living the high life on borrowed money? I think this shows the latter -- the borrowed funds producing a negative return on investment.
Conversely, debt matters far less or not at all when offset by income. Bankruptcy isn't about how much you owe, but about what percentage of your assets it represents.