A rough equivalent of a slide I use in the brief
Tuesday, June 23, 2009 at 2:47AM EDITORIAL: "Britain's Debt Omen," Wall Street Journal, 22 May 2009.
Federal debt held by the public as a share of GDP, 1950-2011.
It was about 100% at the end of WWI. By 1950 it's down to 80%, then down to less than 50% by 1960 and less than 30% by 1970. It remains flat, amazingly enough, across the tough 70s.
Then Reagan comes on and it explodes to roughly 50% by the end of Bush the Elder's term. Clinton brings it back down to about 33% by the end of his eight years (that tax-and-spender!) and then Bush the Younger pulls it back up to the high 30s by 2008 and leaves Obama to clean up the mess, so that now the numbers project back up to about 70%.
The slide I use doesn't track the amount held by the public but takes the entire debt relative to GDP. My numbers go from roughly 90% at Truman's start down to about 30% at Carter's end, then back to 65-66% at the end of Reagan-Bush, down to 57-58% at end of Clinton, and then back up to almost 70% as Obama's splurge kicks in through 2010.
Here's the difference between the two measures, as captured by Wikipedia:
Debt held by the public is all federal debt held by states, corporations, individuals, and foreign governments, but does not include intragovernmental debt obligations or debt held in the Social Security Trust Fund.
So I guess my chart captures the hidden costs of an aging demographic structure better.
Reader Comments (4)
That's a bit of a reach to blame Obama's deficits on having to 'clean up' after Bush2. Clearly, Obama is using this opportunity to expand the power of the federal government over the economy. Ok, we all knew what we were getting when we pulled the lever in the voting booth so this is not surprising. However, the absolute level of spending is a shocker, and goes way beyond what many of us think necessary. The debt he's adding is structural...which means it will be on the books for years and years to come.
In the end, it may take the ruthless international bond market to discipline Mr. Obama and his ways.
Just seems like more of the Washington blame game, but for me the blame game would have to also include the Congress in power, state of the economy, AND Presidential ambitions.
I guess I get tired of the “Who’s fault is it?” question because until we all decide that the answer is “all of us”, we can’t move on to the more relevant question: “When are we going to pay it back?” or at the very least “When are we going to stop adding to it?".
Otherwise love your books - I read Pentagon's New Map on my first trip to India (outsource U.S. tax returns) back in 2005. Blew away Friedman's crapola I was reading at the same time.
The simple question: When in history has anyone (or any entity) ever spent themselves out of Bankruptcy? begs to be answered each time this man proposes another trillion dollar program or proposal . .
And each one has international repercussions . . mostly negative.
What I've said all along is that Obama inherits a financial mess (that will trigger a host of new rules, as such things always do) and a stalled economy that needs to be restarted. Money will be spent in the restarting, and dangerous debt will be accumulated.
My "stand," such as it is, is that Obama has little choice but to stimulate in the short term and then get back to late 80s/early 90s-style tackling the deficit--a back-to-the-future outcome.
My "stand" is also that the international bond market will discipline us by progressively shifting away from dollar holdings, and that this is a good thing.
But yes, I do like having a truly smart guy in the White House, and I know that annoys a lot of people.
For that I must be constantly chastised!