Are We Really Drowning in Debt?

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    Apr 22, 2011 2:01 PM GMT
    For the next several weeks, and likely through election season, Washington will continue to be gripped by the debate about how to reduce federal deficits and the national debt. It's a common focus of legislative preening, particularly after economic downturns, and even more particularly when Democrats control the White House.

    So it's worth keeping in mind how current and projected deficits and debt stack up to their historic levels, relative to GDP. The answers will surprise you.

    The following graph tracks annual deficits as percentages of GDP over the last several decades. Unsurprisingly, what you see is that they spike during economic downturns, with the most severe spike after the United States entered World War II -- a spending effort that provided the economic stimulus the country needed to finally break the back of the Great Depression.

    National surpluses shrank as the country entered a mild recession at the end of the Clinton administration, got worse after President Bush spearheaded deficit financed tax cuts, wars, and domestic spending, and ballooned just as Obama took office thanks to the double whammy of a sharp decline in revenues, which plunged when the bottom fell out of the economy after the financial crisis, and stimulus spending to salvage the economy.

    deficitgdp.png


    Because debt is cumulative and generates interest, it has shot up dramatically in the past three years and is at its highest levels in about 70 years.

    debtgdp.png


    The above graphs are based on data collected by Office of Management and Budget. The Bureau of Labor Statistics provides the data that suggests Congress' priorities are out of whack. Currently, civilian unemployment is higher than at any point in the post-war period save for a brief spike in the early 1980s when the Federal Reserve briefly used contractionary monetary policy to fight inflation. Already its clear that unemployment is falling much more slowly than it did in 1981. And when people get back to work, revenues will climb, and deficits will shrink on their own.

    unemployment.gif


    So as this debate enters its most important phase, remember that by historical standards the debt and deficit numbers aren't nearly as startling as some would have you believe. But also keep in mind that current projections, particularly for debt, will be driven by soaring health care costs to exceed historical highs dramatically.

    http://tpmdc.talkingpointsmemo.com/2011/04/our-non-exceptional-debt-and-deficit-crisis.php
  • rnch

    Posts: 11524

    Apr 22, 2011 2:31 PM GMT
    southbeach1500 saidThank you for that wonderful cut and paste job of Democrat talking points from.... Talking Points Memo! icon_rolleyes.gif


    that's quite the compliment, coming from the "cut & paste" queen here on RJ!


    icon_eek.gif
  • Posted by a hidden member.
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    Apr 22, 2011 2:32 PM GMT
    southbeach1500 saidThank you for that wonderful cut and paste job of Democrat talking points from.... Talking Points Memo! icon_rolleyes.gif


    Dude, you of all people should not criticize someone copying and pasting from a biased site. Without that, you would have no posts. icon_rolleyes.gif
  • musclmed

    Posts: 3274

    Apr 22, 2011 2:45 PM GMT
    A look back an compare to WWII when the world was in a different economic mode, most of manufacturing was in a different mode may not be applicable to today.

    The country was in a fight for survival.

    It can be hardly compared with flushing money down stimulus toilets of "shovel ready projects'.
  • Posted by a hidden member.
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    Apr 22, 2011 3:33 PM GMT
    musclmed saidA look back an compare to WWII when the world was in a different economic mode, most of manufacturing was in a different mode may not be applicable to today.

    The country was in a fight for survival.

    It can be hardly compared with flushing money down stimulus toilets of "shovel ready projects'.


    WWII was a fight for American survival? I think not.
  • rnch

    Posts: 11524

    Apr 22, 2011 3:36 PM GMT
    [quote][cite]southbeach1500 said...
    The difference is, I actually put forth my own opinion on said article / opinion piece being quoted.[/quote]





    incorrect
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    Apr 23, 2011 1:41 AM GMT
    Christian73 said
    musclmed saidA look back an compare to WWII when the world was in a different economic mode, most of manufacturing was in a different mode may not be applicable to today.

    The country was in a fight for survival.

    It can be hardly compared with flushing money down stimulus toilets of "shovel ready projects'.


    WWII was a fight for American survival? I think not.


    In some sense, American intervention in WWII was a fight for survival in the sense that it was orchestrated to take advantage of the other colonial powers' involvement - with a view towards revitalizing our broken economy at the expense of the other combatant nations.

    Although quite unlikely, a victorious Third Reich (assuming victory over France, neutralization/withdrawal of Britain and pacification of the Soviet western rump) along with the Chinese seaboard and parts of Oceania under the Greater East Asia Co-Prosperity Sphere, the USA might have faced a cold-war like scenario throughout the 1950s-60s.

    The more politically compelling reason to "make the world safe for democracy" as used by FDR and his supporters to draw the US into the war (via provocative pickets of German naval traffic) and later by maneuvering Japan into attacking the USA.

    In a broader sense, America's economic success in the later half of the 20th century was built upon her success in WWII.
  • Posted by a hidden member.
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    Apr 23, 2011 1:43 AM GMT
    Christian73 said
    musclmed saidA look back an compare to WWII when the world was in a different economic mode, most of manufacturing was in a different mode may not be applicable to today.

    The country was in a fight for survival.

    It can be hardly compared with flushing money down stimulus toilets of "shovel ready projects'.


    WWII was a fight for American survival? I think not.


    In some sense, American intervention in WWII was a fight for survival in the sense that it was orchestrated to take advantage of the other colonial powers' involvement - with a view towards revitalizing our broken economy at the expense of the other combatant nations.

    Although quite unlikely, a victorious Third Reich (assuming victory over France, neutralization/withdrawal of Britain and pacification of the Soviet western rump) along with the Chinese seaboard and parts of Oceania under the Greater East Asia Co-Prosperity Sphere, the USA might have faced a multi-polar cold-war like scenario with the Japanese Empire, the USSR, Britain (who would likely have aught against the US for its non-intervention) and Nazi Germany throughout the 1950s-60s.

    The more politically compelling reason to "make the world safe for democracy" as used by FDR and his supporters to draw the US into the war (via provocative pickets of German naval traffic) and later by maneuvering Japan into attacking the USA.

    In a broader sense, America's economic success in the later half of the 20th century was built upon her success in WWII.