Much has been made by the likes of Ron Paul and his followers in the “Tea-bagger” movement about how the level of our national debt is fast approaching 100% of the annual gross domestic product. This is represented as some kind of ceiling beyond which we cannot go, complete with various doomsday scenarios worthy of revelation.
As the above graph suggests, we have carried high levels of debt relative to the annual gross domestic product several times in our collective history without suffering the kind of doomsday collapse these modern prophets suggest. In fact you will notice that at the end of World War II we accumulated a level of debt equal to about 125% of our GDP or the amount equal to the entire yearly economic output of the country. No one suggested in 1946, as we set about through profligate fornication creating the generation of swine, that we were facing imminent collapse. In fact, judging from the birth rate, the national response was quite the opposite. Debt, in and of itself, even high levels of debt, have no bearing on the state of the national well being.
What differentiates then from now are three salient points. The first is not demonstrated on this graph. In 1946 we owed this debt to ourselves. Today three quarters of the debt is financed from abroad, so interest payment are, in effect, monetary transfers out of the country. The second point is demonstrated by the graph. Close examination reveals a number of interesting points: we emerged from the Revolutionary war with a debt level of about 35% of GDP, high by historical standards. Notice the up-tick in 1860 as we financed the Civil War. Likewise the two world wars of the twentieth century. Notice also how we lowered our debt burden in times of peace–that is until the emergence of Ronald Reagan. Look at the graph from 1980 onward: here you can see the interruption of the upward slope by the Clinton Administration followed by a return to growing deficits. The third point is this: what did we get for all that debt in the last 30 years?
Previously we established our independence and our own economy, we bound up the nation’s wounds, we fought for a new international order bringing in its wake decades of peace and prosperity. The massive debt of the last three decades has produced no such results. Instead we find that our two greatest exports are jobs and capital. I say this by way of pointing out that it is not debt that is at issue here. It is what we are doing with it or, more precisely, what we are not doing with it.
I point this out because one needs to get some perspective on this problem in order to speak reasonably, if not rationally, on the subject. The howlers on the idiot wrong raise this issue so as to create a climate of fear as we approach yet another debt ceiling in which the Congress will have to vote to borrow additional moneys. In order to whipsaw from granting the filthy rich yet another huge tax break, to now cutting 100 billion from domestic spending, paring such programs as Head Start, Pell Grants, and the Home Heating subsidies for the poor, it is necessary to sound yet another false alarm much as Ol Two-Cows would do at the Homeland Security Department in the run up to the 2004 election.
Once again the conservatives resort to the politics of fear in an effort to stampede the great unwashed into gutting the very programs upon which they depend and prevent us from rebuilding our infrastructure and, by so doing, our national economy. It is palpable nonsense.
Footnotes:
The graph depicting the percentage of debt relative to the GDP can be found at:
www.usgovernmentspending.com/federal_debt_chart.html
GDP stands for Gross Domestic Product. This measurement, formerly called GNP for Gross National Product, is the sum (measured in dollars) of the total amount of goods and services produced by the national economy annually.
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