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Republican Debt Builders

from Peter Radford

Just to make the point, here is a chart I grabbed, back in 2012, from Atlantic magazine:

Total Increase in debt to GDP overall

 

 

 

 

 

 

 

 

 

 

 

It shows the increase in the national debt as a percentage of GDP during various presidential regimes.

Guess what?

Reagan – he of small government and endless anti big-government tirades – added more mightily than anyone else. Second place? George W. Bush. Third place goes to Obama who gets an asterisk for his performance because the deficit is now coming down rapidly which could reduce his score on the chart by the time he is done.

I point this out to you in an effort at injecting a little fact into our election. I realize my effort will be in vain, but I have to try.

A simple look at history suggests that the Republicans do not actually mean what they say about balancing budgets or about the debt. The current group of candidates is not better. They would all – with the possible exception of Rand Paul – make the problems they rant about so much a great deal worse.

The reason for this perversity is simple: the policy prescriptions that the Republicans offer are all totally wrongheaded. They have been shown to be massively erroneous. They never accomplish what they are aimed at achieving. They fail dismally time after time. Yet, such is the Reagan worship and the attachment to the magic of supposedly free markets, that the Republicans are trapped vice-like within the error.

This would be amusing were it not that the error infects our discussions about policy. Those of us who see a robust role for government, and fiscal policy, have to leap an extra hurdle before we can even begin to discuss reality. We have to establish what reality is beforehand. Since that takes time and consumes so much political ammunition we never really drive at a sensible starting place.

It is practically impossible to have a discussion about the proper role of government if the shrillest in the discussion are shouting that there is none.

Worse: those shrill voices are also advocating tax and economic policies that then compound the very issue they are shrill about.

We cannot escape this trap and improve our economy until we move decisively beyond the Reagan era. Let’s all face it: he was mediocre at best in his stewardship of the economy. Facts matter.

Well, I wish they would.

  1. November 17, 2015 at 7:20 pm

    Blame the people/nation, we are a democracy! See the fourth chart here
    http://patrick.net/?p=1223928
    Note the 2/3 for the recent jump relative to WW2
    Wow!!!

  2. anmayhew
    November 17, 2015 at 7:45 pm

    What we need is to change the discourse. I do not know how to accomplish this but we need to stop talking about debt as something bad and recognize the reality that modern economies function as debt, which is to say credit, economies. We need absolutely to ignore those who think that gold is somehow important, but more importantly we need to move away from talking about the level of government debt, even when expressed as a percentage of GDP, as an important measure. I would not want a physician who thinks that the most important measure of my physical state is the balance of my “humors” and I do not want policy makers who think that debt/GDP is the best guide to the state of the economy. As I said, I do not know how to change the political (or academic economic) discourse and have almost given up caring, but for what it is worth I suggest that we stop pretending that debt/GDP tells us much.

  3. November 17, 2015 at 10:44 pm

    If you want to know what is the meaning of a national debt, only about the total sum, you cannot understand anything. Because a debt is calculated with the time, and you never know anything of the reality of the time. Of course you may have an idea of what happened, but only approximatively. Anybody can tell you something about it, and another can tell you differenrt or the contrary.

  4. November 18, 2015 at 12:39 am

    New IMF Paper Shows Yet Again that Reinhart and Rogoff Results Are Erroneous

    Author: L. Randall Wray · February 14th, 2014

    “For a sovereign currency issuer, what really matters is unemployment and living standard, not debt ratios.

    If you’ve got your own sovereign currency, and you do not peg, and you do not issue debt denominated in a foreign currency, then there is no reason to suppose that higher debt ratios cause lower economic growth. Yes, budget deficits can be too high—causing inflation. They can be too low—causing slumps. Debt ratios can be high for “good reasons” and they can be high for “bad reasons”. Focusing on government debt ratios, alone, tells you nothing about the health of the economy in such cases.”

    • November 18, 2015 at 12:57 am

      There is something that really does matter about ‘Sovereign Debt’-
      “The Cost Of Debt Service” A cost that can be paid, at present, by taking currency that has already been issued from its present owners and turning that currency over to the holders of that debt.
      This year alone the debt service will be over $600 billion. This income will be distributed
      to the top 10% because it will be a profit distribution for simply allowing the Feds to use our own money.

  5. November 18, 2015 at 4:22 am

    I agree with all your points. But the thing at the root of all this is the invention of economics. In other words, if there were no so called “economic world” then debt, banking (including the Federal Reserve), and finance as we know them today would not exist. In the Presidency of Thomas Jefferson a mistake was made that is still with us today. Rather that forcing what Hofstadter calls “… the classes that carried on commerce and banking and manufactures” to pay-their-way Jefferson let them off the hook. In Hofstadter’s words, “Jefferson, in short, found himself in a position much like that of modern social-democratic statesmen who, upon attaining power, find themselves the managers of a going concern that they fear to disrupt. Just as they have been incapable of liquidating capitalism, so Jefferson found himself unable to keep it from growing and extending its sway over the agrarian masses. Instead he wisely confined himself to trimming carefully at the edges of the Hamiltonian system.” (Hofstadter, Richard (2011-12-21). The American Political Tradition: And the Men Who Made it (Vintage) (Kindle Locations 1060-1064). Knopf Doubleday Publishing Group. Kindle Edition.) The “Business Class” had already succeeded in establishing its “exceptional” status in Europe. Now that status was secure in the United States, as well. And every President since Jefferson (with the exception of Jackson, Lincoln, and the Roosevelts) have found themselves in the same trap as Jefferson. Afraid to challenge the “monied classes” for fear that class would still prevail and the challenge would only make things worse for everyone else. And perhaps even destroy the nation. Now the exceptional status of commerce, banking, and manufacturing has become a part of the American social DNA. No one can imagine America any other way, let alone see the need or even make the effort to change that DNA. Best anyone can do is as Hofstadter notes, [trim] carefully at the edges of the … system. Short of beginning over from scratch I can see no other solution.

  6. November 18, 2015 at 7:17 am

    To know every thing about economics, you have to know every thing about dynamic money. Since it happened about three thousands years, it has two functions. First is to evaluate every thing that is produced for people, and the other is to transport it from the producer to the user and vice versa. But what becomes if many people who are note producers have the idea to transport the good and change something of this value by taking a part of it for themselves ?That is explained in my book : “Money, how to flip the table off” (Amazon) (Paper or digital)

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