Made the mistake of reading the comment-section of a political article on the LA Times website again today….phewwwwwwwwwww…the polarization is really, REALLY frightening, isn’t it? The same rhetoric, over and over and over again: Obama is leading us into a socialist hell, illegals are bankrupting California, the rich don’t care about anyone but themselves….you can just hear the propaganda being mindlessly repeated. Of course it’s not completely representative of everybody, but unfortunately, I find that there are fewer and fewer people I meet who are in the middle. Exceedingly rare is the Liberal who’ll admit we do have a problem with dependency on federal handouts, or a Conservative who’ll concede that raising taxes or the minimum wage may not always be bad for the economy. Instead, there are endless numbers of people who can’t even manage their personal finances, yet feel they can have valid opinions about how to run the country’s!
Let’s look at one thing always talked about, but so badly understood: the national public debt. According to Wikipedia: “Except for about a year during 1835–1836, the United States has continuously had a fluctuating public debt since its Constitution went into effect on March 4, 1789.” Do you know when it was highest in the US as related to how much we make? After World War II, when it stood at 112% of GDP, or 1.12 times the total wealth created in one year. War is expensive and that one was a biggie. Afterwards though, in 1953 after eight years of democratic presidencies it was down to 71.4%, then in 1961 after 8 years of Republican rule it stood at 55.2% and in 1969 after 8 more years of Blue it had been reduced to 38.6%. You see, when everybody is on board so to speak, a country can move mountains! The ‘problem’ was solved by hard work and unprecedented growth, something that is obviously NOT exclusive to a Republican frame of mind.
By the end of Carter’s time in 1981, the debt was at 32.5% of GDP, but then an interesting thing happened! You see, the GOP is always talking about fiscal responsibility, blasting the left for supposed overspending, but the next 30 years paint a completely different picture: 8 years of Reagan and 4 of Bush Sr. left us at 66.1% a doubling of the relative debt! Clinton brought it back down to 56.4 in two terms, only to let Bush Jr. crank it back up to 84.2 in the same length of time and more importantly leave us in a really deep pickle with a government running enormous deficits every year!
Right now, it’s important to discuss some of the nuts and bolts of the Federal budget which are least understood, like how deficits are reported. Again from Wiki: “The annual change in debt is not equal to the “total deficit.” Social Security payroll taxes and benefit payments, along with the net balance of the U.S. Postal Service, are considered “off-budget”, while most other expenditure and receipt categories are considered “on-budget.” The total federal deficit is the sum of the on-budget deficit (or surplus) and the off-budget deficit (or surplus).” And: “In large part because of Social Security surpluses, the total deficit is smaller than the on-budget deficit.”
You see, as I’ve written about on the pages before, contrary to popular belief, right now Social Security is taking more money in than it’s paying out, and some of the money is used to pay for other things the government does. One last important thing to note: “Contrary to popular belief, reducing the debt burden (i.e., lowering the ratio of debt relative to GDP) is almost always accomplished without running budget surpluses. The U.S. has only run surpluses in four of the past 40 years (1998-2001) but had several periods where the debt to GDP ratio was lowered. This was accomplished by growing GDP (in real terms and via inflation) relatively faster than the increase in debt.”
So where are we now? The fact is that the combination of modest growth and serious military spending has put us in a position similar to the one we were in in 1945. I suggest everyone do some research and see how we got out of that one, before advocating policy! Let me just mention that, in my opinion, the fact that wealth inequality fell and fell at the same time our debt was, all the way to the 1970s, only to rise in tandem since then is not a coincidence…..food for thought, as much as the history of Roosevelt’s “New Deal”.