In a previous entry, I reported the debt ratios: the national debt divided by the GDP at the ends of several presidential terms. Another poster suggested that those figures were less important than the absolute numbers of dollars owed. I disagree for two reasons:
1) The debt ratio is what matters
2) The debt ratio communicates the differece between the parties better.
I explain after the jump.
Matters:
Professionals dealing with credit risks never look simply at the amount owed. Just because Michael Jordan has more on his credit cards than the Smith family doesn't mean he is in trouble or that the Smith family isn't. Just because Jones Drug Store has less debt than GE doesn't mean that its credit is good. You look at the comparison between what is owed and what is coming in or could come in in a year (or in some other period). For a government, what could come in is some fraction of the GDP.
Communicates:
If you look at the figures, both Bush and Clinton borrowed billions. Bush borrowed a lot more billions; but, to the guy in the street, X billion dollars means "one hell of a lot of money." So every administration back to Hoover's borrowed a hell of a lot of money -- what's the difference? At least the Republicans talk about balancing the budget.
The debt ration is a hard sell; I don't deny that. But it's not so hard a sell as the difference in significance between 100 billion and a trillion.