Most recently, mainly from certain über-right-wing political quarters, there has been excessive "fretting" over the national debt and how the Obama Administration’s budgets will further aggravate that debt. All this "fretting" by the über-right and their Republican cohorts was an impetus to take a closer look at the United States national debt and the uses to which all that borrowing was put.
Should you decide to make the jump to the main body of this diary, I hope you will keep in mind how we have recently used much of the gargantuan borrowing that has driven the steep rise in our national debt and the alternative, more constructive uses to which those borrowed dollars could have been applied.
Across the jump this diary, with the help of two charts (Microsoft Excel based), will examine the national debt and hopefully inspire you to make your voice heard on this issue and the great inflection point at which our country now finds itself.
In beginning our look at the national debt of the United States, a few words about creation of the charts are appropriate.
The data used to create the charts were derived from various sources to include the U.S. Bureau of Economic Analysis (BEA), the Financial Forecast Center, The Washington Post and Z Facts.com. Dollar values and derived percentages used in the charts were discounted to 1942-equivalent dollars; the discounting rate used was 3.96 percent and was a figure that I computed from U.S. Department of Labor’s Urban Consumer Price Data for the years 1955-2007. All data for 2009 are estimated values. The years on the X-axis in the chart title "National Debt Analysis (1942-200)" are fiscal years.
The initial chart is a look at the national debt as a percentage of the United States’ Gross Domestic Product (GDP). The primary Y-axis depicts the national debt in 1942-dollars and the secondary Y-axis reflects the percentage of GDP to which the national debt equates.
Also, this first chart illustrates a very high national debt with respect to GDP during the World War II years, a reduction and leveling of national debt in the years 1947 – 1981, and a steep rise in the national debt beginning in 1982 to present. A dip in the national debt can be seen during the years of the Clinton Administration. (Note: This chart is similar to other graphs that depict the national debt of the United States.)
The second chart, depicted below, is similar to the above chart except that it portrays the national debt only in relations to GDP. Four presidential eras (Reagan, Clinton, G.W. Bush and Roosevelt/Truman) and the national debt during those years are illustrated in this chart.
The Legacy
As the above charts illustrate, our nation has an immense amount of debt; debt that was greatly accumulated in the last almost three decades and mainly because of the tax and economic policies of two Presidents of the United States. So what did the American people get for all this borrowing?
The debt created during the years 1942-1949 was used to fight a World War, the Great Depression, and a severe economic recession – necessary borrowing to meet critical national goals. The same cannot be said for the extraordinary amounts of borrowing that was caused by the tax and economic policies of the Ronald Reagan and George W. Bush eras.
Much of that borrowed money was used to fund tax cuts for a small percentage of America’s citizens – the wealthiest of our citizens. The national debt was reduced slightly during Bill Clinton’s presidential years; but most importantly, the national debt was on a downward slope to a more reasonable and manageable level.
Now we enter the Barack Obama years where we find our national debt at a level above 70 percent of GDP – a concerning fact. But as the second chart depicts, our national debt has been as high as 121 percent of GDP – so far a short period of time and in support of the national interest we can support high national debt levels.
Besides the short term nature of the high national debt of the FDR/Truman years, a second critical point was the national objectives (i.e., fighting a necessary war of survival, combating a depression and facilitating the recovery from a deep economic recession) to which the borrowed money was used. Equally important to the national objectives was the fact that this borrowed money established the foundation for future GDP growth. Can we say the same for the immense national debt created during the Reagan and G.W. Bush years? I think not.
Consequently and because of the wasteful borrowing of the Reagan and G.W. Bush years, the increase in national debt that will arise from the Obama Administration’s spending policies must address national issues (e.g., repair/replacement of infrastructure repair/replacement, improvement in public education, providing national health care for all Americans, creation of renewable energy sources, etc.) that will contribute to fundamental growth in the nation’s GDP. The borrowed money, because of its very high costs, must set a new foundation for real, main street economic prosperity – not for a façade of growth (and unnecessary war) as was bequeathed us by the Reagan and G.W. Bush Administrations.