I’ll be spending most of this weekend with another page-turner of a book on my favorite subject, economic growth. (It can’t be helped, I’m wired that way, as I explained a few months ago.)
Because of that, today’s post will be brief, but in a few days, just before the long Independence Day weekend, I’ll post the updated National Debt Thermometer. It’s time for an update, because the Commerce Department will finalize the first quarter GDP numbers this week, and the OECD has issued a new set of economic data for its member countries. But for now, I’ll briefly explain why I keep hammering away at this topic.
Why am I so interested in the nature and causes of economic growth? Largely because GDP growth is the most promising antidote to “Deficit-Attention Disorder.” Our politicians and journalists continue to give far too much airtime to fear-mongering about deficits and debt. (Reason: We pay attention to it, thereby perpetuating it. The word “Debt” is scary; fear is the most effective motivator of all; most politicians and journalists know that—so they use it to gain our attention every chance they get.)
I, for one, would very much like to see the national debate calm down a little—take a big step away from hysteria, towards objectivity—by including the dimension of economic growth whenever we talk about deficits and debt. And what’s the simplest way to introduce economic growth into the debate? A simple, easy-to-understand number: the Debt-to-GDP ratio, or debt as a percentage of the economy. That’s the number we should be watching; it packs a huge bundle of highly relevant economic information into a tiny package. It’s an objective beginning to rational economic debate—unlike the raw debt level, which is almost always an emotion-packed, fear-mongering façade for someone’s hidden political agenda.
We should be watching the Debt-to-GDP ratio to ensure it doesn’t get too high; we should not be watching only the raw dollars of debt, a near-meaningless way of measuring financial health. Sounds simple, but it’s a shocker to a lot of people. To illustrate, see this simple little quiz I posted recently—and try it out on a few folks, because I predict it will cause a few double-takes.
To further that cause, I'll continue to update the National Debt Thermometer monthly in this blog. Additionally, this week I'll introduce a new feature that will help us keep a close eye on the debt-to-GDP ratio’s key components. Is economic growth enough to offset the effects of debt growth? Why or why not? Is our debt burden worsening or improving relative to other countries? We’ll be watching closely, and commenting frequently, right here in this weblog. (To the chagrin of the fear-mongers, I hope.)
