I'm back, and it's the same old subject: the national debt (...more precisely, the federal debt).
Instead of the same boring debt clock we see everyplace else, I decided to display a debt meter, showing the debt as a percentage of the economy.
Notice where it is today compared with where it stood at the beginning of 2009; not good, to say the least. Also shown on the meter are the high- and low-water marks for the USA (1946 and 1835 respectively), as helpful benchmarks.
I presume we can all agree that the ratio has been growing much too fast. It grew from 45% in January 2009 to 64% today. That's not sustainable, and it begs the question, what should we do about it? Most of our politicians and pundits are talking about it, but almost all of them are trapped in a false dilemma: should we cut spending only, or should we cut spending and simultaneously increase some people's tax rates?
A false dilemma. It reminds me of something George Carlin said a while back: "Some people think the glass is half full, some think it's half empty. Not me; I think the glass is too big."
In reality, economic growth is the only way out. Robust growth rates of the Reagan-Clinton era are what we need, far more urgently than we need tax-rate hikes or generic cuts in infrastructure and national security "spending." (For a clue about where I'm coming from, check my 'about' page.) The best way to increase taxes is to leave tax rates where they are, and increase the number of people paying taxes (aka "job creation"). The best way to defend the country and to build the infrastructure our kids and grandkids will need is to grow tax revenues by fostering what Schumpeter dubbed "creative destruction."
Economic growth increases the denominator (GDP) over the long haul, which improves the debt/GDP ratio. Anemic growth as we have today is bad news; robust growth as we had in the '80s and '90s eliminates a lot of problems. Unfortunately, I hear almost nothing from either side's politicians about how any given generic "spending cut" or targeted "tax hike" will enhance private sector growth. I've become convinced that most of them don't understand growth -- just like they don't understand the arithmetic that explains why the ratio of debt to GDP improves when the denominator gets larger. And because they don't understand that, they have no hope of understanding the mathematical truth that the USA could continuously improve its debt-to-GDP ratio while running permanent deficits forever, as long as the economy grew faster than the debt. (Try that brain teaser out on one of the tea party politicians; I predict it will induce cognitive dissonance.)
In any case, I'll be posting here periodically again, and I suspect the national debt issue will be a central topic as it was before.
End note: links to data sources for the National Debt Meter:
GDP - Bureau of Economic Analysis, Table 1.1.5