Tuesday, February 8, 2011

So, what am I gonna do with this?

The graph shows the actual ("nominal") growth of GDP, and the very much greater hypothetical growth of output that would have been required to counterbalance the growth of federal debt. Economic growth enough to keep "federal debt relative to GDP" declining along its golden-age trend.

First thing I'm gonna do -- you're not gonna believe this -- is check my numbers.
I'm thinkin to spot-check 1974 and 2007 maybe, just to be sure.

The graph really highlights the growth of federal debt, really makes it stand out. I think you can tell, it's not at all what I expected to see.

All kinds of things can be said, of course. If the economy continued to grow at a "golden age" rate, there would have been a lot less call for the sort of stimulus spending that arose in response to declining growth. This alone would have pushed the federal debt down and the GDP up, reducing the massive difference from both ends at once. But I have no way to tell how much less stimulus spending would have been enacted over those several decades.

And, of course, the main problem is that we use credit for money. So no matter how much we grow, we're always gonna have too much debt. A result of confused policy.

I do think it is reasonable, since our goal is to achieve adequate growth, reasonable to look at a desired level of growth -- realistic growth -- and go from there.

1 comment:

The Arthurian said...

I forgot about this old graph. Years after, I compared the Federal debt to its 1945-1974 trend. Looks very much like the graph above.