On the Daily Show of 12 April Jon Stewart did a bit on Paul Ryan...
That graph there, in the Paul Ryan inset, is this graph...
Ryan shows that the public debt today is 70% of GDP. He shows that in four decades it will be approaching 350% of GDP. That's funny, because if you look at total U.S. debt, we were already at 350% of GDP in 2008 when the financial crisis hit the fan. Ryan's concerns are seriously misplaced.
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| SOURCE: CONTRAHOUR |
Even funnier, in a sad way, is that all this concern over the federal debt is not about the debt now, but about how big we think we know the debt will be, forty years from now. I'm not impressed by economic fortune-telling. But I do collect it for amusement.
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| SOURCE: Perot Charts |
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| SOURCE: Peter G. Peterson Foundation |
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| SOURCE: Jeff Gundlach via BusinessInsider |
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| SOURCE: Noahpinion |
Here's the Paul Ryan graph, showing where we are today:
The sharp peak there by Ryan's tie is the federal debt of World War II. The long smooth decline that stretches out about as far as Ryan's left hand is the "golden age of postwar capitalism." The little flat that comes next is the 1970s, a crappy time for the U.S. economy. The next hump is the Reagan years and the next one (right under the 70% number) is the Clinton years. The Clinton hump curves down when the federal budget was briefly balanced (at the end of the 1990s). Then there is the tiny Bush II hump, and the Obama increase at the tail end of the graph.
Almost all of that -- everything since 1952, anyway -- you can see in my graph below. You have to look, though, because it disappears down near the bottom of the big sorry redness of private debt.
The federal debt -- actually, federal plus state plus local government debt -- shows up as the blue bars, down near the bottom of my graph here. Compare that blue to the Ryan graph. All the humps and bumps I pointed out are there in my graph, too.
But don't miss the big picture. Don't miss big red. Don't miss private debt. That's the real problem today, today and since the 1970s. That's what holds our economy down.
3 comments:
I'm a bit sleep deprived, but here's a thought anyway.
Private debt is high because wages have stagnated for the last 40 years, while people have continued to want stuff. We have always expected our standard of living to rise in this country, but every penny of economic growth over the period has gone to the top.
So we peons have debt-financed our illusion of prosperity. And it ll went to hell when the housing bubble burst.
What do think about this idea? If I'm close to right, what does it suggest about solutions?
Cheers!
JzB
Good timing, JzB! My noon-time post presents my explanation of the growth of debt.
I agree that "Private debt is high because wages have stagnated for the last 40 years, while people have continued to want stuff. We have always expected our standard of living to rise in this country..."
And I have no reason to doubt that "every penny of economic growth over the period has gone to the top," but I have not studied it.
Oh! Your link in that last part is the first post of yours that I read. I especially liked your "afterthought" about the "ratio of ratios". Not afraid to talk about math a bit, I thought.
Wage stagnation no doubt contributed to the increase in personal indebtedness. Probably not so much for financial business, non-financial business, and government debt however. (I refer you to this graph from an old post by Contrahour at Seeking Alpha.)
I like to say that the concentration of income is a policy of Reaganomics.
I also point out that income cannot concentrate beyond 100% -- and therefore, the policy is unsustainable. So it is bad policy.
I do not base my argument on "concentration of income" because I think this argument is easily undermined by a "class warfare" rebuttal. Obviously the concentration of wealth and income has contributed to the problem. But I have pointed out that even in a state of perfect equality we could see debt increase to a level that it brings the economy down.
I try always to focus on problems that I think conservatives and liberals alike can agree on.
I should add -- if we restore the distribution of income to something like it was before the late 1970s, that would greatly simplify the problem of reducing debt. That is an integral part of any plan to reduce debt without reducing living standards, for sure!
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