Debt Relatives: Uncle Sam

There is an ancient Chinese curse, " May you live in interesting times".

From yesterday:

... one can look at the Federal debt relative to Non-Federal, and Non-Federal debt relative to the Federal debt. Now this graph is more alive, more active, more interesting:

Graph #3: Debt Relatives

The blue line shows the size of the Federal debt relative to the size of Non-Federal. The red line shows the size of Non-Federal debt relative to the Federal debt. Non-Federal debt is so much larger than Federal that the blue line is forced down to the bottom of the graph and most of its variations are lost.

Yesterday's graph does show the Non-Federal debt pretty well. But it's hard to say much about the Federal debt. If I remove the red line and look only at the blue, we should get a better picture of Federal debt activity.

Graph #1: The Federal Relative

 Hm. Still pretty low, innit. That golden age is such a problem... With the Federal debt up over 1.5 times Non-Federal debt at the end of World War II, the Federal relative had no place to go but down. And down it went, as the private sector grew. Until that 1974 recession. Oh, well.

I want to trim out the early years, to get a better look at the Federal relative since it has been less than 40% the size of total Non-Federal debt. I will crop away the years before 1964 and look at what's left:

Graph #2

Now we have something to look at!

The graph opens with the Federal debt above 45% of Non-Federal, and falling. There is a flat spot around 1967, when there was a "near recession" in the U.S. economy. The Federal debt didn't fall so much that year, and probably everybody else's debt didn't grow so much.

The Federal debt probably grew that year, actually, but you don't know that from a graph of debt relatives.

With the 1974 recession, rising Federal countercyclical spending and falling private-sector growth pushed the trend line up a bit. Then as the economy recovered and growth resumed, the line falls again until the next recession, the double-dip of the early 1980s.

Beginning around 1983, the trend line increases gradually until the end of the decade. Remember the "massive" government spending of the Reagan era? Well, this is it. That spending helped the economy grow, evidently, because Non-Federal debt increased almost as fast as Federal debt. That's what the gradual increase means.

From the end of the 1980s to the mid-1990s, the Federal debt gained on Non-Federal, and the trend line rises rapidly. Then in the second half of the '90s, during the brief spell of good years variously attributed (not by me) to Bill Clinton or Newt Gingrich, the economy grew pretty well, Non-Federal debt grew much more quickly than the Federal debt, and the trend-line fell at a fast pace.

Things were quiet at the start of the 2000s, with Federal and Non-Fed growing equally for a few years. Then the Federal relative declined, reaching a bottom in 2007.

After that, things got interesting.