The Federal Relative and "relative to GDP"

This is the Federal Relative; we looked at it recently:

Graph #1: The Federal Relative

Since (as you can see) the Federal Relative is so low, I woke up today wondering what is it that drives people crazy about the Federal debt. Maybe it bothers people that the debt is so big, relative to GDP:

Graph #2: The Federal Relative and Federal debt relative to GDP

The red line here shows the Federal debt, relative to GDP. It's the "size" of the Federal debt. It's big. Since the mid-1960s it has been bigger than the Federal Relative. And though they show similar patterns since that time, the red line has been pulling away, rising higher and higher. And maybe that's what bothers people.

Still... to drive the red line down, we must reduce the Federal debt relative to GDP. But if we want to reduce the Federal debt, we must also push the blue line down. In order to push the red line down, we must push the blue line down. And this is a problem, for the blue line is already just about as low as it can go.

When we take Graph #2 and add to it (in green, below) the trend line of Non-Federal debt, relative to GDP, we start to see what a high level of debt really is:

Graph #3: also comparing Non-Federal debt to GDP

If you get the feeling it is the Non-Federal debt that's pulling everything else up, I think you're right.

Add the Non-Federal Relative to the graph, and it stands out above all:

Graph #4: with the Non-Federal Relative added in

Once again, the Non-Federal component of debt is by far the biggest part of the debt problem. Everything else pales beside it. (And this graph shows the understated version of the Non-Federal Relative.)

On Graph #4 here, in the red and blue lines, the Federal trends, you can see slight increase through the 1980s and into the 1990s.

In the Non-Federal trends, you can see a flattening in the green line, mid-1980s to mid-90s. And in the orange line you can see that flattening translated into a brief but significant decline, 1989-1994. That came just before the vigorous uptrend that accompanied our best recent years.

Again: It was the fall of the orange line, Non-Federal debt, that allowed our economy to perform well, however briefly.

What we need to do is bring the Non-Federal Relative down to perhaps half where it has been for 30 years or more.

The best way to do that? Reduce private-sector debt, the green line. Not the red and blue.


And yes, very often I get up at two in the morning, because my restless mind put two notions together and I want to see what the graph looks like.