Saturday, June 20, 2015

Same Data. Same Conclusion

Steve Keen:
If we’re honest, when we say “why can’t you just be normal?” to someone or about something, what we really mean is “why can’t you be the way I’d like you to be?” So by “normal times”, the Chancellor really means “when things are really good”.

There is something of the sour grapes in saying that by "normal times" we mean "really good" times. It's like saying the really good times were just a fluke, and we ought not expect good times to return. It is a willingness to settle for less than really good times. Sour grapes, and giving up.

Keen identifies the "really good" times:
In that sense, the ultimate “normal times” for the Western world were the years from the end of the Korean War until just before the OPEC Oil crisis—from 1954 until 1973. These were the socially tumultuous years from Happy Days and The Fonz, to the Beatles, the Vietnam War and the death of Jim Morison. But they were also the years when the economy boomed, with the real rate of growth in America averaging 4% a year ... So 1954 until 1973 is the yardstick for “normal times” in the modern, post-World-War era.

And in those normal times, the annual change in US government debt was normally plus 1.72% of GDP.

For the rest of the article, Keen refers to the really good times as "Happy Days".

Yes, that’s right, the “normal thing” for the government during those Happy Days was to run a deficit of just under 2% of GDP.

Okay, don't lose focus. We're not here to talk about Happy Days. Jokes and funnies and reader-coddling aside, Steve Keen notes the important detail that U.S. debt was growing during those good years. Growing at about half the rate of GDP.

For the past few days I have been trying to make the point that the growth of government debt didn't start with Reagan. Back in the 1950s and '60s, the federal government was, on average, running deficits. Small ones? Sure. That's the point. That's what I've been saying for the last three days: The deficits were small in the '50s, a little bigger in the '60s, bigger yet in the '70s, and Reaganesque in the '80s.

You can cry and moan about Reagan, and blame him for massive deficits, I don't care. But you can't ignore the fact that Federal deficits were growing for three decades before Reagan. And you cannot refuse to consider the possibility that anyone in Reagan's position -- at Reagan's time, I mean -- might have done the same.

1 comment:

Jazzbumpa said...

And you cannot refuse to consider the possibility that anyone in Reagan's position -- at Reagan's time, I mean -- might have done the same.

OK. I will consider that possibility.

Historical perspective is one thing. But at every place and time there are choices - policy decisions - and as I am fond of saying, policy matters.

Reagan's policies included reducing tax revenue. For 4 consecutive years from '83 through '86 he ran the largest primary deficits that has ever been recorded.

Gotta run.