If you look at Noah's graph of debt relative to GDP, it certainly looks like the big increase started around 1982:
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| Graph #1: Noah's Graph |
Noah's graph shows the Federal debt as a percent of GDP. I called up GDP (red) and the Federal debt (blue) as two separate series, and looked at the growth rates for those two series. Sure enough, the blue line is way up high in the 1980s:
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| Graph #2. Click Graph for FRED Source Page |
From the mid-1960s to the early 1980s, the blue line, debt growth, changes from very low to very high. Between the mid-60s and the early '80s, the growth of debt went from low to high. So it doesn't make sense to me that Noah says a deficit explosion began after the early 1980s. The explosion started in the mid-1960s and ended in the early 1980s. Noah has it wrong.
And if you look at the blue line on Graph #2, yes, debt growth reaches a high point in the early 1980s. But the trend was downhill from that moment to the year 2000.
Why does Noah's graph show increase beginning arount 1982? Why does it show the debt essentially flat all through the 1970s, while Graph #2 shows increasing debt since the mid-1960s?
Well, because Noah's graph does not show debt. It shows debt divided by GDP. That's not the same thing. Graph #2 shows the growth rates separately, so that we can better evaluate what we see on Noah's graph.
On #2 the blue line runs below the red for almost all the years before 1982. Then, the blue line runs above the red for almost all the years since 1982. So the Federal debt was growing more slowly than GDP before 1982, and faster than GDP after 1982.
This transition, this change that happened around 1982, affects the appearance of Graph #1. It pushes the debt-to-GDP ratio lower before 1982, and higher afterwards. This is one of the reasons Noah thinks he sees an "explosion" of deficits beginning in the early 1980s. There was a decrease in the growth of GDP. Noah has it wrong.
3 comments:
Well - a couple of things.
First - as you point out, there's that old devil denominator.
Second, you're looking at your Graph 2 in a very broad brush manner. Look at the detail and you'll se there really is an explosion of debt from '82 through'86, with growth uniquely above 14% that entire time. Except for the previous blip in '75-'77, with only a single year above 14%, the debt growth in '82-'92 is far greater than anything else in the 2nd half of the 20th century, remaining above 10%/year over that entire period. And this is % change from previous year, so each year the base gets larger, and so does the percentage increment in dollar terms.
In 1979, debt growth was below 7%. That didn't happen again until 1994.
What you have from the mid 60's is higher highs, but there is also a small negative number in 1969. From 1967 to '74 debt growth averages 5.99%. Certainly this is greater than that in the previous post war years, but it is far from explosive.
Now let's revisit Graph 1. Dividing by GDP provides context. Without context, debt is a BIG SCARY NUMBER. With context you can get some idea of how big is too big. Regardless of one's take on that issue, there is a change in the early 80's, and it's huge. Part of the hugeness comes from the very real debt explosion described above, and the rest comes from GDP growth which peaked in 1978, then went into a decline which may now never end.
So - one may quibble at the margins with Noah's assessment, but the claim that he has it wrong really isn't supported by the data.
Cheers!
JzB
Jazz, the difference between us on this seems to be that you focus on the high level of debt in 1982 (or some nearby date) and after, while I focus on the increase that made that high level a reality. I think the increase carries an importance which is unduly neglected.
Once the debt was high, of course the numbers were all big. I don't see that as a surprising fact. (On the other hand, if the deficits increased with the Great Inflation, but didn't fall with the great disinflation...)
Anyway, the Federal debt is definitely NOT as shown on Noah's graph, flat as a pancake until the sudden explosion of '82 and after. You can see it in my False GDP analysis. You can see it in my Inflation-Adjusted Debt analysis. And you can see it in the raw numbers for the annual deficits.
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Thanks for the heads-up on blog comments earlier.
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Wife and I have been watching Longmire on Netflix. Good stuff.
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"Explosion of debt" is not a technical term. That's part of the problem, I think.
Please note, I am not denying that debt was high when debt was high. It would be foolish to do so. I am arguing with people like Noah who pretend there was no period of increase that preceded the high level.
To me, Noah seems to use "explosion" to mean "sudden increase".
You use it to mean a high level for an extended period of time.
I disagree with Noah's version, not yours.
I wouldn't call yours an "explosion" and you do, but I think that's just semantics.
"Part of the hugeness comes from the very real debt explosion described above, and the rest comes from GDP growth which peaked in 1978, then went into a decline"
Yeah, absolutely. And thank you!
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