Tuesday, August 25, 2015

Where's the Explosion?

The blue line shows the rate of change in the Federal debt.

The red lines are calculated trends for the periods 1948-1965, 1965-1984, and 1984-2000.

In which period did the "explosion" of debt occur?


The Arthurian said...

for the record
and before some fool complains about it
i am not here concerned about the Federal debt.

I am concerned about the denial of evidence.

jim said...

Looking at the evidence (the actual deficit):

The story I see is that the deficit moved in steps.
Before the about 1974 it stayed below 50 billion.
The next step was 50-100 billion up to 1982. The
next step stayed around 200 billion until the mid 90's
when it gradually descended back down to the first step.

The Arthurian said...

Jim: "The story I see is that the deficit moved in steps."
Okay, I can see that. (I was looking at FYFSD at FRED.)

You've got debt in three steps: small (before 1974), medium (1974-1982), and large (1982-1995±). So you've got two levels of debt before Noah's 1982 "explosion". I can live with that. I cannot live with Noah's before 1982 there was nothing, after 1982 there was everything story.

Does your story arise only from looking at the evidence, or do you have other things woven into the tapestry?

As for myself, I hold that debt was growing from the beginning (1947). So, when I look at FYFSD in the 1947-2000 period, just by eye, I see:
1. Deficit/surplus centered on the zero line, 1947-1958.
2. Deficits entirely to one side of the zero line, 1958-1967.
3. Then your larger, pre-1974 deficits, 1967-1974.
4. Then the "higher yet" deficits of 1974-1982.
5. Then the really high deficits, 1982-1995±.

Do I see it because I'm looking for it? Or do I see it because I know enough to be looking for it? I am reminded of the Darwin story told by Lionel Ruby.

jim said...

Steps in the deficit translate into a debt curve composed of a series of straight lines which can be easily seen when looking at the debt graph. You can see inflection points where the steps change.

And yes, it does look like another step (plateau) between 1950 and 1960 where the deficit stays at about 4 or 5 billion per year.


The Arthurian said...


Jim, maybe the steps arise from politicians' desire to "hold the line" on deficits until some difficulty (like a recession) leads to a new and higher plateau being established.

jim said...

You ask how I noticed the steps. I noticed the inflection points in the debt graph first. The inflection points in the mid 70's and the early 80's are very noticeable the ones around 1960 and 1989 are subtle and only show up when you try to fit straight lines to the graph.

The inflection points do seem to coincide with some recessions.

The Arthurian said...

Yeah, but I think the recessions are just indicator marks. Not causes of change.
I think the failure of progressively higher deficit plateaus, the failure to prevent recessions, indicates that some other problem was growing with similar vigor. Whenever this other problem (the accumulation of private debt, in my view, but we can call it Problem X) whenever it gained enough on the deficits, recession would result.

I know I'm leaving out all the evidence. I'm just telling why the growth of deficits before 1982 is important to me.

Jazzbumpa said...

OK - I'm late to this phase of the party.

But here is something I alluded to in a comment to an earlier post. You are looking at YoY % change.

Let's look at the actual dollar values. And, in fairness to Reagan, let's strip out the interest component of the Fed deficits and only look at spending vs revenues.

I did that in this post of 6/16, which you commented on.


Primary deficit spending really did explode under Reagan.

There was one bad [if you want to look at it that way] year at the end of Nixon's term. [First Yellow section of my graph 2] Primary deficits then trended down through 1980.

Then, there were 5 straight years of primary deficit levels far beyond anything in the 2nd half of the 20th century - until the next recession forced Bush senior's deficits.

So, in terms of dollar amounts, Reagan's accumulated primary deficits really did explode the debt. This is shown in my graph 3.

As an aside, the contractions in Fed primary deficits under first Carter and then Ronnie's last couple of years each preceded a recession.


The Arthurian said...

Yes, Jazz, I am looking at YoY% change and you are looking at actual dollar values. We are looking at different numbers because we are emphasizing different aspects of the situation.

I am aware that, once the actual dollar values reach a high level, the YoY% numbers can drop right down to zero and the actual dollar values will remain high. I am aware.

But for the actual dollar values to reach a high level in a short period of time, it is necessary for the YoY% numbers go high.

For you, the "explosion" occurs when the actual dollar values remain at a high level. For me, the "explosion" occurs when the YoY% numbers are going up rapidly. Unfortunately, "explosion" is not a technical term, so there is apparently no way for us to reach agreement on this.

But (to flog a dead horse) it seems to me that a sustained period of high actual dollar values would be an explosion of debt, while a sustained period of increase in the YoY% numbers would be an explosion of deficits.

That said, Noah bolloxed it by showing a graph of debt while talking about deficits. And perhaps I bolloxed my graph title too...

Jazzbumpa said...

"emphasizing different aspects of the situation."

I thought we were trying to determine if and when an explosion of Fed debt occurred. Not sure what different aspects there could be.

Let's agree on terms.

Explosion: "a sudden outburst of something such as noise, light, or violent emotion, especially anger."

We needn't get angry about an explosion of debt. But we do need to realize that an explosion of debt results from an explosion of deficits. I showed the explosion of primary deficits in my graph 2.

I then showed the explosion of of debt due to those deficits in graph 3.

They sure look like explosions to me. And I think the declining deficits of the Carter years are highly significant. You couldn't put the up-slanting red line in your graph without the transitory peak of late Nixon - which is completely dwarfed by debt growth of the mid 80's.