Monday, August 29, 2011

US Debt to GDP

John Steele Gordon: A Short Primer on the National Debt -

I just went in debt by $50K. Is that an important statement? Well if I make $10K a year, yes, very -- I borrowed 5x my yearly income. If I make $500K, it is nearly meaningless -- I make 10x that figure, assuming that it is my only debt, I can pay if off with a couple months income.

So too, the only way to understand the US debt is as a % or multiple of GDP. This article does a good job of giving a history of the US debt in that context and makes the problem understandable -- the problem is SPENDING, and the only way to deal with the problem is to cut spending and increase GROWTH.

Oh, and the Reagan or Bush tax cut myths are just that ... myths ... cut spending, create jobs, grow the economy (repeat) ... that is mantra we all need to get on !!!
"That decline ended in 2001 following the collapse of the dot-com bubble and rising unemployment in the resulting recession. By 2003 the debt-to-GDP ratio had risen to 61.7%. Many blame the Bush tax cuts for adversely impacting federal revenues, causing the debt to spiral upwards. But that is just not true. Federal revenues declined by almost 12% in the early years of the decade, but when the tax cuts fully kicked in in 2003, the economy began to grow strongly again and federal revenues increased 44% in the next four years, while unemployment fell to 4.2% from 6.2%. Federal outlays in those four years increased by only 26.4%, and while the debt-to-GDP ratio increased to 64.8% by 2007, that was still well below what it had been in 1994."

'via Blog this'

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