Wednesday, June 21, 2006

Debt Myth 1 - Bush is drowning us in debt

This is the first of a series about the national debt of the U.S.; it’s a short one that deals with recent trends. One of the more powerful attacks on the Bush Administration from both sides is that the national debt has exploded and threatens our very future. On the face of it seems to be a reasonable statement. Since 2001 the public debt of the U.S. has risen from $3,339 billion to (approx.) $4,910 billion, an increase of $1,571 billion or 47%. However, against this it needs to be remembered that the GDP of the US has also risen from $10,172 billion to (approx.) $13,300 billion or 30.8% growth. As such the most important indicator of national indebtedness, the Debt:GDP ratio, has budged only slightly. When President Bush took office it stood at 32.8% and is now at 36.9%. This represents a 12.5% increase; though 92% of it came during Bush’s first three years and only 8% in the last two years. This mega increase most surely had increased our interest rates to unbearable levels as predicted by Clintonomics right? Only in Bizarro world, which I know that's why lefties would believe it to be true. Actually, the average interest rate for marketable debt has fallen from 5.82% in 2001 to 4.693% today. The situation with overall debt involves even bigger and scarier numbers, but I do not see why people insist that Social Security borrowings are debt, they do not have to, and most likely will not, be repaid. Actually, should new debt be issued to pay the Social Security borrowings then that will simply create real debt in place of fake debt (sort of like giving your kid brother monopoly money for real dollars). Conversely, if taxes were raised to pay them then the debt ratio would rise as the economy would be smaller.

This graph shows the mild rise and level of debt currently enjoyed by the U.S. (note for any chest beating libs out there, the debt to GDP ratio increased 8.1% under Clinton until 1998, 4 years after the Republicans took control of Congress, debt interest rates also rose from 6.374% to 6.631%).

Economic info can be found here, and debt/interest rate info here.

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