With low inflation (2.2%), near record low unemployment (4.5%), low interest rates, rising personal income, healthy GDP growth and a Dow above 12,000, this may be the best economy we’ve had post-WW II (the late nineteen-nineties mania doesn’t count as it was predicated and evaporated on a false “Tech Bubble” that was created out of a few rules changes at the SEC).
Still, there are detractors who claim that the current national debt overrides those other economic indicators and changes that picture altogether.
I profoundly disagree.
Detractors often claim that our current level of national debt is reckless, irresponsible and unsustainable, saying things like, “If this government were a household, it’d be in foreclosure and we’d all be facing eviction,” implying that our current debt level is much higher than even an average American household could sustain.
It’s easily proven that America’s current national debt is NOT at all high, even by average household standards. Most American homeowners have a total debt (mortgage, car payments, consumer debt) level that is often 300% or 400% of their annual net (after tax) income, with an annual debt servicing cost of around 50%.
By comparison, the U.S. has a national debt of about 66% of its GDP, with an annual debt servicing cost of about 5% of GDP.
Moreover, it’s NOT much higher than that of many other nations.
England has one of the lowest amounts of national debt at 43% of its GDP. Germany’s is 67% of its GDP, France’s is 66% of GDP, Sweden and Norway’s are both slightly over 50% of GDP. Canada’s is nearly 70% of GDP, Italy’s is 108% of GDP, Japan’s is 158% of its GDP and Israel has a national debt of 99.7% of GDP!
Given that virtually all nations have a significant national debt, the lowest I found was England’s (43% of GDP), with almost all the rest over 50%, many, many nations with 60% of GDP or higher, and a fair amount with more than our current national debt of about 66% of GDP, seems to indicate that our current debt level is not significantly higher than that of most other nations! See link to graph above; SEE:
http://www.optimist123.com/optimist/2005/01/national_debt_b.html
Still, there are detractors who claim that the current national debt overrides those other economic indicators and changes that picture altogether.
I profoundly disagree.
Detractors often claim that our current level of national debt is reckless, irresponsible and unsustainable, saying things like, “If this government were a household, it’d be in foreclosure and we’d all be facing eviction,” implying that our current debt level is much higher than even an average American household could sustain.
It’s easily proven that America’s current national debt is NOT at all high, even by average household standards. Most American homeowners have a total debt (mortgage, car payments, consumer debt) level that is often 300% or 400% of their annual net (after tax) income, with an annual debt servicing cost of around 50%.
By comparison, the U.S. has a national debt of about 66% of its GDP, with an annual debt servicing cost of about 5% of GDP.
Moreover, it’s NOT much higher than that of many other nations.
England has one of the lowest amounts of national debt at 43% of its GDP. Germany’s is 67% of its GDP, France’s is 66% of GDP, Sweden and Norway’s are both slightly over 50% of GDP. Canada’s is nearly 70% of GDP, Italy’s is 108% of GDP, Japan’s is 158% of its GDP and Israel has a national debt of 99.7% of GDP!
Given that virtually all nations have a significant national debt, the lowest I found was England’s (43% of GDP), with almost all the rest over 50%, many, many nations with 60% of GDP or higher, and a fair amount with more than our current national debt of about 66% of GDP, seems to indicate that our current debt level is not significantly higher than that of most other nations! See link to graph above; SEE:
http://www.optimist123.com/optimist/2005/01/national_debt_b.html
So the charge that our national debt level would be unsustainable for a household, is demonstrably false, as is the view that our national debt is significantly higher or even “out-of-whack” with that of other nations.
Some will then retreat from the debt-level argument to the charge that “households can’t sustain themselves on deficit spending the way the U.S. government has."
Of course that’s very true, and it's completely superfluous argument because it ignores the fact that ALL national governments can eliminate debt in ways that individuals and households cannot – they can print more money, or float more government-backed bonds.
Deficit spending IS bad, but the paltry 5% of GDP that comprises the annual debt servicing cost on our national debt is NOT the reason for America’s deficit spending! No, a government that continues to spend more than it can afford on social programs, education and the military, not to mention all those non-discretionary spending items (Social Security, Medicare & Medicaid, etc) is responsible for that.
But has anything changed recently in regards to our spending more than we bring in?
Is deficit spending and the national debt at all new?
No, they’re not new at all.
In fact, the debt has been rising every year for more than forty years. Thankfully, so has GDP, thus keeping the national debt at a smaller percentage of the GDP than it would’ve been absent that growth.
In fact, recently one critic of the current economy charged that, “Whether you want to credit Clinton, the republican congress of the 90’s or both they were able to reign in the debt over a decade.”
That is simply UNTRUE!
In fact, the U.S. National Debt was never trimmed during the Gingrich/Clinton years (I say Gingrich first, because Congress controls the budget).
They merely reduced the amount of the deficit spending, so apparently the fellow who claimed this confused the deficit with the national debt in THAT statement.
In truth, the U.S. National Debt grew from 1993 (and before) and that’s easily proven by looking at those numbers; (how about back to 1990?)
09/29/2006 $8,506,973,899,215.23
09/30/2005 $7,932,709,661,723.50
09/30/2004 $7,379,052,696,330.32
09/30/2003 $6,783,231,062,743.62
09/30/2002 $6,228,235,965,597.16
09/28/2001 $5,807,463,412,200.06
09/29/2000 $5,674,178,209,886.86
09/30/1999 $5,656,270,901,615.43
09/30/1998 $5,526,193,008,897.62
09/30/1997 $5,413,146,011,397.34
09/30/1996 $5,224,810,939,135.73
09/29/1995 $4,973,982,900,709.39
09/30/1994 $4,692,749,910,013.32
09/30/1993 $4,411,488,883,139.38
09/30/1992 $4,064,620,655,521.66
09/30/1991 $3,665,303,351,697.03
09/28/1990 $3,233,313,451,777.25
http://www.publicdebt.treas.gov/opd/opdpenny.htm
So, the DEBT has never been reined in, only the deficit (deficit spending gap) was reined in after Gingrich and company took over Congress.
The National Debt has increased EVERY YEAR.
So has the U.S. GDP.
So the percentage of the GDP of the U.S. debt is still not unmanageable, nor at all “out of whack” for a fiscally responsible country.
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In fact our national debt is itself a very complex concept. It's actually comprised of TWO kinds of debt!
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According to Donald Lambro, “The problem with the $7.4 trillion national debt number is that it is not a true description of what the government actually owes to its creditors. The real figure is a lot smaller than that because, as a JEC report points out, "not all debt is equal." "
That’s because “there are two kinds of debts.
“There is publicly held debt, which is sold to the public in the form of Treasury bills, notes and bonds, which totals $4.3 trillion, or about 60 percent of our total debt. This is the true debt held by banks, retirees who want a safe, secure investment for their money, along with other financial institutions and even foreign governments.
"Then there is something called government-held debt, which totals $3.1 trillion, or about 40 percent of the gross national debt. This is the amount of money loaned from one program to another within the government. It is essentially debt that the government "owes itself."
"For example, Social Security's surplus revenues are routinely spent by the government to pay other bills in exchange for a Treasury IOU that the retirement fund can redeem when its does not have enough funds to pay all of its benefits (which will happen in about 15 years or so).
"This type of debt is largely an accounting mechanism, and counting it as debt is analogous to counting an IOU to oneself as personal debt," the JEC says."
So is this a great economy or what?
I think, since the charges above, about the current national debt overwhelming the rest of the economic indicators, have proven false, that it is indeed a great economy.
In fact, a great and underestimated one, at that.
That’s because “there are two kinds of debts.
“There is publicly held debt, which is sold to the public in the form of Treasury bills, notes and bonds, which totals $4.3 trillion, or about 60 percent of our total debt. This is the true debt held by banks, retirees who want a safe, secure investment for their money, along with other financial institutions and even foreign governments.
"Then there is something called government-held debt, which totals $3.1 trillion, or about 40 percent of the gross national debt. This is the amount of money loaned from one program to another within the government. It is essentially debt that the government "owes itself."
"For example, Social Security's surplus revenues are routinely spent by the government to pay other bills in exchange for a Treasury IOU that the retirement fund can redeem when its does not have enough funds to pay all of its benefits (which will happen in about 15 years or so).
"This type of debt is largely an accounting mechanism, and counting it as debt is analogous to counting an IOU to oneself as personal debt," the JEC says."
So is this a great economy or what?
I think, since the charges above, about the current national debt overwhelming the rest of the economic indicators, have proven false, that it is indeed a great economy.
In fact, a great and underestimated one, at that.
