Yes, I do realize that the three tax cuts passed in 2001-2003 have now been permitted to "sunset", just like the Pay-Go limitations on spending were allowed to "go away" by Congress. But even with newly increased revenue from the reinstatement of those taxes, this year's federal budget will again set records for deficit spending and further increases in the national debt.
The high point of our national debt, measured as a percentage of gross domestic product (GDP), was 121% in 1946 when we were trying to restart the economy and pay off the costs of WWII. The ratio declined dramatically in the following 42 years, under the administrations of Presidents Truman, Eisenhower, Kennedy, LBJ, Nixon, Ford and Carter, at which point our debt-to-GDP ratio had declined to 35%. During the administrations of Reagan and Bush 41, the ratio doubled from 35% up to 70%. During the eight years of the Clinton administration, the ratio again declined, from about 70% back down to about 58%. As has been widely reported and written about, the U.S. was actually on a track to eliminate all public debt towards the very end of the Clinton administration, a condition that Fed Chairman Alan Greenspan thought would be a very unhealthy situation. Since 2000, under Bush 43 and now Obama, the ratio has grown to its highest level since 1945, about 63%. Of course, the curent ratio is affected by both profligate federal spending as well as prolonged recession-like levels of economic activity.
To give some real measure of the debt that our politicians have caused by increased spending, note that when Jimmy Carter left office in 1981, the total national debt of the U.S. was just about $1 trillion. In the 30 or so years since then, under the administrations of Bush 41, Clinton, Bush 43 and Obama, our national debt has risen to the current level of over $12.5 trillion. The trend line reflecting both the amount of debt being created by government spending as well as it's chart as a percentage of GDP has steepened dramatically in the last couple of years.
The ratio of U.S. debt-to-GDP is currently about 63%. That compares to the ratio of the weaker developed economies of the U.K. (69%), Germany (77%), France (80%), and the poster children of political irresponsibility, Greece (108%) and Italy (115%). Unless something changes dramatically, significant reductions in annual deficits, the U.S. will be reaching the levels of the weaker economies within only a few years.
In contrast, the economies with which we are competing to retain our role as an important economic player on the world scene have far less leveraged debt levels and have economies which are growing at dramatically faster rates than ours. China's debt-to-GDP is only 15% and they are struggling to slow their economic growth rate to a more manageable level of about 10%. All of the other emerging economies who we count as our major competitors--China, India, Russia, Brazil--are all considerably less leveraged than the U.S. and all have economic growth rates far higher than our own.
No one is talking about the economic peril that our political leaders have placed us in--certainly not them! So long as they can keep us arguing among ourselves about the partisan issues they create, they know we won't focus on the real and rapidly emerging threat to our way of life. So long as they can keep "delivering the goods" to the interests who finance their election campaigns and the electorate who returns them to Washington year after year, they know they'll be OK.
But what about us? What about the next generations of Americans? Someone better be thinking about these things. Someone ought to be doing something about them. I'm afraid that "someone" is us and we can begin doing something about it in November. It's time to start over. I see no one in Washington who hasn't been a part of getting us into the fix we're in now.
