Debt, doom and despair

By Lorenzo

It is a matter of some comment that the public debt burden of the United States has recently increased somewhat.

Upward, ever upward

And that this surge in debt has come from increased spending

A more elevated state

More than from falling revenues.

Buy now, pay later

(The “negative deficits” in Truman’s and Clinton’s second terms meant the US federal government was running a budgetary surplus.)

Fiscal surge
This surge in the federal budget deficit and federal public debt was in the service of fiscal stimulus (and keeping State and Local government spending up in the face of falling revenues). Various Keynesians have argued that the fiscal stimulus was not nearly large enough or, at least, could have been usefully larger.

My take on this is that (1) if the US Congress could spend so much for so little stimulus effect, then fiscal stimulus is–as a matter of practical politics–an amazingly wasteful way of getting economic stimulus. And (2) since the fundamental problem was contractionary monetary policies, and the monetary authorities “move last”, then fiscal stimulus becomes even more problematic. (As Scott Sumner points out, the fiscal multiplier is a measure of central bank incompetence.)

Your debt, my asset
But what I want to focus on here is the level of US debt. The first thing to remember, is one person’s debt is another person’s asset. So, a measure of US public debt is also a measure of financial assets held by whomever. It is a perfectly reasonable question whether the US state can manage its level of debt, and whether its public finances might have become somewhat debt-addicted, but let us not get the idea that debt is all just negative. Lots of folk, including lots of American citizens (indeed, mostly American citizens), are getting nice incomes out of that debt. As long as US debt/bonds are regarded as “safe assets”, they will be saleable. (The less safe they are rated, the more expensive they will be to sell, but there are no signs of that.)

The second thing to remember is it is a case of been here, done more than that. These are not record debt levels for the US federal government.

It goes up, it goes down, it goes up again

Though it is clear the levels of US federal debt have been trending upwards since the beginning of the C19th.

Then there is the Australian record.

Tried it, not so keen

The use of public spending to keep the policy regime of “protection all around” going during the 1920s is quite clear. Australia had, however, a very bad experience with the burden of debt during the 1930s Depression, and the antipathy has lingered.

But the Australian and US history of national debt pales into insignificance compared to that of the UK.

The British do it bigger, better

When UK public debt was over 250% of GDP in 1815, the British national government had revenues of about 10% of GDP (pdf), which was regarded as an appalling burden of taxes. So, the British government public debt burden was about 25 times its revenue. The current US federal debt is a mere 6.5 times its revenue; 5.5 times if revenue recovers to its postwar average share of GDP.

Somehow, the desperately public-debt-burdened UK managed nevertheless to spend the next hundred years presiding over Pax Britannica and a massive surge in population and prosperity.

So, the next time you hear gnashing of teeth and wailing over the US debt burden, suggest a bit of historical perspective.

13 Comments

  1. JC
    Posted July 18, 2012 at 1:46 pm | Permalink

    Until a few years ago Texas had what they called sodomy laws on their books, although they were dead letter laws. These laws basically made homosexuality illegal in Texas. By your reckoning then you would have been supportive of some clown police commissioner or sheriff going after gay people taking them to court and having them jailed. Not only would you have been supportive, you would also have stood up for the Governor in not intervening and stopping this.

    You really are a clown, KVD and I mean this seriously. Honestly, some of the stuff you put up is intellectually offensive.

  2. kvd
    Posted July 18, 2012 at 1:51 pm | Permalink

    [email protected] look, I have politely answered your statements and insults, and have completely demolished your one and only example of President Obama’s ‘socialist agenda’. Now I am sure there must be other examples you could pursue, but this particular horse is well and truely flogged to death.

    This is not to suggest you are therefore wrong in all your statements and claims, just simply that re the NLRB/Boeing case you are wrong to infer any such ‘magical’ powers to President Obama.

    Also, re the Presidential power to appoint: you [email protected]He stuck on the board the worst leftwing lunatics he knew of” – but the facts are that he appointed two Democrat- and one Republican- leaning members.

    Now it seems that both you and I would prefer him not to be re-elected. You would have voted for him first time around; I would not have. You use wildly emotive language to explain why he does not deserve a second term; I simply believe he has simply not been very effective (basically indistinguishable from his predecessor), and that the U.S. could do (and deserves to do) much better.

    And yes, for the past 35 years or so, the buck has indeed stopped with me. Minor stuff, but I know what you mean about ultimate responsibility.

  3. kvd
    Posted July 18, 2012 at 1:54 pm | Permalink

    [email protected], desipis said it far better:

    Now we see the JC attempt to shift defence into offence by adding a personal dimension to its non-sequitur. This is a clear attempt to lure its opponent into making themselves open to the JC’s favoured ad hominem attack.

    Thanks [email protected]! Both prescient, and succinct.

  4. JC
    Posted July 18, 2012 at 5:29 pm | Permalink

    [email protected] look, I have politely answered your statements and insults, and have completely demolished your one and only example of President Obama’s ‘socialist agenda’.

    I haven’t insulted you. In fact I was very honest with you. You have done nothing of the sort in terms of disproving my comments. None. I don’t appreciate your passive aggressive posture and then accuse others of being insulting.

    Now I am sure there must be other examples you could pursue, but this particular horse is well and truely flogged to death.

    No need to unless you want to see others.

    This is not to suggest you are therefore wrong in all your statements and claims, just simply that re the NLRB/Boeing case you are wrong to infer any such ‘magical’ powers to President Obama.

    Lol, so I’m right, but I was also wrong. ahahaha

    See the Texas example I provided and tell us if that’s how you really thinkk.

    Also, re the Presidential power to appoint: you [email protected] “He stuck on the board the worst leftwing lunatics he knew of” – but the facts are that he appointed two Democrat- and one Republican- leaning members.

    Oh which one?

  5. kvd
    Posted July 18, 2012 at 6:12 pm | Permalink

    Oh which one?

    This is getting boring. But let me do your research for you – from the wiki page for the NLRB:

    In April 2009, President Obama nominated Craig Becker (Associate General Counsel of the Service Employees International Union), Mark Gaston Pearce (a member on the Industrial Board of Appeals, an agency of the New York State Department of Labor), and Brian Hayes (Republican Labor Policy Director for the Senate Committee on Health, Education, Labor and Pensions) to fill the three empty seats on the NLRB.

    Then it gets interesting:

    On January 4, 2012, Obama announced recess appointments to three seats on the board: Sharon Block, Terence F. Flynn, and Richard Griffin.

    Hang in there JC – because Block on her own web page calls herself Republican; Flynn – another Republican – was had up on some sort of ethics complaint in March this year, and that leaves Griffin – who I guess you would call a “worst leftwing lunatics he could find”.

    So I’m reading six appointments, three of whom are Republican, and one of those three seems to qualify as some sort of unethical political hack.

    Does anyone anywhere else let you get away with this sort of irresponsible, unsubstantiated, blanket declaration of what you believe to be “true”?

    Because as of now, if you said the sky was blue I would immediately check my rain insurance.

  6. JC
    Posted July 18, 2012 at 6:57 pm | Permalink

    Are you this INTELLECTUALLY ERUDITE KVD, or just POINTEDLY HONEST to the point of PERSONAL DISCOMFORT? {SOONED BY ADMIN-DEM}

    Odumbo makes 3 recess appointments 2 of which are hard left , one is a nominal republican (why a republican has to get through a recess appointment hasn’t been explained which casts doubt he’s a Republican) while the other board members are hard line leftists and you’re somehow suggesting this is some sort of clue that

    1. He isn’t a hardline socialist

    2. He’s bi-partisan.

    They were recess appointments because Odumbo’s chances of getting these nominations had as much chance getting through congress as MY CONFORMING TO REPEATED MODERATOR REQUESTS TO EXCAVATE SOME MANNERS ON THREAT OF BEING SENT TO THE BIRD HOUSE PERMANENTLY.

    …Lastly, you’re still avoiding the question I asked. Would you have supported a Texas governor allowing the states police apparatus going after gay people while that dead letter law was on the books? See if you’re able to answer instead of avoiding it.

    All this stuff about recess appointments this or that is simply avoiding the travesty committed against Boeing by hardline leftist dunce.

  7. Posted July 18, 2012 at 7:03 pm | Permalink

    Play nice people, or I will have to bring out the moderator stick. You particularly JC, the first line @56 is inappropriate and unnecessary.

  8. kvd
    Posted July 18, 2012 at 7:28 pm | Permalink

    ’nuff said Lorenzo. It was getting boring anyway 😉

    (btw your Natsem link doesn’t – for some reason)

  9. JC
    Posted July 18, 2012 at 7:47 pm | Permalink

    Play nice people, or I will have to bring out the moderator stick. You particularly JC, the first line @56 is inappropriate and unnecessary.

    Why? I’m being honest. He’s managed to fuck around for numerous comments attempting to avoid the point he wouldn’t tolerate in Australia for a second but defends Odumbo’s actions against Boeing. He got clobbered by a tuna to the face with this example and has played this stupid passive aggressive game. He’s really pissed me off.

  10. Posted July 18, 2012 at 9:20 pm | Permalink

    You think, you’re being honest JC, what you’re actually being is rude. SL is studying, LE may be going over the Niagara Falls in a barrel but I’m around, and I will Soon your *ss and enjoy it. I don’t care how annoyed you are – if you keep waving that traders “big swinging d*ck” all over this blog I *will* chop it off (metaphorically speaking).

  11. JC
    Posted July 18, 2012 at 9:31 pm | Permalink

    Really… I’m not being aggressive at all. That’s your opinion and you’re being rude yourself Deux as I don’t find your characterization at all “nice”.

    I take KVD’s model works best, right. Just act pretend sweet, sneer and smarny with loads of a passive aggressive tone. Is that right?

  12. Posted July 18, 2012 at 10:47 pm | Permalink

    You ARE the weakest link, JC. Good-bye.

  13. Posted July 19, 2012 at 6:48 am | Permalink

    [email protected] It is the National Centre for Social and Economic Modelling at the University of Canberra and, yes their server seems to be down.

One Trackback

  1. By Skepticlawyer » Debt and boom on July 19, 2012 at 11:02 am

    […] my Debt, Doom and Despair post I noted that a hugely debt-burdened UK (where the national public debt was probably about 250% of […]

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