Debt v. Growth
Apr 16th, 2010 by David Anderson
A ground breaking study on the relationship of debt to economic growth will be published next month. It is authored by University of Maryland’s own Carmen M. Reinhart and Harvard’s Kenneth S. Rogoff. It is the reason that we are concerned about the increased addition of debt. Our old path had no impact on the economy. Our new path is heading toward the danger level. It is that simple.
Our analysis is based on new data on forty-four countries spanning about two hundred
years. The dataset incorporates over 3,700 annual observations covering a wide range of
political systems, institutions, exchange rate arrangements, and historic circumstances. Our main
findings are: First, the relationship between government debt and real GDP growth is weak for
debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth
rates fall by one percent, and average growth falls considerably more. We find that the threshold
for public debt is similar in advanced and emerging economies.
The risks of debt have to be weighed against the risks of NOT taking on the debt.
Remember government spending is a component of GDP. Without the recent stimulus, we would be in the second year of a deep recession and GDP contraction. This is a valid use of debt.
Under Bush, we took on new debt to finance tax cuts for the rich. We were told it would create new prosperity, but it did not. This was clearly an unwise use of debt.
I’ll bet this is going to make all good patriots angry as hell that they supported George Bush over Al Gore.
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Censorious villainy against patriots is going on !!
You should know!!
Being censored, indeed I should…but here is the good news Hube. it is now okay to openly make fun of Tea bag tax protesters.
The black guy is notoriously cautious, so if he thinks making fun of tea bag tax protesters is okay – then it is open season my fellow patriots.
The black guy is notoriously arrogant and so full of shit he’d probably be white were he evacuated of it.
If ever there were Marie Antoinette and George III wrapped up into one pompous wannabe monarchist posing as a democrat Barry Hussein Soeterobama is it.
Barro’s pose in this pic sums up this man’s pathological narcissism and megalomania. Really it sums him up:
http://aka-cdn-ns.adtechus.com/images/508/Ad714236St1Sz170Sq1173574V1Id3.jpg
So let me get this right…it all comes down to the black guy for you then? You just don’t like him and it burns you up that he won the election?
How burned up about it are you? Willing to join a Christian militia? or just burned up enough to march around carrying a nonsensical, misspelled sign?
When Jimmy Carter left office national debt was $950 Billion. When George Bush left office it was around $12 Trillion. During the time Republican’s had a lot to say with what was going on. After all, Congress was GOP from 1995 to 2007. Reagan began the era of huge deficits. He tripled the deficit taking the National Debt over the $1 Trillion mark for the first time in American History.
Following the Reagan tax cuts, the Gingrich Congress capital gains tax cuts, followed by several historic sized George Bush tax cuts – all of which we were told would be good for us – we find ourselves totally broke hopelessly in debt.
Yesterday, the GOP Tea Party rallied for lower taxes. More of what George Bush did. Why do these irresponsible voices call themselves patriots? They are part of the con. Keep lowering taxes, we can cut spending. That is not the case.
There is no way to cut our way out of the record breaking $1.3 Trillion dollar deficit Republicans passed on to the new Administration. The new Administration deficit stands at around $1.7 Trillion. The GOP Tea Party needs to rethink what is patriotic and what is not.
All good Republicans need to stand up to our establishment leaders and tell them to end the con game. Find a new direction. Be American.
So why are every single one of our GOP candidates for Congress saying we need to do what Reagan did? Do they mean lower tax rates and triple the deficit. Deregulate the S&L banks then bail them out when the cancer of greed and corruption implodes them. That is what happened under Reagan. Remember John McCain and the Keating 5? The $150 billion taxpayer bailout?
Why are our candidates for Congress saying do what Reagan did? If we let them get away with hot air then we only encourage more deception. More fake history. Somebody in the conservative movement has to call these people out. Ask what they mean about Reagan and debt and deficits.
“Somebody in the conservative movement has to call these people out. Ask what they mean about Reagan and debt and deficits.”
Good luck with that.
So let me get this right…it all comes down to the black guy for you then?
Exactly how much it does for you, friend.
*Gag*
Yet another Donanon123Holt rambling strolls down revisionist history lesson lane.
*Snooooooozzzzze*
Dude, your day is done. Please stop with the constant rehash.
We get it. You’re old. But you don’t have to be Grampa Simpson tedious.
@anon12 –
My gosh! That is quite possibly an astute observation. I’ll have to go all liberal and challenge my preconceptions and biases by giving that some thought. Forgive me for being taken aback. This is the last place I’d expect a (possibly) astute observation.
Carry on patriots!
The history I presented was not revisionist. I was truth. Do you have other numbers or facts?
If it is “tedious” and you “get it” why do you keep sounding like you don’t get it? Conservatives are selling a failed old impossible to deliver philosophy. They need to find a new path.
GOP Candidates Urquhart, Wade, and Rollins are from my generation. They should know all that tedious history stuff. This is not the 1980′s but our candidates are talking like it is. They are promising lower taxes and deregulation. That message is not prudent, not relevant to the times.
Liberals are not going to change conservatives and vice versa. The only people who can call conservatives out on this stuff are fellow conservatives. People like David and Frank here should demand more from fellow conservatives.
I disagree Anon. I have no issue with a smart use of short term debt to prime the pump. Investment tax credits, homebuyers credits, cash for clunkers done more efficiently as an assignable refundable credit, social security rebates, energy development breaks, innovation prize money, build here credits and rebuilding the power grid and other future infrastructure to build a better economy. I have no problem with helping the states by assuming Medicaid costs for a couple of years so states don’t have to lay off teachers (if they want to temporarily redirect that money) or cut back on health care for the poor.
I do have a problem with the long term plan of adding new programs and giving us trillion dollar deficits as far as the eye can see. Before the recession, Bush had cut the deficit in half while dealing with two wars. Is it too much to ask that we not increase the structural deficit? The long term problem is that the current regime’s plans would accelerate the debt accumultion and take us into the danger zone.
We need to think differently.
The Marxist Obama (actually, the Socialist-Democrat Congress, since Presidents can’t create debt) has created a larger deficit in one year than the total deficit incurred since the Constitution was ratified. This is stunning, but remember, BO’s goal is to make the majority of Americans wards of the state, like in Europe.
Over the past few decades, roughly 50% of Americans vote, even less in off-year elections. This year will be different. The average, apolitical citizen has had a sufficient demonstration of the meaning of ‘Hope and Change’- socialism. And the ’10 elections will be a repudiation- Republicans will absolutely take control of the House, and there’s even an outside chance at the Senate (if Boxer and Murray lose).
Go ahead and laugh at the Tea Party. You won’t find it to be so funny this coming November.
Rick, how do you get that number? More deficit in one year than the total deficit since the Constitution? That’s not correct. This year will be a record deficit but . . .
Here’s the link to official numbers:
http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm
• When Carter left office national debt was less than $1 Trillion
• When Reagan left office is was $3.2 Trillion
• During the period Republicans controlled Congress (1995-2006) national debt about doubled from $4.6 Trillon to $8.5 Trillion.
• When GWBush took office debt was $5.8 Trillion. When he left it was over $11 Trillion.
As of today national debt is around $12.8 trillion.
The numbers show that under GOP Presidents and GOP Congress’ we did incur more debt that at any time in our history. Let’s hope this new administration and new Congress does not break that record.
I say again, I am Republican. I am Conservative. Seek truth. Do not hide truth. There’s a value we can unite around.
David, you still didn’t deal with the fact that without the stimulus, we would have a massive hole in GDP and we would now be in the second year of GDP contraction and depression. That is what you are rooting for.
Whatever borrowing the stimulus took was worth it, because we are now holding steady and almost certainly headed for a V-shape recovery.
It is Bush who gave us the structural deficits by cutting taxes too much and in the wrong place. When the tax cuts for the rich expire some of that structural deficit will be corrected.
Bush’s bailouts and Obama’s ARRA, on the other hand, are temporary increases in the deficit and do not contribute toward a structural deficit.
It is often overlooked that the lions share of the stimulus is not new spending, but rather tax cuts/ tax incentives like the home buying credit. Of the $787 billion total $288 billion is slated for reduced taxes, credits, etc.
So far around $300 total has been allocated. Of that around $100 Billon is tax relief. About another third is entitlement help to states. The other third is spending on infrastructure and the other stuff.
http://www.recovery.gov/Pages/home.aspx
A Lion’s share is now a third?
David, lion’s share is defined as the biggest or greatest share.
The Rocovery Act is focused on three areas: tax relief, entitlements, and contracts grants and loans. Of the three, tax relief is slated to get the lions share of the $787. If it helps I could say a whole lot of the stimulus is in the form of paying less tax. A lot of the Recovery Act attention goes towards expanding small business access to credit, providing tax reductions and credits for hiring etc.
I could have said “biggest portion” which is my understanding of what lion’s share means. Anyway, $288B in Recovery Act tax relief is nothing to sneeze at. But the deficit does make you cough.
Seek truth. Do not hide truth.
Okay, but you can start by showing a chart of federal deficits (as I alluded to), not national debt.
Rick, I thought you said
Obama . . .has created a larger deficit in one year than the total deficit incurred since the Constitution was ratified.
The numbers I see say the total of deficits since the Constitution was ratified must be somewhere around $12 trillion. The one year Obama deficit is supposed to be around $1.5 T. The deficit Obama got from Bush was around $1.3 T
If you are saying 2010 might be the biggest deficit in history, yes. But bigger than al deficits combined since day one, no.
The huge Republican-Democratic deficits are not all new spending. A big part is falling revenue from bad economy. 2010 a lot of the deficit comes from revenue down, plus close to $100 billion in new tax relief credits deduction etc in the Recovery Act.
No matter how you cut it, it’s bad.
By the way the most certified socialist is the Governor of Alaska. Alaska government took over all valuable oil assets in the name of the people. Oil wealth is redistributed in the form of a yearly dividend check for each Alaskan. A Republican Governor socialized Alaskan oil around 1980. Sarah Palin added a windfall profit tax on Alaska oil then added a $1000 bonus on each redistribution check. At the time (2008) Palin said “Alaska was set up different than other states, Alaskans own the resources and we share that wealth.” Socialism is not always bad. Depends on how far you go. Alaskans own the oil, but private corporation do the drilling so it is not the dictionary definition of socialism where the State must both owns and operate an enterprise to be officially socialist.