Quote:
Originally posted by RawAlex@Feb 28 2004, 12:56 PM
Colin, that isn't the point. Look at 10 years. 6 years of only 44% ratio, and the last 4 years of 67% ratio. It doesn't matter if the GDP is growing if the debt is growing almost as fast. That is something that in the long run can cripple an economy (see Italy, Japan). It is even more significant that this is happening during economic growth... the GDP growth for those two time frames are similar, but the debt increases are VERY different.
If 4 years is a short time to judge things, then 2 quarters ain't nothing important!
Alex
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There's no evidence whatsoever that a constant debt/GDP ratio of around 60% is harmful to an economy. You have it backwards anyway. There has been solid economic growth partly because of deficit spending not in spite of it. Look at the history of the US economy in the 20th century (it's the one I am mostly familiar with) and there are plenty of examples. The strongest growth the US experienced this century occured during World War II. The US economy grew a whopping 22% in one year in 1943 at the same time as a massive surge in US debt nearly doubling the total debt in one year. Debt up 88%. in one year! Economy roars to life. Surprising? No, Expected. Meanwhile, attempts to balance the budget during slow times have done nothing but harm the economy. Look at the balanced budget attempts throughout the depression. They were obsessed with balancing the budget. What happened? Spend less money, GDP shrinks. You attempt to balance the budget and spend less so less money went into the economy and this shrinks the economy further. Repeat that a few times and you have 1929-1932. Start deficit spending and BOOM! Immediate economic recovery.
What do we have to show for our recent deficit spending? Well, the economy has taken off. GDP is up more in the last six months than any other period during the last 20 years. The US cut taxes and spent lots of money and now it's economy roars to life. Amazing, huh? No, Simple.
Whether you want to look at 10 years, 20 years, 30 years or 40 years what you will see if that the US economy has grown at a very strong clip. There's not even a record to compare it to. The US economy is 10x larger than the 5th largest economy. No one has found a better way.
Last edited by Colin at Feb 28 2004, 03:55 PM