Skip to content

A Comment, a Response, and some Surprising Economic History

2017-05-24

An article in the New York Times noted in its first sentence that “President Trump entered office facing the worst ratio of debt to gross domestic product of any new president in American history except Harry Truman — an onerous 77 percent.”  (In reality, Truman faced a debt ratio of 109 percent, much worse than Don.)  Here are some comments on the article:

s. cavalli

NJ

It’s so easy for liberals to give away when they are giving it away. Paying it back is another story which Republicans are left to deal with.

You cannot pay it back. Those giveaways keep giving and giving. Essentially with the increase in Medicaid recipients we are paying for Medicaid health expenditures and paying through the nose. We are paying and paying for unemployment and food stamps on and on.

The only way to solve this budget problem is to cut back on the giveaways and that’s impossible. You cannot take back what you are giving away. So sacrifice somewhere is the only solution and sacrifice is what each and every American must do to make up for the Obama mistakes.

I responded as follows (many others also responded, all disagreeing with s. cavalli):

Truman, and Eisenhower after him, responded to those horrendous debt ratios (the ratio of debt to gross domestic product of 77 percent referred to in the first sentence of the article we are commenting on) by imposing income taxes of 70 to 90% on the richest Americans. The result was the greatest period of sustained growth and prosperity our nation has ever known: the 50’s and 60’s.  Of course, they didn’t pay down the debt at all in real dollars, they just grew the economy so that the debt as a ratio to GDP dwindled away to insignificance.

The math is simple and straightforward. It shows that we can afford to feed and house our poorest, even provide them with free health care, if we impose sensible, progressive income taxes; marginal rates of 50% on the richest are more than sufficient. Progressive taxes lean most heavily on those who can most afford to pay, and that is only fair.

Prior attempts to solve this long-term debt problem with cutbacks have only resulted in strangled growth and progressive impoverishment. The only way to deal with massive debt like this is to grow your way out of it.

Taxes don’t take money away, they put it into circulation. The government spends money by paying private citizens to do things, and that stimulates the economy and results in progressive growth. The results in real life prove this reasoning right.

Besides, the basic lack of compassion that your argument posits is just against human nature. It is in our natures to help our fellow man, and the results are improvements in everyone’s well being.

 

 

Then there is this, which I didn’t know how to respond to:

Len Charlap

Princeton, NJ 3 hours ago

Why in the world would you want to balance the budget? EVERY time we had a balanced budget for more than 4 years, we fell into a real gut-wrenching depression. This has happened 6 times and accounts for all of our depressions.

“The definition of insanity is doing the same thing over and over and expecting different results” – source unknown

“Those who don’t know history are destined to repeat it.” – Edmund Burke or George Santayana

vulcanalex

Tennessee 3 hours ago

Because if you don’t the interest will consume the income. Not only balanced but we need a surplus for many years to reduce the debt to a reasonable level. That level is something nobody wants to talk about because it would be much lower than the actual reality.

Len Charlap

Princeton, NJ 1 hour ago

vulcanalex – I am afraid your are trying to apply kitchen table economics to the economics of a huge long lived country that can create the currency its debts are in. Didn’t you read what has ALWAYS happened when we significantly reduced the debt. Are you in favor of a 7th depression?

BTW even with our “large” debt, net interest payments are running at less than 1% of GDP.

Len Charlap

Princeton, NJ 1 hour ago

In a dazzling display of historical & economic ignorance, the author manages to match Trump’s economic stupidity. She says,

“President Trump entered office facing the worst ratio of debt to gross domestic product of any new president in American history except Harry Truman — an onerous 77 percent.” Right. The debt ratio was 109% in 1946–a LOT bigger than today. So what happened to poor Harry S.? What disaster befell the country?

Why, the Great Prosperity of 1946 – 1973 happened when the GDP averaged 3.8% growth and real median household income surged 74%. (If you want to raise the “Europe was Rubble Myth,”. look at http://piketty.pse.ens.fr/files/capital21c/en/pdf/F1.1.pdf which shows that the out put of Europe was about the same as the US in the Great Prosperity 1946 – 1973).

Why didn’t she look at Hoover who started with a debt ratio below 20% or Jackson who got it down to 0% What happened to them? Hint: The Crash of 1928 and the Panic of 1837.

“To his credit, the president put forth the goal of balancing the budget over a decade and starting to reduce the debt.” How has this worked out in the past? History relentlessly shows how wrong – headed this is:

The federal government has balanced the budget & paid down the debt more than 10% in just six periods since 1776–1817-21, 1823-36, 1852-57, 1867-73, 1880-93, and 1920-30. The debt was paid down 29%. 100%, 59%, 27%, 57%, and 38% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.

Advertisements
No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: