Can you believe this? Can you comprehend how much money one trillion dollars is? That’s 1,000 billion dollars. Now times that by more than three.
For reference, in 2002 we broke the two trillion dollar mark. That means – no matter how you look at it – the federal government has grown almost 36 percent in less than five years, and we’re estimating growth of more than 55 percent between 2002 and 2009.
For those interested, here’s a link to historical tables going back more than 100 years.
When you look at the data, take a look at the deficit or surplus each year. The last year that we ran a surplus was in 2001, but it’s important to note the deficit percentage as compared to the total spent. In the early to mid 80s, our deficits were bad (22 to 25 percent) in comparison to what they are now (6 to 9 percent).
Here is an analogy. If you made $150,000 per year, would it be acceptable to carry a $25,000 car loan. The percentage of debt would be about 17 percent. That means that if you made $300,000 per year, it would be acceptable to carry a debt (car loan) of about $50,000. Just because your debt load doubled, does not mean that it is a bad thing. You must compare that to your income.
That’s why the yearly deficit numbers don’t mean much on their own, you must compare that number to some other number. Below, I’ve compared to the budget, but in most cases it is compared as a percentage of GDP. Here is a good Cato Institute article on the subject. Maybe deficit spending is okay?
Since 1963, we have had 14 years when debt has been below 33 percent of GDP and 26 years when it has been higher. Conventional wisdom is that economic performance should have been better in the years when we had less relative debt, but the facts are the opposite. Real economic growth averaged 3.47 percent in the high debt years, which was almost 1 percent higher than the 2.59 percent average growth of the low debt years.
Unemployment was also lower in the high debt years averaging 5.65 percent as opposed to 6.43 percent in the low debt years. Inflation averaged a whopping 7.6 percent in the low debt years, almost 3 times as high as the average 2.95 percent of the high debt years.
Here is some information I put together from the historical data. Note that the budget is listed in trillions of dollars. The Budget column indicates the deficit percentage as compared to the total outlays of the budget. 2008 and 2009 data points are estimates.
On a final note, there is a difference between yearly deficits and the national debt. In total, it’s estimated that the U.S. has a “mortgage” of about $5.1 trillion dollars (national debt). That certainly is a lot of cash, but since the government is taking in about $2.6 trillion per year how does it look now? Maybe compare that to your own debt load and see how the percentages work out?