Category Archives: Economics

How bad is the National Debt

How bad is the National Debt

To gain some perspective let’s take a look back in time when two renowned economists disagreed on the best way to manage the economy.

Keynesian Economics vs. Monetarism: An Overview

Monetarist economics refers to Milton Friedman‘s direct criticism of the Keynesian economics theory formulated by John Maynard Keynes. Simply put, the difference between these theories is that monetarist economics involves the control of money in the economy, while Keynesian economics involves government expenditures. Monetarists believe in controlling the supply of money that flows into the economy while allowing the rest of the market to fix itself. In contrast, Keynesian economists believe that a troubled economy continues in a downward spiral unless an intervention drives consumers to buy more goods and services.

Both of these macroeconomic theories directly impact the way lawmakers create fiscal and monetary policies. If both types of economists were equated to motorists, monetarists would be most concerned with adding gasoline to their tanks, while Keynesians would be most concerned with keeping their motors running.

Regardless of their input, Congress has taken an approach that would enrage even Keynes. In simple terms, he advised that deficit spending was helpful during economic downturns but that the government should budget for surpluses during the good times. Regarding overall debt, he recommended keeping the ratio to GDP at under 75%.

So what have we done?

END OF FISCAL YEARDEBT (IN BILLIONS, ROUNDED)DEBT-TO-GDP RATIOMAJOR EVENTS BY PRESIDENTIAL TERM
1929$1716%Market crash
1930$1617%Smoot-Hawley reduced trade
1931$1722%Dust Bowl drought raged
1932$2034%Hoover raised taxes
1933$2340%New Deal increased GDP and debt
1934$2740% 
1935$2939%Social Security
1936$3440%Tax hikes renewed depression
1937$3639%Third New Deal
1938$3742%Dust Bowl ended
1939$4051%Depression ended
1940$4349%FDR increased spending and raised taxes
1941$4944%U.S. entered WWII
1942$7248%Defense tripled
1943$13770% 
1944$20191%Bretton Woods
1945$259114%WWII ended
1946$269119%Truman’s 1st term budgets and recession
1947$258103%Cold War
1948$25292%Recession
1949$25393%Recession
1950$25786%Korean War boosted growth and debt
1951$25574% 
1952$25971% 
1953$26668%Recession when war ended
1954$27169%Eisenhower’s budgets and Recession
1955$27464% 
1956$27361% 
1957$27157%Recession
1958$27658%Eisenhower’s 2nd term and recession
1959$28555%Fed raised rates
1960$28654%Recession
1961$28952%Bay of Pigs
1962$29850%JFK budgets and Cuban missile crisis
1963$30648%U.S. aids Vietnam, JFK killed
1964$31246%LBJ’s budgets and war on poverty
1965$31743%U.S. entered Vietnam War
1966$32040% 
1967$32640% 
1968$34839% 
1969$35436%Nixon took office
1970$37135%Recession
1971$39835%Wage-price controls
1972$42734%Stagflation
1973$45833%Nixon ended gold standard and OPEC oil embargo
1974$47531%Watergate and budget process created
1975$53332%Vietnam War ended
1976$62033%Stagflation
1977$69934%Stagflation
1978$77233%Carter budgets and recession
1979$82732% 
1980$90832%Volcker raised fed rate to 20%
1981$99831%Reagan tax cut
1982$1,14234%Reagan increased spending
1983$1,37737%Jobless rate 10.8%
1984$1,57238%Increased defense spending
1985$1,82341% 
1986$2,12546%Reagan lowered taxes
1987$2,35048%Market crash
1988$2,60250%Fed raised rates
1989$2,85751%S&L Crisis
1990$3,23354%First Iraq War
1991$3,66558%Recession
1992$4,06561% 
1993$4,41163%Omnibus Budget Act
1994$4,69364%Clinton budgets
1995$4,97464% 
1996$5,22564%Welfare reform
1997$5,41363% 
1998$5,52660%LTCM crisis and recession
1999$5,65658%Glass-Steagall repealed
2000$5,67455%Budget surplus
2001$5,80755%9/11 attacks and EGTRRA
2002$6,22857%War on Terror
2003$6,78359%JGTRRA and Iraq War
2004$7,37960%Iraq War
2005$7,93361%Bankruptcy Act and Hurricane Katrina.
2006$8,50761%Bernanke chaired Fed
2007$9,00862%Bank crisis
2008$10,02568%Bank bailout and QE
2009$11,91082%Bailout cost $250B ARRA added $242B
2010$13,56290%ARRA added $400B, payroll tax holiday ended, Obama Tax cuts, ACA, Simpson-Bowles
2011$14,79095%Debt crisis, recession and tax cuts reduced revenue
2012$16,06699%Fiscal cliff
2013$16,73899%Sequester, government shutdown
2014$17,824101%QE ended, debt ceiling crisis
2015$18,151100%Oil prices fell
2016$19,573105%Brexit
2017$20,245104%Congress raised the debt ceiling
2018$21,516105%Trump tax cuts
2019$22,719107%Trade wars
2020$27,748129%COVID-19 and 2020 recession
2021$29,617124%COVID-19 and American Rescue Plan Act
2022$30,824123%Inflation Reduction Act and student loan forgiveness

As you can see the problem started in 1981 and we have not looked back.

National debt growth

National debt growth under every president from Richard Nixon to Joe Biden

See how much debt was racked up during each administration

By Breck Dumas FOX Business

The U.S. national debt surpassed $31 trillion this recently and will balloon further as federal government spending continues to accelerate along with interest paid on the balance.

American leaders have been on a spending binge for decades under both Democratic and Republican administrations, and not since Republican President Calvin Coolidge, who departed the White House in 1929, has an American president reduced the national debt over their tenure in office, according to an analysis by Sound Dollar.

Both the executive and legislative branches have a say in spending: The president submits a proposed budget each year to Congress, which ultimately holds the power of the purse.                                                                                                                         With that in mind, Sound Dollar adjusted the figures to account for the fact that in a president’s first year in office, they operate on a budget they inherited from their predecessor.

The national debt took a significant leap for the time under GOP President Richard Nixon, who racked up $121.3 billion — nearly three times the debt of Democratic President Lyndon B. Johnson — before resigning during his second term in 1974. A few years prior in 1971, Nixon famously took the U.S. off the gold standard.

Since that time, the debt has continued to surge.                                                                                                                                            Following Nixon, Republican Gerald Ford was able to tack another $223.8 billion onto the debt in only three years in office during a period of stagflation. Democrat Jimmy Carter added $299 million during his single term, marred by a recession.

Ronald Reagan was the first president to push debt accumulation into the trillions, contributing $1.86 trillion to what the U.S. owed during his terms from 1981 to 1989. The Republicans implemented tax cuts to pull the economy out of recession and boosted military spending during his time in office.

Fellow Republican George H.W. Bush nearly matched the amount of debt accumulated under Reagan but did so in a single term, adding another $1.4 trillion during his presidency due in part to U.S. involvement in the First Gulf War.

National debt growth slowed some after that during the two terms of Democratic President Bill Clinton, who famously worked with a GOP-controlled House of Representatives to balance the budget. But the debt still grew by $1.4 trillion by the time Clinton left office in 2001.                                                                                                                                                                                       Spending surged again, however, under GOP President George W. Bush when another $6.1 trillion was added to the debt from 2001-2009. Bush was president during the terrorist attacks on the U.S. on Sept. 11, 2001, which led to the U.S. war in Afghanistan that lasted 20 years. The U.S. also launched the Iraq War under Bush in 2003, and Congress famously passed a $700 billion bank bailout during his tenure in reaction to the financial crash of 2008.

After George W. Bush, Democratic President Barack Obama added another $8.34 trillion during his time in the White House from 2009 until 2017. During the Obama administration, Congress implemented some tax relief proposed by the president and also passed his signature “Obamacare” health insurance reform, the Affordable Care Act.

Republican President Donald Trump added nearly as much national debt during his four years in office as Obama did in eight, posting another $8.2 trillion. Trump vastly expanded the defense budget under his watch and cut taxes, but much of the debt incurred happened as a result of the COVID-19 pandemic in 2020 when Congress passed trillions in relief spending to combat the virus.

President Joe Biden also submitted a record military budget last year, and the Democrat-controlled Congress further passed his American Rescue Plan Act to provide additional pandemic relief. Less than two years into office, Biden has added $1.84 trillion to the national debt.

Who uses our Fuel?

In our country, the focus seems to be on reducing the use of petrol in passenger vehicles. While this segment represents a significant portion of our consumption at about 140 billion gallons per year, it does not represent the majority of usage. Our airline industry uses over 100 billion, Ocean freight over 100 billion and commercial land freight uses over 53 billion. While there are other usages these four represent the vast majority. While we are making significant progress with both EV technology and application we must recognize that we are only dealing with about a third of the issue.

The solutions for Ocean Freight seem to be “decarbonization”:  https://old.geodis.com/us/blog/air-ocean-transport/reducing-environmental-footprint-ocean-freight

The focus of the airlines seems to be on a sustainable fuel source that reduces fossil fuel consumption, but does little to deal with the carbon emission issue: https://www.4air.aero/saf-map?gclid=Cj0KCQiA3uGqBhDdARIsAFeJ5r2HXEbjZOdCiPRkTKaHeChZef0mvM0ZBgUoMMJQF4ZQu0EUkK_yRxAaAk8LEALw_wcB

Note: We export about ½ of the oil we produce. I’m depressed.