The White House’s Office of Management and Budget Table 7.1 shows data on the National Debt going back to 1940. There’s gross debt, debt held by the public, debt held by Federal Government Accounts, and debt held by the Federal Reserve. And the data is provided in dollars and as a percentage of GDP. The size of the debt looks different depending on which measure one chooses.
So what is the most useful way to look at the size of debt? Well, on the one hand, you don’t want to count money owed from one branch of the Federal government to another, so debt held by the public makes more sense than gross debt. Furthermore, if the average person borrowed $1 million, they’d have some trouble paying it back, whereas Bill Gates would have no such issues. Therefore, debt as a percentage of income makes more sense than debt in dollars.
With all that said, here’s what Debt held by the Public as a percentage of GDP looks like, going back to 1940:
The graph indicates that debt exploded with the start of World War 2 – by 1946, the debt, at 109% of GDP, was almost two and a half times greater than it was in 1940. Presumably, a country fighting for its collective life could be excused in taking such a financial gamble.
After World War 2, the debt declined until 1974, bottoming out at just under 24% of GDP. Since then, its generally risen… quickly in some years, not so quickly in others. What’s the cause of this? No doubt there are many, but one cause is obvious, when you play with the data a wee bit. The graph below shows the Debt held by the Public as a percentage of GDP in the last full year of each Presidential administration, color coded by Political Party, following the end of World War 2:
And here is a slightly different look – the next graph shows the annualized percentage change in the Debt held by the Public as a percentage of GDP from the end of one administration to the end of the next:
Note… a negative decrease in the debt is, obviously, an increase in the debt.
The last five Democratic Presidents, Clinton, Carter, LBJ, JFK, and Truman all reduced the debt, and one has to go back sixty years to find a Democratic President who, facing the Great Depression and World War 2, allowed the debt to increase. On the other hand, the last four Republican Presidents, GW Bush, GHW Bush, Reagan, and Ford all oversaw an increase in the country’s indebtedness. It has been more than thirty years since a Republican President left office (albeit in a scandal) having reduced the National Debt. In the last few decades, somewhere along the way, the Republican Party has become the Party of fiscal irresponsibility.
It doesn’t have to be that way. Lord knows I’m no Republican, and it seems to me that many of what currently seem to be core Republican policies appear almost designed to increase the debt. Even so, there’s still something in the Republican DNA that believes fiscal responsibility is a good thing. All else being equal, Republican voters appear to prefer a lower debt over a higher one, and they seem to believe (even if that belief is mistaken) that they are more likely to get it from Republican politicians. President Bush himself, in the Economic Blueprint for his Presidency, promised to retire “an historic $2 trillion in debt over… 10 years.” His debt-fighting plan was so ambitious that he expected annual surpluses to “outstrip the amount of maturing debt starting in 2007.”
But as he said elsewhere in his Economic Blueprint,
Government must be results-oriented—guided not by process, but by performance. There comes a time when programs must be judged by how well they achieve their purpose. Where we find success, we should reward it, and make it the standard. Government action that fails in its purpose must be reformed or ended.
Its time to apply that standard to the policies that Republican politicians promise us will reduce the debt.