The Weekly Standard recently published a comparison between US deficit today and during WW II. Looking at tables of data supplied by the government, here is the relevant tidbit.
| Fiscal Year | 2005 $ | % GDP |
| 1943 | -531.7 | -30.3 |
| 1944 | -501.1 | -22.7 |
| 1945 | -525.4 | -21.5 |
| 2009 | -1,274.4 | -10.1 |
| 2010 | -1,153.0 | -9.0 |
| 2011 | -1,127.6 | -8.7 |
It looks like the data goes both ways. In real dollars, we're borrowing more, but in terms of GDP we're borrowing less. I say "it looks like" because when you think about it, the data really doesn't go both ways.
First, it tells you that we are a much wealthier country. Wealthier by a factor of 6, in fact. Comparing '43 with '09, the deficit is twice as high, yet only 1/3 the portion of GDP.
Second, we're not fighting a war, we're paying bills. A case could be made for the deficit in '09 being caused by a banking collapse, but after that, it's just making payroll. Payroll is anyone getting a check from the government, working or not and that's the vast majority of the money we spend. Borrowing to make payroll is usually a very, very bad sign.
At first glance, this suggests that we are completely out of control as a society. The people of a wealthier country should require less government assistance and a nation at peace should not have to borrow money to make payroll.
I'm open to other interpretations.
More on that here.
ReplyDeleteIn short, we got out of that by immediately running balanced budgets plus a big helping of inflation (debt devaluation).
Well, the odds of anything close to a balanced budget are zero, so we'll probably need even more dollar devaluation this time.
Except we have been fighting two wars. and some sort of ill defined action. Or have you forgotten.
ReplyDeleteIraq and Afghanistan aren't exactly Europe and the Pacific. Iraq in particular has wound down to almost nothing, yet the deficit is still high.
ReplyDelete