Rambling on The Great Depression

Jan Raymond (NajD) wrote:
Chris Berg - I would be cautious about being proud of being an ideologue. Ideologues ignore facts over logic. Fact - In the last 100 years Republicans have always championed low taxes, less regulation and smaller government. Only twice have they managed to grab control of both houses of Congress and the Presidency and had the opportunity to act on their beliefs, from 1921 to 1932 and from 2000 to 2006. Both times during their period of control we blew up big investment bubbles that popped and by the time the Republicans were going out of power we were in the midst of, respectively, the great depression and the great recession.
Fact - On the budget deficit since WW II the budget deficit grew about 16% when Republicans were President and about 8% when a Democrat was President. The biggest jumps in the deficit were a direct cause of policies enacted during Ronald Reagan's Presidency and George W's Presidency.
A particular Ideology may be emotionally appealing, but if you want to produce good policies, facts matter."

Comment on "W.Va. Democrat Wins"

The commentor Chris Berg, to whom Jan was replying, requested numbers... so I got some.

The amount of the INCREASE in the National Debt during each presidential term.

• Ronald Reagan’s First Term – $656 billion increase 
• Ronald Reagan’s Second Term – $1.036 trillion increase 
• George H.W. Bush’s Term – $1.587 trillion increase 
• Bill Clinton’s First Term – $1.122 trillion increase 
• Bill Clinton’s Second Term – $418 billion increase 
• George W. Bush’s First Term – $1.885 trillion increase 
• George W. Bush’s Second Term – $3.014 trillion increase 
• Barack Obama’s First “Year" – $1.573 trillion increase

(From http://thenationaldebtcrisis.com/the-national-debt-by-president)

Percentage increase in debt to GDP :  

• Ronald Reagan 1st term +11.3% 
• George H. W. Bush 1st term +13.0% 
• Bill Clinton 2nd term -9.0% 
• George W. Bush 1st term +7.1% 
• George W. Bush 2nd term +20.7% 
• Barack Obama 1st year +9% (trying to fix the disaster of the past 8 years) 

(from http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms)

 Lets look at a picture based on the data from bea.gov

(from http://www.visualeconomics.com/presidential-spending-expenditures-by-year/ )

The dark colors are the Gross Domestic Product of the United States, the lighter colors are the Expenditures (spending) of the government.  The Visual Economics site is an interesting place to spend lots of time looking at pictures.

I found this great write-up about what happened and what works with the Economy, Debt, Spending and Tax Cuts - What They Never Tell You.

I found a statement on the Great Depression that I feel has correlation to the ongoing Great Recession :

The  case that the New Deal exerted a damping effect on recovery through distorting prices and wages seems to be undermined significantly when we consider the international comparisons picture <snip> for no nation recovered significantly faster than the United States, regardless of whether they pursued New Deal like policies (as few did). If we take out the kink of the 1937-1938 recession on the grounds that one way or another it represented the results of a policy mistake not intrinsic to the New Deal per se then the United States becomes the indisputable champion of recovery. (see http://www.analysis.williamdoneil.com/Depression_Facts.pdf)

It is interesting to note that the 1937-38 recession was just after the 'deficit hawks' convinced Roosevelt to cut spending drastically.  The recession ended and recovery picked back up when Spending increased once again.

The Daily Markets website has an interesting article comparing The Great Recession to The Great Depression.  It is a chart they have on that article that I am interested in dissecting.

So, The Great Depression hit in 1929 and you can see the skyrocketing debt to GDP ratio as Roosevelt spent our way out of it - including the final push up and out of the Depression - World War II.  Then a sharp decline as we paid it off - and more - all the way back to around 1890's level by 1955 or so.  Our debt climbed slowly back until 1981 when it began to increase drastically.  So, what happened in 1981 - Reagan and his Supply-Side, Voodoo, Reaganomics : "Cut taxes, Deregulate and Deficits don't matter."

One major difference between The Great Depression and now is that we hit the levels of Depression Debt back in 2003 - 5 years before the Recession officially hit - thanks to Reagan and the Bushes.  Most of the current debt (42.7%) thanks to G.W. Bush.  Note that the above graph only goes to the end of the last Bush  budget year - the third quarter of 2009. ( Yes, up to Q3 of 2009 it was Bush's Budget - just like Bush presided over three quarters that were a Clinton Budget. Which is why a 'fiscal year' is different than a 'calendar year' )

History shows that we will have to greatly increase the spending and the debt to get out of this mess, but that the recovery will allow us to pay down most of it rather quickly after recovery.  I can only hope that we take our history lesson and move away from Voodoo Economics that the GOP drool over getting a chance to implement.

Also worth a read is Peak Debt, from a U.K. blogger about the U.S. Debt from back in 2006.

... okay, going to stop rambling now...  Republicans BAD! Reaganomics Very Bad! Democrats only less bad....