National Debt as a Percent of National Income

This graph shows that $9.2 Trillion of the $12 Trillion supply-sider increase in national debt is considered problematic by economists. They say it is fine to increase the debt in step with national income. Republicans say the whole $12 Trillion is a problem.

The green line shows what would have happened if Reagan and the Bushes had just kept the debt growing at the same rate as the economy. That would make their parts flat. Many conservatives claim Congress increased Reagan's budgets, but this is not the case as you can see documented here.

WWII caused the debt to shoot up, starting in 1942, and reach 30% higher relative to the country's wealth than it is today. The economic stimulus of that government spending pulled us out of the great depression and into high gear to win the war.



The green line in the graph shows what would have happened if Reagan had proposed budgets that let the debt increase in step with inflation and the economy—if he had kept it at a constant fraction of GDP. That's not much to ask of a president who said he'd do far better than those before him, since every previous post-war president had actually reduced the debt as a fraction of GDP.

By the end of the Reagan-Bush 12-year "revolution," the extra debt they had piled on the country was costing the country an extra 2.6% of GDP in interest—$300 million a day. Without that interest working against him, Clinton would have paid down the debt a bit faster. That helps the green-line goes down in the Clinton years. That's what would have happened without the Reagan-Bush interest burden.

Now if W. Bush had held the line as all non-supply side presidents had done, the national debt would have been only 21% of GDP, and the country would have been ready to pull itself out of the Great Recession with ease. In fact when W. Bush's last budget year ended we would have had $9 Trillion less in debt.

So how did Reagan, the great debt-slasher, go so far wrong? Partly it was his belief in supply-side "economics." This "theory" claims that when the government cuts taxes, especially taxes on corporations and the rich, it makes them so happy to keep more of their money that they work much harder, get richer, and pay even more taxes than before the tax cut. So the lower the tax rate, the more money the government collects to pay down the debt! Believe that happy talk, and you can run up quite debt.

Of course the rich loved this "theory" and fed the press many stories about the wonders of the new supply-side "economics" (cooked up by Laffer, as a graduate student). Money talks, and a lot of people listened. It's time to rethink what radical conservatives have done and are doing to our country. The Reagan-Bushes National Debt now totals $9.2 trillion. That's the lions share of our present debt.

source:
zFacts.com
http://zfacts.com/p/461.html