Thursday, September 10, 2009

Paper clips say it all

The downside to term limiting presidents is that they can arrange much of this to really hit us when they're safely out of office and completely unaccountable.

Debt is bad. It's that simple. Don't do it.

Hat tip:


Henry Cate said...

I am glad you enjoyed the video.

N.S. Allen said...

No. No, it is not that simple.

We ran ungodly deficits through WWII and came out of that war with a massive national debt - over 20% of our GDP at one point. That's significantly larger than the debt we face now, and it's almost certainly larger than the debt that we'll face under any or all of Obama's policies.

We also happened to survive that debt just fine and went on to enter a period of economic power and prosperity.

Debt by itself, debt that has no attendant benefits, is bad. That's certainly true, because debt is not a good in itself. But in quite a few cases the benefits of spending outweigh the risks of debt and deficits. WWII is an obvious example. Helping the economy out of a dramatic recession is another good one.

Long story short: Debt can, in cases, be bad. In other cases, it can be the best option available. And economics and public policy are always more complicated than YouTube videos and paperclips.

Henry Cate said...

True, debt by itself might be good. Many businesses borrow money to build plants and develop products which will generate revenue, and hopefully profit.

The Wikipedia article on United States public debt has a graph showing that public debt spiked at near 110% in 1945, but it then dropped down to about 40% in 1960, and maybe 5% in 1975. Then it has public debt slowly climbing to about 40% now. A table farther down in the article tracks gross debt with a similar pattern. One interesting line to me is "The debt is now projected to double under the Obama presidency to a level close to 97% of GDP."

One difference between today and WWII is that the debt from WWII was paid off. Today the Federal government keeps going farther and father in debt. Politicians today might claim all the debt is "invested" for the future, but very little is truly being used to increase our country's productive capacity.

My analysis is very little of the debt taken on by the Federal government really helps grow our economy.

One of the things I like about the YouTube paperclip video is it helps people understand the sheer magnitude of the debt. Very few people seem to understand the huge difference between saving 100 million dollars and going into debt for a trillion dollars. A video like this, while not perfect, does help put the debt in terms so that more people can have some sense of what is happening.

din819go said...

I was going to comment but found it to be a rant --- just suffice it to say == Nick - this is not WWII the federal spending did not put people back to work and create an the spending is doing the opposite and the process should have been allowed to unfold in 2001 when the economic downturn truly started...

Can anyone say gold standard?

Kay -- we miss your blog being active -- hope everything is okay ---

Kay Brooks said...

Thanks for your concern. Things are OK but we're experiencing what doing business on credit can do. It's one of the reasons I'm so concerned about what our unrestrained spending and borrowing will bring upon this nation and our children. It's got to stop.

I've created a new post with a few personal details: Personal Update