The estimated Gross Domestic Product of America in 2010 – the total value of the economy – is $14.62 trillion dollars, with 94.3% – or roughly $13.8 trillion – as debt.
The current ‘debt ceiling’ is $14.294 trillion, which means that no more debt can be added thereafter without Congress raising the ceiling. And that ceiling is going to be reached quickly in the coming months sparking a debate about whether to raise the ceiling or hold firm against more debt.
That GDP in 1792 was $220 million and the debt was 35% of GDP (all figures from usgovernmentdebt.com) This debt came from the Revolutionary War.
In 1840 GDP was $1.56 billion and the debt was .23% of GDP
In 1890, GDP was $15.1 billion and debt was 10.3%. This came during a period of unprecedented industrial growth.
In 1913, when the federal income tax became law, GDP was $39.1 billion and debt was 7.46% And debt has climbed steadily since because the income tax gave the Congress fresh new flows of revenue which it has spent over and over and over.
In 1916, GDP was $49.6 billion and the debt was 7.28%
Under Treasure secretary Andrew Mellon, top tax rates were reduced substantially and GDP in ‘The Roaring 20s’ increased rapidly. By 1929, GDP was $103.6 billion and debt was 16.34%
By 1934 GDP had fallen to $66 billion(!) Imagine if the total wealth of America suddenly fell by 37% over the next few years. That is what the depression was like.
In 1945 and the end of World War II, GDP was $223 billion while debt was 116% of GDP. This spike in GDP was due to very high levels of military weapons spending spurring on the economy, while the debt was a result of the cost of World War II.
In 1960, at the height of the Cold War with still-heavy military expenditures – more than three times the rate of today – GDP was $526 billion and the national debt was 54.4% of that GDP.
In 1980, when Ronald Reagan was elected, the GDP was $2.79 trillion, and the debt was 32.6% of GDP. This came after Jimmy Carter substantially cut military expenditures during his tenure (1977-1981) leaving our military “hollowed out”.
In the last full year of Ronald Regan’s tenure in 1988, GDP was $5.1 trillion, and the debt was 51% of GDP. Notice that the GDP increased by a whopping 82% over just 8 years under Reagan who cut tax rates for top earners by 60%. This was unprecedented growth in American history and led to a rough doubling of revenues (100% increase) to the US Treasury, contrary to liberal economic dogma that tax cuts would reduce revenues.
Yet during Reagan’s presidency the debt increased substantially. Because Reagan spent a great deal on the military to defeat the Soviet Union – certainly the best-spent dollars in American history like the other wars – but the heavily-Democrat Congress went on a wild spree at the same time, after promising not to.
This is why Ronald Reagan has historically been accused by the left only for his deficits and debt but never for his really big accomplishments which were a booming economy, massive new revenues for the government and, most significantly the defeat of Soviet communism, the latter of which was utterly priceless and has led to substantially less need for military spending to this day.
In 1995 under Clinton, GDP was $7.4 trillion and debt was 67.1%
In 2001, GDP was $10.2 trillion and debt was 56.5%.
By 2005, under George Bush and Republicans in Congress, whom conservatives knew to be big-spenders, GDP was $12.64 trillion and debt had grown to 62.8%.
The numbers since 2007 have been: 2007 ($14.08 trillion, 64%), 2008 ($14.44 trillion, 69.15%) 2009 ($14.26 trillion, 83.3%) and 2010 $14.62 trillion, 94.3%). Notice how little GDP growth there has been over the last four years – hardly any – but how much the debt has increased (by almost 50%, mostly under Obama).
Now there is going to be a war in Congress about increasing the debt ceiling. The true Tea Partiers like Republican US senator-elect Rand Paul of Kentucky are going to say No, but the Establishment Republicans and all the Democrats are going to call to raise the ceiling. If the ceiling is not raised, spending must be leveled or cut, or taxes must be raised.
This current spending path is unsustainable. Taxpayers are tapped out. The previous Big Debt of World War II was eventually mitigated by rapid economic growth in the ensuing decades. Today’s economy no longer can sustain such debt levels. That is why the Democrats took such a drubbing in this election. The people understand that government is out of control.
In February 2010, the US House of Representatives increased the ceiling to the current level by a 217-212 vote, with all Republicans and 37 Democrats voting against it.
The US never has defaulted on its debt which it will do if spending surpasses the debt ceiling. Economists have argued that a default will destabilize global markets.
“It would mean essentially our government would become a business that can’t pay its bills, and eventually people would stop doing business with it,” said Phillip Swagel, a visiting professor at Georgetown University and a top Treasury official in the Bush 43 administration.
Yet that would be a good thing. The US today is like the guy who goes broke but keeps putting new charges on his credit card. It might be best for him to be exposed for who he is, just as our Democrats must be exposed for their decades of spending excess. Even the Euros are moving toward fiscal restraint and are criticizing Obama and the Democrats for spending.
During the Clinton administration failure to raise the debt ceiling led to a brief shutdown of the government. This remains an option. But the media have played that shutdown as a crime against the American people, while they never see debt the same way.
The recent election and our current economic crisis has certainly changed that picture, however. The money is no longer there. And the people will have to decide at the ballot box how to proceed. November 2 was just a start.
Please visit my website at www.nikitas3.com for more. You can read excerpts from my book, Right Is Right, which explains why only conservatism can maintain our freedom and prosperity.