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Friday, July 14, 2006
The National Debt, Pt. 1: A Very Brief History
A reader writes:
Isn't the national debt a better picture of our fiscal condition?
Where's the good news? Doesn't the administration simply have more payroll tax money, etc., to mask the debt situation?
Excellent questions indeed and an excellent prompt to talk about the national debt. But, the discussion is a bit lengthy for a single post, so I’m going to start a series of posts about the national debt.
There’s been a lot of talk about the deficit lately (it’s getting smaller, tax cuts don’t pay for themselves, etc.), but absent from the discussion is the national debt. However, implicit in discussions about the deficit is the concern that deficits grow the national debt. So, let’s talk about the debt.
When President Bush took office in 2001 the national debt was $5.8 trillion, at the end of this fiscal year (September 30), that number will be $8.5 trillion. Since taking the helm of the nation’s finances, Mr. Bush increased total debt by 47%. President Clinton, on the other hand, presided over a 26% increase in total federal debt ($4.4 — $5.6 trillion). President Reagan increased nominal national debt by 113%.
(click on image to enlarge)
But these numbers are somewhat misleading because they do not account for inflation. A more helpful way to understand national debt is to measure it in context of the size of the overall economy. Measured in these terms, Mr. Bush has increased national debt from 57.4% of GDP to 63.7% (projected). That’s an 11% increase. President Clinton’s are significantly better. Under Mr. Clinton, the national debt actually shrank - from 66.2% of GDP to 58%.
(click on image to enlarge)
Next: Why the national debt matters
Posted by Craig Jennings
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