The other day I added a post that had errors in it—Part 2 of “Warren Buffett Fixes Congress!”. Part of the problem is that I was using an unposted draft written in response to an earlier “Buffett” email, and the data was old. But a more serious error is treating the gross national debt as just so many trillions of dollars. Today it’s maybe $16 trillion, a big scary figure, as deficit hawks and debt fanatics keep reminding us. But we can best make sense of the debt as a ratio, typically a percentage of the nation’s output, or GDP, because that tells us whether it is debt we can handle.
After all, that was Warren Buffett’s point about our post-WW2 debt, which was over 120% of GDP. Even that high, it was debt we could handle. We mostly grew our way out of it: a rising GDP pushed down the ratio of debt to GDP every year from 1946 to 1980, except when the debt bumped up a bit during and after recessions—which is part of the normal process of economic recovery (see revised Figure 2, below). By 1980, when Ronald Reagan was elected President, the debt had fallen to a low of 33% of GDP. Since then it has been continually on the rise except for Bill Clinton’s time in office.
In the original post there are two graphs (Figures 2 & 3) affected by errors, and I am going to fix them here. Figure 2 had an error in how the period of a president’s responsibility is measured. Correcting it produces a change that is subtle but important.
Here is how Figure 2 looked in the original post:
I had experimented with counting the year after a president leaves office as his responsibility. After all, when a president takes office his predecessor’s policies are still in force and still producing economic effects, which makes it unreasonable to hold a president entirely responsible for what he immediately inherits. So, I figured we could say his first year actually belongs to his predecessor.
(For an example of a lag in measuring a president’s responsibility that works, see an earlier post on presidents and job growth.)
But the national debt is reported in annual figures, and shifting a president’s responsibility forward a whole year, as the first Figure 2 did, seems excessive. So, here is a revised Figure 2, counting presidents as responsible only for the years they are in office, and using the latest revision of the data. I’ve also indicated recessions (grey columns).
If you look closely, you can see the shift going all the way back to Reagan. For instance, Obama’s first year now starts in a curve back down the line, pushing George W. Bush’s final year back to an almost horizontal segment.
This small revision causes a big change in my earlier comparison between Democrats and Republicans and the amount of added debt they are each responsible for. In the original post, I said the rise from 1980 to 2011 was 65%, with Republicans outscoring Democrats almost 2-to-1 (43 percentage points scored by Republicans, 22 by Democrats). That’s not true now. Instead, the rise in debt is 61%, with 31 percentage points scored by Republicans, 30 by Democrats—a virtual tie. Of course, this is an illusion because, in real life, presidents start out with an economic situation they had no hand in creating.
Still, the revised Figure 2 has something more to tell us. Nowhere is the slope of the line of historical debt growth so pronounced as it is in 2011, except during WW2. The urgent push to supply and carry out the war effort is funded almost entirely by deficit spending and, as a consequence, the national debt rises abruptly. After the 1980 low, the long rise of national debt is the result of deliberate policy choices to increase spending (e.g., expanded military spending under Reagan) while cutting taxes. In contrast, the two rapid surges of national debt under FDR and Obama are responses to emergencies—the first one responding to a financial crisis and depression followed by a world war, the second responding to another, almost equally damaging financial crisis.
The trouble with Figure 3, besides its use of old data, is that it measures the growth of national debt in a way that is inconsistent with the measure used to produce Figure 2, which is national debt as a percentage of GDP. The Office of Management and Budget (OMB) reported gross national debt for 2011 at $14.8 trillion. And GDP for 2011 was $15.1 trillion, which puts the debt at 94% of GDP, a high but not unmanageable level. At this writing, it’s clear that the recovery, though slower than we’d like, is taking hold. This year’s third-quarter GDP was $15.8 trillion after a recent upward revision, and so long as the economy is growing, the U.S. can manage its debt.
Here is the original Figure 3, showing the growth of national debt during presidential terms:
Figure 3 graphs the growth of debt as an absolute quantity unrelated to anything else, and that gives an inaccurate comparison of presidents and their responsibility for the economy. Rather than revise it, I am going to drop Figure 3 altogether and replace it with a new Figure 4:
Figure 4—not part of the original post—shows the growth of the ratio of debt as a percentage of GDP for each president’s time in office. Here we see something related to what we saw in the revised Figure 2. The rise of debt as a percentage of GDP under Obama is much faster than the rise under Reagan: 46% in three years vs. 52% in eight years. Aside from the fact that much of the debt during Obama’s term is a consequence of what came before, the swiftness of the rise is a sign of something the Republican right can’t acknowledge—that Obama’s debt is the nation’s response to an emergency, the financial crisis largely brought on by policies that the Republican right, and some right-thinking Democrats, clamored for.