Changes in Federal Debt, Annually, By President

To follow up the previous post, here's a nice list that I've reduced from a wikipedia table with figures about the rates of increased federal debt. But ha! There is one exception! The federal debt went down one (ONE!) time since 1993. This time, I'll add the growth in GDP right next to the growth of the debt, and put an asterisk * after the years spending increase percentages outstrip growth of GDP.

1994 Clinton 4.6% GDP: 3.8%
1995 Clinton 3.4% GDP: 2.7%
1996 Clinton 3.0% GDP: 2.7%
1997 Clinton 1.7% GDP: 4.3%
1998 Clinton 1.0% GDP: 4.4%
1999 Clinton 0.8% GDP: 4.2%
2000 Clinton -2.1% GDP: 3.7%
2001 Clinton 0.2% GDP: 1.2% *
2002 Bush 5.5% GDP: 1.3% *
2003 Bush 6.2% GDP: 1.4% *
2004 Bush 5.7% GDP: 3.4%
2005 Bush 3.7% GDP: 2.6% *
2006 Bush 3.4% GDP: 2.9% *
2007 Bush 3.6% GDP: 2.8%
2008 Bush 5.0% GDP: 0% *
2009 Bush 5.5% GDP: 2.6% *
2010 Obama 12.5% GDP: -2.0% *

Can't say that the magic formula is Democratic President, Republican Congress anymore!

After isolating, it's interesting to go back and lay these two side by side, as the original table does. What can be observed?

1. Government consistently grows in cost.
2. The debt consistently grows.
3. Only in one of the Clinton years, his last, did the spending increases outstrip growth of GDP. In 6 of the 8 Bush years it did. Also, in Obama's first year. Were the smart years the Clinton years, or the Bush years? Looks like we can learn something from this.

I see a lot of criticism tying the lack of revenues to the Bush tax cuts. Ok, but is the lack of GDP growth no factor? After all, tax revenues are relative to the growth of GDP. If a person enjoys a tax cut to 20% and makes $100,000/year, he pays $20,000, while the person suffering a higher tax rate of 25% while making $50,000/year pays $12,500.

Maybe we should worry far less about tax rates, and worry a whole lot more about seeing to it that people can make more income. Taxing millionaires might yield satisfying rhetoric, but will cause your income to rise? Will it put 20 people into jobs? I mean jobs that expand GDP by creating wealth.

If we're really interested first and foremost about raising revenues, shouldn't we be trying to do everything we can to get fuller employment, and for people to earn more? We have 2.8 million millionaires. Meanwhile, we have 14.1 million unemployed. Nevermind the underemployed, like me. I'd rather see us get the unemployed into jobs, and the underemployed more work.

So, if the smart days were the Clinton years, we should observe that there is no GDP growth, so we should accordingly spend less. I mean, if that was smart then.

Worried About China?

I'm not, even though it seems to be poised to surpass the USA in so many meaningful ways, with GDP being just one such. To me, the meteoric rise of the Chinese economy is an fine example of what even a little capitalism can do to raise the standard of living anywhere- even within a farily totalitarian regime.

It should be a stark lesson to us, and easy to see: More capitalism = more wealth. More government = less wealth.

There is an interesting Washington Post article today that gives many reasons not to worry about China, despite our huge trade deficit with that country. Here's one:

One important nuance we keep forgetting is the sheer size of China's population: about 1.3 billion, more than four times that of the United States. China should have a big economy. But on a per capita basis, the country isn't a dragon; it's a medium-size lizard, sitting in 109th place on the International Monetary Fund's World Economic Outlook Database, squarely between Swaziland and Morocco. China's economy is large, but its average living standard is low, and it will stay that way for a very long time, even assuming that the economy continues to grow at impressive rates.

Remember what kept that economy down- the Communist regimes, beginning with Mao, and to the present.

I don't like the conclusion in the quote, though. The USA was once in the position China was, relative to Britain, as an economic power. The US was the up and coming low-tech, cheap production underdog, while Britain was the high-tech economic ruler of the day. The British once scoffed at America's position in the world, confident it would never be surpassed. The USA kept producing cheaply and innovating, eventually becoming the high-tech producer of the world.

Why was Britain surpassed by the US? Two things. The UK became increasingly regulated, and Britain had a worldwide empire. "The sun never sets..." That took enormous effort to sustain, and proved unsustainable. The British choked off innovation in their industries, via regulation.

Here we are in the USA, repeating the mistakes of history. We hyper-regulate our industry, driving the business to other countries. We are trying to play the world's cop, intervening in affairs that don't affect us directly, paying for bases and operations in most of the world's nations.

The US built its wealth under relative 'isolation'. Notice that China, once greatly involved in funding revolutionary forces in SE Asia, now is relatively isolationist itself. How about that? Increase capitalism, reduce interventionism, and China begins to assert itself as a growing financial power.

China is hardly perfect, but in some important ways, they are going in the right direction, while here in the USA, in those same important ways, we are going in the wrong direction.