Here’s a remarkable picture I had never seen before, found at Josh Friess’s new blog and ultimately from Ed Hall. It’s a plot of the national debt versus time, adjusted for inflation.
The obvious here is so obvious that it’s almost physically painful: a long period of relative stability post-WWII, followed by a sudden period of rapid growth instituted by Reagan, which wasn’t halted until Clinton came to office, and was immediately resumed by his successor.
Whether or not a certain amount of debt is good for the economy is an interesting and complicated question. There are very good arguments, at the least, that you wouldn’t want to work your way all the way down to zero debt, as it would dramatically curtail our flexibility in dealing with the money supply. But the unavoidable fact is that eventually this debt is going to have to be repaid. When the tax-cutters talk about giving money back to people, they are lying. In truth they are continuing to spend the money, just on credit. If they really wanted to give the money back, they would cut government spending. But spending is fun, just like cutting taxes is fun, and it would take actual responsible grown-ups to resist either temptation.