Bush Wasn’t So Bad

August/29/2011 16:32PM
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Many economists say the debt to GDP ratio is key to evaluating the state of the economy. Total debt meaning the debt sum of all Federal bills, notes and bonds. Publicly held debt is the sum of Treasury notes held by individuals, banks, and governments. Add to that the intragovernmental debt which is mostly the social security trust fund. Or, the money the government has stolen from our social security deposits to waste on such things as foreign aid to countries that hate us. Add this together to get total debt.

In 1970 the debt to GDP ratio was 39%. With Reagan at the helm it was in the 20% range after 1983. In grew to 58.15% in 1990. In the years 1998-2000 there were surpluses in the federal budget due to a Republican congress and Clinton acting like a Republican. In 2000, the ratio was 57.3%.

Along came the Bush tax cuts. If you listen between now and the 2012 election, you will hear the Democrats blame those for the current situation. But, here are the facts, when the tax cuts were all in place in 1993, federal revenues increased 44% in the next four years, unemployment fell to 4.25 and federal spending only went up 26.4%. In 2007, before the Pelosi Congress came in, the ratio was 64.8% Less than it was in 1994. When Bush left it was 67.7%.

Now come the Obama years. In Obama’s first year it grew to 84.4%. Last year it was 93.3%, and this year it will be above 100%.

Here’s how I look at this ratio. If you went to get a mortgage and your spending was 75% of your net income, you might get a small mortgage approved. Unless Barney Frank, Chris Dodd, or Dick Durbin was the banker. Then, you only need fog a mirror to get a mortgage, backed by your government, packaged by Goldman Sachs, and rated by Standard and Poor. But, to get a bigger mortgage, your ratio would need to be closer to 50%.

In the Bush years, pre Pelosi, we as a country were in pretty good shape. The tax cuts had driven us to reasonable unemployment and a decent ratio, despite two wars. When the Pelosi Congress came in they spent as if the GDP were growing at record rates. When the recession hit, Obama stepped up the spending while the revenue side kept going down, not because of tax cuts, but due to job losses and lower GDP growth. Obama has stepped up the spending more and it it weren’t for the Tea Party and the 2010 elections, he would have the ratio approaching 150%.

Main Street Americans have stepped up savings and paid down credit card debt. It’s time to take Main Street to Washington and do the same.

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