An Example of Poor Analytics - The Federal Debt
Mark Rapier CMAS, ALC
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Being a policy nerd, this article about the federal deficit caught my eye.
The article looked at the change in the federal debt for all presidents, beginning with Theodore Roosevelt.? It was no surprise that Woodrow Wilson and Franklin Roosevelt topped the rankings.? All they did was lead the nation during two World Wars.
In retrospect, this was a clickbait piece. ?It took less than a minute to look at the entire list. ?I later realized that the article missed the most important point. ?The size of the debt matters, but the debt to Gross Domestic Product matters more.? Using CoPilot, I created this table.?
A few things stood out to me in the table.
?? I would have expected that ratio to increase more under George W. Bush than it did, given the aftermath of 9/11 and the Afgan and Gulf wars.
?? I was surprised to see that the change under President Obama was as large as it was, given the health of the economy?at the end of his second term.? He did have to cope with the 2008 recession and the Agfan and Gulf wars.
?? The size of the increase under President Trump surprised me, given he only served one term.? Granted, COVID was part of the equation.
?? I was surprised to see the ratio fall under President Biden.? This means the economy grew faster than the debt.
The more important takeaways.
?? According to the Treasury Department, over the last 100 years, the debt grew from $394B to $35T.
?? Using the Minneapolis Fed's Inflation calculator, $394B in 1924 equals $7.2T today.
?? The St. Louis Fed says that a healthy ratio depends on several factors, and one size does not fit all.? They do not offer an opinion on the current level of debt.
?? The World Bank reports that the tipping point for sovereign debt is 77% of GDP.
?? Until President Obama, the US was well under the World Bank's tipping point.
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Neither party is talking about the federal debt in the current election cycle.? There are two main reasons for this.? They believe there is more important messaging.? Both candidates proposed policies that would increase the deficit.
The other reality is that politicians do not want to discuss what it will take to get us back to 70%. ?Accomplishing this will require two things. ?First, revenues must increase, and politicians hate to talk about?tax increases of any kind, especially ones of the size required. ?Second, spending must decrease. ?Every spending program benefits someone's constituents; no politician wants to explain why a program is going away.
In addition to this, the reality is?that solving the problem is a long-term activity, and politicians have little inclination to focus beyond the next election cycle.? After all, one of their main objectives is to get re-elected.
The result is that we are not getting the leadership we need from either party.
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Retired Sergeant Major (US Army) / Also retired from civil-service (having been assigned to MPD-DC,DOJ,FPS, DOD, and finally DHS)
3 周Regardless of political affiliation, all American citizens (voting public) should be greatly concerned about ever increasing debt and now the current administration plans to borrow nearly $1.4 trillion over six months, with $546 billion from October to December and $823 billion from January to March next year, reflecting rising debt and fiscal challenges. With the national debt nearing $36 trillion and interest payments consuming a growing share of federal revenues, economists warn the debt outlook remains uncertain, with no stabilization expected by 2029. No matter who wins the election; starting January 2025 the new administration must cut the Federal budget and cut more and more each year of their administration. Balance the budget before the end of their term. Shrink the size of government — institute an immediate Federal hiring freeze and eliminate the evergrowing number of servile flatters who work up at HQ within the beltway — just how many deputies, special assistants, program analysts, aides, drivers, associate directors, and/ or chiefs-of-staff do these political appointed agency Directors / leaders / Chiefs need? Congress needs to act now to halt the growth of the debt and power of unelected Admin State.
Enjoying life after a finance career
1 个月Well the Trump and Biden swings might likely be explained by Covid’s effect on GDP in Trum’s term — and question of why the eventual rebound in GDP during Biden term didn’t impact the ratio more.