Suggestion for Cool YouTube on Federal Debt
Darren C. sent me this neat website where you can graph the US federal debt going way back to 1791. I was playing with it and came up with (what I think would be) a really cool 3-minute YouTube. But to see my vision, you have to do the following on the site:
* First set the range from 1791 to 1816. You can see how the War of 1812 saw a big runup in the debt.
* Then do 1816 to 1866. You can see how on this scale, the Civil War (or War of Northern Aggression, etc.) blows the previous history out of the water.
* Then do 1866 to 1919. You can see that on this scale, it looks like nothing is happening until BOOM, World War I makes the debt explode.
* Then do 1919 to 1946. Same story: World War II is now the only thing going on.
* Do 1946 to 1980. It’s not as intense, but it looks like going off the gold standard is as significant as a major war in terms of adding to the debt.
* Finally, do 1970 [sic] to the present, to see just how much debt the Reagan, G.W. Bush, and Obama administrations are racking up. They dwarfed what happened in the 1970s.
So my vision is a YouTube that starts following the timeline, while the arrow of the debt moves along. At each major event, the narrator (either spoken or in text) explains what it was. The camera keeps pulling back or something, so that you can see how what was a huge jump in the beginning (from pre-Civil War debt to post-Civil War debt e.g.) is nothing when you go from pre-World War I debt to post-World War I debt etc.
The effect you want to give you the viewer is similar to what happens in those “scale” videos where you zoom out and see how many Earths fit in Jupiter, how many Jupiters fit in the sun, how many suns fit in Betelguese etc.
So if someone wants to make that video–maybe title it “War & Fiat Money–Expensive Disasters” or something–I think it could be really cool.
The graph only shows the absolute national debt in dollar which is meaningless. Even if you had a completely stable debt situation of let’s say 10% in an economy an exponentially rising graph like the 1960-2010 is exactly what you would expect, since the economy grows exponentially.
You will see the same effect on graphs for investment, savings and any other economic benchmarks if you use abolute numbers.
On the contrary, If you used a genuine approach you’d see that unlike wars leaving the gold standard didn’t have any significant effects on the national debt situation at all.
If you want to critizise deficit spending I’d find it more convincing if you did it without manipulating your audience. If you make videos like that I am afraid you might just come across as some kind of right-wing Micheal Moore.
I like your work, so I’d find it disappointing if you’d sacrifice your credibility for things like this.
The economy wasn’t growing exponentially since 1791? The economy can only grow when we have fiat money?
I understand what you are saying, but my point still holds: The debt–in absolute dollars–jumps up like 5 times in US history, the first four because of major wars.
“The economy wasn’t growing exponentially since 1791?”
Was it? I don’t know. But I doubt they had a stable debt level all the time. As far as I know, they actually paid off debt sometimes.
“The economy can only grow when we have fiat money?”
Who said that?
“The debt–in absolute dollars–jumps up like 5 times in US history”
Aren’t the Austrians always saying that absolute numbers don’t matter? That rising nominal asset prices aren’t real wealth? Now, all of a sudden, when it comes to debt it’s fine to use them?
That seems like someone who is changing the test criteria according to his prefered outcome.
Even if you had a completely stable debt situation of let’s say 10% in an economy an exponentially rising graph like the 1960-2010 is exactly what you would expect, since the economy grows exponentially.
By “the economy grows”, do you mean real productivity, or do you mean dollar spending?
How much debt could the government have accumulated if they were limited by a 100% reserve gold standard? The war of 1812, the civil war, WW1, and WW2 were all financed by banks abandoning a 100% reserve gold standard and inflating paper currency beyond the supply of specie. This is why there were bank panics in 1819, 1873, 1920, and 1929.
A constant debt of 10% would not generate an exponential absolute growth unless the money supply and thus spending grew exponentially. But spending growth does not imply that the economy is growing. It just means there is more money sloshing around the economy. Most importantly, the major reason why the debt could keep accelerating from 1970-2010 is because the government no longer became constrained by gold in any sense, not even remitting gold bullion to foreign central banks. So the exponential nominal rise in debt 1960-2010 is not something to simply wave off.
“By “the economy grows”, do you mean real productivity, or do you mean dollar spending?”
Probably both. Eitherway, taking absolute numbers is like saying a Japanese guy with Y500,000 debt is worse off that an American with $50,000 debt. If you look at the real value represented by the absolute numbers, you’ll see that going off the gold standard didn’t have a significant effect on the public debt situation. It might have had a significant effect on inflation, but that’s another question.
“How much debt could the government have accumulated if they were limited by a 100% reserve gold standard?”
Infinite. All the future promisses with medi-care and social security wouldn’t have been avoided by a gold standard. If any, it would have restrained the ability of American citizens to buy bonds. But it wouldn’t have stopped the government making promisses for the future and borrowing money from abroad.
Christopher said: “since the economy grows exponentially”.
Yes, but only in terms of dollars, not adjusted for inflation.
But you’re right. It would make more sense to compare debt as % of GDP.
“Yes, but only in terms of dollars, not adjusted for inflation.”
So adjust these absolute debt numbers for inflation and see what happens.
I.O.U.S.A kind of did this. Watch this clip starting at 2:00.
http://www.youtube.com/watch?v=lcb0hMPG5S0
Yeah that’s pretty good.
Based on the I.O.U.S.A. clip, it seems like the real culprit is supply side economics, not going off the gold standard (it is of course possible that supply side policies would not have been viable if we’d still been on gold).
We went off the classical gold standard starting in WWI and never returned to it. We didn’t really go off the gold standard in 1971. We merely finished the transition to a world fiat standard. Though I do agree that under Reagan the debt levels started to get out of control. But it wouldn’t have been possible to run up all this debt under a classical gold standard.
No, that doesn’t follow.
Increased productivity generates higher standards of living, and increased real demand can only be borne out of increased supply. This is true supply side economics. These facts are not refuted by government in the 1980s borrowing and spending ever larger sums of money.
Besides, the “gold standard” up to 1971 was not even a real gold standard. Austrians predicted it would fail.
Increased productivity generates higher standards of living, and increased real demand can only be borne out of increased supply. This is true supply side economics.
When I refer to “supply side economics” I am talking about the idea (advocated by folks like Laffer, Kemp, Reagan, etc.) that you could increase tax revenues by cutting tax rates. I believe this is the standard usage.
Besides, the “gold standard” up to 1971 was not even a real gold standard.
This is true, but not relevant to Bob’s point.
Did you guys actually do what I suggested in the post? The debt figures don’t look like what I would have predicted. I would have thought they grew more or less exponentially, but they don’t. Just keep the starting point at 1791, and then run through the ending point being 1816, 1866, 1919, and 1946. It’s really amazing in my opinion.
And the thing about supply-side economics is bogus. Tax receipts almost doubled during the 1980s. So Reagan was a hypocrite, sellout etc. but because he let spending explode.
Bob,
You’re right that debt doesn’t grow steadily. There are big jumps periodically, after which the debt either falls or levels off in nominal terms. You’re also right that most of the jumps are associated with wars, but the last one is not. The only place I would differ with you is in identifying the last jump as starting in 1971 rather than 1981.
And the thing about supply-side economics is bogus. Tax receipts almost doubled during the 1980s.
Tax receipts almost doubled during the Carter administration too, and that was during a four year period, as opposed to an eight year period under Reagan (if you adjust for inflation the tax receipts went up by about the same amount under Reagan as under Carter, which since Reagan started from a larger base means that it went up more in percentage terms during the four Carter years than during the eight Reagan years).
Also, if you look at the charts on pages 27 & 28 of the Liberty Magazine issue you linked to in your “Paging Bill Woolsey” post above, you’ll see that spending increases under Reagan were not out of keeping with what had occurred under recent presidents (Reagan’s increase in gov spending per capita was about the same as Nixon and Carter and less than Kennedy and Johnson). The problem wasn’t that spending per person started growing faster under Reagan; it’s that taxes per person didn’t grow as fast as they had before (that is, this is why deficits increased; people vary as to whether this is actually a problem, but the supply siders did argue that cutting rates was a means of increasing taxes per person).
check out this % of GDP from the IMF
http://www.imf.org/external/datamapper/index.php?db=DEBT