Tuesday, October 23, 2007

More on U.S. Debt

In two previous blogs I have presented U.S. national debt data showing that it is high and growing relative to other countries. In The Growing Price of U.S. Debt, I estimated the debt at $67,000 per U.S. taxpayer, with the number about six times bigger if we add unreported U.S. liabilities. In The U.S. 10-Trillion-Dollar Debt Limit I noted that the debt limit has been raised an average of $500 billion per year since President George W. Bush came to office and noted that our state and local officials don't have the luxury of running deficits. NYC Mayor Bloomberg has assailed the continuing huge U.S. budget deficits as "lunacy" in a speech to British conservatives.

My concerns focus on the fact that the debt is (1) growing fast, (2) understated, because it does not include social insurance liabilities, and (3) leaves a legacy for our children of a burden of taxes (especially, as the U.S. tax system is now structured, payroll and income taxes) that will reduce their standard of living. The other concern I have is that continuing current-account deficits mean that the debt is being financed by overseas accumulations that could be de-accumulated under conditions that will tie the hands of the United States internationally.

Now I would like to add to the pile of evidence against current practice an interesting summary of the growth of the U.S. national debt since 1938 by Steve McGourty, who takes a partisan approach - he lays the blame for the bulk of the growth of the debt at the feet of tax-cutting Republican Presidents Reagan and George W. Bush. Actual reductions in the national debt occurred in the last 50 years only under under Presidents Kennedy and Clinton (adjusted for inflation). His charts are interesting. I would be interested in seeing (1) his numbers adjusted for inflation, (2) an addition for unfunded health and Social Security liabilities, and (3) a link between the current-account deficits and the budget deficits.