Home > Uncategorized > The Story Of Spending

The Story Of Spending

I’ve posted this before, but I wanted to do so again.

Spending is a just as a big a problem in one party as it is with the other. Part of the reason, and you will find this if you actually look, is that democrats and republicans do not balance the budget on their own. It’s often said that democratic presidents have been better on the deficit and the debt then republican ones, it’s true, but not truthful, here’s why.

Democratic presidents like Clinton that have done well budget-wise, usually have at least a republican house of reps. I give credit 60% to that body and 40% to the president. So a more proper thing to say than democratic presidents are good on the debt is that a combo of a democratic president and a republican House are good on the debt.

Another thing that irritates me is people complaining about the size of the debt. It doesn’t matter people, learn some economics. the size is not very relevant, the growth rate and the future outlook on the growth rate are the things that matter. Currently, his holiness, the Obama and the right honorable Congress are running up a tab at the rate of 1.3 trillion a year.

When the debt grows faster than the economy, you have a problem.

When the debt grows faster then inflation, you have a problem.

The only time the size comes into play at all is if the amount of debt became such that paying the interest was not possible leading to default.

Just remember that if the debt grows slower than inflation, the debt is actually shrinking, not growing. Not that I am advocating for debt spending, I’m just telling it like it is.

Just to demonstrate what I mean by “the debt is actually shrinking”, take the debt we had in 1790 about 54 million dollars. Not a lot right? Inflation adjusted, that debt today would be around 4.1 trillion dollars. If you took a person making the median income for the state of Maine, about 45,000 a year, he would make about 4.5 million dollars over the course of their work life, 18-65, or 47 years. That means to pay off the debt from 1790 if we had added no more and paid only interest, we would need to confiscate the life time income of 12 such people to pay off the principle. (I made many assumptions and did a little static forecasting here, but it’s just to illustrate what I mean, not an independent point.)

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