Robert Reich recently posted an article on Salon about why we should not worry about the US government debt, and why it should be even higher that it is now. Government spending, he says, got us out of the Great Depression, and it can get us out of the current recession. Reich’s dad though that it would take 60 years to pay of Roosevelt’s debt, and it only took 20, so why are we worried now? Here is a graph that illustrates Mr. Reich’s point:
As Reich claims, the debt was higher in the 40’s, as a percentage of GDP, and it was paid off ( to a pre-war level ) in about 20 years.
I’m still worried. We don’t know what the next 20 years will bring. If those years are as prosperous as 1945 to 1965, a larger debt, and associated spending, may be a net benefit to our economy, but there is a deeper problem. Here is a graph from the GAO report A Citizen’s Guide to the 2008 Financial Report of the U.S. Government that shows the sum of the US Government’s expenses, from 1970 to 2080:
That red bar is payments on the Government debt, and the black line is total revene, estimated to contine in the future at the historical 18% of GDP. Notice the expenses grow exponentially, and the revenues doesn’t change much at all. That situation is very bad.
The report says:
These large and growing deficits could increase Government debt levels as a percentage of GDP to unprecedented and unsustainable heights – from 170 percent by 2040 to over 600 percent by 2080 – far exceeding the historical high of 109 percent that occurred immediately following WWII and far exceeding the Government’s ability to fund program expenditures.
The problem isn’t just the payments on the debt, it is the debt plus all of the other mandatory government expenses. And, this report was written before the current health care debate, the resolution of which may increase mandatory expenditures even more. Our government has much higher expenses today than in 1945, and we can’t count on the next 20 years being as prosperous as the post war years.
The GAO offers a very direct instruction:
With respect to entitlement spending, the nation must change course before the deficit and debt reach unprecedented heights. The Government must act to bring social insurance expenses and resources in balance. Delays will increase the magnitude of the reforms needed and will place more of the burden on future generations.
Robert Reich’s dad was wrong about Roosevelt’s debt, and Reich is wrong about about today’s debt; it will be a burden to our grandchildren.