"Debt/GDP in the U.S. was 114% after WWI, declined steadily to under 30% by late 1970's. Starting with Reagan tax cuts in '81, it rose to between 45 and 50%."
The numbers depend on which measure of debt one uses. According to OECD
figures that use "general government gross public debt," the debt/GDP ratio
rose in the US from 37.0% in 1980 to 62.2% in 1995, an increase of 68%.
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Sure, but we were talking about sustainability and trends by period. From the former standpoint, it is the net debt which matters, not debt the Gov owes to itself. Most of the latter is Social Security Trust Fund assets, in which regard what matters is the expected pay out, for which real cash is required and Gov internal debt is not sufficient. Note that if Clinton did his funny-money act with the Trust Fund, gross debt would rise with no change in net debt and arguably, no change in anything else but the veracity of the Trust Fund balances.
>From the latter standpoint, whether
you use gross or net, you would still see a benign
decline from 1945 to 1980, then the run-up to the
present period.
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Max: "I'd say the rise in debt/GDP was narrowly political--the
determination of the Right to shrink government by sabotaging the revenue
system--as opposed to a figment of deep political-economy."
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This sounds plausible for the US, until you look at the rest of the
advanced countries. . . .
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Your response is well-taken, though the evidence of an explicit, base political intent behind the simultaneous tax cut and military build-up in the U.S. is pretty clear.
The interest rate/deflation point is interesting but squishy. Eisner pointed out that inflation devalues outstanding public debt and, on that account, ought to make pre-existing debt easier to carry. But how does that translate into a factor in pushing up debt/GDP? The new debt is less easy to carry if the real interest cost is higher. The inflation component shouldn't matter. Otherwise average growth in the 1980's is slightly better than the 1970's, though not as much better as supply-side propagandists make out.
My defensive, not well-informed reaction to the point about other countries is that their debt increases were due to monetary enslavement to the Bundesbank and aging populations putting more stress on their social insurance systems. But I'd welcome better explanations.
mbs