A recurrent theme in US politics is that Democrats overspend and that Republicans are more careful with the nation’s finances. Every time the US has an election, the Republican right tends to call the Democratic left “Tax and Spend Liberals”, and make all sorts of charges that the election of Democrats will inevitably doom the country to huge deficits. These charges have been made so many times that most Americans inevitably take this notion as established fact. To verify if the charge is realistic, a close look at the statistics behind the US national debt is most informative.

Have a look at the graph shown below, for it tells us many things about long term trends in the US national debt.

The most striking thing about this graph is in the overall trends. Looking at the 70 year period shown in the graph, a few things stand out: 1) the national debt spiked upwards very quickly during the 1940s due to the staggering costs of WWII. 2) Debt as a Percent of GDP (DPGDP) then declined for the next four decades, from Truman in the late 40s and early 50s till the end of Jimmy Carter’s time in office in 1980. 3) DPGDP then skyrocketed during the Ronald Reagan and George Bush Sr administrations. 4) DPGDP declined again during Bill Clinton’s time in office. 5) DPGDP then rose substantially again during George W. Bush’s administration in the early to late 2000s. 6) From George W. Bush’s years of elevated debt, DPGDP has increased again during the first year of President Obama’s administration.

Remember when looking at these numbers that an increase in DPGDP is bad and a decrease in DPDGP is good. That assertion rests on the assumption that running more balanced budgets is a good thing and running more imbalanced budgets is a bad thing.

So by looking at this graph, can we conclude that Democrats generally increase the National Debt and Republicans generally decrease it? Actually, by looking at the data, we can easily conclude the opposite, that in the 70 year period shown, that Democrats have more often reduced DPGDP (Debt as a Percentage of GDP), and Republicans have more often increased it. The largest increase of DPGDP in this period was during Ronald Reagan’s administration. This is highly ironic when one considers the God-like awe that many Republicans show toward the memory of Ronald Reagan. Reagan is often held out as an example of “The Ideal Conservative” and yet he actually initiated the largest increase in the National Debt in the last 70 years.

Shown below is a table showing the change in National Debt during these various administrations.

Administration                   Change in GPGDP                Verdict

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R-Eisenhower                         – 16.2%                                 Outstanding

D-Kennedy/Johnson             – 16.5%                                  Outstanding

R-Nixon/Ford                         -  2.8%                                    Adequate

D-Carter                                   -  3.2%                                    One term only

R-Reagan                                + 20.5%                                   Terrible

R-Bush Sr.                              + 13.1%                                    Terrible

D-Clinton                                -  8.8%                                      Very Good

R-Bush Jr.                              + 12.4%                                    Terrible

Data from WhiteHouse.gov

Another standard charge the Republicans have made toward Democrats is  to call them”Tax and Spend Liberals”. Looking again at these figures, another thing that stands out is that the Republicans rather than being the opposite of Tax and Spend only take the opposite of one of those tactics. It is true that the Republicans have generally taxed less, however they kept on spending, albeit often on different priorities. Ronald Reagan enacted several large tax cuts which were cheered by the Republican base. However, his administration also engaged in a massive increase in military spending. So what happened was that he spent without taxing, thus leading to the huge deficits and massive increase in Debt as  Percent of GDP that happened under his watch. If a government taxes adequately to match its spending, it can maintain balanced budgets while still increasing government spending. If a government spends heavily without corresponding taxation to cover the spending, it will accumulate large deficits, as was done during the Reagan, Bush Sr. and Bush Jr. administrations.

Again looking at the past 70 years, DPGDP declined during all four Democratic administrations. Looking at the Republicans, DPGDP actually increased during 3 of 5 Republican administrations. Again the irony is overwhelming given the way the Republicans like to taunt the Democrats on the issue of the National Debt.

And now we come to the Obama administration. Obviously we are early yet in assessing how this particular administration will do in terms of managing the level of the National Debt. So far, the numbers are in fact not encouraging. The annual deficit has shot up sharply during the first year of the Obama administration. One could argue however, that the economic situation facing the nation was indeed dire when Obama took office and the unprecedented Credit Crisis and implosion of the banking sector (which began during the late days of Bush Jr.) necessitated large amounts of government stimulus to right the economy. It is still relatively early days for Obama, but clearly the current level of elevated spending is unsustainable. Will it succeed in stabilizing the economy and preventing a further downward spiral? Only time will tell.

I am generally of the belief that governments as well as people should live within their means. That means running balanced budgets or ideally surpluses. The last US president to run surpluses was Bill Clinton. When a government runs a deficit, it has only three choices in order to balance the books. It can 1) reduce spending 2) increase taxation or 3) some combination of  1 and 2. Will Obama become the first Democrat in 70 years to actually increase the Debt as a Percentage of GDP? Or will he find some combination of reduced spending and increased taxation that can eliminate the annual deficit and balance the books. As much as I find Obama to be inspiring in many ways, on the financial side, things are less encouraging and so far he appears headed in a negative direction. Hopefully, over the full course of his administration, Obama will be able to find the political courage to halt the disturbing slide toward higher levels of debt. One can only hope this will be the case.

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