From: baldwin@csservera.scs.usna.navy.mil (J.D. Baldwin)
Newsgroups: alt.politics.bush
Subject: Re: How bad is the deficit/debt? (was Re: The essence of Clinton)
Date: 8 Oct 92 19:12:11 GMT
Organization: Comp. Sci. Dep't., U.S. Naval Academy, Annapolis, MD
In-reply-to: howard@netcom.com's message of 07 Oct 92 15:17:24 -0400

Howard Berkey (howard@netcom.com) writes, in response to me:
>However, since the debt (total, not yearly deficit) is money borrowed
>for a wide variety of services, it IS fair to compare the debt today
>against the debt in 1979 as long as inflation is taken into account.

It most certainly is fairer than your original formulation, but still
not as "fair" (subjectively, anyway) as comparing it as % of GDP.
Again, I don't have the figures handy.  I wish I did, and I hope
someone will supply them.

>Inflation (in general) has not totalled 400% since 1980.

No, but neither has it totaled 0%.  Your $4T : $1T debt figure made it
look like the debt had increased fourfold, which it has, in nominal
terms.  The substance of my objection aside from the debt/deficit
confusion was that this isn't really fair or particularly useful (and
you seem to admit this).  I don't mind your doing this nearly as much
as I mind Ross Perot's doing it.

The problem is, actually, much more complex even than this (as I,
coincidentally, read in a column by Hobart Rowen this morning which
quoted the economist Robert Eisner on the subject):

      (1) First, there is the issue of debt as % of GDP.  Some
          (Keynesians, I'll bet) believe that a ratio of 1 to 2
          (that's debt/GDP == 1 or 2) is "optimal," whatever that 
          means.  Certainly, it matters what the ratio is.

      (2) Next, it matters very much what that borrowed money is
          *spent* on (this hadn't occurred to me before reading
          the article this morning, so I guess I'm not as smart
          as I thought).  To simplify, a company that borrows money
          to meet a payroll is in debt with "nothing to show" for
          it.  A company that borrows money to build a building is
          still in debt, but has something in the "assets" column
          to show for it.  It's the same way with the gov't.  As
          much as I hate to admit it, *some* government spending
          puts things in our national "assets" column.  Any spending
          which would not take place if a balanced budget were a
          requirement *might* 

      (3) Finally, the ways in which deficit spending affects
          savings and investment in the economy are technical and
          cause the MEGO syndrome in me ("My Eyes Glaze Over"),
          but I am under the impression that they aren't all bad.

(The article, on the Op-Ed page of today's Washington "Post," is
entitled, "Growth and the Myth of the Deficit."  Rowen seems to
present Eisner's thesis fairly and clearly and then misunderstands it
completely in his final paragraph.)

Howard continues, quoting me:
>>I consider the deficit/debt problem to be a major national issue and 
>>regard a balanced budget as a highly desirable goal, but I am also 
>>capable of putting things into perspective.  
>
>FYI: The last balanced budget was under Pres. Johnson.  The next 
>closest was Pres. Carter.  

Oh, I know.  But "the next closest" could mean anything.  This was
also before Carter inflicted 14% [??] inflation on us.  It would be
ironic if the disastrous economic policies that resulted in such
massive inflation and interest rates actually made him look good in
retrospect because his deficit numbers look artificially low in
comparison to succeeding years.  Again, I don't have the figures.  I
*do* know that deficits balooned seriously under Jimmy "a balanced
budget by 1980--and you can count on it!" Carter and were a fairly
major issue in the 1980 election (yes, yes, the irony is harsh,
considering who won that election and his deficit record).  This was
mostly a result of his huge federal programs, which didn't kick in to
the deficit figures until the later years of his term.  Examples:
Dep't of Education ("Is there one person out there who thinks
education has improved in this country since it was founded?" --Bruce
Herschensohn), Dep't of Energy (how much oil has it produced?),
Synfuels Corporation (mercifully cancelled, but not before wasting
$<n>G), etc.

And how come you never see things like comparisons of today's nominal
"peacetime" defense budget to the nominal "wartime" defense budgets
from WW II?  Why is the one form of flim-flammery so much more obvious
than the other when they are two forms of the same thing?  Just a
rhetorical question (I don't know the answer).

>>Now, the *service* on the national debt as % of GDP is a genuinely 
>>alarming number.  
> 
>Definantly.  Every dime of the fed. taxes collected in 1990 from the 
>period representing January to April 19 went to paying the INTEREST on 
>the debt.  That's 30% of our tax money.  

This is not a flame (I promise), but you really must try to speak more
clearly on this subject.  What does "30% of our tax money" mean?  Is
it 30% of federal revenues?  (I think *not*!  That would be about
$300G right there.)  Is it 30% of federal non-FICA tax revenues?
(Nope.  Still way big.)  Is it, maybe, 30% of all *personal income
tax* revenues?  (That sounds much more reasonable.)  These are all
very different numbers.  Seeing as personal income tax accounts for
only 37% of federal revenues (even, unfairly, excluding Social
Security stuff), using last year as a guide, the more important
measure--still not the whole story, as SS is excluded--is that .30 *
.37 == 11% of our federal revenues go to service the debt.  Not so
horrible (though the *trend* doesn't bode well).

Just incidentally, do you know how far back you have to look to find a
federal government 37% smaller?  1987, that's how far.  Makes one
think.

>Another way to look at it: 
>1990 TOTAL SPENDING on public education: $199 billion 
>1990 TOTAL INTEREST on the national debt: $184 billion

Mmmph.  Repeat sentence #1 of my previous paragraph.  Is this spending
at all levels?  Then it's apples and oranges.  What was the federal
figure for the equivalent period?  Also, what proportion of the
education spending was financed by deficit spending?  That's not
really a fair question, or even answerable in any meaningful way
(because it assumes that all spending is equally "responsible" for the
deficit total), but it still makes an important point.

And then there are those of us just recalcitrant enough to believe
that maybe, just maybe, a dollar spent on servicing the debt that gets
*taken away* from the federal Department of Education is a *help* to
education in the U.S. and not a hindrance.
--
 From the catapult of:              |+| "If anyone disagrees with anything I
   _,_  J. D. Baldwin, Comp Sci Dept|+| say, I am quite prepared not only to
 _|70|___:::)=}-  U.S. Naval Academy|+| retract it, but also to deny under
 \      /   baldwin@usna.navy.mil   |+| oath that I ever said it." --T. Lehrer
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