(Readers: Please note this blog is constructed as a story about the 5th revolution in the US. While not all chapters are linked, I think the story will be more meaningful by starting at the beginning.)
Jordan: “Let’s discuss two issues that seem to have changed how people think and act.”
King III: “I’m going to guess. You don’t like Republicans because #1, they are fiscally conservative and #2 they think government is the problem.
Jordan: “King III, you’re partially right but your analysis is backwards.”
King III: “There you go again. Trying to turn black into white and red into green.”
Queeny: “King III, would you be quiet and listen for a change? You remind me of Mr. Know-It-All on that cartoon show. What was it?”
Caesar: “Bullwinkle. One of my favorites.”
Queeny: “That’s right. Now King George III, be quiet and listen.”
Jordan: “OK, I’m going to show you a chart first, then discuss what it means. This chart addresses King III’s claim that Republicans are fiscally conservative.”
King III: “Where did you get the data, some liberal think tank. You should be talking to the Heritage Foundation. Now that is a top-notch, unbiased group.”
Queeny: “III, didn’t I ask you to be quiet. In case you hadn’t noticed, you are not in charge and these people do not work for you. You need to listen and maybe you will learn something…for a change.”
Jordan: “Thanks Queeny. Having been around King George III before, I’m used to his style. And your description as Mr. Know-It-All from Bullwinkle is spot on.”
Cleo: “C’mon, get on with this.”
Jordan: “OK, this chart displays debt as a percent of GDP. Think of your household income and then how much debt you have.”
Queeny: “Are you talking about credit card debt, personal loans and say even a mortgage?”
Jordan: “In very general terms, yes. So think about when you bought your first house. How much income did you have and how much was the mortgage?
Caesar: “I hate to think of it. We really stretched to get a nicer house. I think our mortgage was 3-4 times our annual income.”
Jordan: “I know the comparison to national economy is not quite the same, but at that point your debt equaled 300-400% of income.”
Caesar: “Probably a bit more if you added in the credit cards and college loans.”
Jordan: “Whatever the actual number, at least 300% of income.”
Jordan: “Now, let’s look at Federal debt as percent of gross domestic product, or GDP. And III, don’t get all exorcised that the comparison between government debt and household is not exactly the same.”
Cleo: “What do those up-and-down lines mean?”
Jordan: “The lines separate four periods after WWII that we want to discuss. #1 is WWII to 1980; #2 years 1981-1992 under Republican Presidents Ronald Reagan/George H.W. Bush; #3 years 1993-2000 under the Democratic President William J. Clinton; #4 years 2001-2009 during the Republican President George W. Bush; #5 years 2009 with a forecast thru 2016 under President Obama.”
King III: “Just looking at this, I know you had to distort the data.”
Queeny: “King III, I don’t say this very often, but would you just shut up and listen?”
Caesar: “For fear of stating the obvious…and I confess I did not realize this…Ronald Reagan was not what I would describe as a fiscal conservative. In fact, the spending looks more like our definition of a ‘tax-and-spend’ liberal.
Jordan: “The spending is right. But unlike the so-called ‘tax-and-spend’ liberal, Reagan just spent…without the tax revenue to pay for it.”
King III: “But Reagan had to spend money on defense. To counter the threat by the Russians. Bush 43 has the threat after the attack on 09/11.”
Queeny: “Just for a minute, let’s assume all the increases in defense spending can be justified. Like Jordan said, then why didn’t Reagan and Bush 43 pay for the extra spending? They just ran up the deficit? If I recall correctly, taxes were cut under Bush?”
King III: “But all that extra defense spending…”
Queeny: “King III, I don’t understand your logic. You’re saying, or at least implying that running up the deficits for defense is OK as long as Republicans are in office?”
Cleo: “Children, quit bickering. Let’s get back to the data. Am I interpreting this chart correctly? Under Reagan and then Bush 41, debt as a percent of GDP about doubled. Is that right?”
Jordan: “Yes. The most important thing to remember, During the Reagan Administration, the US switched from being a major creditor to the rest of the world to the world’s #1 debtor nation. Whether you think the increased spending under Reagan was justified or not, the fact is the spending was never paid for and the deficit increased dramatically.”
Queeny: “You are kidding. The US became the #1 debtor nation under Reagan?”
Jordan: “Pardon me for all the numbers but bear with me. At the beginning of the Reagan Administration, debt was about 32% of GDP. At the end of the Reagan Administration, debt was about 53% of GDP, an increase of about 65%. If one counts the Bush 41 as a continuation of the Reagan Administration, debt increased from 53% to about 66% of GDP.”
Cleo: “So if you take Reagan and Bush 41 combined, debt as a percent of GDP increased more than 100% – from about 32% to 66% of GDP. Wow.”
King III: “Yeah, but what about debt under that socialist FDR?”
Queeny: “Would you just quit yapping and look at the chart? The increase in debt under Reagan/Bush 41 seems to be about the same proportion as during the 1930’s when the Roosevelt Administration implemented New Deal programs. So there!”
Jordan: “Queeny, I like your style. You should be explaining this.”
Queeny: “Some people just keep spouting out statements despite facts to the contrary.”
Jordan: “One more comment, then we can take a break. Since after WWII, how many times do you think the budget has been balanced?
King III: “Ten times and all under Republicans.”
Jordan: “Well, you’re just about right for the number of times. Actually 12. But 9 times out of 12 were Under Democratic presidents, not Republicans.
King III: “Ok, Mr. Smartguy, when was the last time the US had no outstanding debt?”
Jordan: “Andrew Jackson, I think. But I do know it was before the Civil War. We have been in debt ever since.”
Cleo: “May we take a break, please. I have to go.
Caesar: “Go where Cleo?”
Cleo: “You know where. After a break I would like to continue.”