Scene: Jordan and Sandy, a former business colleague, are having coffee.  The discussion begins Entry #121,.  This segment is a continuation of Jordan’s description to Sandy of a conversation with the Speaker of the House and the Senate Majority Leader, which begins Entry #123.

Jordan:  “Feel better, John Boy?”

John Boy:  “Much.  Now, now back to the debt to income discussion.”

Mackey:  “OK, so we agree Bill Gates can take on a lot more debt than any one of us because his income is much higher.  What does that mean for the Federal debt?”

Jordan:  “John Boy, you want to explain this to Mackey or you want me to?”

John Boy:  “Let me try.  The simple answer is we should link the amount of Federal debt to Federal income.  The more income the country has, the more debt it can have.”

Mackey:  “Alright, I understand the concept but what makes up Federal income?”

Jordan:  “Two approaches.  One measure is revenue collected through taxes.  The other measure is gross domestic product, or GDP.  Most measures of debt are against GDP because that represents the income of the country rather than just taxes collected.”

Mackey:  “John Boy, you think GDP is a fair measure.  You can’t trust these liberals to tell you the truth.”

John Boy:  “Relax, both measures have their plusses and minuses but yes, I think debt as percent of GDP is fair.  From what I’ve read, the ratio is used by a wide range of economists, including some of our own.  Let’s stick with debt as a percent of GDP.”

Jordan:  “Here’s a question for both of you.  Did debt as a percent of GDP increase more during Bush 43 or Obama?”

Mackey:  “That’s a stupid question.  Obama, of course.  Hands down.”

Jordan:  “John Boy, what do you think – Bush or Obama?”

John Boy:  “I’m afraid to answer because it seems like a trick question.”

Jordan:  “OK, here’s another.  Did the Federal deficit as a percent of GDP increase more under FDR – up until WWII – or under Ronald Reagan?”

Mackey:  “I’d like to say another stupid question but now I’m not so sure.”

Jordan:  “We seem to be making progress.”

Mackey:  “You know, Republicans hold up Ronald Reagan as the paragon for fiscal conservatism.  What’s wrong with that assumption?”

Jordan:  “Lots wrong.  One final question for now.  When’s the last time debt as a percent of GDP declined?”

Mackey:  “Under a Republican, of course.”

John Boy:  “Mackey, I think we are in for a rude awakening.”

Jordan:  “Look at my iPad.  Here’s a chart to get us started.  It’s from the BLS (Bureau of Labor Statistics).”

John Boy:  “Another liberal organization – should be named BS, not BLS.  Just kidding.  I know BLS has been a credible source of data for decades.”

Jordan:  “Look at this chart.  Federal debt as a percent of GDP beginning in 1800.”

Mackey:  “Now we’re talking.  That’s when the US was really a great country – no debt and lots of growth.”

John Boy:  “Mackey, you need to take a close look at this chart.”

Mackey:  “Whoa.  That can’t be right.”

(To be continued)