Monday, 20 October 2008

Spending your inheritance...

The economy has been big news of late - and not least as a topic of debate in the USA in the run up to the election. So I thought I'd have a look at at how things really are and dug up some numbers on the American national debt.

I was interested to see how things fared under the different political parties over there and the results were a bit of a surprise. Common rhetoric says the Democrats are wont to raise taxes and spend more - and that it's the Republicans that aim to cut cost and give money back to the taxpayer. What I found was that yes... Federal spending tends to rise faster under the Democrats - but the clearest trend was that the national debt almost always rises faster under a Republican president.

But hej, isn't it the Senate and the House of Representatives that agree those things? Check it out...

So what does it show?? It measures the increase in gross federal debt as a proportion of the increase in GDP.. and covers the period from 1979 to 2007. As the economy grows what part of that growth is mortgaged to meet current spending? The numbers at the bottom show who has control of the two houses - +2 is both Republican, -2 is both Democrat - and each point is a year - red for a Republican president, blue for a Democrat. All but two of the Democrat years lie below a limit of debt increasing by half the rise in GDP.. and all but one of the Republican years lie above that same limit.

Surprisingly it doesn't matter who runs the parliament - under a red president the debt just keeps on rising... In effect Republican presidents are giving tax cuts funded not by growth but by borrowing. If you need the money can't you just go and borrow it for yourself!!

If you read this report from the US Government Accountability Office you can see that escalating debt interest combined with increasing welfare and pension costs for the ageing population means America is facing a huge funding crisis in the coming decades.

My conclusion? America can't afford another Republican in the White House...

No comments: