Chuck Madere: America’s Total Debt Report - page 2

Chuck Madere here bringing you some valueable information  by Michael Hodges that you can use to help you understand our debt situation.

This chart shows the trend of federal government debt (Dept. of Debt data), as a percent of national income.

Note the left part of the chart shows that the debt ratio was heading down from 1957 to 1974. Had that trend continued, the red dash-line shows there should have been zero debt by about 1987.

But, the slope of the downward trend slowed in the late 1960’s, and by 1974 ceased to drop - - oscillated for 10 years - - and then rocketed upward to a historic peace-time record high in 1996.

The reason for the declining debt ratio to stop falling is quite clear. It was due to the fact social spending was climbing many times faster than the economy - as seen in the Grandfather Federal Government Spending Report.

Note the right edge of the chart - - the downward pointing red arrow. That means if today’s debt ratio had been 40% (as it was in 1966-84) of national income, instead of today’s actual ratio of 82% - - today’s debt would be a whopping 4.7 Trillion less than is the case.

It may be worth noting, much of that excess was money siphoned out of the various trust funds (such as from Social Security), and spent on non-pension activities - - without even accounting for this in the budget deficit calculations. As the federal government siphoned off all trust fund surpluses, it left behind non-marketable (worthless) IOUs - - that not even the Federal Reserve counts as market debt - but, the Treasury Dept. properly records it. And, the federal government does not even pay cash interest on that ‘borrowing’ - it just sends over a few more worthless IOUs. All this makes the social security trust fund more vulnerable to disaster - - as the demographic bulge of the baby boom looms very near. The balanced budget plan does not include additional siphoning off of incoming trust fund surpluses, nor does it budget to repay that already siphoned-off. Complete discussion of this is in the Grandfather Trust Fund Report and its companion report with charts.

How often it is heard from politicians that all debt was created in the 1980s. The facts are that half all debt dollars were created in the 1990s - - and, the 1990s (as seen in the chart) have not only rising debt ratio but the highest seen in peace-time - - despite receiving revenue from the 2 largest tax increases in U.S. history.

If politicians want to wrongly camouflage the situation and blame it on the 1980s (which is a falsehood), then they should be willing to reduce today’s debt back to the ratios prior to the 1980s - - say the ratios in the mid-1970s. As seen at the right edge of the chart, the red downward arrow shows all they have to do is to budget spending reductions totaling $4.2 Trillion - - which is more than the entire federal budget. That’s how far we have come.

Thanks for reading

Chuck Madere

by Michael Hodges - email
updated June 2008
- a chapter of the Grandfather Economic Reports -