"From the origins to World War II
In its first 150 years, the government periodically undertook systematic multi-year reductions in the national debt by taking in more revenues than it spent.
Each of six such sustained periods led to one of the six major depressions in our history. The last three of these crashes were the truly significant depressions of the industrial era.
This is the record:
1. 1817-21: In five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819.
2. 1823-36: In 14 years, the debt was reduced by 99.7 percent, to $38,000. A depression began in 1837.
3. 1852-57: In six years, the debt was reduced by 59 percent, to $28.7 million. A depression began in 1857..
4. 1867-73: In seven years, the debt was reduced by 27 percent, to $2.2 billion. A depression began in 1873.
5. 1880-93: In 14 years, the debt was reduced by 57 percent, to $1 billion. A depression began in 1893.
6. 1920-30: In 11 years, the debt was reduced by 36 percent, to $16.2 billion. A depression began in 1929.
There have been no such multiyear budget surpluses and debt reductions since World War II and, significantly, no major new depression. The record suggests that reducing the debt never sustained prosperity, even when the debt was virtually wiped out by 1836. The highest deficits were those of world War II, ranging from 20 to 31 percent of Gross National Product. For a few years following the war, the debt was greater than GNP, the only such case in history. The wartime borrowing and spending actually ended the Great Depression.
Post-World War II
Both political parties pledge to balance the budget by 2002, and all budget-balancers hope ultimately to reduce the national debt. In the meantime, the nine recessions of the depression-free postwar decades have each followed reductions in the annual deficits relative to GDP.
Using data developed by Warren B. Mosler, economic analyst for a Florida investment firm, I suggest how some of the recent recessions have been politically significant:
· Deficit reductions, 1971-74, led to the recession that began at the end of 1973; a slow recovery did not help Gerald Ford in 1976.
· Deficit reductions, 1977-80, gave way to a recession in 1980 that damaged Jimmy Carter’s re-election hopes.
· Deficit reductions, 1987-89, were followed by the 1990-91 recession that harmed George Bush.
Meanwhile, the longest period without a recession was from November, 1982 to July, 1990.
The Republicans who now praise that "Reagan boom" never refer to the deficits or blame the Democratic Congress, while Democrats repeatedly attack "Reagan deficits." Neither side seems aware that a steep rise in deficits began in 1981, preceding the "boom" by almost two years.
When deficit reductions finally began in 1987, they paved the way for the next recession. Political irony is everywhere.
When the economy slides downhill, the incumbent president is badly damaged, and it does him little good to proclaim "success" in reducing deficits.
Ronald Reagan suffered no political harm because of the deficits of the 1980s and, even at his advanced age, might have been elected again in 1988 if he had been permitted to run. Whatever citizens say to pollsters, they vote against recessions, not budget deficits.
Driven by what appears to be wholly fallacious economic principles, politicians have put together such monstrosities as the Gramm-Rudman-Hollins deficit-reduction policy and the more recent "zero-sum budgeting" (all new programs must be financed by cuts in existing programs), along with the Clinton administration’s "reinvention of government" ("downsizing") to virtually guarantee a new economic disaster, perhaps more serious than any in recent decades."
Think big deficits cause recessions
If this would just be one instance, you could call it circumstance. If it was a few instances you can use the correlations doesn't imply causation fallacy. But when it happens over a dozen times, it starts to become empirical, and incredibly strong evidence. Which side of history will you take? The sidde of science and observation? OR the side of religious fervor where logic and reason is thrown out the window for ideology?
