The national debt of the United States officially surpassed $18 trillion this past week. The news has been making the rounds of every media outlet, with many economists reminding us of the very shaky footing of the U.S. economy. However, there are other analysts who play down this outrageously irresponsible amount of debt.
In his latest in-depth commentary, David Stockman explains the larger narrative of U.S. fiscal policy that delivered this growing debt load. Stockman should know something about the topic. He was Director of the Office of Management and Budget under Reagan back in the early 1980's, which is when U.S. debt passed $1 trillion for the first time.
Think about that – it took more than 200 years for U.S. debt to reach $1 trillion. But as Stockman points out, the last $1 trillion of debt accumulated in about 1 year.
Stockman looks back at that period in the 80s, and answers two important questions: how was U.S. debt allowed to get this large, and what does the future hold?
What this means is that the $18 trillion of public debt outstanding today is the real debt—–not the convenient illusion peddled by Washington and Keynesian economists that the “publicly held” debt is only $13 trillion and therefore a “manageable” 75% of GDP.
Nope, the nation's true leverage ratio today is 106% of GDP. Thirty-three years on from the first trillion dollar crossing, the public debt burden on national income has tripled. And when you add the $3 trillion of state and local debt, the total public sector debt ratio is nearly 120% of GDP.
And that gets to the final question. How did we get away with this vast fiscal debauch? The short answer is that we didn't.”
