Deficit Hawk Disinformation

Deficits have since the Great Depression been the only real tool the federal government has had in its arsenal to fight recessions, and especially serious declines such as during the Great Depression.  So are federal deficits the problem today, or the solution?  A look at the facts might surprise you.

Notice in the chart below that the National Debt approaches 120% of Gross Domestic Product (GDP) at the beginning of the Truman Administration.   This tremendous increase in federal debt that began as World War II was drawing to a close, precipitated what is thought by many to be the golden age of American capitalism, from 1945 until the early 1970s.   President Obama’s budget projects National Debt as a % of GDC to peak at 101% in 2011 and begin to decline in the next three years.  Economic historians will tell you that during the Great Depression, President Roosevelt tried deficit spending but hit the pause button in 1937 and the economy tanked.  It took the enormous deficits from the early 1940s through the early years of the Truman presidency to get the economy really moving again.

The long term structural deficit, especially continuing escalation of health care costs, must still be addressed.  However, if history is our guide, an argument can be made that the danger is for the brakes to be put on deficits too soon.

Source:   http://zfacts.com/metaPage/lib/National-Debt-GDP.gif

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