Spending

My conservative friend and I have been discussing government spending recently. Let it be known that I really don't have a clue about macroeconomics, but just like everyone else - I have an opinion. 

I have to agree with my conservative friend in that fact that the current rate of spending is outrageous. How will we ever recover from this mess I ask? So I looked at a few trends. For some reason the Democrats have always been associated with spending. But if you look closely at the numbers, it seems as if the stereotype is wrong. 

According the the US Government, Jimmy Carter had a budget deficit of $74 Billion dollars when he left office. Over the next 12 years with two Republican Presidents (Reagan, Bush-HW) the budget deficit more than tripled to $298 Billion. Now, over the next 8 years (Clinton) the US managed to pull itself out of a deficit and manage a $236 Billion surplus - Yes, we were bringing in more money than we were spending. I honestly don't think we'll see that again for a long time. Then came W Bush. Over the past 8 years, the US went from a 236 Billion surplus to an estimated 396 Billion deficit (a low of 413). Seems like we've done some serious spending recently.

Let's also have a look at our US national debt. During the 12 years of the Reagan-Bush-HW era, the US went from $1 Trillion in debt to $4.1 Trillion. A difference of $3.1 Trillion. During the 8 years of Clinton, the US went from $4.1 Trillion in debt to $5.8 Trillion. A difference of about $1.7 Trillion. Then came W Bush. During the W era of 8 years, the US went from $5.8 Trillion to $11 Trillion in debt. A mere difference of $5.2 Trillion. 

So, there seems to be a trend - when a Republican is in office, we spend more than we make, and we sell more debt to China (Foreign countries own about 28% of our US Treasury Securities - China owns about 22% of that foreign ownership - the most of any country). I wish I had one of those USA credit cards where I could continue to spend above my income while exponentially increasing my debt.

Regardless of the numbers and regardless of who is in office, we're in a trend now that has to stop. Obama is spending, but I appreciate that his spending is on infrastructure and green technology. This type of spending is an investment in our future and will continue to pay dividends. But we've got to figure out a way to reduce China's ownership of our debt. Someday that bill has to be paid. Now, if we reduce some of the Billions going to Iraq and raise a few taxes, we might be able to pay for some of this crap. Nobody likes more taxes, but if we want to be the world's keeper and manage two wars, we shouldn't be drastically cutting taxes. Instead, open up your wallet and pay for it. We love to spread democracy but we hate paying for it. Instead, we've decided that it is too much of a burden so we'll just pass on our debt to our children and grandchildren.

Imagine what the $1+ Trillion dollars going to Iraq could be paying for right now. Only time will tell.