Subj : The National Debt. To : ALL From : BOB KLAHN Date : Wed Dec 04 2013 14:29:42 This is an analysis of pre-WWII records of the national debt, going back to 1790. The idea is to look at how things have changed and what happened back then to make a difference in how the debt has grown since then. Details on some of the factors affecting the collection of the data found at the end of the commentary. ************************************************************************** The national debt is really not that difficult to deal with, you know. Look at history. Yes, there has not been one single year since this country was founded that it was debt free, but there were multiple times where the debt was drastically reduced. In researching that I looked for a reduction of 40%-50% or more in the pre-Civil War period, and after the Civil War I looked at debt as a percentage of GNP as well as dollar reduction. Before 1890 I didn't find stats on the GNP. readily available. I'm not getting paid for this after all. Oh, and they used GNP rather than GDP then. Not enough difference to matter for this purpose. From 1790 till 1930 I find 7 times when the dollar amount of the debt went down to those specs, 1803-1811, 1815-1835, 1838-1839, 1843-1847, 1851-1857, 1866-1893, 1919-1930. From 1890 to 1930 twice it went down enough as percent of GNP I feel confident in calling it on the road to, if not paying off the debt, then making it trivial. Twice, 1835 and 1915, I call it so close to paying off the debt it could have been done. The actual debt went from $127 million in 1815 to $38 thousand in 1834. I call that on the road to paying it off, but that was the dollar amount low point. By 1915 the debt was at aprox 2.5% of GNP. IOW, by spending 1/2 of one percent of GNP every year for 5 years we could have paid it off. In 1930 the debt debt was at 16% of GNP, again, awfully close to payoff range, in my opinion. So, just how did that happen? Well, graphing federal spending it became immediately clear. The debt was brought down drastically by cutting federal spending........ on the military. You weren't expecting that, were you? Yes, it was cuts in military spending that brought the debt down. Every time in the pre-1930s US a major reduction in debt was during a period of low military spending. So, it appears to be simple, just cut military spending and you cut the debt. Note, that does not mean low social welfare spending. (Republicans call everything not military "social welfare".) Much of that time social welfare spending was higher than military spending, and it went up while military spending was down. Even when military spending went up, social welfare spending sometimes went up, yet the debt stayed down. When the debt did jump it followed military spending jumps. However, that leaves the question, why, if they so drastically cut the debt, didn't they continue on that route to pay off the debt? Well, let's look. The 1835 and 39 declines seem to have ended with recessions so bad as to qualify as depressions, the worst this country saw before the Civil War. The 1840s into the 1850s showcased three major recessions, plus a war. The Mexican-American war may not be on the top of your list, but spending sure shot up. As to the others, oh yeah, when the debt fell by so much, then it shot up again, that was when military spending jumped drastically. Now why was that? I'll just speculate. When you drastically cut military spending, you drastically reduce your military. Now, nice as we like to think people are, there are always some who will look around, find you are weak, and decide it's a good time t o take what you have. Or maybe they just want to knock you down a peg. So, when the debt drops drastically, we have a war to bring it back up. That appears to be about how it goes. Major spending increases are actually major military spending increases during that time frame. So, do we cut the military, drastically reduce the budget, then get a war, or do we try to think it through just a bit better? Notice I focused on the period from 1790, the first year I could find these numbers for, until 1930. I chose that time frame because, from 1930 on everything changed. Between 1919 and 1930 the debt dropped, as I said, to 16% of GDP. From 1920 to 1930 this country had 11 consecutive balanced budgets, the longest string of the 20th century. Then came the Great Depression. Seems balanced budgets of the 20th century are consistently followed by recessions. The longest strings seem to have the worst recessions . The national debt went up to 50% of GNP by 1940, at which time GNP was back to where it was in 1930. Don't even start to think that was all because of increased social welfare spending. Remember, that $16 Billion in debt was 16% of GNP when the GNP was $100 billion. In the first few years of the depression the GNP dropped 46%. When that $100 billion dropped 46% that 16% turned into aprox 28% of GNP. All that before borrowing one penny more. Ten years of depression just under doubled the debt to GNP ratio. After that World War II kept it climbing, so fast and skyrocketed the economy so much that by comparison the depression was trivial. Yes, military spending did it again. Since World War II we have not had a year of low military spending. Even the Vietnam war only increased military spending a relatively small percentage of GDP. Military spending did go lower, but not much, and not for long. Before World War II we could, and were, attacked by foreign foes, but it was difficult for them to launch and supply any military effort over that distance. In World War II and after we learned, the oceans no longer protect us. We are vulnerable to attack, and with today's weapons, destruction. ************************************************************************** Most of the numbers here came from the Govt Printing Office's publication, "Historical Statistics of the United States From Colonial Times to 1970", Bi-Centennial edition. Please note that figures before WWII may differ from post WWII figures, and the older they get the more they may differ. In earlier years the numbers were far less rigorously collected, that and communication difficulties made them much less reliable. Throughout this I used current dollars, not constant, or inflation adjusted, numbers. Since I was looking at the dollar amount of the debt so inflation adjustment was not applied. That plus, the record difficulties make inflation adjustment for very old data difficult. Also, I broke up my research into pre-Civil War, pre-WWI, and Pre-WWII. The scale of the numbers jumps drastically between those periods. I did not, in this case, look much at post WWII because there has been no time since WWII that the debt went down significantly, and no time that military spending went down very much or for very long. Which makes it a different situation. Which is another way of saying, after Dec 7, 1941, everything changed. BOB KLAHN bob.klahn@bex.net http://home.toltbbs.com/bobklahn .... War is God's way of teaching us geography. --- Via Silver Xpress V4.5/P [Reg] * Origin: Fidonet Since 1991 Join Us: www.DocsPlace.org (1:123/140) .