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October 31, 2003

"Bush Boom"- Bush Booming Debt

Like the end of "major combat operations" and Iraq's "imminent threat", conservatives may rue declaring the start of the "Bush Boom." This quarter could easily be a false dawn once again of temporary growth followed by another drop.

Given the economic steroids being injected into the economy in the form of low interest rates and massive deficits, it's hard to take seriously celebration over one quarter of growth, especially with the pathetic job creation. If this is all Bush can generate maxxing out the public credit card to inject money into the economy, it means the underlying economy-- without the artificial stimulants -- is truly sad. As Lloyd Bentsen once said of the Reagan "boom", "You know, if you let me write $200 billion worth of hot checks every year, I could give you the illusion of prosperity too."

Bush Record Debt Increases: Well Bush is writing a record $371 billion "hot check" for fiscal 2003, with an estimated $480 billion deficit to come in fiscal 2004. Despite this, some Bush defenders will claim that his deficits aren't so bad if you take into account inflation. (Yes, inflation-adjusted numbers make the dollar increase in deficits in Bush years look roughly similar to many Reagan and Bush I deficits.)

But the problem with that argument is that it raises the right issue of making comparisons taking account of inflation, but it only does so in regard to the yearly deficit number, without paying attention to the effect of inflation on increases in overall debt each year.

They are not the same number.

The overall real increase in debt, adjusted for inflation, is the combination of the deficit each year between annual taxes collected and federal spending, COMBINED with how much the value of the existing debt changes due to inflation. Even as deficits increase the debt, inflation cuts the real amount owed on existing debt. For example, if the nominal deficit increases the debt by 10%, but high inflation cuts the real cost of the debt by 10%, the outcome would be no real increase in public debt.

You can read here for more but the following graph gives you a long historical view of the real increase in debt. It only goes up to 2000, but the evident fact is that since WWII, the only period of real increase in public debt was the Reagan-Bush I period:

Integrating Bush Junior into the analysis shows that he's continuing that tradition of buying temporary economic stimulus at the cost of massive increases in public debt. Below is a graph showing annual real increases in debt year to year since the start of the Nixon administration:

Graph- Yealy increase in real debt.GIF

The overall chart explaining the following graphs is at the end of post, but here is a quick summary.

If you add up each four-year term, including current estimates for inflation and deficits for Bush through 2005, as calculated by the Congressional Budget Office, you see that the real increase in debt under Bush will be the largest of any four year term:

Graph- Increase in real debt.GIF

And if you want to measure responsibility-- ie. how much of a situation was inherited and how much of the problem was created in a President's term, just look at much each President added to the annual deficit between the last budget of their predecessor and their final budget (using the estimated Bush 2005 deficit as his final budget):

Graph- increase in real deficit.GIF

On this scale, Bush ranks as the most irresponsible, recklessly borrowing President in American history, with essentially no competition.

Here is the overall chart of debt held by the public as adjusted to inflation year to year:

Chart- real debt- large chart.GIF

Posted by Nathan at October 31, 2003 10:03 AM