Debt and Growth

"Raising America's debt limit is a sign of leadership failure."

--Sen. Barack Obama (D-IL) (2006; repudiated, 2011)

“Our generation's greatest challenge is an economy that isn't growing, alongside a national debt that is.”

--Sen. Marco Rubio (R-FL)

Rubio identifies with Senator (as opposed to President) Obama, who says those who fight national debt increases are leaders. Rubio, however, takes the next step Obama didn't by linking debt constriction to economic growth. Rubio—Republicans—believe prosperity comes from shifting resources from government to the job-creating private sector.

Obama—Democrats—seem to think keeping government big helps the economy, but more important than economic growth, big government helps the nation’s people. Here’s how the Washington Examiner’s Michael Barone phrases the thought:

[Obama won’t serously] address entitlement issues [and] wants spending to continue on its upward trajectory and tax rates to be increased. [The] intellectually serious argument for this: We're an aging country that needs to spend more on health care and we'll just have to settle for less economic growth, as Europe has done. [emphasis added]

John Podhoretz, writing in Commentary, agrees the president seems unconcerned about economic growth, but wonders if Obama’s approach might backfire on him:

The lubriciousness with which Obama went after Paul Ryan’s serious and stark budget proposal . . . suggests that he thinks the GOP went for the bait—that he demanded a serious debt-reduction plan, then got one from Ryan, and is now intending to build his reelection campaign on attacking it.

But what if the misdirection goes the other way? What if Obama is making a mistake . . . defending the entitlements—when he should really be panicking and doing whatever he can think of to get some economic growth going so that he [can] prevent [the] Bush tax cuts from [becoming permanent] after the 2012 election? [emphasis added]

You know the economy isn’t really growing, right? Here’s a graph from Jay Cost that illustrates the average growth rate from 1948 to the present—dotted line (3.43%)—plotted against real growth over that period (solid line):


The graph is ugly. Cost points out that any time we’re above the dotted line, growth is faster than 3.43% per year. Any time we’re under it, growth’s below 3.43% up to that point. The graph shows the economy has been winding down for a decade, with only one year between 2001 and 2007 above 3.43%. But since the latest recession, growth is significantly under 3.43%, and it’s expected to fall even farther in the next two years.

Big government—big government spending—is not working. Especially, it’s not working for the average person. Look back at Cost’s graph published earlier showing what a small percentage of our population currently has a job (lowest share since the early 1980s). And look at another Cost graph, which shows that real per capita wages and salaries, which peaked in 2007, have since fallen to their lowest level since 1998:


Under Obama, our economy is on the wrong track. And the people know it. Two-thirds of them currently believe the country’s going in the wrong direction.