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Does anybody know how much real debt the Federal Government took on in its efforts to combat the Great Depression? I am talking about debt as a percentage of government revenue here. Everybody knows the New Deal was expensive, the question is how expensive was it?I am going to look into this more myself so hopefully I can answer myself as well. I think this is a very pertinent question given the massive amounts of debt the current government is piling up. Perhaps a look at what happened then can inform what happens now.
I looked around and found a chart which indicates by about 1940 it was 50-55%. During WWII it maxed out just above 120%, and in 2008 it was around 65%.See the chart: "Debt as a % of GDP 1940-2009"http://www.marktaw.com/culture_and_media/TheNationalDebt.html
I saw a chart today that said something like debt was 65% of GDP in 1929 and we had reached the same percentage in 2008. I have it book marked at work and will have to add it. I think it is significant that public debt was allowed to reach so high then. If you look at the charts debt was not a significant source of public spending until WWI except for the Civil War.What really intirgues me about the Depression is that many economists now say that you can not borrow your way out of a recession yet that is what they tried to do then and it looks like they are trying it again. I made the point at work today that one major difference between now and the 30's is demographics. The population of the US is much older now and in the 30's there were many more people available to productively work and support the non-productive portion of the population while simultaneously paying the taxes to help pay down the debt. That is not the case in 2008. I have said elsewhere that WWII really ended the Depression. What will bring us out of the current meltdown? I certainly hope is not something as catastrophic as WWII.
There's a conservative radio talk show host who has a good angle on economics and his argument is that we should basically let businesses fail to get through the crisis. I think this is probably the right way to go. There's got to be a purging phase that we get through…if this means the auto industry shrinks by 50% in America or that banks fail, then so be it.
I am of two minds aout the bail out. On one hand I say let them fail, but on the other hand I wonder what will replace these businesses if they do fail. What I really want to see is a shareholder revolt against the incompetent corporate governance that put these companies in the position they are in. These idiots have proven they are not competent to run these huge companies so why do they still have jobs?
The airlines were failing too, but they didn't get a bailout, and they're still around. Let teh non-union Toyota and Nissan buy GM and Ford, that'll straighten them out.. Or maybe the American automakers could merge.
Glad to see you back Ski. It's been a while.Didn't the airlines get a pretty big cash infusion shortly after 9/11?
I do not know. I assume that if they did, it was to enhance security not because of a down economy. Other than the week or so after 9-11 when there were no flights, the airlines still did fairly well.edit: Airlines received a $25 billion bailout after 9-11.
I thought so but was too lazy to look it up. The government is all about bailing people out of trouble. I dont blame the airlines for the post 9/11 bailout federal requirements and the terrorists attacks completly screwed their business model. I do have issues with bailing out banks and insurers who made bad decisions and the people that got loans they knew they couldnt pay for.
I think it was an automaker argument that because the airlines got the cash infusion, so should the car industry. If some of these businesses are allowed to fail, other businesses which survive will fill the leftover demand and become stronger as a result. Yes, there will be difficulty in the short term as people lose their jobs. But eventually as the economy recovers new companies will spring up. In the end capitalism is engaged in this kind of "creative destruction". By bailing out companies the government artificially props up companies which are not forced to face their own inefficiencies or failings. Problems can then multiply. As has been mentioned elsewhere, who is going to bail out the U.S. government?
If some of these businesses are allowed to fail, other businesses which survive will fill the leftover demand and become stronger as a result. Yes, there will be difficulty in the short term as people lose their jobs. But eventually as the economy recovers new companies will spring up. In the end capitalism is engaged in this kind of "creative destruction". By bailing out companies the government artificially props up companies which are not forced to face their own inefficiencies or failings. Problems can then multiply. As has been mentioned elsewhere, who is going to bail out the U.S. government?
I agree with your argument 100%. Bailing out poor decision makers or companies that make products that are unable to effectively compete leaves a bad taste in my mouth for some reason. The companies begging for handouts sound like little little kids that spent all their money on candy and now want more of the good stuff but don't want to work for it.
Getting back to my original post. I found some data from the OMB that says total government debt in 1930 was on the neighborhood of 16 billion dollars Historical US Debt versus something like 10 trillion dollars today. These are numbers so big we cant even visualize them.
