In case you were wondering why we are doing nothing to slow our inexorable march towards Greek-style insolvency, look no further than those who are vested with the power of the purse string. Yesterday, Congressman Rush Holt (D-NJ) suggested that we are not spending enough "to invest in research and development, education and infrastructure that would allow America to compete in this increasingly global economy." He proved his assertion by comparing our deficits to....the WWII era!
According to the Office of Management and Budget, America’s deficits were more than twice as large in the 1940s as they are today. In 1943, the deficit was 30 percent of our economy’s size; in 1944, it was 23 percent. Today, it is less than 9 percent. As for publicly held debt, it was significantly larger as a share of our economy in 1944 than it is today.
Hmmm, what do you think was going on during 1943-1944? Oh yes, that WWII thing.
Obviously, we had a massive military buildup – the most unprecedented in world history – which was very costly at the height of the war. But those were temporary annual deficits. Immediately after the war, our deficits returned to historical lows. Consequently, our total gross debt dipped well below 60% of GDP during the next decade, and eventually, under 35% of GDP. Just three years after the war ended, total federal outlays were just 11.6% of GDP; today's outlays are 24.5% of our economy. Even in 1944, at the height of the biggest war on world history, our total debt was 97.6% of GDP, lower than our current 100.5% debt-to-GDP ratio.
Now if Rep. Holt wants to compare our spending levels to the WWII era, let's take defense and war spending out of the equation for a moment. In 1944, defense spending accounted for an astounding 86.6% ($79.1 billion) of total federal outlays ($91.3 billion), while non-defense spending accounted for just 13.4% ($12.2 billion) of the budget. In other words, non-defense spending in 1944 was pegged at 5.5% of GDP ($219.7 billion).
In 2012, total defense and war spending will check in at $662.4 billion, or roughly 18% of our estimated $3.7 billion budget. That means that our non-defense spending will come in at 20% of our GDP (roughly $15.092 trillion), compared to 5.5% in 1944. This year, our defense spending will account for 4.4% of GDP compared to 36% in 1944. So if we want to engage in absurdity and use WWII spending as an accurate yardstick, why not reduce our non-defense spending to WWII levels, and cut spending by over $2 trillion?
The irony is that the military is the only expenditure that Democrats want to cut, yet they are using WWII – when defense consumed almost our entire budget – as a paradigm for auspicious government "investments."
It's a shame we can't ship these loons off to Greece.