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Los Angeles, California, United States
The blog 'Breaking Bread' is for a civil general discussion, like you might have at the dinner table with guests. The posts 'Economics Without the B.S.' are intended for a general audience that wouldn't have to know the difference between a Phillips Curve, a Laffer Curve, or a Cole Hamels Curve. Vic Volpe was formally educated at Penn State and the University of Scranton, with major studies in History, Economics and Finance, and Business; and, is self-educated since by way of books and on-line university courses. His practical education came from fifty years of work experience in the blue-collar trades as well as a white-collar professional career -- a white-collar professional career in production and R&D. In his professional career and as a long-haul trucker, he has traveled throughout the lower forty-eight. From his professional career alone he has visited many manufacturing plants in the United States, Europe and China. He has lived in major metropolitan areas and very small towns in various parts of the United States. He served three years with the U.S. Army as an enlisted man, much of that time in Germany.

Sunday, December 30, 2012

Balanced budgets

Economics Without The B.S.**:
[**  Double entendre intended.]

Does the Federal Government have to balance budgets for prosperity?
            Under Truman – in eight years he had four balanced budgets -- Debt to GDP went from over 100% to approximately 75% when he left.
            Under Eisenhower – in eight years Ike had three balanced budgets -- Debt to GDP went from over 70% to approximately 55% when he left.
            During the spend-thrift 60’s (up to FY1969) (the Vietnam War, Great Society Programs, etc., etc.) where we had eight years of Democrats and the only balanced budget was the one submitted by LBJ in FY1969 -- Debt to GDP went from over 55% to approximately less than 40% when the Liberal Democrats finally got kicked out.  (WAS THAT A TYPO?  NO IT WASN’T!)
During the inflationary ‘70’s (when we had to pay for oil, Great Society Welfare Programs, etc., etc.) -- Debt to GDP stayed under 40%.
            Debt to GDP climbed under Reagan and continued to climb until FY1996, and thereafter declined until the Bush years of FY2002 – but remained at a healthy % below 60%.  When Bush left office it had climbed to 85%.
Summation of the Clinton Years with Bush 43 Years: 
            1.  Clinton assumed office when we had a mild recession.  Unemployment was around 7.5%.  When he left office the unemployment rate was around 4.0% in a mild recession – we were near full-employment (considered somewhere around 3.25 to 3.5%) and were just under 4% (I think it was 3.8% the year before the recession).  The GDP grew at annual rates of over 3.5% for the nine year span including the mild recession he inherited from   Bush 41and the mild recession he left for Bush 43.  He achieved growth rates of over 4% (even 4.8% in the best year) – these are real GDP growth rates, in other words minus the inflation rate.
           
2. Bush assumed office when we had a mild recession.  He had a massive tax cut followed by another one in 2003, supposedly to stimulate the economy.  The real GDP growth rates during his eight years never got to 4%.  The best year was 3.5.  He only had one other year over 3%.  For his best six years -- not including the recession he inherited from Clinton or the one he left for Obama -- his average growth rate was only 2.5%.   The unemployment rate during Bush’s years was generally over 5% -- he had three years (2001, 2006, 2007) when it was around 4.6%; all the other years was around 6% until his last year.  In other words, he never got anywhere near full employment.

OVERALL POINTS TO BE MADE:
 (1)  IF YOU WANT A SOCIAL WELFARE PROGRAM,  YOU NEED TO HAVE A STRONG ECONOMY TO SUPPORT IT; AND,
 (2)  FEDERAL GOVERNMENT SPENDING IN THE RANGE OF 17 TO 20% OF GDP IS NOT A DRAG ON OUR ECONOMY (WHEN WE HAVE A STONG ECONOMY).

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