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A Political Party Meltdown

Ever since Alexander Hamilton refunded the debts of the Revolutionary War with a federal debt, the United States only went into debt to pay for its wars. Hamilton stabilized the dollar and refunded the debts incurred by the states in the Revolutionary War as an obligation of the new federal government. The federal debt stood at 35% of gross domestic product (GDP). By the 1830s the Revolutionary war debt had been paid off – just in time for the Civil War when federal debt climbed back up to 33% of GDP. Still, the Civil War debt was pretty well paid off by the turn of the 20th century. After World War I, the federal debt surged to 35% of GDP. But by the mid-1920s federal debt had declined to below 20 percent of GDP with state and local debt rising to 16 percent of GDP. Government debt began the 20th century at about 20 percent of GDP. It went up sharply to 45 percent as a result of World War I and above 70 percent in the depths of the Great Depression. In the 1930s the administration of President Roosevelt attempted to get the nation out of the Great Depression with federal borrowings. Debt has breached 100 percent of GDP twice in the 20th century: during World War II and in the aftermath of the Crash of 2008.

One thing this history of US debt reveals is that once upon a time the US government was accountable toward paying down the federal debt. When is the last year that the federal debt was smaller than it had been in the previous year? The answer is 1957.

06/30/1956   272,750,813,649.32
06/30/1957   270,527,171,896.43

This adds up to 54 years since paying down the federal debt took place. Never before in our history has the nation gone so long without paying down the federal debt.

Government Spending started out at the beginning of the 20th century at 6.9 percent of Gross Domestic Product (GDP). Spending got a big kick in World War I and ended up at about 12 percent of GDP in the 1920s. Then came the Great Depression, in which famously President Roosevelt and the New Deal cranked spending up to 20 percent of GDP. World War II really showed how the United States could commandeer its national resources for all out war. Government spending peaked at just under 53 percent of GDP in 1945.

President Clinton famously said, in 1995, that the era of big government was over. But he was wrong. The post World War II era has been a golden age of government spending, and it shows no sign of ending. Although spending dropped back to 21 percent of GDP immediately after WWII, it steadily climbed thereafter until it hit a peak of 36 percent of GDP in the bottom of the recession of 1980-82. Thereafter government spending chugged along in the mid 30s until the mortgage meltdown of 2008. In the aftermath of bank and auto bailouts, government spending surged to wartime levels at 45 percent of GDP. The mortgage emergency seems to have ratcheted out-year spending up a notch. Near term government spending in the future is pegging at 40 percent of GDP. When is the last year that the federal spending was smaller than it had been in the previous year? The answer is 1955

Total Spending -fed $ million
1954   77692

1955   73441

This adds up to 56 consecutive years since real cuts in federal spending took place. Never before in our history has the nation gone so long without real spending cuts.

I think the 2010 elections revealed that We the People are demanding that the federal government stop supporting the status quo. Our nation is on the wrong track, and our elected officials need to make a course correction or we will elect officials who will.

Let me provide an example from history of the type of course correction being demanded. Compare the federal spending and debt on President James Madison’s watch to the federal spending and debt on his successor, James Monroe’s watch. This has nothing to do with party politics, because at this time in our history there was only one major political party, the Democratic Republicans.

President James Madison

Year Federal Debt (millions) Federal Spending (millions)
1809 57 11
1810 53 9
1811 48 9
1812 45 21
1813 56 32
1814 81 35
1815 100 33
1816 127 31

President James Monroe

Year Federal Debt (millions) Federal Spending (millions)
1817 123 23
1818 103 21
1819 96 23
1820 91 19
1821 90 17
1822 94 16
1823 91 16
1824 90 22

 

There are some who are going to argue that an emerging nation only 30 years old is not comparable to a nation that is the world’s sole super power and leader of the free world. In terms of numbers they are not comparable, but there are fundamental financial principles that are timeless. In 1820, the admonition by Benjamin Franklin that we have a Republic if we can keep it was well understood.  We knew we could not become like France and allow a powerful Napoleon command a big government. Keeping the federal government small meant real cuts in federal government spending. We knew that paying down the federal debt from the wars was necessary to keep our Republic and grow as a nation.

The major political party founded by Alexander Hamilton, the Federalists, had a complete meltdown. They literally wet their pants when the Brits captured our nation’s capital and burned the buildings to the ground. Instead of trying to keep our Republic, these Federalists held a convention in Hartford Connecticut to secede from the Union and make the best deal they could make with the Brits. Hamilton and his Federalist buddies had always had a low regard for the settlers in the frontier. They had no confidence in General Jackson and his ragtag army of redneck hillbillies defeating the Brits at New Orleans. Their attitude about preserving the Union and the abilities of frontiersmen armed with Kentucky long rifles destroyed them as a political party.

These kinds of attitudes remind me of the attitudes the Democrats today have about the Tea Partiers. Is it possible we are today eyewitnesses to the meltdown of Democrats as a major political party? Only time will tell. We need to hold firm to the idea that our nation is long past due to make corrections in federal spending and payments on the federal debt, and supporting the status quo is not an option.

pilgrim
I am retired after 36 years of being a state of Indiana employee. I enjoy writing and reading conservative blogs.

3 COMMENTS

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3 COMMENTS

  1. I think philosophically the Democrat Party is on the verge of becoming unraveled. But it will require a gargantuan effort to free this country of their poisonous, pernicious influence. They have so many tentacles into the bureaucracy, so many taproots into power and money, a national press that shields them from scrutiny and accountability.

    Winning elections, chasing them and their destructive views from polite society is a good start. But it is only a start.

    • I agree that it is going to to still take a while to completely chase them away. There were still some Federalists around after the War of 1812, and also some federalist newspapers. They just screwed the pooch too much with their secession talk to ever be a major political force after that.

  1. I think philosophically the Democrat Party is on the verge of becoming unraveled. But it will require a gargantuan effort to free this country of their poisonous, pernicious influence. They have so many tentacles into the bureaucracy, so many taproots into power and money, a national press that shields them from scrutiny and accountability.

    Winning elections, chasing them and their destructive views from polite society is a good start. But it is only a start.

    • I agree that it is going to to still take a while to completely chase them away. There were still some Federalists around after the War of 1812, and also some federalist newspapers. They just screwed the pooch too much with their secession talk to ever be a major political force after that.

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