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Zombienomics, or Nikki Haley’s Day of Debt Reckoning
Debt Zombie Haleynomics: Britain’s Buffett vs the Austrian Austerian
Let’s unpack Haley’s bundle of economic and historical illiteracy one step at a time. We’ll examine the post WWII history of US national debt, the controlled experiments in US economic and financial market history, tax policy and zombie debt fantasies and the numbers on which states and regions generate the biggest share of the national debt.
The Long History of Zombie Ideas on Debt: It’s the Denominator, Stupid
British Tory then American conservative alarmists like Haley have been braying about the phantom debt trap for 2 1/2 centuries, starting with conservatives’ founding troll, counter French revolutionary Edmund Burke, who said he’d rather be ruled by the Turk than the debt Britain was running up. Britain’s rapid post-Napoleonic growth and Alexander Hamilton’s copy of “Dutch Finance” — the US treasury bond market — proved Burke spectacularly wrong on both sides of the Atlantic. Britain’s debt/GDP ratio in 1815 was 225% and Britain kept issuing century term Consols (bonds) with 3–4% coupons. Result? Debt/GDP ratio dropped all through the high growth 19th century. Reason? To paraphrase James Carville’s “it’s the economy, stupid” Clinton campaign slogan, it’s the denominator, stupid. Britain’s growth rate was far higher than the debt service. The debt was incurred for public investment in infrastructure, public education and public health, not consumption.
The same “it’s the denominator, stupid” principle applies to the US. In 1944 the federal deficit was 44% of GDP. Yes, 44% of GDP in a single year and a national debt/GDP ratio that peaked at nearly 120%. Where did the money go? Not just mass producing planes, tanks, ships and other military hardware the Germans and Japanese would destroy on both the western and eastern fronts, which our then fully employed Rosie the Riveter workforce would have to produce all over again. It went into the Manhattan…
