War and peace and US Federal debt …

Last four US recessions, Federal Debtand GDP, 1982 to 2012

Last four US recessions, Federal Debtand GDP, 1982 to 2012

Governments have two legitimate reasons to increase debt; finance war or recover from a recession. We don’t worry so much about wartime increases in debt, since generally the output soars both during the conflict and after. However recessionary increases in debt, if not carefully controlled (i.e., minimised) tend to seriously destabilise the economy in the future.

The chart shows US GDP (black line) and Total Public Debt (red line) over the last four recessions. The table below presents the performance quantitatively; even with an increase in debt of some 20%, the economy two years after the recession’s end is clearly not performing as well as it has in the past.

US recessions, increase in Federal Debt during the recession, and GDP increase two years later

US recessions, increase in Federal Debt during the recession, and GDP increase two years later

And some folks are worried about a double dip recession in The United States.

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