With the U.S.’s expanding debt reaching $15 trillion, Congress is faced with the challenge of how and where to make cuts in government spending or provide economic relief for citizens; the most recent example being the Christmas debate over extending the payroll tax break.
For House Democrat Rep. Rush Holt (D-N.J.), a key component to recovery is increased government spending. In an op-ed last week in The Star-Ledger, Holt wrote of “the importance of public spending, even in tough times, on things that advance our country.”
Holt argues that in proportion to the current size of our economy, our deficit is actually half of what it was in the 1940s.
“In 1944, its deficit was 23 percent of our economy’s size. 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,” Holt said, attributing the statistics to the Office of Management and Budget.
“To those who say that our deficits are too high to invest in research and development, education, and infrastructure that would allow America to compete in this increasingly global economy, I will simply point out that, had we listened to that same pessimistic argument seven decades ago, Americans would not be nearly as prosperous as we are today,” Holt said.
Daniel Horowitz, who works in public policy and writes for conservative website RedState.com, says there’s more to the debt story, as a massive military buildup was key to World War II-era public spending.
“Consequently, our total gross debt dipped well below 60 percent of GDP during the next decade, and eventually, under 35 percent of GDP,” Horowitz claims, adding that by 1948 “total federal outlays were just 11.6 percent of GDP; today’s outlays are 24.5 percent of our economy.”
Horowitz added, “Even in 1944, at the height of the biggest war in world history, our total debt was 97.6 percent of GDP, lower than our current 100.5 percent debt-to-GDP ratio.”
Trade With China
Peter Navarro, economics professor of University of California, calls Holt’s comparison a non sequitur (a statement containing an illogical conclusion), adding that a contributing factor to U.S economic problems can be found in trade relationships overseas.
“People were at war during that period of time. ... The way to increase our global economy is to crack down on China’s unfair trade practices, end of story,” Navarro said.
Navarro describes the debt discussion as “misplaced.” The debt problem would not exist if our trade with China were to grow 2 percent, like it had in the past.
But due to China’s unfair trade practices, which Navarro calls “weapons of job destruction,” our trade deficit is higher.
He listed five major unfair practices, which give China an advantage. China “violates the World Trade Organization (WTO) agreements through illegal export substance, manipulation, counterfeiting and piracy, worker abuse through use of prison labor and sweat shops, and lack of environmental protection.
“If we want put Americans back to work, we must force China to play by the rules,” he said.
Navarro states the current debt equates to every person in this country owing 50,000 dollars. “We don’t have that much to spend. ... We are not going to solve our problems in government until we get smarter people in Congress,” he said.
Navarro describes his political orientation as “good politics makes for bad economics.”
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