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Politics : View from the Center and Left
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To: Lane3 who wrote (60023)4/19/2008 1:15:20 PM
From: KyrosL  Read Replies (1) of 542587
 
Your notion that you need a budget surplus to claim fiscal responsibility is naive. My graph, plotting debt as a percent of GDP, is very relevant and not lame at all.

You can measure fiscal strength of companies, individuals and countries by looking at their debt to equity ratio. The lower the ratio, the better off they are fiscally. For countries, it's debt to GDP. You don't need a surplus to reduce the debt to GDP ratio. You only need to keep debt increasing at a lower rate than the economy is growing. Or, in other words, keep your expenditures increasing on the average at a lower rate than the economy grows.

Reagan/Bush inherited a debt to GDP ratio of 35%, and managed to blow it up to 65% in 12 short years. Clinton brought it down to 58%, only to have W blow it back up past the high that his dad achieved.
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