Civil War. WWII. Now. Three worst debt moments in American history

by Ryan Streeter on November 15, 2012. Follow Ryan on Twitter.

At Bloomberg View Kenneth Ackerman writes:

The U.S. government today owes $16.05 trillion to bondholders and creditors, more than $51,000 for every American. This debt is already larger than the country’s annual economic output and threatens to cripple the economy for generations.

In its 235-year history, only twice has the country run up this big a tab: during the Civil War and World War II. Each time, though, the U.S. managed to dig its way back, regain its credit and emerge as the world’s leading economy. Both episodes offer lessons for today’s predicament.

 After a tour through the past predicaments, he concludes:

The history is clear. With four things — income, growth, discipline and patience — the U.S. has climbed out of financial holes similar to the one it now faces. Since Election Day, President Barack Obama and House Speaker John Boehner have signaled the need for a bargain: cutting some $4 trillion in debt over the next decade. That’s the very type of disciplined, long-term plan that saved the country’s finances in the past.

I would offer that “discipline” is what’s required to actually cut the $4 trillion. Saying you will make such cuts doesn’t require any discipline.

And that’s a problem for one obvious reason: the sense of urgency is greater when you are living amidst ruins or in a shaken society. Today is different than the years immediately following the Civil War and WWII. The question is whether we can muster the strength to practice the discipline required to restrain spending growth and foster economic growth. If we can’t, this will prove to be the biggest crisis period in the history of the Republic.

  • Craig

    The Washington politicians don’t have the discipline. They have lost touch with their voters and the accountability is too low. Examples of local or state-wide success, I believe, is due to the nearby accountability (pressure) and the sense that this is truly affecting them, their friends and their collective kids.

    It’s nice to see that we finally are using a negative phrase (fiscal cliff) to describe our situation. But I hear it only in a broad context. Is that term being used by the media to describe our exponentially growing debt, the sequestration, the need for another increase in the debt ceiling or the collapse of it all?