How the National Debt Confused Reagan

How could Reagan mistake the lowest national debt for the highest?

zFacts-2005-Nominal-Debt-Reagan.gif(Or was it on purpose?)

He forgot inflation and forgot the US was growing—size matters.

This graph compares the size of the Gross National Debt (the blue line, $T) with a typical part of the U.S. economy — spending on furniture. The vertical line (1979) is when Reagan got it backwards.

As can be seen furniture spending was at an “all time record high” in 1979, just like national debt. Was America going crazy on furniture? Was the debt going crazy? No. No. The country was just getting bigger and richer, and dollars were worth less. The debt was actually shrinking relative to the national income. That’s why you can see furniture pulling way ahead of the debt when Reagan was elected. The whole economy was pulling ahead of the national debt. That’s not a problem — quite the reverse.

The most popular national debt web sites are still making Reagan’s mistake.

The debt grew rapidly during World War II, but its growth during peace-time prosperity, starting in 1982, was unprecedented.