John Steele Gordon: A Short Primer on the National Debt - WSJ.com

John Steele Gordon: A Short Primer on the National Debt - WSJ.com

But while these numbers are fun to play with, they don't mean much. It's the debt's size relative to gross domestic product that matters, just as personal debts must be measured against a person's income before they can be properly evaluated. The GDP of the United States was $15.003 trillion at the end of the first quarter in 2011. That makes the public debt equal to 66.1% of GDP and the intra-governmental debt 31.1%. Total debt is now 97.2% of GDP and climbing rapidly.

And it's the climbing rapidly part that is worrisome, not the debt's current size relative to GDP. Indeed, the debt has been substantially higher by that measure in earlier times. In 1946, in the immediate aftermath of World War II, it was 129.98% of GDP. But while the debt had increased enormously during the war (it had been 50% of a much smaller GDP in 1940), it did not increase substantially over the next 15 years. It was $269 billion in 1946 and $286 billion in 1960. The American economy grew so much in those years that the debt, while slightly up in absolute terms, was down to only 58% of GDP by 1960.

It seemed like a good idea at the time

A stunning conclusion from the Kauffman Foundation by way of Mass High Tech:

The financial industry’s dizzying growth prior to 2008’s credit crisis may have stifled entrepreneurship by stealing talent that otherwise would have gone to innovative new companies.

That’s the conclusion of a new Kauffman Foundation report, which found that the financial industry recruited scientists, mathematicians, and engineers from graduate schools to create new financial instruments, such as the collateralized debt obligations that led to the financial crisis.

"Their talents have made them well-suited to the design of these complex instruments, in return for which they often make starting salaries five times or more what their salaries would have been had they stayed in their own fields and pursued employment with more tangible societal benefits," the study stated.

"Because these new hires are often the very individuals who otherwise would have comprised the most robust pool of prospective founders of high-growth companies, the financial-services industry’s steady rise has had a cannibalizing effect on entrepreneurship in the U.S. economy," said Paul Kedrosky, the study’s co-author and a Kauffman senior fellow.

At MIT, for example, nearly 25 percent of all graduates went to work in the financial sector in 2006, up from 18 percent in 2003.

File under: "Engineers blow things up."

Full report available at the Kauffman Foundation.

Look to history for the bright upside

Nathan Fisk in today's Christian Science Monitor: Why the US will survive this recession.

Then, as in 2008, America's most prominent financial institutions collapsed or nearly failed under the weight of speculative promises. Yes, the devastation is remarkably similar, but so is the cure.

From the Panic of 1837 to the Great Depression of the 1930s to the difficulties of 1969 and '70 when the cost of living jumped 15 percent, American ingenuity has consistently beat back economic calamity.

In 1837, it was the individuals who cast their vision forward who succeeded. Tough times spur recovery.

The time is ripe for American genius to surge. We must shed the idea that our government can buy us out of a depression or somehow use a new tariff or tax to encourage growth.

Rather, we must turn to our ingenuity and the audacious independence unique to our nation – and change the course of America.