Which administration, since Gerald Ford, added the largest percentage to the national debt, and which added the smallest percentage? Those were the two questions and here are the answers.
During the Carter Administration, the national debt increased by 42%. That was a four year term.
Under the Reagan Administration, the national debt increased by 189% so he is the “winner.” It did take eight years.
The senior Bush Administration increased the national debt by another 55% over four years.
The Clinton Administration increased the national debt by a mere 36% over eight years.
Bush 43 pushed the national debt up another 89% in eight years.
This data dispels the myth that Republicans are fiscal conservatives while the Democrats are the party of big governments. The facts do not support what we hear pounded into our heads almost daily.
The above percentages were tied to administrations. The figures are much more complex when one breaks it down into what party was in control in the Senate and/or the House. I do not have accurate figures for all those permutations.
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A number of months ago I wrote a post, “Slaying the Goats.” Search for that post if interested. Expanding on the point of cost, Evensky raises the question, “Why has this active premium cost hurdle received so little attention?” It is no surprise Evensky supplies the answer.
“The answer is that investors (and investment professionals) have short memories and recent market returns have been historically high. [This was written in the late 1990s.] During the last 10 years or so, market returns have compounded at around 15 percent. At this rate the hurdle drops by almost 40 percent. John Bogle of Vanguard, making a similar observation in a Vanguard publication [The Vanguard Group, Selecting Equity Mutual Funds Conference Paper (Chicago: June 14, 1991), 1-14], notes that assuming an active management cost of 2 percent, it “eats up” only 1/8 of the returns of the 1980s and 1990s, but almost 20 percent of the long-term historical equity returns.”
Holding costs down is more important than ever as we are projecting market returns of 7% to 8% over the next decade. A 2 percent management fee eats into profits to the tune of around 30%. That is a hit no portfolio can sustain for long.
Photograph: North side of Mt. Hood, near Portland, Oregon
If a pollster were to approach you on the street and asked, which of the modern day (after Ford) administrations added the largest percentage to the national debt, who would it be? Is it Carter, Reagan, Bush 41, Clinton, or Bush 43? Of these five administrations, which added the smallest percentage to the national debt? We will not have data on the Obama administration for another three years.
Do you have your answer to these two questions? Look for the answers tomorrow. Keep in mind that Carter and Bush 41 were in power only four years, whereas the other three administrations were in control for eight years.
If these same questions were asked when parties controlled the Senate or the House, the answers would not be so simple. Since Congress controls the purse strings, an analysis of which party added to the national debt is the more important question. If anyone has access to that research, be sure to post it in the comments section.
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Photograph: Seven Sisters, Norway
