 "Photo: Illustration by Hannah Loftus")
The current national deficit is $1.4 trillion, the largest deficit in U.S. history, without adjusting for inflation.
However, “That doesn’t mean anything,” said Daniel Kuester, professor of economics. “In 1942, it was less than $100 billion. In 1942, in nominal dollars GDP was $161 billion. GDP today is $14 trillion.”
Nominal numbers are the current prices without adjusting for inflation.
Kuester said it is better to look at the deficit as a percentage of gross domestic product. The deficit is the amount of money we owe in one year, while GDP is the total number of goods and services sold in the U.S. in one year.
The current GDP is $14.3 trillion, according to the U.S. Bureau of Economic Analysis. That makes the current national deficit almost 10 percent of GDP.
Looking at the percentage, the current deficit is the largest deficit since World War II, when the deficit climbed above 20 percent.
The public criticized the Reagan administration for deficits created by tax cuts in the 1980s, but those ranged between 3 to 4 percent of GDP, Kuester said.
“So a 10 percent deficit is pretty substantial,” Kuester said. “Some economists would say the deficit is appropriate for the current situation in our economy.”
Andrew Long, assistant professor in political science, said polls have shown that the public is concerned about the deficit, but people have not lost faith in the government. If the market was losing confidence in the government’s ability to repay those debts, people would not be buying government bonds.
“I feel that our generation will get the brunt of this deficit,” said Janie Simpson, junior in political science and pre-law. “Hopefully, there will be policies that come out that guard against [another recession].”
Long said the government is trying to step up and drive the economy due to the recession. The private sector was unable or unwilling to stimulate the economy and therefore the government stepped in to help by creating the stimulus package and lowering interest rates. As a result, the government and the public face a large national deficit.
Kuester said the level of debt of the United States as compared to the GDP is around 80 percent. While that is cause for concern, it is not as high as some industrialized countries facing similar recession, like Japan.
“I would say it is not a concern if this is a one-year deficit in response to the stimulus bill for better or worse,” Kuester said. “It is being sold as such, but is that what is really happening? Only time will tell.”
Kuester said while college students should not be overly concerned with the deficit and national debt right now, it might cause problems in 20 years.
Long echoed Kuester’s remarks in saying students should be concerned with unemployment rates. According to the Bureau of Labor Statistics, September’s unemployment rate was 9.8 percent.
The unemployment rates can keep graduates from entering the work force and receiving higher pay. That, in turn, causes their career salary caps to be less than if the economy was healthy.
Simpson said college budgets are being cut right now and that has caused campuses, like K-State, to cut staff positions and increase tuition.
“I think part of the stimulus package helped boost student aid this year,” Long said. “In contrast of being concerned for the deficit, Congress is doing things to help students...They are making college more affordable.”
President Obama said the deficit will shrink with the repayments of the stimulus packages by the corporations who took them, Kuester said, but Congress, with Obama pushing, is looking to increase government spending on things like health care.
“That stuff isn’t for free,” Kuester said. “We have these big deficits, and they are talking about expanding the government which might give people some pause.”
