Blue debts bad, Red debts good

The Eurozone debt crisis is spooling up again.   For the moment it's Spain that's in the firing line, but the portents for the entire region over the next few weeks are not good.  Greece's "technocrat" government has resigned, paving the way for an election in early May that could well produce a new government that rejects the  terms of the EU/IMF bailout.  Even more ominously, there seems to be a good chance that France will elect as its new President the Socialist Francois Hollande, who has pledged to rewrite the entire EU fiscal pact.

It's interesting to see how US commentators are covering the crisis.  There is a remarkable degree of consensus there that the austerity measures Europe is imposing on itself are self-defeating and doomed to failure, and that only a pro-growth strategy can bring debt down to manageable levels.
 
It's not surprising to hear views of this kind coming from Nouriel Roubini, for example, or from Paul Krugman. What is remarkable is that the rabid, swivel-eyed free marketeers who write most of the well-known economics and investment newsletters are saying exactly the same thing:  Europe, or at least the usual suspects -- Greece, Spain, Portugal, Ireland for starters -- must spend more or tax less in the short term if it ever hopes to get on top of its debt in the longer term.

These folks, most of whom would probably be proud to be identified as card-carrying Republicans, offer a very different prescription for their own country.  Without exception, they see the free-spending ways of the Obama administration as a slippery path to Hell, or at least to the imminent loss of the United States's pre-eminence in the world economy, despite the fact that fiscal stimulus is the principal reason that US growth is   outpacing that of the Eurozone and the UK, both of which have opted for austerity.

So, come November, if Mitt Romney wins the Presidency, we can expect a sharp swing toward fiscal austerity in the US, right?  Er, no.  The Republicans talk a good game when they are out of office, but change their tune remarkably quickly once they get their man behind the Oval Office desk. Remember Alan Greenspan?  Yes, I know we'd all rather forget him, but when Bill Clinton was President, Greenspan  excoriated the Administration for planning even moderate fiscal easing. Once Bush Jr. was in office, Greenspan became the staunchest advocate of extravagant tax cuts.  

Take a look at this nifty chart*, which shows the US debt/GDP ratio all the way back to 1900, with the control of the White House, Senate and House colour coded.

If you go back to the 1960 and 1970s, you can see that the debt/GDP ratio was in steady decline regardless of who held the Presidency -- and this was, remember, the Vietnam war era.  Once Ronald Reagan arrived on the scene, however, the debt ratio took off like a rocket, and in the subsequent decade it has continued to rise sharply under a succession of Republican Presidents, falling only during the two terms of the Democrat Clinton.

It's true that the debt is rising sharply now under Barack Obama.  However,   as the chart shows, the latest upward spurt began under Bush Jr -- and whereas Obama is trying to alleviate the impact of the worst financial crisis in eight decades,  Bush was (prior to 2008) presiding over a strongly-growing economy.

US right wingers may be right to fret that the US ("the brokest nation in history") is running out of time to correct its fiscal problems; but recent history shows it's unlikely to be the Republicans that set a change of course.

* This is from Wikipedia, created by "Vision thing", used under creative commons license.  You can see a much larger version here.