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Japan had a horrible natural disaster. But Japanese politicians had already created an economic train wreck, and U.S. political leaders are emulating the Japanese model.
Japanese leaders placed their country in the untenable economic situation of running up their outstanding gross debt to GDP ratio from 68% in 1990 to an estimated 230% in 2011. That is a 20-year man-made disaster created by politicians.
Japanese politicians suffocated the future growth and job-creation ability of their country with a massive load of central government debt. Perhaps Japanese politicians have some unique trait that forces them to rob future generations of economic opportunity.
But wait! U.S. politicians have the same trait.
In 1990 gross outstanding central government debt to GDP was 64% for the U.S. compared to Japan's 68% — very similar outstanding central government debt levels.
In 2008 the U.S. outstanding debt load was 71% while Japan's had climbed to 195%. So by 2008 Japanese leaders were already well past the debt load that had sapped the economic strength of their country.
The 2008 number for the U.S. may have seemed like a debt load that the U.S. economy could cope with. After all, it increased by only 7 percentage points from 2000. But real economic growth in the U.S. was a subpar average 2.6% from the first quarter of 2000 to the fourth quarter of 2007.
That was subpar growth compared with the prior decades and doesn't even consider the 2008-09 recession. Real economic growth for the entire last decade was 1.9% — the slowest growth for any post-WWII decade. Did the regulatory burden and debt load of the federal government create a slow-growing economy last decade?
If it did, the U.S. economy is locked into subpar economic growth because gross outstanding debt for the U.S. is estimated at 99% by the IMF in 2011, up from 71% in 2008. That is an increase of 28 percentage points.
Should the outstanding gross debt burden increase at that pace for the remainder of this decade, the U.S. outstanding debt-to-GDP ratio would be over 180% in 2020. That would approach the 20-year politician-made disaster of Japan.
Politicians across many different countries seem to have a unique ability to create economic train wrecks. U.S. political leaders are driving recklessly down the same road that Japan chose. President Obama appointed a Deficit Reduction Commission last year. That commission's recommendations were to reform entitlements, cut federal government outlays and reduce the outstanding debt burden.
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