The debt hawks are to economics as the creationists are to biology.

Recessions and recoveries ultimately are associated with money, and more specifically with money growth. In general, less money growth = less economic growth. (That actually is something of a tautology, since economic growth is measured in money.)

There are several definitions of money, most differing on the basis of liquidity, the ease of converting to currency. The most liquid form is called M1, which consists of currency and checking account deposits.

The government no longer measures the less liquid forms, M3, L and the most inclusive form: Debt of Domestic Non-Financial Sectors. And for many reasons, the supplies of the various money forms do not move together. For instance, there are periods when M1 goes up or down more than M2, even though M1 is part of M2.

I found an interesting pattern relative to recessions. In the following graph, you see a strong tendency for one form of money, Federal Debt Held by the Public, to grow more slowly before recessions, then grow quickly during recessions, then resume growing more slowly after recessions.

M1 exhibits a similar, though less consistent pattern, and M2 is less consistent yet. One consistency is: Following every recession, at least one of the money forms grows at an increasing rate — every recession except the most recent one:

Here, despite (or because of) worries about deficits, every measured form of money has shown a sharp decline in growth rate. Perhaps this overall decline in money growth is responsible for the slowness of the recovery — yet another bit of evidence that debt fear has hurt our economy, and increased federal spending is desperately needed.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity