With all the talk about Obama’s financia mess (deficits of >$9 trillion), I was wondering how this debt compares (in magnitude) to that faced by the British Government, at the end of the Napoleonic Wars. Briain had borrowed heavily to finance the war…and the Royal navy had been vastly expanded , in order to defeat Napoleon. I belive the British had a major crisis-Dutch and Austrian Banks were reluctanct to advance more credit, and Britain faced the task of demobilizing thousands of soldiers and sailors, and reviving industries that were used to war orders.
I belive that the British Chancellor of the Exchequer (Ricardo) got the idea of floating long term/purpetual bonds (consols)-should the USA follow this practice?
Are we in a worse position than Great Britain, ca. 1815?
Interesting question. I’ll hijack it by linking to a comparison between current US borrowing and the debt we had immediately after WWII.
Later he adds a caveat though.
I see that Britain had a debt topping 200% of GDP after WWII: http://www.economicshelp.org/2009/03/historical-national-debt.html
(Also: google debt gdp UK historical napoleonic war for some relevant .pdfs)
On paper, no. The British debt was about 260% of GDP in 1820; see here. The US ratio at the moment is, I believe, around 80%.
At first glance, this appears to support the notion that there is nothing to worry about. However, we face two issues that the UK didn’t in 1820. First, the UK deficit was based mostly on military spending, which could be (and was) cut with the coming of peace. Our government spending goes mostly toward social entitlements which are much more difficult to cut.
Second, the US (and most modern governments) face unfunded liabilities–that is, promises of future benefits (in the US, mostly Social Security and Medicare) which don’t show up in the official accounts. The UK faced no such equivalent in 1820. The unfunded liabilities of the federal government dwarf the nominal deficit by three or four times.
Most of our social liabilities (SS and Medicare) are completely funded by their own taxes though. So far as I know, they’ve never run a deficit and are responsible for 0% of the current debt, even though they’re responsible for most of the current spending. This is projected to end sometime in the future (this year, maybe, for Medicare), but solving this problem is simply a matter of readjusting the benefits and taxes. I seriously doubt the programs will be allowed to run deficits for more then a few years, simply because such a thing is so obviously unsustainable.
Excluding the Stimulus program, the bulk of the remaining budget is defense spending and interest on past debts (which themselves are largely due to past defense spending), similar to the post-Napoleonic situation in Britain.
That’s a lot of assumptions.
The problem is that ther government has been borrowing from Social Security since time immemorial. However, that won’t continue forever (unless they keep reducing benefits head of it), and the money is going to have to go back in, and soon. Plus, this will herald the considerable reduction of income to the program on a massive scale, because the retirees won’t be working (obvious, I know). It’s going to be an ugly political fight. The AARP is going to fight like only senior citizens can.
But more immediately, the general racheting up has caused currency issues and may seriously weaken the dollar. The decline has already started, thanks in no small part to Turbo-Tax Tim Geithner.
Thanks, it is goo to know that the UK face much worse. What are the chances that Tim Geitner will be able to refinince the ebt, ala Davi Ricaro? Purpetual bons sound cool!
Sorry for this, just wanted to point out I think it’s a bit unfair to call it “Obama’s financial mess” as some commentators have done. In fact, as this article points out, 90% of the current deficit stems from either business conditions - ie. the 2001 and 2008/2009 recessions reducing tax revenue - or policies initiated by George W Bush. Obama’s fiscal stimulus is 7% of the deficit and his plans for health care, education, energy and other areas only amount to 3% combined.
And that does relate to your question: as people have pointed out, the British government faced a much higher debt-to-GDP ratio back then, but the problem for the US right now is that some of the main drivers of the debt in the future will be social programs that will be very hard to scale back. The main one is Medicare, along with Social Security and Medicaid. As this Politifact article says:
As the article goes on to say, even if Obama managed to pass his entire healthcare agenda undiluted by the Republicans (which isn’t going to happen), even that wouldn’t stop the growth in the deficit driven by healthcare costs. I’m sure they’ll figure a way to solve the problem (it’ll have to involve some serious pain somewhere), but it doesn’t look good, does it? 
“John Bull’s Progress” which can be seen here, third illustration down, was a contemporary satire of how the war impoverished Britain.
The Napoleonic wars tended to deny markets to UK products on the continent and also in the Americas.
In the twenty years or so following the Napoleonic, \Britiain experienced something of a boom, and its this period as much as any other that set the ground for the massive expansion of the northern Victorian cities such as Manchester, and especially Leeds which had suffered greatly during the loss markets for its pimary products, cloth, clothing, leather goods - at one time literallly one third of Britains export wealth passed through Leeds.
I know we tend to think of the industrial reviolution as a 19thC thing, but the huge growth in production, factories, engineering etc took place largely in those years following the Napoleonic wars.