Look no further than the latest Flow of Funds data from the Federal Reserve Board to get a snapshot of what’s happened in the U.S. economy during the new millennium.

Because “credit is the mother’s milk of the economy” let’s focus on debt growth by each sector.

…credit is the mother’s milk of growth; without credit the economy cannot flourish. And credit cannot flow freely without a well-functioning financial system. – Mark Zandi

Reagan Keynesian Recovery
But, first,  take a look at the credit binge during the Reagan expansion of the 1980’s.  Double digit debt growth from 1982, when the economy began to emerge from a deep recession to 1986.  Almost all sectors experienced rapid credit growth during this period.

Not to downplay the supply-side structural reform under Reagan, which we always support,  but it sure looks like his economy was a classic debt-fueled Keynesian expansion. The data are undeniable.

An Aside:  IMF and World Bank
Comprehensive economic policy during an economic crisis, either hyperinflation or a depression/deep recession, for example, consists of both stabilization and structural reform.

Traditionally, in emerging markets, the International Monetary Fund (IMF)  is charged with stabilizing a country during an economic crisis through various macroeconomic policies, both fiscal and monetary.  The World Bank then moves in with structural adjustment and reform policies and financing to “fix” the economy.

At least, that was the case when we were there in the mid-1980’s.   Note, we worked at the World Bank in the mid-1980’s on Chile’s first structural adjustment loans.   Add that to our work on Poland and we are proud to say we helped reform two of the best performing emerging market economies over the last 30 years.  Economic superstars!

That’s our epithet.

W Bush’s Economy
Starting in 2000 notice the rapid expansion of mortgage debt,  double digit growth from 2000 to 2006.  This fueled the housing bubble and the use of home equity to finance consumption.  Home equity as an ATM stimulated aggregate demand.  The housing/credit bubble was instrumental helping the economy emerge from and avert a very severe recession brought on by the crash of the stock market, which began in early 2000.   One bubble replaced by another more onerous, dangerous and debilitating housing/credit bubble.

The Great Recession
Notice, the collapse in household debt growth in 2008.  The deleveraging of the consumer and business sector, coupled with state and local governments,  led to a severe downturn in domestic demand and resulted in the great recession.

The federal government did exactly would it should do during a deep recession through a debt-fueled fiscal expansion.   Annual debt growth of the federal government exceeded or came close to 20 percent from 2008-2010.   The alternative do-nothing policy was a Great, Great, Great Depression.  We can’t emphasize enough the word Great.

Yes, but debt rose several trillion dollars under Obama?   Yadda, yadda, yadda!

Don’t get us wrong,  we are the first to say, or scream, that the country needs a long-term structural plan to deal with our national and private debt obligations.   Economic stimulus should be temporary and used only during downturns.  Simpson-Bowles, anyone?

We give an A plus to the Obama policymakers for averting a catastrophic global depression.  There is no doubt, at least in our minds, if not for their and the Fed’s bold stabilization policies,  all of us would be living under martial law and probably under a freeway eating bark.   Counterfactuals can’t be proven, but this, we are pretty certain.

President Obama, not so good on structural reform, however.   Could have been better and probably constrained by the “do-nothing, obstructionist Congress.”

Enter Trump
The markets have high hopes for the Trump Administration introducing and implementing vast structural reforms in the economy.  The new president inherits a relatively strong economy and won’t be distracted and busy trying to stabilize a collapsing economy as President Obama was at the beginning of his Administration.

This should allow him to focus on the needed reforms to get the economy back to a higher growth trajectory, especially given he has a ruling majority in Congress.  No excuses.

Here’s to hoping they are the right policies.

The Administration can start by jettisoning the disastrous Border Adjustment Tax (BAT) idea, which will severely hurt President Trump base voters through higher inflation and job layoffs in our WalMart nation, in order to finance tax cuts for higher income earnings.  Economic and political nonsense, in our opinion.

We are rooting for you, Gary Cohn.