Can We Please Stop Pretending the GDP Is "Growing"? State, National, International, posted by GX, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 2, 2011 at 8:13 am
While this is a reposting of another blog, I found the numbers and implication interesting. It definitely calls into question the efficacy of our current Keynesian experiment/deficit spending.
We ramped up deficit spending (essentially pulling forward demand) with the hope of kick-starting the economy. But we a debt-laden society, people can't afford to spend more. So we end up with a flat economy and a much larger debt burden and little hope of paying it back. Think about the implication of this for our future generations.
Can We Please Stop Pretending the GDP Is "Growing"?
The Federal Government borrowed and spent $5.1 trillion to get $700 billion in total GDP "growth" from 2008-2011. In constant dollars, there was no growth at all.
The Federal government borrowed and spent $5.1 trillion over the past four years to generate a cumulative $700 billion increase in the nation's GDP. That means we've borrowed and spent $7.28 for every $1 of nominal "growth" in GDP.
In constant dollars, GDP is flat: we got no growth at all for our $5.1 trillion: zip, zero, nada. In constant dollars, the GDP in 2011 might return to the 2007 level, if the economy continues "growing" at the same pace reached in the first three months of 2011. If not, then the GDP will actually be lower than pre-recession levels.
If you borrowed $7 to get $1 in your pocket, would that strike you as a good deal? How long do you reckon you could borrow $7 to get $1 of "growth" in your finances?
Let's say you need $3,000 a month to pay all the household bills. No problem, just go borrow $21,000 and your household economy will "grow" by $3,000. If this isn't the height of fiscal nonsense, then what is?
Here are the numbers, drawn from these sources: U.S. GDP by year and U.S. GDP in constant (2005) dollars.
Total public debt in 2007 (pre-recession) was $8.95 trillion.
Total public debt in 2010 was $13.53 trillion. This is an increase of $4.58 trillion. Add in the 2011 deficit of $1.6 trillion and the total is $5.1 trillion in additional debt in the four years from 2008 to 2011.
GDP in 2007 (pre-recession): $14.08 trillion
GDP in 2008 (recession starts): $14.44 trillion ($364 billion gain)
GDP in 2009 (recession officially ends in mid-2009): $14.12 trillion ($322 billion decline)
GDP in 2010: $14.51 trillion ($390 billion gain)
Let's be generous and assume the U.S. economy continues "growing" at the first-quarter pace of 1.8% for all of 2011: GDP advanced 1.8% in Q1 2011 (BEA). That would add $260 billion to the 2010 GDP, so the GDP at the end of fiscal year 2011 would total $14.77 trillion in nominal dollars. In constant dollars, it might reach back up to 2007 levels, but only if the economy doesn't roll over.
Total up the gains and declines in annual GDP for the four years from 2008 through 2011, and you get $690 billion. That's the total sum of each year's gains for the four years. That means we as a nation borrowed and spent $5.1 trillion to get $700 billion in GDP "growth." That means we borrowed and spent $7.28 for each $1 of nominal GDP "growth."
In constant (2005) dollars:
GDP in 2007 (pre-recession): $13.23 trillion
GDP in 2008 (recession starts): $13.31 trillion
GDP in 2009 (recession officially ends in mid-2009): $12.88 trillion
GDP in 2010: 13.04 trillion
GDP in 2011 (assuming 1.8% annual real growth): $13.3 trillion
In constant (2005) dollars, the economy actually shrank in the three year span of 2008-2010. Add in a couple hundred billion of real "growth" in 2011 and we're back to 2007 levels, at best.
That's what we bought with $5.1 trillion in additional debt and Federal spending.
Just as a refresher:
2007 $2.56 trillion
2010 $2.16 trillion
2007 $2.72 trillion
2010 $3.72 trillion
In three years, Federal spending jumped almost exactly $1 trillion, or 36.7%.
In 2011, the Federal deficit is 11% of the nation's GDP.
In 2011, the Federal government is borrowing 42% of its expenditures.
And don't forget, the recession ended in mid-2009, so we're two years into a "growing economy" here in mid-2011.
Does anyone seriously believe the economy won't buckle if the Federal government doesn't keep borrowing and spending 11% of the entire GDP each and every year until Doomsday?
All we're doing with these vast sums borrowed from future generations is propping up a bloated, no-accountability, cartel-Crony Capitalist/Central State Status Quo.
Here are the deficits of the past three years, and the estimated shortfalls for fiscal year 2011:
2008: $458 billion
2009: $1.4 trillion
2010: $1.3 trillion
2011: $1.6 trillion (est.)
These don't include "supplemental appropriations" for war costs, losses in Fannie Mae and Freddie Mac, etc., which is why the debt has risen by more than the sum of the "official" deficits.
Notice the trend here? The deficits keep getting larger as the "recovery" continues. If we keep "recovering" at this pace, we'll soon be borrowing 50% of the Federal budget each and every year.
And of course this doesn't include the $2 trillion increase in the Federal Reserve's balance sheet--trillions squandered on propping up the housing markets--(look how successful the Fed was in propping up housing valuations), nor does it include TARP and other "off-balance sheet" Treasury bailouts and guarantees.
I have covered this before in regards to the "self-sustaining recovery": Is the Recovery "Self-Sustaining"? Here's a Test (March 22, 2011).
Does borrowing and blowing $7 to get $1 of nominal "growth" seem like a good deal to you? Does it strike you as sustainable? If it does seem sustainable and a good deal, congratulations, you are qualified to run for Congress.
Posted by Where is b?, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 2, 2011 at 8:50 am
It sure will be interesting to get b's and other progressives' counter to this. Remember from their perspective "everything is OK" and it is the nasty Tea Party that is making a mountain out of a mole hill. Remember when b said a couple of months ago that real estate was ripping again. I sure hope b is not the financial advisor for the government union she represents.
Posted by b, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 2, 2011 at 1:23 pm
Classic TEA Party math - down is up, left is right.
I wonder what GDP and employment numbers would look like if the government had substantially reduced spending over the past two years, instead of increasing spending.
Why don't you take a stab at that number--just back out every dollar (and related jobs) that were paid for with stimulus dollars, TARP bailouts, auto industry bailouts, etc. Don't forget to back out the cumulative GDP impact of these workers re-spending the money they earned thanks to those programs.
You really want a scandal? Take a look at how these "tax cuts for the rich" have panned out. They were supposed to be stimulative...cut taxes for the wealthiest, and the benefits will trickle down. But all we have to show for 30 years of that policy is slowdowns in GDP growth whenever they're implemented, complemented by soaring deficits and debt.
Posted by b, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 2, 2011 at 1:33 pm
Yes, Stacey, the insults and personal attacks on this site do get tiring after awhile. It would be nice to be able to focus on real issues and real statistics, rather than ridiculous comments like, "I sure hope b is not the financial advisor for the government union she represents"
Posted by steve, a resident of the Parkside neighborhood, on Jun 2, 2011 at 1:46 pm
b, I'm afraid most of the stimulative impact of the 'tax cuts' was lost due to the spike in oil and gas prices. There's so many moving parts to our economy, you can't dismiss the tax cuts positive effect. Tax revenues are up since the beginning of the fiscal year, so that alone should tell you the cuts had the desired effect.
Posted by Did you fail math?, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 2, 2011 at 5:06 pm
LOL - of course b always finds a way to distort things. If the simple two numbers highlighted above (cummulative debt and change in GDP) are wrong, please do correct them.
And if you agree with the approach, shouldn't we be spending an infinite amount now that is debt financed and not worry about the future? How do you explain and/or justify the end-state examples like Greece? For years, they have spent more than they took in and now they are out of room. Please do help me understand why this policy makes sense and where is the positive example.
Even Keynes said you should only spend built-up surpluses during down turns. He never suggested deficit spending.
Funny how you constantly accuse others of funny math and numbers and can NEVER quantitatively justify your points.
Posted by reality speaks, a resident of the Amberwood/Wood Meadows neighborhood, on Jun 2, 2011 at 5:21 pm
The answer is simple. All Republicans and Tea Party need to unite and stand solid in eliminating medicare. It's the fiscally conservative thing to do. Only abolition of medicare will take us on the path to prosperity. End medicare! End entitlement groups' dependence on our parasitic government. Obama is a socialist!!! Down with Mohammed!!!
Posted by Time lost is gone forever, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 2, 2011 at 5:28 pm
b and steve are so off base. Newsflash, stimulus to cities for public employees & their pension funds, and to Auto worker unions, college pell grants given to inner-city youth for something to do, giving half-billion dollar gifts to solar startups who never got started, is NOT dealing with the economy. Dealing with the GDP is not watching small manufacturing close and literally disappear.
Wasting billions and billions of $, plus focusing on campaign agenda of 2000 pages under the guise of 'health care' LOST TIME which can never be recovered.! Those valuable early months the base of our economy was being lost, and will take multiple years of difficulties to HOPE to recover. But those important early months, with all of Washington screwing with everything under the sun thrown in, under the pretense of health care...for future years ...now HC is such a tangled mess, it may never get straightend out.. No, that is NOT dealing with the GDP !. The ' P ' in GDP means PRODUCTS !!! When the doors of small manufacturing are closing...there are NO PRODUCTS being manufactured !! get it ?????? PRODUCTS matter. Inner cities and public employees do not prop up the GDP of the USA ! ! We'll work on 'recovery' but sadly that up front 'lost time' can never be 'recovered' ! ! !
Posted by b, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 2, 2011 at 8:23 pm
steve said: "Tax revenues are up since the beginning of the fiscal year, so that alone should tell you the cuts had the desired effect."
These tax cuts were passed in 2001-2002. You're saying that they're just now having a positive effect, ten years later?
This economy has done nothing but improve since Obama's policies were implemented two years ago. Tax revenues are just one of many, many indicators that have shown consistent improvement.
Deficit spending during recessions has a long history of proven, successful stimulative impact. The problem is that you have to reverse the effect in the good years. Clinton successfully did it. Bush ran us off a fiscal cliff--tax cut and spend, spend, spend.
Posted by Time lost is gone forever, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 2, 2011 at 11:24 pm
b- obviously you aren't suffering consequences, or you would have to admit that Obama has not had JOBS, JOBS, JOBS, on his agenda...literally done nothing about the job situation. Of course that doesn't matter to people who usually don't work anyway.
All the rhetoric and hypocritical hyperbole will not help the pretense of an improving economy !! When companies close their doors, the jobs don't come back !
Posted by b, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 3, 2011 at 6:07 am
Obama has saved millions of jobs. These policies stopped the cliff plunge, stabilized the market, and have slightly improved the situation. We'd be at 30% unemployment if the government had recklessly pulled the rug out from under the economy, as you suggest.
You never did answer my question about what happens when you pull $2 trillion of spending out of the GDP numbers. You can't present this funny money analysis without also analyzing the consequences of your proposal. That's what makes it utter BS.
Posted by Did you fail math?, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 3, 2011 at 7:22 am
b - of course we both know the answer to your question. The recession would have been worse. It is a healthy part of the process and inevitable. If this had happened the downturn would have been significantly worse for a bit but we would have written down much of the debt that is now holding us down,bad companies (including more of those on Wall Street) would have gone out of business BUT we'd be on the road to recover.
Now all that has happened is all that bad debt has been transferred to the government, Wall Street has been saved and the middleclass has been shafted. Worse the stimulus money we spent wasn't spent productively so we don't have much to show for it. Much of it went to bail out Wall Street, favored and inefficient unions, and government empl0yee unions. Look at all the roads that were repaved that didn't need to be. Did those actions make our economy fundamentaly more productive? No.
We are now facing many years of the "recovery" we have experienced these past two years. Funny how we criticized Japan for the approach they took which has caused them to be in a continual recession for decades, but we are now doing the same thing.
So we have once again an economy that is stalling, a mountain of debt and huge entitlement bills that are coming due because of the retirement of the baby boom generation.
So back to the questions I asked you - what point were you trying to make with the wikipedia debt numbers you referenced?
Posted by b, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 3, 2011 at 8:57 am
OK, I'm baffled. You say this current approach is a problem, and then concede that it is what brought us back from the brink.
We've tried the classic Republican tax cut and spend approach, and that's been an utter train wreck, as shown in the link I posted.
So what exactly are you proposing here? This is my problem with the TEA Party approach. It is all about whining. But there are NO workable solutions on the table. Anyone can manipulate stats to make a point. If the problem is so obvious, why isn't anyone solving it?
Slashing a few million bucks from Planned Parenthood and NPR didn't get us there. Bankrupting Medicare means bankrupting the middle class. The TEA Party doesn't dare touch the military boondoggle. So what's YOUR proposal?
Posted by Time lost is gone forever, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 3, 2011 at 9:23 am
b- You seem to try to get politics in all your comments rather than discussing actual economics. I have not heard you ranswer for getting back the TIME lost when Obama focused on Health Care and his campaign agenda but IGNORED MIDDLE-CLASS JOBS IN MID-SIZED COMPANIES. How do we RECOVER TIME LOST....while the UNemployed class grows. Obama lost control in the beginning SADLY there are no do-overs.
Posted by Chunky, a resident of the Happy Valley neighborhood, on Jun 3, 2011 at 10:31 am
I agree with Time Lost. We need to assign a time-study supervisor to measure Obama's work performances. Time assigned to finding Osama bin Laden = +2; time assigned to health care = +3; time assigned to jobs, jobs, job = -4. But, from my time-study measurements, Obama is ahead of the game at +1. Go figure? HOW do you FIGure that Time LOST?
Posted by Did you fail math?, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 3, 2011 at 10:37 am
Having the government take on more debt to prop up the economy when we are already saturated with debt is like giving a drunk who wants to kick the habit one more bottle of wiskey to start his recovery. It doesn't work and it never has. Look at Greece. Is allowing such a bankrupt society to continue deficit spending fixing anything?
What is especially bad is taking on debt that doesn't create productive assets. The more debt is not creating any mechanism to dig out of the hole. It is in fact making the hole deeper. This is in fact what we have done these past few years. Yes, deficit spending stopped an even worse recession, but is this good thing?
So what would I do? I'd:
- Prosecute the crooks on Wall Street to re-establish a rule of law
- Let the "too big to fail" fail
- Let the Bush tax cuts expire
- Eliminate all corporate subsidises especially farm, oil and ethanol
- Bring Governement expenditures back in line with revenue by reducing the military, right-sizing Medicare and Social Security, getting rid of Obamacare and create true healthcare reform, right-size goverment workforce both in terms of numbers and compensation
I'm sure there is more to do, but this would be a good start.
So let me ask you a question since I've answered yours. What is the logical conclusion of your suggested approach of continued deficit spending? Can you share with us one current example of where this actually worked?
Posted by Time lost is gone forever, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 3, 2011 at 11:56 am
Chunky, you are easily confused since you don't know how to read.
The TOPIC of THIS thread is about the current hype to mislead and pretend the GDP is growing .....which readers know it is not. If you could read, you could check this week's economic/GDP confidence of the informed movers and shakers.
There is NO single success that will ever offset the economic/GDP situation for the now long-time UNemployed male... so you'll have to come up with something else.
Posted by question, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 3, 2011 at 12:02 pm
"Did you fail..",
Maybe your just so used to having people disagree with you that you thought I was? No, I don't disagree with your statement. Deposit insurance is costing taxpayers a bundle. You said "I'm sure there is more to do". I was asking a serious question.
Posted by Did you fail math?, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 3, 2011 at 12:19 pm
We are doomed - amazing but sad video. Hard to imagine this stuff still goes on in this economy. I guess this is what happens when you know someone will continue to bail you out. I'll bet these guys didn't get fired after this was exposed because they are part of a union.
There are absolutely no consequences in this country anymore for bad behavior and stupid decisions for anyone - that includes the government itself, Wall Street, factory workers ...
When are we as a society really going to get pissed and expect more from each other? There are so many parallels between Greece and the US these days.
Posted by Chunky, a resident of the Happy Valley neighborhood, on Jun 3, 2011 at 5:27 pm
Why is it that whenever I read someone say 'we're broke' I get the distinct feeling that THEY are not broke at all, but only want ME to think we're broke so that I'll be critical of state workers like they are, rather than being critical of the filthy rich yahoo who originally lied by stating 'we're broke'?
Posted by Did you fail math?, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 3, 2011 at 6:17 pm
tweet instead - do you appreciate how utterly incorrect and misleading the Reich number you quote is? The tax/GDP number is low simply because the Federal government is borrowing so much to prop up the economy. Think through it - the more the government borrows/spends and artificially inflates the economy, the greater their percent of GDP is and the less the tax paying portion is. Assume for a moment that the entire economy was made up from Government spending based on borrowed money, the tax/GDP ratio would be zero.
b - funny how you don't call out this distortion. Funny how you've gone silent. Cat got your tongue? Or maybe you've finally realized your basic tax/spend/feed the government employee unions is bankrupt.
Posted by ?, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 4, 2011 at 3:14 pm
With the Friday employment report and numbers heading in the wrong direction, it is going to be an interesting election cycle. Given the Fed and Federal government have already blown their wads, it will be difficult for them to artificially boost the economy in time for the next election.
Posted by tweet instead , a resident of the Another Pleasanton neighborhood neighborhood, on Jun 4, 2011 at 10:15 pm
Wow- Did you fail math? is not only full of himself, he now corrects the words Robert Reich said himself! I think I tend to believe him a bit more than your arrogant, flippant answers- when you posted-"I'll bet these guys didn't get fired after this was exposed because they are part of a union." It was definitely the tell-tale sign of your bias and distortion of the truth. Why you protect the true private sector criminals that have never been held accountable for destroying our economy is classic.
But hey, what ever makes you feel better, keep spewing.
Posted by PhD, a resident of the Amador Estates neighborhood, on Jun 5, 2011 at 2:11 am
(University of Phoenix in case your wandering).
We'll never get to have our Republican jobs agenda until we eraze Medicare and all the programs that kader to the old, the disabilitied, and all other spongers and freeloaders. People need to be held accountable and forced to become responsible.
Posted by Time lost is gone forever, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 5, 2011 at 1:46 pm
So what was Obama's first reaction to the pathetic job and unemployment numbers this week.... go to where he always goes...straight to Detroit to talk about jobs in an auto factory ! Obama has never addressed Main street USA, or small manufacturing jobs....only auto union, public union, and green jobs.....the 12+% UNemployed in CALIF be damned !! When a No Cal $90k/yr Dad is UNemployed for 51 weeks, there are serious consequences....in 10 yrs never missed a house payment, but retirement savings are about gone. Can't sell now that value has fallen below payoff. So Obama goes speak with auto union TV backdrop AGAIN ! ...so that solves all for long-term UNemployed ???
Posted by Perhaps?, a resident of the Happy Valley neighborhood, on Jun 5, 2011 at 4:14 pm
Perhaps the 90k per year dad was incompetent and shouldn't have been making half that?
Perhaps the 90k per year dad should have tried to organize his workplace as protection against arbitrary lay-offs and firings?
Perhaps the 90k dad should have used his time while drawing unemployment benefits to develop a (new) skill?
Perhaps the 90k dad should consider moving to the midwest where auto industry jobs have ticked up a notch?
Perhaps the 90k dad should consider how corporate America is sitting on its wealth, not hiring, in hopes that a more scalliwag-friendly administration will be voted in that leaves corporations to do the kinds of thing Enron and Lehmann Bros did with impunity?
Perhaps the 90k dad should quit bellyaching about an administration that has continually been hamstrung by Republican obstructionism?
Perhaps 90k dad's myopic focus on Obama as sole cause of his approaching indigence and destitution is a function of pin-headed ways of thinking through problems?
Perhaps it is not too outrageous at all to infer that 90k dad has drawn unemployment compensation while belly-aching about entitlement groups the entire time without recognizing the contradiction?
America: herein stands a case study of an uneducated public and the consequent inability to think through problems, personal, political, or otherwise.
Posted by Did you fail math?, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 5, 2011 at 7:17 pm
b - nice try of trying to duck a question. I'll repost them here since you have such a hard time finding them:
"So let me ask you a question since I've answered yours. What is the logical conclusion of your suggested approach of continued deficit spending? Can you share with us one current example of where this actually worked?"
Posted by Did you fail math?, a resident of the Another Pleasanton neighborhood neighborhood, on Jun 6, 2011 at 8:41 am
Seems like b can ask all sorts of opposing questions and challenge stated facts because they don't fit with his/hers distorted view of reality, but somehow can't find clearly stated questions and is unable to respond.
Notice how they are conveniently gone when they are challenged but readily comes back to the blog when they can respond on their own terms.
Posted by SteveP, a resident of the Parkside neighborhood, on Jun 7, 2011 at 9:03 am SteveP is a member (registered user) of PleasantonWeekly.com
'perhaps' your post is absent of the usual liberal compassion for those poor, unfortunate lost souls amongst us who can't live without the nanny state taking care of our every need. Where is your (bleeding) heart?
You said "quit bellyaching about an administration that has continually been hamstrung by Republican obstructionism?" Where were you and your messiah when the Dems were in the majority from 2006 through 2010? Not making the economy any better, that's for sure. No, you and your ilk were occupied with preserving illegal immigrants 'rights', gay 'rights', infanticide, and your numerous other immoral and degenerate policies.
'America: herein stands a case study of an uneducated public and the consequent inability to think through problems, personal, political, or otherwise.'
Speaking of which, what's up with the latest trend of liberals posting as 'extreme right wingers' and intentionally misspelling every other word. Do you guys really have that much free time that you're now arguing both sides of an issue? Maybe you should post under the name Cybil, instead of Phd.