[Attention Surplus Disorder]

Hey, we’re running $1.2, $1.4 trillion deficits in a $14 trillion dollar economy, right?

So government spending well over what gov’t receipts in tax revs is 10% of the economy, right?

And the government borrows 43% of every dollar it spends, right? Let’s call it 40%.

So correct me if I’m wrong. 40% of 10%, or 4% of our GDP just simply does not exist based upon organic demand. It “tallies”, it exists on the coin counter because the government borrows money and spends it.....somewhere.

Our growth rate is cited as 1.5%, 2%, 3% depending upon whom you wish to listen to. But 4% of it is non-existent.

The inescapable conclusion is that there is no growth in the economy absent government deficit spending. In one sense, the Timmy Geithners of the world are right: If we balanced the budget tomorrow the economy would shrink by 4%, which would probably be called and feel like a more-than-mild recession. Add in the knock-on effects and it would be worse.

Oh, and this condition has existed since 1983.

[NVDave]

You’ve nailed the underlying issue: A component of our “GDP growth” is based on borrowing from the future. It’s a mirage, a fraud, wrapped in BEA/BLS accounting to legitimize it.

[TennesseeProfessor]

Very definitely some scary statistics you quote, but it’s not as dire as you conclude. If the US government stopped borrowing, all the money currently going to buy T-bills would go elsewhere, possibly including funding new startups, low-interest business loans, buying new bonds, ... all of which would grow our economy much more than government spending.

Unfortunately, lately the Fed has been one of the biggest buyers of T-bills which means the last 2 years of our economy have been largely fictitious.

[Principled]

The inescapable conclusion is that there is no growth in the economy absent government deficit spending. In one sense, the Timmy Geithners of the world are right: If we balanced the budget tomorrow the economy would shrink by 4%, which would probably be called and feel like a more-than-mild recession. Add in the knock-on effects and it would be worse.

Yep. But while our medicine will make us worse off for a bit, it's the only way to get well.

[Captain Peter Blood]

The short term effects would be worse than that. The contraction would be more like 50%.
We are borrowing .53 cents of every dollar spent.
To put things in immediate balance would require across the board spending cut us of at least 50% or more and no more debt.
That in itself will mean massive reductions in Social Security and Medicare benefits and the Baby Boomers heading into retirement get nothing.