Spending, Deficits, and Our New GDP

Townhall.com ^ | August 20, 2013 | Mike Shedlock

[Kaslin]

Here are a few charts from reader Tim Wallace on spending, the deficit, and GDP.

Federal Spending as a Percentage of GDP



Spending and GDP in U.S. Dollars



Deficit Compared to Revenue



Wallace writes ...

 Hello Mish

1. In the past 48 years we have averaged about 19.3% of GDP in federal spending. Since 2009, federal spending has averaged 22.7% of GDP. 

2. The second chart shows 4th quarter GDP numbers along with the federal spending numbers. Note the huge surge in 2009 which has never been pulled back. 

3. The last chart shows deficits as a percentage of revenue. Historically, the average is 17.5%. Since 2009 however, 52.7% of spending has been deficit spending. 57 cents of of every dollar spent was borrowed.

My contention is that there has not been an economic recovery, just deficit spending by government to cover up failed economic policies.

[Tenacious 1]

My contention is that there has not been an economic recovery, just deficit spending by government to cover up failed economic policies.

I've been saying something similar (maybe the same). Maybe somebody can set me straight on this.

First, when did we start counting government spending as part of the GDP? The government produces nothing. There is no "product" to include in the Gross Domestic Product. Next, if we are counting the federal economic activity as part of our GDP, and the economy is supposedly "growing" at 1.7%, how much by % is the "growth" of government adding to the entire equation?

Government spending actually takes wealth out of our economy (shrinks it). If its included in the calculation, it should be included as a deduction (like the tax code calculations).

[KOZ.]

ping

[Pietro]

What these charts show is how effective the tea party has been in reversing the runaway spending.

There's still much to be done, but we can make a difference.

[staytrue]

fyi, from wiki GDP = private consumption + gross investment + government spending + (exports − imports) I am not saying I agree with it, it just is.

[4Liberty]

Private spending is voluntary market spending, and so indicates free market value to both buyer and seller.

Govt spending is coerced spending by a plurality of voters or influential pressure groups. It is not voluntary or unanimous, as we taking place in markets. Therefore, G, Govt spending, is of unknown value at best, except to the interest groups that receive it.

Two economists from Ohio university, free market types, wrote an article years back, entitled, “Let’s take the ‘G’ out of GDP” — referring to staytrue’s classic economics formula (GDP = C + I + G + net X) for these reasons.

Increase in G, ‘Govt spending’ does raise the total GDP figure.

But it’s neither wealth or growth — it’s largely economic theft & corporate welfare (bailouts, subsidies, forced transfers).

Unless it is allocated for true collective goods — Highways, National Defense services, etc.

4L

[DBeers]

2. The second chart shows 4th quarter GDP numbers along with the federal spending numbers. Note the huge surge in 2009 which has never been pulled back.

How odd? It's as if the country still operates on the 2009 Federal Budget, the one passed when leftists controlled House & Senate, the one passed to STIMULATE, the one that has been maintained through continuing resolution with automatic inflation increases, THE ONE WITH SPENDING THE 2010 House was elected to eliminate!

Talk about taxation without representation! The US is still spending like the leftists are the majority in the House!