Thursday, April 28, 2011

One more for the collection

SOURCE: GAO via Wikipedia


Greg said...

The stupid thing about that projection on the graph is that it is assuming current paths of GDP growth and federal debt growth forever. If GDP doubles from our current level then the ratio is cut in half immediately without any change in the debt level.

We need to increase GDP and our "debt ratio' problems will be solved.

The Arthurian said...

Greg, you're missing the Royal Wedding!

We need to increase GDP and our "debt ratio' problems will be solved.

How can something be so clear to some people and so dark to others?

Back in the mid-1990s the Wall Street Journal and the Investors Business Daily (among others) were concerned about slow growth of GDP. Both newspapers showed graphs of Federal Spending relative to GDP and claimed that the up-trend on their graphs was due to the growth of Federal Spending. Both craftily neglected their own initial complaint that GDP was growing too slowly.

The denominator problem fools many people. "The stupid thing"

Greg said...

So the question needs to be asked.... can we increase GDP without increasing govt spending and govt debt?

Yes under a couple conditions.

1) The private sector takes its current income and spends more of it and in addition takes some of its current savings and liquidates it to pay down debt.

2) The private sector borrows more

Do many people really want to do #1 with the future prospects so uncertain? People want to save more now not less, and I think that is rational. #2 just puts us back on our path of the last 25 years.

The ONLY sane options are increased govt spending and a certain level of debt forgiveness. It must be recognized that debts that cant be paid wont be paid and lets move on.