Two articles this week have me rolling our eyes. Our political leaders in Washington – from both major parties – are leading us merrily down the road to financial disaster, and they don’t seem to give a damn! They have access to the same facts and figures as we do, but they’re terrified of actually doing something to correct the problem, for fear that the electorate will retaliate against them. Well, I have news for them . . . when reality hits home, they’ll be out on their ears anyway, because we’ll know where to place the blame.
First comes the news that the USA’s Gross Domestic Product hasn’t really been growing at all, despite government claims to that effect, and despite adding trillions more dollars to the national debt. Business Insider reports:
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 (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 trillionGDP 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.
. . .
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.
There’s more at the link.
Next, USA Today reminds us that the ‘official’ national debt bears no relationship whatsoever to the true national debt, because Congress doesn’t follow the accounting practices accepted as normal by business, commerce and industry. The government doesn’t account for its liabilities until it actually has to pay them. If they’re still a future cost, such as pensions for Government employees, or growth in Social Security and Medicare expenditure, it pretends these financial obligations don’t exist. The result is catastrophic, in financial terms.
The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security. That brings to a record $61.6 trillion the total of financial promises not paid for.
This gap between spending commitments and revenue last year equals more than one-third of the nation’s gross domestic product.
. . .
The $61.6 trillion in unfunded obligations amounts to $527,000 per household. That’s more than five times what Americans have borrowed for everything else — mortgages, car loans and other debt. It reflects the challenge as the number of retirees soars over the next 20 years and seniors try to collect on those spending promises.
Again, more at the link. Bold print is my emphasis. You can read more here about what makes up this monstrous debt. (If you want to see how it’s affecting your everyday purchases, Old NFO has a very illuminating table of statistical changes from January 2009 until now. Go read.)
The blunt truth is that such debts are already unsustainable, never mind allowing them to grow even larger; but right now, our politicians are arguing about whether to add a couple of trillion dollars more to our government’s authorized debt ceiling. Nero must be laughing in his grave!
Peter
So, exactly what mney is it that we're handing over to Greece?