Reality Check on "Dramatically Reducing Govt Spending"
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|Thu, 11-17-2011 - 2:28pm|
Here is an eye-opener for all of you "We need to dramatically cut Government Spending NOW, with NO increases in taxation!" crowd.
The graph below clearly shows the reversal in the decline of our Gross Domestic Product (GDP) after the implementation of President Obama's 'stimulus'. The 'why' behind this is the fact that Government Spending accounts for 38% of our GDP. The infusion of Federal funds actually worked to 'stimulate' Production - which is measured by the GDP - reversing the decline in GDP, and causing a near normal growth pattern in our GDP during the last two years.
Unfortunately, it seems to take significantly more than 'normal' growth in our national GDP to meaningfully reduce our currently horrific national unemployment figures. Comparing the above graph with the one below shows the direct effect on Employment of the huge dip of 4-5% in GDP following the Crash of '08 and the resultant Recession - an immediate rise from 5.5% unemployed to slightly over 10%. It also clearly illustrates how, once 'demand' suffers from high unemployment and consumer hesitancy, even 'normal' increases in our GDP do not quickly result in higher employment figures. (Interestingly, with so many still out of work, and the GDP going UP, someone is profiting from the increased productivity of our economy - and that someone is NOT American Workers. Who, I wonder, could those someones be?)
Now here's some quick math on the relationship between 'cutting' government spending and our GDP:
Percent of our GDP reliant upon Government Spending = 38%
Cutting Government Spending by 10% would remove 3.8% from our GDP.
Please compare the two charts again and consider the immediate results of a 3.8% retraction in GDP on our national employment rate. Only this time the effects would happen when the unemployment rate is already in excess of 9%!
Now, explain to me how we don't need a 'balanced' approach of tax increases and smaller federal budget cuts to effectively reduce our Deficit without further damaging our economy.
And then explain how you will deal with the massive rise in unemployment resulting from the affects of