Reality Check on "Dramatically Reducing Govt Spending"

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iVillage Member
Registered: 06-28-1997
Reality Check on "Dramatically Reducing Govt Spending"
74
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.

Graph of Real Gross Domestic Product

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%

So:

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

~ SW

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iVillage Member
Registered: 10-25-2006

<>

That is exactly what the conservative righties want.

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http://www.pnhp.org/news/2009/october/meet_the_new_health_.php

http://www.youtube.com/watch?v=DQTBYQlQ7yM

iVillage Member
Registered: 11-20-2011

Wow, do you honestly believe what you said?

Do you really think that the conservatives WANT to start wars?

Avatar for songwright
iVillage Member
Registered: 06-28-1997

Sigh . , . It is truly hard to have a substantive discussion when folks continually ignore the topic and instead throw around simplistic ideological sound bites like they were some basic 'Laws of the Universe'. My OP was in no way a defense for the status quo that has led us to crippling levels of government borrowing and deficit. BUT! There is no 'quick fix'. The statistics I showed are pretty much incontrovertible (and currently accepted by almost all reputable economists) -- We have to be very careful about how quickly we reign in government spending, lest we throw our already struggling economy into an even deeper recession!

Remember, it wasn't governmental spending that caused our current economic woes. They are a direct result of the greed and recklessness of the Financial sector. When the economy tanked, revenues plummeted, and the government was forced to borrow more money to 'stimulate' the economy to prevent an even worse situation. The top graph on my OP clearly shows that, contrary to current Conservative talking points, the 2009 stimulus reversed the decline in GDP and stabilised our economy. But with the financial sector continuing to sit on $4Trillion in assets (rather than investing it in the country whose flag they all so proudly wave at GOP events), the economy is still tottering on the brink, with 9% statistical and almost 17% real unemployment. It is obvious that any cuts we make to government spending in this economy need to be very carefully considered. Instead, we have a bunch of extreme Right Wing idealogues chanting 'Cut Spending' and 'Cut Taxes on the Job Creators' - with obviously NO CLUE about the actual real-world ramifications of such a policy. And with revenues not currently meeting expenses, it is ridiculous that the very people who are benefitting the most from our current economy (the top 5%) are paying a substantially smaller share of their earnings to support our government than the average blue-collar worker or low level professional in our society.

lizzi b: The government doesn't make anything, so any government spending is a financial loss to our GDP.

anthony60: What are you referring to with "Government Spending accounts for 38% of our GDP"? That's a little confusing because there is no product made by the government, it actually sucks productivity out of the private sector.

~ SW

iVillage Member
Registered: 03-02-2009
songwright wrote:

lizzi b: The government doesn't

"Resist, we much. We must, and we much. About that, be committed."

iVillage Member
Registered: 11-20-2011

Anthony60 wrote:

"A few posts that I've seen here the last few days really explain a lot, now I know more about why liberals think the things they do. Unfortunately, it's based on false premises."

Scary isn't it?

iVillage Member
Registered: 05-13-2009
Really? Doesn't produce anything? Are you serious? Did you listen to Eisenhower on the M-I complex?

Lockheed Martin Corp, General Dynamics. Boeing, Northrop Grumman...Among the biggest companies in the US sucking on the teet of the US government.

These companies would not exist without the US government.
iVillage Member
Registered: 10-25-2006

Yes.

-----------------------------------------------
http://www.pnhp.org/news/2009/october/meet_the_new_health_.php

http://www.youtube.com/watch?v=DQTBYQlQ7yM

iVillage Member
Registered: 03-02-2009
chestnuthooligan wrote:
Really? Doesn't produce anything? Are you serious? Did you listen to Eisenhower on the M-I complex?

Lockheed Martin Corp, General Dynamics. Boeing, Northrop Grumman...Among the biggest companies in the US sucking on the teet of the US government.

These companies would not exist without the US government.
All good examples of the government buying stuff, with our tax dollars, and producing NOTHING. At least they are performing a legitimate function of government, the national defense. But again, producing NOTHING.
Wow, first the they didn't know that the federal government was created by the states, now they think it produces something. I can only hope that this will help the left see our government in a new light, one that reveals that all the trillions that it spends every year is way more than we need to spend for legitimate governmental function.

"Resist, we much. We must, and we much. About that, be committed."

iVillage Member
Registered: 09-30-2011

Sigh . , . It is truly hard to have a substantive discussion when folks continually ignore the topic and instead throw around simplistic ideological sound bites like they were some basic 'Laws of the Universe'.

You mean like the liberal mantra "government spending creates jobs and grows the economy?"

iVillage Member
Registered: 09-30-2011

Really? Doesn't produce anything? Are you serious? Did you listen to Eisenhower on the M-I complex? Lockheed Martin Corp, General Dynamics. Boeing, Northrop Grumman...Among the biggest companies in the US sucking on the teet of the US government.

Er...right...PRIVATE companies servicing the needs of the US government.

These companies would not exist without the US government

I think you should do a little more research if you think the US government is the only client of the businesses you mentioned.

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