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: 09-30-2011

To be fair, owning large shares of GM, the US and Canadian governments do produce cars. ; )

iVillage Member
Registered: 05-13-2009
General Dynamics Defense revenue = $6,186,922,361, Civilian revenue = $540,310,194. 08% of the business is civilian revenue. Research done.
iVillage Member
Registered: 03-02-2009

General Dynamics sure made a lot of stuff, didn't they? Oh, and the government still produced NOTHING.

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

iVillage Member
Registered: 09-30-2011

Sorry, but i don't know what your point was.

iVillage Member
Registered: 05-13-2009
lizzie_B wrote:

Sorry, but i don't know what your point was.

This post doesn't sound vague familiar?

Me: 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.

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

Me: These companies would not exist without the US government

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

iVillage Member
Registered: 11-20-2011

Just curious, who else would defense contractors do the majority of their business with?

iVillage Member
Registered: 11-20-2011

chestnuthooligan wrote:

"The largest defense contractors do frighteningly little civilian business."

Why is that frightening?

iVillage Member
Registered: 05-13-2009
Because if the 2013 sequestration cuts go into effect, millions will lose their jobs.
iVillage Member
Registered: 05-13-2009
Well, if their biggest customer no longer can buy the services, then these companies will not exist. If the government does not provide security, then anarchy and chaos would fill the vacuum.
iVillage Member
Registered: 09-30-2011

My point, which you disputed and asked me to do the research, was that defense contractors do most of their business for the government and could not exist without government spending. Well, I did. The research is indisputable. The largest defense contractors do frighteningly little civilian business

First, I didn't say that a US defense contractor didn't necessarily do the bulk of it's work for the US military and I also didn't limit their extra-US military work to "civilian business."

It didn't take much looking, and we've only scratched the surface, but as you can see, all of the contractors you mentioned do extensive commercial work as well as work for foreign governments and companies.

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