Reality Check on "Dramatically Reducing Govt Spending"

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


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


iVillage Member
Registered: 02-05-2011
So lets print a 300 million trillion dollar bills and send a trillion dollars to everyone in this country.

Imagine how enormous our GDP would be then, we would all be fabulously wealthy.

Not possible that a plan like that could have any pitfalls, now is it?

If some small inflation occurs, we can just mail 2 trillion dollar bills the next day, and 3 trillion after that.

Poverty solved, GDP through the roof, and a happy future for all.

Excepting the total crash of our currency. :)

Now, deduct the cost of the borrowing and inflation against the gdp growth.

Then visit shadowstats and see what the real unemployment and inflation rates are.
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Registered: 02-15-2007

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Registered: 02-15-2007

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Registered: 11-10-2006
Ok... Maybe it's the unisom talking right now. But I am really enjoying the banter thing you guys got going on. if I didn't get a kick out of the "freaks outs my ...." comment (that's right chestnut, I genuinely enjoyed that), I loved picturing a butter fight in the cow try. Anyhoo.... This is some really interesting stuff. I can always count on you guys for some great info.... And a giggle too. Now that I feel like that drunk person that's always hugging people.... I'm history. Ha!