The Gross Domestic Product (GDP) is the dollar and cents value of all the goods and services produced and consumed or purchased in one fiscal year. It is a measure of the productivity of the nation expressed as a number, which is reported quarterly and allows us to see growth or shrinkage in the overall economy. It can also be measured by a comparison of all yearly incomes and is, then, a statistic that tells us the immediate economic condition of the nation.
Toward the end of 2008, with the Real Estate Debacle, the National Economy crashed. The country was saved from falling into a deep depression by the actions of Presidents Bush, Obama, and Congress. Even though the economy was saved from disaster unemployment fell to over ten percent, with many other people being either partly employed or under employed. The value of most homes fell with many either being underwater or, with constant refinancing, being at the bottom of the ocean. From 2010 on, with the election of a Republican majority in the House of Representatives, nothing was done to alleviate the poor economic situation. In fact there was more job shrinkage with the Republicans in the House and the filibustering Senate minority undergoing a policy of economizing. There has been no fiscal policy from Congress since 2011. In the Federal Reserve, imaginative ways have been utilized to increase the amount of money in circulation and help solve the housing disaster.
What has happened since 2009 is that there has been economic recovery but today unemployment is hovering just below eight percent.
The hue and cry around Congressional Washington D.C. is that we have to economize, gain control over our National Debt. The U.S. currently owes over sixteen trillion dollars and is spending more than it is taking in taxes. The current argument is that we cannot bankrupt our children by leaving them owing this inordinate amount of money.
If we go back to the amount of money this country spent fighting World War I and the amount we lent to our allies then which, after 1929, was never paid back; to the amount spent by the Roosevelt Administration from 1933 on, when he assumed office; fighting the Great Depression; to World War II when we were the Arsenal of Democracy and paid for ourselves and our allies fighting the war; to the European Recovery Act of 1948 (The Marshall Plan), and to Korea and Viet Nam. All of these required negative financing, presumably spending money we did not have. Yet none of these massive expenditures brought poverty or hardship to future generations of Americans. In fact what these outputs of money did was to greatly grow the economy so that debt as a percentage of the GDP actually diminished because of the economic growth.
After World War II the United States emerged as a middle class nation with full employment and there was a much higher standard of living for everybody. The Marshall Plan was a checkbook to European countries to enable them to recover from the war by spending the money we gave them in the U.S. In both the Korean and Viet Nam Wars the United States was able to produce both guns and butter, fight the wars and provide for the population of the country.
In none of these cases was any real debt transferred to future generations. What occurred was a growing standard of living for everyone. Why would the situation be different now if the government used fiscal policy to create jobs by rebuilding the infrastructure of the United States? The result would be a lessening of unemployment and a lessening of the National Debt as a percentage of the GDP. A little bit of money spent would create a lot of money collected by all levels of government in taxes.
As a footnote: the National Debt consists of two parts, private and public debt. Public debt is the money the government has borrowed from many of its own agencies that have surplus funds, like social security which holds over two and a half trillion dollars of the debt. The Federal Reserve is and has been spending forty billion dollars a month purchasing its own debt. In fact the government admits to holding over forty percent of the National Debt. By my estimate it owns well over sixty percent of its own debt. Twice, that I’m aware of, in 2012 the Federal Reserve quietly transferred 89 billion dollars to the Treasury.
Where are the real economic problems? The Republicans are creating them by their actions in Congress. They and a number of Democrats agree that the major problem is the Debt and not creating jobs for the unemployed. What these people have created is a sense of irony, creating problems that exacerbate the negative aspects of our current situation. Isn’t it time to take a realistic look at the economic problems of the United States and focus on job creation rather than shrinking the economy to attempt to pay off the National Debt?