Monday, March 26, 2012

What is the Real Gross Domestic Product?

As explained earlier here the Gross Domestic Product (GDP) was created in 1934 to give a figure for national production. The big problem with the GDP is the actual equation, Y = C + I + G + NX.
It should read Y = C + (1.05) I – G + lNXl with government counted as a negative and NX in absolute value terms.
The actual equation is Y, or Gross Domestic Product, and the four independent variables that are;
C = Consumption. About 70% of the US economy, typically 60% elsewhere.
I = Investment. The most important portion of the economy.
G = Government spending. The negative portion of the economy and most corrupt.
NX = Exports minus Imports. This accounting method dates back to the days of mercantilism economics.
The problem is that government is treated equally as consumption and investment. Nothing could be further from the truth. Government is a dead weight on society and steals resources from the productive private sector. Some government is needed; police, judicial, and social justice at the local level, but the federal spending level should NEVER exceed 18% of the GDP.
Why?
There is decades of budget data showing that since WWII whenever the federal government consumes more than 18% of the GDP 91% of the time a budget deficit will occur.
There is decades of budget data showing that since WWII whenever the federal government consumes more than 20% of the GDP there has NEVER been a balanced budget.
So why do it?
As can be seen with the Obama Administration it comes down to thieves stealing as much loot as possible from the taxpayers and distributing it among like minded thieves, usually unions, state and local governments, and others dependent on the public purse for their livelihood. The thieving of the productive portion of the economy continues until the economy collapses and the host dies. Only then will the government parasites leave the host. The founding fathers referred to it as revolution.
In the past the federal government showed the peasants respect, consuming less than 18% of the GDP in the 1950s, 60% of the time, the 1960s, 30% of the time. Since the end of the gold standard and the Bretton Woods system in 1971 the federal government has consumed more that 18% of the GDP every single year. The lowest it has been since 1971, is under Bill Clinton, 18.2%. In that time we have had budget deficits 90% of the time, the only reprieve under Clinton and one year of Bush.
The reason budget deficits are important is they show the federal government overreaching into the economy and crowding out private sector investment that would have produced goods and services that the people wanted, the creation of jobs that would be sustainable and productive. Contrasted by government worker pretend work that at best, drains resources, and at worse, destroys productive jobs.
So here is the GDP for the last 40 years in 2005 dollars (adjusted for inflation) with and without government.
Date…………GDP (billions)….GDP (- fed gov.) …Federal Consumption%…Labor Force %
1971-01-01…… 4409.5……….. 3549.6………………………. 19.5…………………….. 56.6
1972-01-01…… 4643.8……….. 3733.6………………………. 19.6…………………….. 57.0
1973-01-01…… 4912.8……….. 3994.1………………………. 18.7…………………….. 57.8
1974-01-01…… 4885.7……….. 3972.0………………………. 18.7…………………….. 57.8
1975-01-01…… 4875.4……….. 3836.9………………………. 21.3…………………….. 56.1
1976-01-01…… 5136.9……….. 4037.6………………………. 21.4…………………….. 56.8
1977-01-01…… 5373.1……….. 4255.4………………………. 20.8…………………….. 57.9
1978-01-01…… 5672.8……….. 4498.5………………………. 20.7…………………….. 59.3
1979-01-01…… 5850.1……….. 4674.2………………………. 20.1…………………….. 59.9
1980-01-01…… 5834.0……….. 4568.0………………………. 21.7…………………….. 59.2
1981-01-01…… 5982.1……….. 4654.1………………………. 22.2…………………….. 59.0
1982-01-01…… 5865.9……….. 4510.9………………………. 23.1…………………….. 57.8
1983-01-01…… 6130.9……….. 4690.1………………………. 23.5…………………….. 57.9
1984-01-01…… 6571.5……….. 5112.6………………………. 22.2…………………….. 59.5
1985-01-01…… 6843.4……….. 5283.1………………………. 22.8…………………….. 60.1
1986-01-01…… 7080.5……….. 5487.4………………………. 22.5…………………….. 60.7
1987-01-01…… 7307.0……….. 5728.7………………………. 21.6…………………….. 61.5
1988-01-01…… 7607.4……….. 5987.0………………………. 21.3…………………….. 62.3
1989-01-01…… 7879.2……….. 6208.8………………………. 21.2…………………….. 62.9
1990-01-01…… 8027.1……….. 6269.2………………………. 21.9…………………….. 62.8
1991-01-01…… 8008.3……….. 6222.4………………………. 22.3…………………….. 61.7
1992-01-01…… 8280.0……….. 6450.1………………………. 22.1…………………….. 61.4
1993-01-01…… 8516.2……….. 6693.7………………………. 21.4…………………….. 61.7
1994-01-01…… 8863.1……….. 7001.8………………………. 21.0…………………….. 62.5
1995-01-01…… 9086.0……….. 7214.3………………………. 20.6…………………….. 62.9
1996-01-01…… 9425.8……….. 7521.8………………………. 20.2…………………….. 63.2
1997-01-01…… 9845.9……….. 7925.9………………………. 19.5…………………….. 63.8
1998-01-01…… 10274.7…….. 8312.2………………………. 19.1…………………….. 64.1
1999-01-01…… 10770.7…….. 8778.1………………………. 18.5…………………….. 64.3
2000-01-01…… 11216.4…….. 9175.0………………………. 18.2…………………….. 64.4
2001-01-01…… 11337.5…….. 9274.1………………………. 18.2…………………….. 63.7
2002-01-01…… 11543.1…….. 9338.4………………………. 19.1…………………….. 62.7
2003-01-01…… 11836.4…….. 9504.6………………………. 19.7…………………….. 62.3
2004-01-01…… 12246.9…….. 9846.5………………………. 19.6…………………….. 62.3
2005-01-01…… 12623.0…….. 10111.0…………………….. 19.9…………………….. 62.7
2006-01-01…… 12958.5…….. 10353.8…………………….. 20.1…………………….. 63.1
2007-01-01…… 13206.4…….. 10617.9…………………….. 19.6…………………….. 63.0
2008-01-01…… 13161.9…….. 10437.4…………………….. 20.7…………………….. 62.2
2009-01-01…… 12703.1…….. 9527.3………………………. 25.0…………………….. 59.3
2010-01-01…… 13088.0…….. 9973.1………………………. 23.8…………………….. 58.5
2011 (est)…….. 13249.9…….. 9897.7………………………. 25.3…………………….. 58.2
As can be seen the productive sector of the economy peaked out in 2007 and is currently down 6.8% from the 2007 level. Trillions of dollars wasted to accomplish nothing more than allow politicians, Wall Street, and the Federal Reserve outbid the rest of Americans for the remaining real resources of production. Printing money, giving it to your friends, outbidding the peasants for goods and services, then telling the peasants that there is no recession, only positive economic growth.
The real growth for 2011 will be negative 0.8% in real terms when government spending is removed. I hope this removes any doubt that the ministry of information is feeding the peasants hopium and dopium.

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