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April 19, 2012

Borrowing Creates Growth? These Charts Seem to Disagree!


To date, agents of big government have defended the massive borrowing and spending policies that the federal government has undertaken since the financial crisis of 2008. Whether it was $700 billion for TARP, billions for education, Fannie/Freddie, jobs, or unemployment benefits, the government is arguing that all of this spending is being used to promote economic growth. "Investments" seems to be the term President Obama likes to use, as he did in his weekly address this past Sunday.

Unfortunately, as shown by the above charts, we are borrowing three to six times as much (in terms of % GDP) than we are getting in economic return. In 2011, we had under 2% economic growth for the year, however, the government borrowed an astounding 10% of GDP. Just by looking at the charts, we can see that this gap historically has not been this great since at least 1990. So, why aren't these deficits creating the knockout growth government officials imply them to be?

Because it's not true.

According to the chart detailing the same statistics going back to 1960, deficits were very small and yet we had periods of solid economic growth. Could it be perhaps that this was because the private sector controlled a larger portion of the economy? If anything, today's charts show us how inefficient the government has become in spending money.

Remember, it's your tax dollars (at perhaps a higher rate) that are going to have to pay for this debt trap we are running straight into!

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