Nobel-Prize winning economist Paul Krugman has hit the nail on the head again and taken the wind out of the sails of regressives. Hopefully people are listening. Krugman points out that while our deficit has increased dramatically in percentage of GDP, the problem really lies with the GDP itself and not federal spending.I have written about this at length in prior columns on PoliticusUSA.com, that the best way to reduce our deficit is to increase employment. According to OMB (Office of Management and Budget) and Paul Krugman, GDP rose at a rate of 5.1% from 2000-2007 and from 2007-2010 GDP grew at a rate of 1.7%.
If GDP grew at the 2000-2007 rate of 5.1% during the years 2007-2010 federal spending would have only increased by 1.75% of GDP, rather than the current 4% of GDP. So essentially, when the GDP fell during the recession, it met with Federal spending. Federal spending didn’t meet with a growing GDP.
Most of our current spending has been on income security, programs like extended unemployment, SSI, food stamps, and tax credits. This is obviously needed in order to support those who are on hard times due to this Great Republican Recession.
The numbers do not lie, income security spiked from 6% in (2000-2007) to 30% in 2007-2010 and Medicaid rose from 7% in (2000-2007) to 12% from (2007-2010).
In fact in Krugman’s article the graph actually shows a DROP in “everything else” from 6% in (2000-2007) to 5% from (2007-2010).
So nominally, our federal spending would not have increased during the first term of the Obama Presidency, had the economy continued to grow at the same rate as 2000-2007.
This isn’t Big Government spending, it’s a depressed workforce. Unfortunately for American citizens the current crop of Republicans and some regressive Democrats are taking this opportunity to undo the social safety net, rather than concentrating on economic growth.
