Updated: What? Government Debt Strangles The Economy? (& The Big Freeze Fallacy)



You don’t say! Since when? The bundling by the Congressional Budget Office of government debt and economic stagnation is a newish thing. The so-called partisan patsies of the president’s office usually keep the two intertwined categories discrete and separate, leading the country to think that the one has nothing to do with the other, and that the economy is subject to the voodoo of “animal spirits.”

“The nonpartisan CBO said the deficit for the current fiscal year will come in at $1.35 trillion, a slight improvement over the $1.38 trillion it predicted last August. But it warned that rapidly rising federal debt could strangle the economy.” [My emphasis]

Reuters writers, on the other hand, are keeping it real with this subtle subterfuge:

“The U.S. budget deficit will remain at levels not seen since World War Two, congressional forecasters said on Tuesday in a report that lays out the stark challenge facing President Barack Obama as he seeks to boost the economy and cut spending at the same time.”

Did you spot the propaganda in the Reuters item? In order to amount to a half-honest lede, “Boost the economy” ought to have been followed with “by spending,” or replaced by those two words.


WSJ: “In 2007, before the recession, federal expenditures reached $2.73 trillion. By 2009 expenditures had climbed to $3.52 trillion. In 2009 alone, overall federal spending rose 18%, or $536 billion. Throw in a $65 billion reduction in debt service costs due to low interest rates, and the overall spending increase was 22%.

In one year.”

CBO confirms that Democrats have taken federal spending to a new and higher plateau: 24.7% of GDP in 2009, 24.1% this year, and back to an estimated 24.3% in 2011. The modern historical average is about 20.5%, and less than that if you exclude the Reagan defense buildup of the 1980s that helped to win the Cold War and let Bill Clinton reduce defense spending to 3% of GDP in the 1990s. …
This means that one of every four dollars produced by the sweat of American private labor is now taxed and redistributed by 535 men and women in Congress. …
Compared to this gusher, Mr. Obama’s touted spending freeze for some domestic agencies is the politics of gesture. It would apply to only 17% of the budget, and these programs have already had a 22% increase in their annual appropriations in the past two years, and another 25% increase including stimulus.

4 thoughts on “Updated: What? Government Debt Strangles The Economy? (& The Big Freeze Fallacy)

  1. Steve Bernier

    Is this where the word “DUH” would be appropriate? $1.35 trillion is a lot of wealth to be “spread around”.

  2. Myron Pauli

    Should interest rates ever go to 10% – not inconceivable if confidence in the paper dollar drops from all this counterfeiting – just SERVICING the debt will cost $ 6000 per taxpayer. And by taxpayer, I mean supermarket grocery bagger, nurses’ assistants, etc. The federal budget will be $ 25,000 per janitor, bus driver, and hairdresser. Add the state/local budgets (California is nearly in Chapter 11) and it is a complete catastrophe. And there are not enough rich people to save this wreckage.

    The only part Obama might have right is blaming Bush and the Republicans. However, Obama and the Democrats were williing and eager accessories to the the criminality of these defecits.

    And what do we have to show for all the spending? The eternal gratitude of the Iraqi people for liberating them, a generation of ghetto illiterates, and GM Clunkers!!!!

  3. Gringo Malo

    Doesn’t 1946+65=2011? Aren’t we about to see a rather large increase in Social Security and Medicare spending as the Baby Boomers claim what most of them regard as their entitlements? I suspect that we could eliminate all discretionary spending, withdraw from all our foreign military commitments, and still be swimming in red ink.

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