Should gvt deficit spending be excluded from GDP?

Discussion in 'Economics' started by wartrace, Aug 14, 2011.

  1. wartrace

    wartrace

    Just thinking today, seeing as our debt is now 14.6 tr and GDP is supposedly 15tr and 1.7 trillion of that GDP is money government is borrowing, should the Government GDP component be excluded from the real GDP number if we are looking at debt/GDP? The government claims debt to GDP is "only" 97% but if you exclude the pulled forward tax revenue (added debt) it is actually 110% of GDP.

    Can borrowed money be included in the GDP calculations?
     
  2. Corporations borrow money.
    Households borrow money.

    By definition, an economy has three components: private business, individuals, and the government. If one runs a surplus, one of the other two must run a deficit.
    When the government was running a surplus in the late nineties, businesses and households were piling on debt. Now, businesses and households are shedding debt, that is, running a surplus. Government is piling on debt.
    So, no. Debt is always there, and some part of the economy is always piling it on while some other part is paying it off.
     
  3. You are looking at it purely from a domestic understanding. Lots of that debt is foreign in origin.
     
  4. True, in that the US runs a current account deficit. That's a different question than what the OP brought up, though. The current account was deteriorating in the 90s, and it's not any better now. The domestic sectors that were in debt then and now are different though.
     
  5. Doesn't matter how you do it, as long as you're consistent.
     
  6. Due Buy

    Due Buy

    Lies. You write as if debt is an essential component of life. No. It isn't. That is a fabricated reality aka an untruth aka a lie.

    People can and do run without debt. So can private businesses and government. It's called living within your means.