"We don't intend to turn the Republican Party over to the traitors in the battle just ended. We will have no more of those candidates who are pledged to the same goals as our opposition and who seek our support. Turning the party over to the so-called moderates wouldn't make any sense at all." - Ronald Reagan, Nov. 10, 1964

National Debt Now Eclipses GDP

March 2, 2012   ·   By   ·   1 Comments

The national debt to GDP ratio is now over 100 percent. It’s official now.

Well, almost. We’ll know more when the first quarter Gross Domestic Product (GDP) numbers are published by the Bureau of Economic Analysis on April 27.

But, based on a preliminary analysis of data on the GDP and national debt figures from the Bureau and the U.S. Treasury, barring greater than expected GDP growth in the first quarter, the national debt probably eclipsed the economy in sheer size, perhaps never to return, on or about Feb. 23, 2012.

Since the beginning of the year, the national debt has grown by $265.58 billion, or about $4.42 billion every day, to $15.488 trillion. That compares with an economy that is probably only growing by about $1.66 billion a day to a current level of about $15.420 trillion.

Therefore, the current debt to GDP ratio is already 100.4 percent — and climbing.

When Barack Obama took office it was a little over 74 percent when the debt was about $10.4 trillion. The reason the ratio has skyrocketed is because the debt has been growing much faster than the economy. While the economy grew at 1.8 percent in 2011, the debt grew by over 10 percent, an astounding figure.

In 2012, this process will continue, when the debt will grow at over 7 percent for the year, much faster than the economy, which is only expected to grow at 3 percent.

Meanwhile, some economists, calling themselves Modern Monetary Theorists, still maintain remarkably that debt really does not matter at all. That as long as the nation’s central bank prints more money to perpetually refinance the debt, all is well.

Except, the larger the debt becomes the more it is a drag on the economy.  Economists Carmen Reinhart and Kenneth Rogoff have found that gross debt levels above 90 percent tend to have a draining effect on economic output — even with central bank intervention.

To be certain, as the national debt has climbed astronomically in the past three years, the economy has been sluggish at best.

Moreover, the sovereign debt crisis in Europe — brought on by too much government spending and an inability to refinance every larger sums of debt — has wrecked havoc on markets since 2010, harming growth.

No nation can long endure where, just to keep our heads above water, greater and greater portions of the national wealth must be dedicated to a useless paper trade — i.e. refinancing an ever-larger debt. The more money that is invested in government debt, the less money there is simply to invest in assets like equities.

The only way out of this vicious cycle is to reverse the relationship of debt and economic growth to one where the growth of debt is predicated on economic expansion, and not the other way around — because debt does matter.


Note: Reader comments are reviewed before publishing, and only salient comments that add to the topic will be published. Profanity is absolutely not allowed and will be summarily deleted. Spam, copied statements and other material not comprised of the reader’s own opinion will also be deleted.


Similar Posts:

Robert Romano is the Senior Editor of Americans for Limited Government (ALG) News Bureau. Americans for Limited Government is a non- partisan, nationwide network committed to advancing free market reforms,private property rights and core American liberties.
Robert Romano
View all articles by Robert Romano
Roberts website
Print Friendly

If you enjoyed this article, please consider leaving a comment below (subject to the comment guidelines listed at the bottom of the article), sharing it to Facebook or Twitter or another social media site, subscribing to the RSS feed to have future articles delivered to your feed reader, or have a daily digest of the latest American Clarion articles delivered to your email inbox each morning..

Featured Articles

For_Greater_Glory

Art Imitates Modern Life: Movie Reflects Obama’s War on Christianity

Bob Ellis

It isn't often that you see a movie come out of Hollywood which shows a triumph of religious freedom over secularism, but "For Greater Glory" tells the true story of a war few of us knew about. When we understand that the story is about government forces that were determined to bring religion under its heel, it almost sounds like it was ripped from today's headlines over President Barack Obama's war on Christianity and religious conviction. Yet it is not about the modern-day attempts of Marxists to oppress Christians, but about a similar war waged nearly 100 years ago in Mexico.

Whittle_Into_the_Sea

Driving a Currency-And a Country-Into the Sea

Bob Ellis

Ever wondered how a country could be driven to ruin from the inside? Europe is hard on its way to showing us. In fact, the socialists within the United States are vehemently trying, as usual, to emulate Europe...and bring the US to ruin as well. Bill Whittle explains how this can happen, using aerodynamics as an analogy.

Memorial_Day_flags

A Safety Too Crippling

Jim Bowman

Today is our Memorial Day. This day brings renewed commitment to preserving what those who sacrificed so much believed in. As such, this pause in our hectic lives should also afford a period to reflect and consider our post 9/11 journey. Whether it be a war of armies or of minds, we first need to recognize that threats come in all shapes and sizes. And as our Constitution so plainly identifies, threats need not be from foreign sources but also home-grown, as in the words, “both foreign and domestic.”

money-lock_b

Securing Your Credit

David John Marotta

If you plan on applying for a new job or applying for a credit card, car or home loan, you may want to check your credit report first. A U.S. Public Interest Research Group report in 2004 found that one in four credit reports have serious errors that could significantly lower your chances of being approved. Your credit report will outline your full credit history. And it can help you verify you have not been the victim of identity theft.

Memorial_Day

What Do We Honor this Memorial Day?

Bob Ellis

What do we honor this Memorial Day? What do we seek to honor on Memorial Day? How do we honor what we seek to honor on Memorial Day? Do our actions on days other than Memorial Day dishonor what we claim to honor on Memorial Day? These are questions each of us needs to ask ourselves, if our great nation is to survive and the sacrifices of our forefathers are not to be in vain. Do we dishonor the commitment and sacrifice of those who came before us by taking the easy path, by compromising with evil, by accepting a lower standard, by hoping to do "good enough" instead of striving to preserve and pass on the very best? If our words on Memorial Day aren't merely cheap platitudes, we need to look long and hard at what we're doing--and make the necessary changes in ourselves.

Archives

Other News

Other Commentary

Featured Blogs

Stop CISPA

"We don't intend to turn the Republican Party over to the traitors in the battle just ended. We will have no more of those candidates who are pledged to the same goals as our opposition and who seek our support. Turning the party over to the so-called moderates wouldn't make any sense at all." - Ronald Reagan, Nov. 10, 1964

Switch to our mobile site

NewMedia blog