“GDP that stems from new debt — mainly deficit spending — is phony: it is debt-financed consumption, not prosperity. Net of deficit spending, our prosperity is nearly unchanged from 1998, 13 years ago.”-Rob Arnott, Research Affiliates

Arnott says the Democrats and Republicans are to blame.  They continue to play games with the voters/taxpayers.  While tax revenues have steadily dropped since 1998, because of a bad economy, both major political parties just spend spend spend.

Yes, Arnott says the declining economy started back in 1998, it just didn’t impact the system until 2007, when the housing bubble burst.  One reason the Federal Government is having a problem with its spending is that our elected officials think our incomes are up, and as a result, tax revenues should be as well.  But they’re not; Arnott says tax revenues are at 1994 levels.

Arnott says part of the problem with the politicians is that current economic  statistics are flat wrong.  Economic stats, showing consumer spending and GDP, include deficit spending. In other words, credit cards and loans are being used to make it look like the average person has money.  And this has been going on for a while.

By using purchases made with credit cards, or loans, it makes it look like people have money, and that the economy is good.  These stats are used by our politicians to justify spending tax payer money.

When you throw out the debt spending by consumers, the real GDP figures show we’re stuck in the 1990s.  Arnott calls GDP minus debt spending “structural GDP”.  Also, he says government spending is another misleading factor used in GDP stats.  He says that should be left out as well, only private sector GDP should be looked at, and it’s not pretty.

Another analyst, Max Fraad Wolff, says historically countries go down the drain when their government debt gets close to its GDP levels: “We are approaching national debt on par with the total GDP of the country. This is very serious because most economic research suggests that countries tend to decelerate in their growth and have more and more severe economic problems, once their debt-to-GDP ratio gets above about 90 per cent. And we’re about to go through that level.”