It is a well-known fact of national economics that increasing amounts of national debt produce ever-decreasing levels of economic growth. click here . Please consider the following quote from a book by Hunter Lewis, “Where Keynes Went Wrong.”
“There is a diminishing return to taking on debt. In the United States, we have operated on Keynesian principles since World War II. The government has printed money. Debt levels have grown. We have not only gotten inflations and bubbles. We have also gotten less and less growth for each increment of debt.
“During the decade 1950-1959, we added $338 billion in debt, and we got 73¢ in economic growth (increase in gross domestic product) for each $1 in new debt. For the decade 1990-1999, we added $12.5 trillion in debt, but got only 31¢ of growth per dollar of debt. For the seven plus years 2000-2008 (1st quarter), we added $24.3 trillion in debt, but got only 19¢ in growth for every dollar of debt. It thus required more and more debt to generate further growth.”
As the above link points out, a study by North Carolina State University Economics Department shows that if economic policy by the government continues as it is now, by 2020, the national debt/GDP ratio will be 110%; and the annual growth rate will be -.56%!
Growing national debt produces a negative growth in GDP, just because it costs more to service the debt than the increasing input of money can produce in growth.
During the present administration and the end of the Bush era, we have seen some $870 billion used to stimulate the economy; and the annual growth of the economy is still at only about 1%/year. Now we see that President Obama wants to inject another $470 billion into the economy in his “jobs bill.” When will he ever get the clue? More deficit spending will not do the job.
Monday, October 3, 2011
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