Friday, July 29, 2011

The GDP and the Economy


The GDP has a very sluggish growth despite the words from our wonderful macroeconomists who predicted a turn about with the Stimulus. I always come back to Romer's report on January 11, 2009 on how things would turn out. Not a recommendation for the new Delphi oracle to say the least. The above shows the change in GDP since early 2008.

The above shows the components.

A look above at Government expenditures shows that State and Local are slowly building after a drop from their explosive growth but that the Defense spending is still moving forward at an unlimited rate. It is clear that we need to cease that and in fact re-trench substantially. A Defense cut of $50B pa is not unrealistic now. In fact a cut of $60B is achievable by returning forces and acting with a pure Special Forces mindset.

Also the non Defense spending has risen almost $100B and this too can be cut back.

These do NOT include Medicare and SSI. Needless to say we can do a great deal there. Thus it is possible to achieve a $500B cut from the Federal budge and then add easily a 10%-15% reduction on entitlements and we are on a good standing.

The above depicts the change by Quarter. Note the drop in the early part of the Recession but the growth has continued.

Finally we re-emphasize the Govt changes. Defense still remains an issue. This is especially disconcerting since we are allegedly winding down. There is also the issue as to where such expenditures as Homeland Security and CIA/NSA/NRO etc are hidden.