To hear business journalist Joe Weisenthal tell it, deficits are about growth, not spending and taxes. It’s best to compare deficits as a percentage of gross domestic product (GDP) to get a more accurate picture of how deeply indebted the country is. If you owe someone $100 but make $50,000 a year, your personal economy isn’t going broke. But if you owe someone $10,000 and you only make $50,000 a year, then you’ve got problems.
Even the unemployment rate reflects this. When it’s high, deficits run higher as a percentage of GDP, probably from the employer of last resort, the U.S. government, doing everything it can to help the struggling private sector by spending where it cannot in order to stimulate the economy. This chart by the Federal Reserve Bank of St. Louis shows that when times are tough, the government spending gets going.
Look at that blue line! Spending is seriously on the decline, despite what some political figures and pundits would like you to believe.
If this graph projection by the financial blog Calculated Risk is any indicator, then America’s fiscal future looks pretty bright. That is, if it doesn’t sequester and shuts itself down back into recession.
