Debt Eclipses GDP But Democrats Want to Keep Spending

January 11, 2012

Economic Research Shows High Levels of Debt Drag Down Economic Growth but Democrats Won’t Stop Their Spending Spree

The growing national debt officially surpassed the size of America’s economy this weekend, just the latest symptom of America’s dire fiscal crisis.
Even as America’s fiscal crisis worsens, Democrats have shown no sign of ending their spending spree. President Obama has presided over “the most rapid increase in the debt under any U.S. president,” but Democrats are still demanding more failed stimulus spending.
Sadly, the Democrats’ last stimulus made a bad economy worse. With the national debt sitting at a whopping $15 trillion, Democrats expect Americans to simply ignore what research and commonsense tells them — that high debt levels threaten economic growth.

The growing national debt officially surpassed the size of America’s economy this weekend, just the latest symptom of America’s dire fiscal crisis:

NATIONAL DEBT STANDS AT $15.24 TRILLION: (“The Daily History of the Debt Results,”TreasuryDirect.Gov, Accessed 1/10/2012)

SIZE OF NATION’S ECONOMY AT $15.18 TRILLION: (“National Economic Accounts,”Bureau of Economic Analysis, Accessed 1/10/2012)

A $4.6 TRILLION INCREASE IN NATIONAL DEBT SINCE OBAMA TOOK OFFICE:(“The Daily History of the Debt Results,” TreasuryDirect.Gov, Accessed 1/10/2012)

Even as America’s fiscal crisis worsens, Democrats have shown no sign of ending their spending spree. President Obama has presided over “the most rapid increase in the debt under any U.S. president,” but Democrats are still demanding more failed stimulus spending:

OBAMA RECORD “THE MOST RAPID INCREASE IN THE DEBT UNDER ANY U.S. PRESIDENT”: (Mark Knoller, “National debt has increased $4 trillion under Obama,” CBS News’Political Hotsheet Blog, 8/22/11)

100 DEMOCRATS RALLY AROUND OBAMA’S CALLS FOR MORE STIMULUS:(Thomas.gov, Accessed 1/10/2012)

WHITE HOUSE SAYS “WE CAN’T WAIT” FOR MORE STIMULUS, EVEN THOUGH THE FIRST ONE FAILED: “President Obama’s growing impatience with Congress’ refusal to ‘pass this bill now’ has launched a new approach — bypassing Congress by taking actions that don’t require congressional support and insisting that ‘We Can’t Wait’ for any more delays on Capitol Hill.” (“President Begins ‘We Can’t Wait’ Economic Push,” Fox News, 10/24/2011)

Sadly, the Democrats’ last stimulus made a bad economy worse. With the national debt sitting at a whopping $15 trillion, Democrats expect Americans to simply ignore what research and commonsense tells them—that high debt levels threaten economic growth:

“CBO: STIMULUS HURTS ECONOMY IN THE LONG RUN”: (Stephen Dinan, “CBO: Stimulus Hurts Economy in the Long Run,” The Washington Times, 11/22/2011)

GOLDMAN SACHS RESEARCH: “The eventual effect of sustained fiscal imbalance is slower growth and greater risk of a fiscal crisis. Our estimates suggest that a 10-point increase in the debt/GDP ratio lowers growth four years later by 0.2 percentage point, and increases the probability of a debt crisis by 2.5% in the aftermath of a financial crisis like the recent one. (See No Rush for the Exit,”Global Economics Paper, No. 200, June 30, 2010 and “When One Crisis Leads to Another,” US Economics Analyst, 11/04, Jan. 28, 2011.) To avoid this, lawmakers must begin to identify deficit reduction strategies.

“Ultimately, what goes up must come down. In the case of the federal budget, this means that a deficit-financed boost to growth will eventually lead to a drag. While policymakers can try to smooth the transition by phasing in cuts and incorporating multi-year fiscal commitments, achieving a sustainable fiscal policy will inevitably be a painful but necessary process.” (Jan Hatzius and Alec Phillips, “Fiscal Restraint: A Question of When, Not If,” Goldman Sachs Global ECS U.S. Research, 3/2/2011)

MAJOR ECONOMIC STUDY LINKS GOVERNMENT DEBT TO SLOWER ECONOMIC GROWTH: “The sharp run-up in public sector debt will likely prove one of the most enduring legacies of the 2007-2009 financial crises in the United States and elsewhere… Our main finding is that across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes… Seldom do countries simply ‘grow’ their way out of deep debt.” (Carmen M. Reinhart and Kenneth S. Rogoff, “Growth in a Time of Debt,”American Economic Review Papers and Proceedings, 12/31/2009)