Have massive deficits pulled/kept us out of a recession?

When Obama left the Oval Office, his FY2016 deficit amounted to $585 billion, and his GDP Growth rate, 1.6%.....a "DISMAL" rate of growth according to many Trumpeteers.

Today, according to the CBO, and several other forecasters, Trump's FY2019 deficit will eclipse $1 trillion.

Now, if we were to assume that 60% of Uncle Sam's deficits have purchased goods and services/increased the GDP, the question is; Have massive deficits pulled/kept us out of a recession?

Let's take a look;

GDP

GDP = Personal consumption + government spending + business investments + (Exports - Imports). In 2017, the sum of all these factors amounted to $18.051 trillion, and in 2018, $18.566 trillion

GDP GROWTH RATE

There is fine line between a POSITIVE and a NEGATIVE GDP growth rate, for example; In 2018, Personal Consumption amounted to 69% of GDP, thus, $18.566 trillion X 69% = $12.8 trillion.

However, had 2018 Personal Consumption amounted to $12.2 trillion, thus, (minus $600 billion), most likely, the economy would have experienced a negative growth rate.

ACTUAL

2017 Real GDP; $18.051 trillion

+2.9% ($515 billion) =

2018 Real GDP; $18.566

Minus $600 billion = $17.966 trillion, thus, less than the previous year equates to a negative growth rate.

NOTE: Trump's estimated FY2019 deficit; $1 trillion X 60% = $600 billion

CONCLUSION; No doubt massive deficits have pulled/kept us out of a recession.

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Don't know if deficit spending has kept the US out of a recession but it's a fact that our government is spending $1 trillion more than we have to spend...and we're doing this with no national emergencies or long-term investments in the future. $1 trillion in government spending equals approximately 10 million US jobs plus collateral impacts...remove deficit spending...and the US loses about 10 million jobs.

What's more interesting to me other than the fact government is unnecessarily spending money it does not have, when deficit spending is this high, any concept of greatly reducing deficit spending is not going to happen! Two reasons; First, politicians won't be elected or re-elected, and second, most so-called US citizens are too greedy to demand fiscal responsibility. So how this egregious deficit spending and mounting national debt ends is anyone's guess...

 

It looks as if the economy is being propped up by an ever accumulation of more debt, while in the short term injection of money into an economy can be beneficial but long term it’s a disastrous financial policy, especially when we enter another depression or recession. If the government is spending $1T on the economy during normal times what will it take to shake a recession?

It’s unsustainable and neither party cares.

 

Like 2009 ?

 

Government spending is inefficient.

Have government spend $10 billion and you get some economic value. But $10 billion spent by the private sector has more of an impact.

 

The Gov and FED spending dwarfed GDP dollar gains 2009 -2017. That equates to net destruction of capital. Of course we have to pay the Gov debt back, which is a claim on future productivity.

 

And what is worthless on economic impact is a couple trillion $ given to billionaires through the Republican party by Trump has no economic impact all!

Other than raising the prices of dream retirement in Spainish properties and tax havens in foreign banks!

Infrastructure improvements? Nope!
Health care? Nope!
Meaningful raises for workers? Nope!

Just wealthy corprate buyback for billionaires! Its the gutting out America's future!

 

In reference to said $1 trillion deficit, here's a new idiom;

"Don't bite the hands of the bondholders who kept feeding us"

 

Guess you forgot about the many trillions given to Wall Street via the FED during the Obama years

 

Now, consider the injection of another $454 billion in consumer debt from 2017 to 2018.
https://www.reuters.com/article/us-...13-3-trillion-in-second-quarter-idUSKBN1KZ1QZ

Compare that with the roughly -$100 billion debt deleveraging in 2009, from GWB's recession inducing debt deflation. That's and almost $550 billion differential.

In essence, the current economic "boom" is bought by debt, both public and private. It is no Trump economic "miracle", it will end as other tax-cut based expansions -- in a huge recession.

Imagine taking $600 billion in private debt and $500 billion in public debt out of the equation. Where would the US economy be? Already in negative growth territory.

 

Consumer confidence drops more than expected, reaching its lowest point in nearly two years

"“The escalation in trade and tariff tensions earlier this month appears to have shaken consumers’ confidence,” Conference Board senior director Lynn Franco said"

https://www.cnbc.com/2019/06/25/us-consumer-confidence-june-2019.html

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Consumer Confidence and Its Impact on the Markets

"When consumers aren't confident, they tend to save rather than spend and perhaps constrain economic growth"

https://www.thebalance.com/consumer-confidence-and-its-impact-on-the-markets-1978947

 

Many economic indicators suggest that the short term tax-cutting sugar high is already over, as predicted. Actually, I would have predicted it would last a bit longer. However, with the mega corps pocketing the tax cut wind fall rather than investing it in jobs, wage growth and innovation, this is also not unexpected. After all, the economy runs on consumer spending. If it is demand limited, there is nothing supply side economics will do to help the economy.

 

We all know why Trump eagerly wants a 1% interest rate cut...……..because said cut would sustain his 3% GDP growth rate, HOWEVER, a few hours ago;

Fed Chief Jerome Powell warns against policy bending to ‘short-term political interests’

https://www.cnbc.com/2019/06/25/feds-powell-warns-against-short-term-political-interests.html

In addition,

Fed’s James Bullard said "a half-point rate cut would be overdoing it"

https://www.cnbc.com/2019/06/25/sto...n-focus-as-investors-await-more-fed-talk.html

 

My goodness, do you check anything before you post?



Household Debt Service to Disposable Personal Income was 33 percent higher before the recession than it is today. And the idea that it has spiked under Trump is blithering bullshit.

 

Wonderful, please link me to your post where you claimed it would last past today at the time it was being legislated and implemented.

 

One point to add is that 600 Billion in extra Gov't spending amounts to more than a $600 Billion dollar increase in GDP.

 

Well, no one accurately knows the multipliers/domino effect, but I will tell you this; "There is definitely a fine line between a POSITIVE and a NEGATIVE GDP growth rate".

QUESTION: Said fine line equates to how many billions?

Let's take a look at the facts;

1. Consumer spending drives a significantly large part of U.S. GDP
https://www.thebalance.com/consumer-spending-definition-and-determinants-3305917

REAL PERSONAL CONSUMPTION EXPENDITURES



https://fred.stlouisfed.org/series/PCEC96

Nov 2018 RPCE...…$13,115.6 trillion
Dec 2018 RPCE...…$13,001.2 trillion
RPCE down approx. $114 billion

RESULTS;


https://tradingeconomics.com/united-states/gdp-growth

 

I am in complete agreement with you - my addition only makes the situation you much worse than what you have concluded. Most of the 600 Billion first goes into the pockets of employees - Gov't, Defense Contractors and so on. This money is then spend buying stuff - the store owners then pay their employees and spend these extra profits... and so on. Point being .. the contribution to GDP is much higher than 600 Billion.

I often used this analogy. The massive credit card (deficit) spending increase by Trump is akin to putting nitrous oxide into an engine .. short term gain for long term pain.

 

Of course it was. That's what caused the crash.
Of course under Trump, he borrows it for you.