On Eating Our Seed Corn; Or, Why Gross Domestic Product Measures May be Deceiving

Those raised around farms will probably know what eating one's seed corn means, but what does that have to do with Gross Domestic Product? Read on, and I will try to make the point.

Back in the 1970s on the campaign trail with my good friend Bob Krueger (former Democratic Congressman and US Senator) Bob would often use the term "we are eating our seed corn" in discussing government budgets and deficits. (Yes, Democrats, or some of them, were concerned about that in those days.) Bob was one of those rare politicians who would tell the truth, even when many people didn't want to hear it.

Of course we know that if you eat your seed corn, you have no seed to plant to get next year's crop. You would then be broke, or would starve to death. Not a good outcome.

This brings us to the current debate over the huge and growing deficits and national debt. Borrowing against the future to pay for the present is just like eating your seed corn. Our people, many businesses, and almost all of our governments have been doing this for years. The party is just about over. The train that is our economy is about to come to the abyss.

So what does this have to do with Gross Domestic Product, and how it is measured. Read on.

GDP is measured by adding Consumption (both private and business) plus Investment plus Government Spending plus Net Exports (exports - imports).

Those are the constituent parts of GDP. Note that the only net figure is the import/export number, and for over 40 years that has been a negative number.

Right now, GDP as thus measured is positive, and we are in a "recovery." Does it feel like a recovery to you? Ask the record number of long term unemployed.

Why do not we measure the net domestic product, whereby all of the spending would be reduced by the amount of borrowing that supports it? NDP has a good ring.

I am not an economist, so I cannot give any expert opinion on why the gross figure is considered better than a net figure, but I do know that relying on the gross figure has to distort the view of what is really happening in the economy.

Consider that government spending is all included although at least 44% of it is borrowed money. Is that why politicians always want to do a big stimulous when we hit a recession? It certainly makes it statistically look like a recovery. That is why we had a "recovery" this past year, and now that the stimulous is running out the "recovery" is faltering.

Back out the deficit spending and a clearer  image of the real economy emerges.

Also consider that private (consumer) spending is also a gross figure, when by all reports, much of it is again being done on credit cards. This, of course, is one reason why the Federal Reserve always wants to force interest rates down during a recession. They want to encourage the consumer to borrow and spend.(Another is to allow the banks to borrow at low rates and lend at higher rates, helping their profits.) That is a lot of what got us into this problem.

The last decades were spent on a big joyride, with consumers being encouraged to buy things (houses among them) that they could not afford. A lot of people maxed out their credit, then borrowed their home equities to buy the tickets for that ride.

The fact that the measured GDP was good enabled the politicians---of all stripes--- to get elected and reelected because times appeared to be better than they were. And they sold it as such.

Here is where the measure of GDP deceives us: the last forty years we have been eating our seed corn, and the economic measure the government statisticians, the economic statitisticians, and the politicians have been using to tell us where we are has hidden the facts. Of course, we all know about liars, damned liars, statisticians, and politicians.

What is all this about? It is very simple. Over 30 years ago, Bob was right. We were eating our seed corn then, and that has continued to this day. And many want to continue.

That train I wrote about six months ago when I last posted speeds on nearer the abyss. At some point it will get too late to stop it in time.

Somebody needs to get serious about this, or we need to throw them out.

The State of the United States

No, not the speech, although I will get to it later, perhaps.

The state of our country is not good. We are mired in a deep recession with high and growing unemployent, and only the huge institutions that were bailed out by the government are showing profits. Main Street still suffers.

We are in a situation caused by a huge expansion of credit wherein large financial institutions, both private and semi-public engaged in wild speculation, creating a bubble in real estate, and then the bubble popped.

This had the effect of destroying much of the capital of the financial institutions, but also the capital of the general public.

With the bubble gone, the US Government under George W. Bush stepped in to socialize the huge losses of the financial institutions, but not, of course, the huge losses that had been imposed upon the general public. (I call this the Golden Rule) In fact, the general public will end up paying for the financial institutions' losses as well as their own.

Hope and Change gets elected and promptly nationalizes General Motors and to some extent, Chrysler.

Relief for the general public? Hardly.

Next is a huge "stimulous" bill that goes primarily to large Democratic political constituencies, adds nearly a trillion to the deficit, and accomplishes nothing but add further burdens on the general public.

We then get a Cap and Trade Bill that is rushed through the House without being read. This bill would add hundreds of billions to the costs of energy....to be ultimately paid by whom? You got it. The general public.

With the first of these matters a movement began to form: The Tea Parties. The public was awakening. But the politicians ignored them or put them down as extremists. Who were the partiers? The general public.

After Cap and Trade passed the House, the Pelosi crowd began to attempt to socialize our country's medical care. Behind closed doors.

It was if the Iron Curtain was rebuilt right there in Washington, D.C. Everything was done behind closed doors. In secrecy. Few know what kind of deals were made to buy "support" for the bill, but what is known is that it was terribly unfair to.........the general public.

A similar bill is now pending in the Senate, where the majority party is still trying to push it through, in spite of the opposition of....the general public.

So here we are after one year of Hope and Change. We have no hope, and only a change for the worse.

Elections in Virginia and Massachusetts have given the general public a chance to be heard, but from the State of the Union speech last night, it is clear that the lessons have been lost by the politicians in our government.

Maybe they should all watch and listen to the ad that newly elected Senator Scott Brown ran during the campaign in Massachusetts. It is one of the very best I have heard in my over fifty years in politics.

You can find it here. If you do nothing else, go to this ad.

The public will get little, if any, relief from the policies spoken of by the President last night.

But we can get relief in November when we have the opportunity to throw all the rascals out. There is Hope, after all.

Who will lead the revolution?

Happy and Sad

A couple of years ago when I decided to try blogging, the main objective that I had was to not become a slave of writing on a schedule. I don't think anyone can say that I have, since it has been so long since I have posted here.


Another of my intentions was to do it for fun. Often it has not been.


Since I retired I have been enjoying life, with a great family, a faithful dog, wonderful friends and good health, at least for an old codger.


My family, friends and I have lived the American Dream. It has been great, and I hope that we can preserve that opportunity for our children and their children.


The above is the happy part.


It is a cultural thing, I suppose, for the elderly to disapprove of what the younger generations are doing. My parents disapproved of our teen music, just as my generation doesn't appreciate the kind of music and culture of the current teens. That is just natural, and is not something that I am that concerned about.


What I am concerned with is the direction in which our country, and particularly our government, is headed.


This is the sad part.


One can read past posts and get an idea of the things that are so sad. A quick summation would be that our people are increasingly losing their liberty to an ever growing and increasingly uncontrollable government.


Since at least the last Great Depression we have all looked increasingly toward the national government to solve every problem, and increasingly let our state and local governments become so hooked on Federal funds that they can only respond to the Feds, and not to the desires of the people.


It is not my intent to go into great detail about the hows and whens, but we all must realize that we have been letting our government drift out of control for several decades.


The more this happens, the less free we become.

This is Christmas time, and I am going to be happy, and I wish happiness and a Merry Christmas to all of you.


After this happy period, I am not going to be sad any more.


I am going to be mad as Hell.

The Biggest Lie

"I'm from the Government, and I'm here to help you."

That's it. You have all heard that. There are other big lies, but this is the biggest.

Government, if left to its own devices, as the liberals would have it, is only here to enslave us.

We need an effective governemnt to do those things that we, in the Constitution, have asked it to do.

We do not need a slavemeaster.

Think about it.

Public Option Off the Table?

The New York Times is quoting Kathleen Sibelius, the HHS Secretary, that a government insurer "is not an essential element" to the health insurance reform bill.

If that is the case, and they will let that part go, then one of the worst parts of the bill will have been taken out.

Hooray for the good guys!

Now, if we could only find out what is in the rest of the bill.

Some reform does need to be done, but it has to be done in a way that keeps the government out of our business.

Liberals want the government in our business, so we must be vigilant. Pelosi and Reid can be very sneaky, as we have seen with the stimulus bill and the cap and trade bill.

Its Not Just About Health Care

A lot of liberals are making the mistake in thinking that all of the protesting out there by the citizenry is just about the health care bills.

Nothing could be farther from the truth.

Some of it is....it is the issue du jour. But there is a lot more. A lot.

Victor Davis Hanson, is great essay, says it this way:

"There is a growing sense of a “we’ve been had”, bait-and-switch. Millions of moderate Republicans, independents, and conservative Democrats — apparently angry at Bush for Iraq and big deficits, unimpressed by the McCain campaign, intrigued by the revolutionary idea of electing an African-American president — voted for Obama on the assumption that he was sincere about ending red state/blue state animosity. They took him at his word that he was going to end out-of-control federal spending. They trusted that he had real plans to get us out of the economic doldrums, and that he was not a radical tax-and-spend liberal of the old sort."

Read the whole thing here.

Professor Hanson goes on the give reasons for why "we have been had" but there are others he misses.

And he misses one important thing: these protests are also against the Republican policies of the last few years.

The people are tired of the government messing everything up. They are tired of the corruption, the power of the big lobbyists, the huge and growing deficits, the move to have the government control every aspect of our lives, the terrible, huge bailouts of the financial institutions, the nationalization of Chrysler and General Motors with the concurrent gift of 40% of the stock in GM to the United Auto Workers, an adjunct of the Democratic Party, and a whole list of other things.

While the Democrats may be the worst offenders, Republicans started us down the path to the bailouts and the nationalizations, and certainly were running up huge deficits. They also really enjoyed slopping at the trough when they were in power.

Much of this anger is directed at the entire political process. Some did, as Hanson points out, foolishly think that Obama might really change things, and hope that government could be made to work better.

Obama's only interest is to make it work better for his political allies. Anyone who thinks differently is still being foolish.

My view is that Americans do want their government to work better than it has, but they also want it to be limited to those things government can do best.

They want the government to stay out of things that the government is incapable of doing, like making medical choices for over 300 million Americans. Some regulation, yes. Deciding when to put granny down, or whether grandpa can have a knee replaced, or a neonate should be saved or not, no.

Hell no.

Running Chrysler and General Motors, no.

Taxing energy and destroying our economy (even more), no.

Running up trillions more in national debt, no.

Expanding government at the expense of the private sector, no.

One could go on and on. Obama is trying to cram the very opposite down our throats. The Republicans so far have not really put forward credible and effective alternatives, at least none that have been well publicized.

Message to Republicans: don't try to regain power by saying "we will do better." Nobody will believe you.

Show us.

Message to Democrats: Get off the socialism now.

Waste of Time

I see from U. S. News and World Report that Americans spent 9.9 billion hours doing government paperwork last years, a waste of $460 Billion of costs.

The time spent was a 25% increase from 2004.

Just think what Obama's programs are going to add.

A crushing blow to the economy.

Who really believes the government can do anything right? Or efficiently?

Anybody?

A hat tip to Hotair.

The Founding Fathers

Starting the blogging day wondering what the Founding Fathers of our country would think about what we have allowed our government to become.

I cannot imagine men like Washington, Jefferson, Adams, Hamilton or Franklin would approve of it.

Nor do I.

The Only Thing Stimulated In a Government Stimulus

Ed Morrissey has an article over at AIP that discusses what the "stimulus" bill stimulates:

"A new GAO review of the $787 billion stimulus package tells us what we should have known all along. When government spends money themselves to stimulate the economy rather than let citizens have their own money to spend, the only part of the economy that gets stimulated is government itself. " (My emphasis)

Who would have guessed? The liberals in Congress rushed this bill through with anyone even having a chance to read it, without any input, and without letting the public in on any of it.

This is the kind of hope and change we can expect from the Democrats, and probabaly from a lot of the Republicans as well. Over three quarters of a trillion dollars, which is equal to about $100,000 per household of four, is blown proping up government programs that need to be pared back.

What could your family have done with that money? Better than the government, I would bet.

Read the whole article.

And think about getting a new bunch of politicians.