FIG 6 :   This is a plot of yearly GDP and yearly deficits in unadjusted dollars starting from 1960 ending in 2010. The deficit is increasing slowly from 1960 to 1972 during the days of gold standard. From 1972 to 2000 GDP increases as the deficit is decreasing with a slope equal to 4000billion in 500 billion or 8.  For 1 dollar of deficit GDP changes by $8. After this deficits increase again and the GDP rises more slowly. GDP changes by 1000 billion for a deficit change of 300 billion, a slope of 3. In the region of falling deficits the slope is larger, near 8. Most recent data shows deficits increasing a lot and the GDP falling. This is the region of Wall street gambling, mortgage crisis, trillion dollar wars etc. which have done nothing good to the economy.

Data for this is from Section S – FedBeaSna  : A001  S. 1.a Total Economy-Current account combined with A007 Federal Govt for deficits.

FIG 6 Deficits vs. GDP

About these ads