You don’t need a Harvard economics PhD to know the state of the economy, and in fact, if you are so credentialed, you probably don’t know the state of the economy. From Lance Roberts at davidstockmanscontracorner.com:
Last night, President Obama took the stage at the Democratic National Convention to throw his support to Hillary Clinton in her bid for the Presidency. He also took the opportunity to take a victory lap for his economic achievements while in office.
With the 2016 Presidential Election fast approaching, this was one of the final chances the President will have to try and divert attention away from Hillary’s “trustworthiness” problem following continued revelations surrounding Benghazi, email scandals and the Clinton Foundation which is now under investigation by the IRS.
The problem for the Democrats currently, following a rather severe beating at the polls during the 2012 mid-terms, is the broad loss of faith in “hope and change.” With Donald Trump and Hillary Clinton virtually tied in the majority of polls (within a margin of error), it is imperative to regain those voters. Not surprisingly, since voters tend to “vote their pocketbook,” it wasn’t surprising to hear the President spin a decisively positive economic picture during his speech. He hopes that by pointing to falling unemployment rates, economic growth and higher confidence levels; it will give voters a sense of confidence in the President’s accomplishments and be convinced the expect the same for Hillary.
The question is whether the majority of the voting public will agree with the President’s message? Let’s take a look at some charts.
Government Debt
Since 2009, Government debt has surged by $7.8 Trillion and by the end of the next budget cycle will likely surpass $20 Trillion in total. The problem is that during the current Presidential term, real economic growth has risen by just $2.09 Trillion. However, even this number is inaccurate as the current government debt levels do not include other liabilities of the government such as social security and other social welfare programs.
The following chart quantifies it a bit better when you look at cumulative increases in debt and real, inflation adjusted, GDP.
Yes, the economy is growing, however, that growth has come at a huge cost of a debt burden that will be amplified if borrowing costs rise with anticipated increases in real interest rates. Of course, this is entirely ironic considering it was President Obama himself who admonished the previous administration’s increase in debt which he conveniently forgot to mention during his self-congratulatory speech.
The problem is this. There is a direct correlation between the expansion of debt and economic growth. Debt detracts revenue from productive investments that lead to economic growth and diverts it into non-productive interest payments. This is why the explosion in the amount of debt required to generate economic growth (currently $3.72) is unsustainable longer term.
To continue reading: Why MainStreet Isn’t Buying Obama’s Economic Recovery Fantasy
