It's the Economy! (Stupid)

"I am a retired professor of economics, having taught for 40 years at New York University, San Francisco State University, and the University of California. During my tenure, I worked for three publishing companies as a consulting editor on new book proposals. "It's the Economy! (Stupid)" is one of the best manuscripts that I have ever read covering the golden keys to our economic future and a "must read" for our politicians, university faculty, and money vendors on Wall Street."

Prof. Stanford L. Johnson, PhD
Emeritus, San Francisco State Univ.

(excerpt from the book...)

The Federal government comprises 7.1% of the GDP of the USA (see table on next page), a budget of almost $3 trillion, and it employs 4.2 million people in all its branches. It is the largest organization in the United States, and indeed the entire world. The responsibility of the President of the United States is not only to identify problems in America and abroad that affect our lives and security, and then proffer possible solutions to Congress, but he or she must also be the CEO and COO of this large organization with all of the management requirements this implies. It is, therefore, not for the faint of heart and requires considerable analytical, organizational, managerial, and budgetary skill. While much of this is always delegated, as Harry Truman so eloquently pointed out with the sign on his desk in the Oval Office - "the buck stops here" with the President.

This chapter will look at how the government relates to and affects the US economy as a whole. In the next chapter we will examine the budget itself and how it is constituted. The information in these two chapters - like most of the information in this book - comes from the Bureau of Economic Advisors. These are the numbers that the President and his cabinet use to help them manage the government and the economy. Thus, if you ever want to become President, pay attention to these numbers and understand the implication of what it means to manage the US government. When you do this, you will understand why the US public has felt more comfortable in the last 100 years with electing men (to date) who have served either as governor of one of our states or as Vice President before occupying the Oval Office. In fact, only one sitting Senator has been elected President during this time--President Kennedy. While all presidents must have an understanding of the problems that face us, and be able to communicate effectively about the policies he/she chooses to deal with them, he/she also must be acutely adept at managing the business of the Federal government, too. This presidential role is as critical as the others in assuring the country's interests are well looked after.

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On the facing page you will see the percentage shares of the major components of the US economy broken out into categories since 1930 to get an overview of their relationships to the economy as a whole. On the next two pages you will find a further break-out of these categories into smaller parts for those who want more detail.

As you can easily see, the share of government at all levels at its height in the 70s comprised only 22.5% of the GDP of the country - that's the most it has been except during WWII itself which was an extraordinary period as we all know. Consumption makes up about 70%, investment about 16% and there was little or no trade deficit until 1990. Beginning in 1990, however, and accelerating after 1999, as the negative sign implies, the trade deficit has been depleting the US economy ever since. Indeed, the percentage of the GDP dedicated to both imports and exports has risen markedly since 1970, again underscoring the growing dependence of our country on the new global economy in ways it hasn't been in the past. Imports, for instance, jumped by over 55% during the 90s, from 10.9% in 1990 to 16.9% in 2006. Exports grew, however, from 9.5% to only 11.1%.

What's perhaps most interesting looking at the chart on the facing page is how fairly consistent the economy has performed over time. The only major anomaly since 1930, besides trade, has been the shift from the production of non-durable goods (from 37% in 1930 to 20% today) to services (from 32% in 1930 to 42% today).

(...more in the book)