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...)

Much is made of government deficits and perhaps it is important to remind politicians on a regular basis about deficit spending since it is, after all, our money that they are spending. But in macro-economics there are deficits, and then there are deficits. And all deficits are not the same or have the same effect on the economic health of the nation. Nor are deficits static and unrelated to events. Nor are they unrelated to our competitors in the new global economy. For example, you'll hear in 2008, how "Bush has increased the deficit to $8 trillion! Oh my god!" This actually is true. But, so what? That is: "Compared to what", and "how bad is it?" You are probably thinking I'm crazy, but bear with me because this is very important to understand about our economy, and especially relative to the new global economy.

First, let's identify the "deficits" that are common to normal political discourse: These are the short-term current budget deficit and the long-term government deficit (also know as "the national debt" in popular parlance). The first concerns the difference between how much the government takes in and how much it spends on a yearly basis. This deficit then accumulates over time and becomes the long-term government (national) debt. These two are the deficits used most often in the political football game that's played during election years. But there are actually two other deficits that aren't talked about which in many ways are far more important to the issue of American's global competitiveness: These are our trade deficit and our international investment deficit (see Chapter 2).

While all deficits effectively mean "we owe someone", unfortunately, as mentioned in Chapter 2, these latter deficits don't seem to get the attention from anyone in America that they should, neither from the administration, nor Congress, nor the American people. Yet these deficits are what should concern us most in the new global economy! This notwithstanding, since so many Americans focus on and discuss the politics of the long-term national debt and budget deficit, these will be the focus of this chapter to bring more clarity to them for all.

Let's begin by dealing with deficits in the abstract. To do this, try to think beyond our own nation-state's borders and imagine the entire world in its galactic state as an on-going globe that spins around on its axis, and its axis spins around the sun, and the universe spins around in space. In other words, the global economy never stops. Therefore, to view deficits just within the confines of our own country at any one given time is to ignore that our economy is intricately linked to the global economy, and at any given time, our economy has always been relative to the rest of the world. Consequently, all things economic should truly be considered based on this new paradigm because the USA is not alone in the world, and its deficits are intricately connected to our relative competitive position in the new global economy.

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THE LONG-TERM NATIONAL DEBT
IN GLOBAL & HISTORIC PERSPECTIVE

So when discussing America's budget "crisis", one needs to ask first: "Is there a crisis?" And then ask: "Compared to what?"
Only by answering these questions can we have a better perspective on the subject. The first thing against which to measure our budget is our own economy. Why? Because the first perspective on deficits is on the totality of our relative economic progress spinning through the universe and not just on a fixed point. In 2007, the size of the US economy was roughly $13.8 trillion. Our long-term debt was $8.8 trillion. This works out to our long-term debt being approximately 64% of our current GDP. This, in isolation, seems like a colossal disaster in the making. But is it? For instance, is the current long term debt the worst in our history?

(...more in the book)