Posted by Congressman John Campbell at 12:00 am on Feb 22, 2010 1 Comment
We can debate exactly what caused the near economic collapse in
the fall of 2008, but clearly over leveraging and excessive risk
taking by consumers, banks, and “non-banks” was a major
contributor. The economy continues to have a drag caused by
deleveraging and fallout from the losses incurred during that
period. The U.S. Federal government prevented that collapse by
putting the imprimatur of the United States Treasury on a lot of
private debt in order to stop the run. It worked because the world
markets had a tremendous level of trust in the full faith and
credit of the United States government.
But the shoe may soon be on the other foot. Federal spending as
a percent of Gross Domestic Product (GDP) is now over 25%. The last
time the government represented that much of the economy, we were
building B-29 bombers to drop their payloads on Japan and Germany.
As a result of the economic downturn, taxes collected are only
about 15% of GDP (whereas 19% has roughly been the average for the
last 40 years) hence the huge deficits.
And that’s only the federal government. State and local
governments now comprise (roughly) an additional 10% of GDP. So
combined,… Read More