An Exposition of Public Debt and a Note on Some

I'm sure everyone has seen a debt clock or two. The one at http://www.usdebtclock.org is probably the most useful debt clock on the internet. I have posted in the past about how the economy is not really growing, the government just used quarter over quarter numbers instead of year over year numbers to trick people into thinking we were growing. In response, a friend brought up a question: How much of the "growth" was a result of government deficit spending? Well for the entire fiscal year ended September 30th, 2009 the government deficit was $1.42 trillion dollars or about 10% of the $14.3 trillion seasonally adjusted annual rate (SAAR) released for the end of the third quarter 2009.

To be sure, not all of the government deficit goes directly into GDP and I do not wish to get into the why's and why not's today, rather just be aware all government expenditure does not end up as GDP. So in answer to my friend's question, if we took away just the federal government's deficit, the economy would have been in very bad shape indeed. Referring to the debt clock, over 37 million Americans, over 12%, are on food stamps. So if the government did not provide those food stamps, with borrowed money from the wealthy of both the U.S. and other countries, we would have had a very, very ugly time in the third quarter and indeed most of the last year on just feeding the country.

Surprisingly it is not easy to find the deficit of the state and local governments. I wonder why it is so hard to find such a thing. Maybe I should try bing insteady of google. Oh sweet. Second result when using bing.com, after about half an hour of looking in google. Google has lost its touch on searching. Anyway, state and local governments have budget shortfalls of $178 billion or 26% of their budets. This is at least better than the 40%ish level of the federal government. So overall, approximately $1.68 trillion of government deficits in one year have helped prop up our economy to shrink at a 2.3% rate.

To be sure, in the government's defense, it has promised the U.S. citizen in times of need a place to live (unless you are homeless) something to eat (unless your disability check is too high), and a paycheck for all the taxes you have paid in (unless you can't find another job after a certain amount of time, sorry about you). So it is only right the government has spent this money. There was a contractual agreement of sorts between the government and the people. If they pay in, this is what one can expect in return. Social insurance.

Hm.... Speaking of some of the debt. Some went to AIG and other companies who paid ginormous bonuses to their employees. Same deal. I defend the pay out on the grounds there was a contract made between the employee and the employer. Was the contract itself moral? Probably not from a socialist perspective, but from a capitalist perspective the contracts were completely fine. If someone is going to make a company hundreds of millions of dollars, why should this employee not get a piece of the pie? One might say "well the company failed so no one should get anything." I'll say, if these people getting these bonuses did not do such a good job at whatever it is they did, AIG would have failed to an even more extraordinary degree. So what these employees getting the bonuses really did was to reduce the total failure of AIG by making money in their own respective divisions and as such deserve the reward originally given to them contractually by the company. ANY time a company fails the first stakeholder is always employee salaries and bonuses owed. Before bond holders, before bill collectors, it is the employees who get their due first. I'm pretty sure the company has to pay employee salaries before even taxes, to put it into perspective. So why should the rules change for AIG and other companies which failed?