This model is based on consumption (spending by consumers, businesses and the government.
) rather than wealth building or production.
So every dollar spent is a dollar of GDP and every new dollar spent is GDP growth.
Most politicians catch on to this real fast.
The more you spend, the more GDP goes up and the better your chances for reelection.
This already sounds like a win-win situation.
But wait, it gets even better.
We have to get over one speed bump first.
To spend a dollar you have to produce a dollar.
But the government does not produce anything so it has no money to spend.
No problem, it just has to get its dollars from somewhere else.
The government has to take a dollar from producers in order to spend a dollar; or it has to borrow the money and pay interest from someone else.
It doesn't matter where the dollar comes from in the GDP model because every additional dollar the government spends is counted as an increase in economic growth (GDP.
) Now, if the government takes a dollar in taxes from a producer to spend; you could argue that the overall net is one dollar.
You subtract a dollar from the economy in taxes and then spend that dollar.
That sounds simple enough.
But this could be a problem later because you have to keep increasing taxes to pay for the spending.
Do they care? They will probably be out of office by then.
You would think tax payers would catch on to this, but remember you elected them because they were clever and great communicators.
So they just change the meaning of the word spending to investment and everyone is happy.
Long-term they try to convince tax payers that they are only doing this because the government can spend dollars more wisely than the producer they took it from or because the government can buy something the producer cannot.
Here is the BINGO.
You borrow the money because if you pay-as-you-go, tax payers could catch on.
And you get to pay huge interest payments on the borrowed money--you got it.
Every new dollar paid is an increase in GDP.
Now, think of the GDP growth we are going to get when our deficits go up by 10 trillion or more over the next few years.
PLUS, if interest rates rise significantly, and they will, because of all the debt; BINGO -even more GDP growth.
If you think this is a sane approach to our economy, do nothing.
If not, support politicians who are sane.