David Stockman's "Golden Constant": What It Means to the National Debt

Part II of Mike Church's discussion on David Stockman's Why Deficits Do Matter, Three Areas of Why the Deficit has Skyrocketed

Yesterday I introduced you to former Reagan Budget Director David Stockman’s “Golden Constant” analysis of the United States’ near 100 year tradition of holding all public and private debt to less than 1.6 times the GDP. After Richard Nixon took the dollar off the gold standard in 1971 this “golden constant” began rising, until by 2007 we were holding debt 3.6 times the GDP. What this means is that nearly 2/3 of our purported increase in living standards from 1971-2007 weren’t increases at all, they were merely charges, accrued to the debt card issued to every American. This puts the National Debt not a paltry $14 TRILLION but a more unbelievable $52 TRILLION. If that’s not shocking enough, consider that when the American shoeple were first confronted with a bit of this knowledge after the 2008 “meltdown”, instead of paying the debt down, we rolled the dice and increased it even further. As Stockman tells it, our personal, voracious appetite to consume has netted over $400 BILLION in increases or nearly 4% while private wages and salaries have dropped by $100 billion or 2%. No wonder everyone has 4 plat panel HD TVs! What this means to you is that this debt must be repaid and spending our earnings, less savings must resume. That is a log way to drop for most folks-imagine spending one HALF of what you currently spend in real terms-half the toys, half the restaurant meals half the channels on DirecTV, you get the picture? Alas most people won’t or simply will not comply and this is why an imminent government default is nearly assured because the shoeple have already chosen that path.