Mercy, Mercy, Me: The Economy

With apologies to the late Marvin Gaye...

When I was at Syracuse University, I majored in Accounting. Accounting majors MUST take Economics. I actually remember some of that stuff, so I have a more than rudimentary understanding of what is behind much of the debate our nation is having right now. I have two very basic pieces of advice for anyone trying to understand what needs to be done to fix the ginormous mess we are in. First, IGNORE the GOP. They are selling the same snake oil that essentially caused this mess in the first place. Second on my list is this: understand what Gross Domestic Product (GDP) means.

Since ignoring the GOP is not that hard to do, I want to give a very brief lesson on GDP. Simply put, the Gross Domestic Product is a way to measure our national income AND the output of our economy. Since it is MEASURABLE, there is a handy formula for it:

C+I+E+G = GDP.

C = Consumer Spending. Currently, this is in the toilet.

I = Gross Investment. This too, is currently in the doldrums.

E = Exports MINUS Imports, AKA the Trade Deficit. It doesn't HAVE to be a negative number, but I venture that most of us haven't known a time when the USA ran a Trade Surplus. We certainly haven't lately.

G = Government Spending.

There is the formula for GDP. Anyone with common sense or that will take the time to HONESTLY think about it knows that three out of the four components of GDP are down. Way down. Two consecutive quarters of negative growth equal a recession. We are currently in a recession. With the lack of consumer and investor confidence, don't expect to see a rise in either C or I in the near term. E, which is currently a HUGE negative number, isn't going to become a surplus soon, if ever again in our lifetime. That leaves G, the dreaded Government Spending to pull the economy out of its tailspin. Sorry GOP, but that is a FACT. It is a well known fact if you have taken Economics 101.

So, do not moan about the $787,000,000,000 stimulus that was recently signed into law. It was necessary. In my humble opinion, it is too small by nearly half. I think that $1.3 TRILLION would have been a much better figure, but I don't get a say in these matters. Be patient. The economy WILL turn around. My guess is by March, 2010, we will be able to breathe a little bit better.

Love and Peace...