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GDP, or if we spell it out, Gross Domestic Product, is the primary measure the economic activity within a nation. Mathematically, it is the sum of all consumer and government spending on goods and services, business capital investment spending and the value of the nation’s net exports (exports minus imports) for all the goods and services produced within a nation’s borders.
When most people think of these things, they think of tangible items. As consumers, many can see themselves buying a cup of coffee or getting a haircut. As taxpayers, you can see the government buying airplanes or contracting to fix a pothole. As business owners, or just people who work at businesses, you can see the business making capital investments, such as buying a computer or expanding a facility. Where net exports are concerned, you can see container ships in ports being unloaded and reloaded.
But did you ever think that one of the United States’ fastest growing exports might not be something you can see and touch? The New Republic‘s William Galston writes:
Several days ago, the Congressional Budget Office (CBO) released its preliminary analysis of the fiscal impact of the president’s FY2012 budget proposal. Its findings were not pretty. In no year between now and 2021 would deficits fall below 4 percent of GDP. Over the next decade, enacting the president’s proposal would create deficits totaling $9.5 trillion, $2.7 trillion more than the cumulative deficit in CBO’s baseline budget. Federal debt held by the public would double from $10.4 trillion to $20.8 trillion, 87 percent of GDP, and annual interest on the debt would rise from 1.4 percent of GDP to nearly 4 percent. Even if the share of the debt held by foreign investors and governments does not increase over the next decade, CBO’s projection suggests that we’ll be shipping fully 2 percent of our GDP (almost $500 billion) overseas each year by the end of the decade, just to pay the interest on foreign holdings of U.S. government debt.
We wonder if the U.S. government’s leaders have really considered what the consequences of continuing that kind of trade imbalance fueled by its excessive spending might be.