Ever wondered how our economy keeps on growing, if slowly, when everything is so troubled? But it must be true, the government says so. Yeah and the nice man just wants to give your kid candy, right? Here’s something to consider: U.S. Economic Growth Sans Debt is a story about that and how it stacks with reality. One part of reality is the fact that we’ve been running our economy on borrowing for a while now, that means we have to devote future income, future growth, toward repaying it.
If you buy a house with a mortgage, your equity is the price you paid less the money you’ve borrowed, right? The equity is what you really own. (But you pay taxes on the whole thing…) Here’s a graph of the growth in our economic output (GDP) less the growth in our borrowing (TCMDO). Gives a little different picture of the ‘healty growth, though small’ that we hear about, doesn’t it?