US Debt Surges A stunning $7 Trillion In Just 6 Years

The government will make a significant change in the gross investment number, which will now include research and development spending, art, music, film and book royalties, and other forms of entertainment as the equivalent of tangible goods production.  The U.S. will be the first nation on earth to pull off this magical GDP trick.

But the shenanigans played by government may fool some people into thinking that growth in the U.S. is gaining strength.  It may even convince some investors that the debt and deficit to GDP ratio is falling.  In addition, it may cause politicians to claim that government spending as a share of the economy is shrinking, so it’s OK to ramp up the largess….

However, the BEA and our leaders in Washington have overlooked the most important point, as they so often do, which is that revenue to the government cannot be faked.  Even if D.C. desired to include all the sea shells washed up at the beach as part of our gross domestic product, it would not increase the amount of tax receipts to the government.  Therefore, it cannot alter the only metric which really counts; and that is our nation’s debt and deficits as a percentage of government income.  It will not increase by one penny the amount of revenue available to the government to service our debt, and this, in the end, is all our creditors are really concerned about.

Revenue to the government was $2.58 trillion in fiscal 2007.  But despite all the government spending and money printing by the Fed, revenue for fiscal 2013 is projected to be just $2.7 trillion.  The growth in Federal revenue has been just over $100 billion in 6 years!  Nevertheless, our publicly traded debt has grown by $7 trillion during that same time frame.  The fact is that the U.S. economy isn’t growing fast enough to significantly increase the revenue to the government, but our debt is still soaring.

It all comes down to this, the U.S. government will not be able to service its debt once interest rates normalize, and that will be the sad truth regardless of what voodoo tricks Washington uses to report GDP.  It’s a shame they won’t just implement real measures to grow the economy like reduced regulations, simplifying the tax code and balancing the budget.  At least we can still purchase precious metals and mining shares to protect our portfolios when the curtain finally comes down on the government’s magic act.”