The Calculus of Deficit Spending

The Trend Is Not Our Friend

Mathematicians often rely on the old saw that a picture is worth a thousand words. The picture displayed above is Coyote Morning Ugly. Christopher Rupe and Nathan Martin of EconomicEdge.Com have examined the marginal utility of America’s continued deficit spending over time. Quite simply put, each year’s deficit spending produces less present value per dollar spent.

In 1966, we got about $0.75 per dollar of debt in present benefits. By 2010, the average trend was down to about $0.10. We lose $0.014 per year in present value from deficit spending. Even pulling the “inverted hockey-stick” year of 2010 out of the data would do little to improve that present trend.

Extrapolating this out seven more years gives us a zero marginal productivity for deficit spending. That would be the point at which every dollar of deficit spending no longer had a positive impact on GDP. Is that what literally has to happen before people realize that our current levels of national government spending will lead us to national suicide?