It is said that one of the sources of the tremendous prosperity of Hong Kong was the refusal of one of the early governors of the colony to keep economic statistics.  The story says that he dismantled the government economic statistics organization to prevent the misuse of the resulting statistics, and government meddling in the Hong Kong economy.  The result was one of the most amazing economic success stories in history.

Our federal government is deeply involved in our economy, and gathers lots of statistics.  We define our times as good or bad depending on what we now call our GDP.  Oddly enough, we count in the GDP the money that is borrowed and spent by the federal government.  This would be like someone who loses his job, but increases his spending, putting everything on his credit cards.  His “income”, including his borrowing, is going up!  Unfortunately, it’s all a lie.  He has no income.  He is producing nothing.  All he is really doing is destroying his own financial future.

That’s how our federal government is measuring our GDP.

Like the unemployed man, the federal government is racking up massive debt, and counting its borrowing and spending in our GDP.  The complaints of the GDP shrinking if the federal deficit is cut are valid because the borrowing and spending is counted in the GDP.  Reductions of federal spending come directly off the GDP number.

It is vital that we call this what it is – nonsense.

There is a great article about this in a newsletter I get from John Mauldin, here:

http://www.johnmauldin.com/outsidethebox/does-unreal-gdp-drive-our-policy-choices

Our debt is a threat to our future.  Playing games with the numbers to confuse the issue is dishonest and destructive.  On the part of politicians who use their spending to buy votes and maintain position and power, it is also self-serving.

Kicking the debt habit will be painful, but cannot be avoided.  The pain only gets worse the longer we avoid facing it.