There’s an excellent post at Of Two Minds chock-full of nice charts and graphs (for those of you who like nice charts and graphs) in a similar vein to my earlier post this morning. Here’s the 30 second summary:
- GDP growth has averaged about 2% since 2000.
- GDP growth has been flat since 2007.
- GDP growth since 2007 would have declined 11% without massive federal spending.
- Public employee healthcare costs in many jurisdictions have grown by 11% per year since 2000.
- Adjusted for inflation stock gains since 2000 have been negative.
- Public employee pension promises assumed annual gains in the vicinity of 8%.
These charts make it clear where we’re going in terms of public pension and healthcare costs. The real economy isn’t growing at all, or is actively shrinking if we remove massive Federal stimulus, and long-term returns in stocks are negative.
But let’s make the happy-story assumption the U.S. economy is about to resume its long-term GDP growth rate of abour 2% per annum.
A 2% (inflation-adjusted) growth rate in the real economy compounds to a 24% increase over 11 years, while an 11% annual increase in pension and public employee healthcare costs compounds into a 315% increase.
Is that disparity sustainable? Clearly, it is not.
You can’t fix that with tax increases, unless you’re planning on increasing taxes every year. The best you can do with that strategy is divvy up the ever-decreasing pie. This is no way to run a railroad.