Chicken and Egg

I'm in rhetoric overload about the economy.  It's in the toilet, one side says, because we're out of control on government spending (in danger of turning into a socialist nation).  No, it's in a death spiral, the other says, because corporations have screwed the pooch thanks to deregulation, and are totally out of control with their own excesses.  All quote numbers as "percent of GDP" to support themselves and point fingers everywhere else.

So I looked some stuff up.  Here.  The Gross Domestic Product stats page with the Feds, from 1940 (picked at random) to 2009 (last stat date).  What I found was ... interesting.

Since 1940, government spending (fed, state, local) has risen - from 15% of GDP to 20% of GDP (as high as 25% in the 50's) while Goods and Services (which is the stuff that businesses produce) has also stayed fairly level at 68 -71% of GDP.  Looks like they're all wrong, right?

Look again.

During that time period (which started in WWII and continued through Korea and Vietnam), married couples filing jointly paid taxes from 79% (for the million dollar upper tier) in 1940 to 88% (for $200K and above - which pretty much set the upper tier for a long time) 1942-1943, to a high of 94% from 1944 to 1945 (according to the tax bracket page).  Tax rates on the upper tier didn't go below 80% ($200K) again until 1964, and not under 70% until 1982, when it was lowered to 50% (for $85,600 and above).  It then bounced around with max income rising, then percent lowering, until we're now at 35% for $372,950 and above.  (Not as dramatic as what happened in the beginning of Income Tax when the original tax rate of 7% in 1913 went to 77% by 1918, but that's a whole 'nother discussion.)  During the same period, the government outlays almost always hit the 20%'s during war time, and fell back into the 'teens afterward.  (And taxes almost always shot up, too, either in percent or upper bracket cutoff.)

Also during that time period, the proportion of Goods and Services changed just as dramatically.  In 1940 (war time, remember) Goods produced was approx. 41% of GDP (57% of their category), while Services were just 30% of GDP.  By 2009 that had changed to Goods 20% of GDP, Services 48% of GDP.

Oh, and the Net Exports of Goods and Services went from +1.5% of GDP to a high of +4.5% in 1946, when it started its spiral to a low of -4.9% in 2008 (when the crash made everyone pull back, so it's -2.5% now).  If you didn't know, that means we send out more than we take in (and in the service sector that means were farming out 36.7% more jobs than we're importing.

What does this mean?

Simple.  Everybody's right.  And everybody's horribly, terribly wrong.

We are living in a financial house of cards.  We consume more than we produce, which is bad enough, but we're dismantling even the potential to produce more not because we're farming it out to China and India but because we're backfilling the sucking hole with a more "educated" (yet another discussion) and entitled worker.  We've gone from a product-based economy (making solid, in-your-hand items) to a service-based one.  We rise through the ranks of corporate America by finding the holes in the system, and then we go to work for ourselves to market our methods.  If we can hire others, we tend to own businesses that do what everyone else doesn't want to do - cook, clean, handle money, make healthy, instruct, protect - but not those that make cars, or sweaters, or even movies, because those facilities are vanishing from the landscape.  If this trend continues - and it has for 70 years - then it won't be long before we're all be working for someone else, because a service-oriented person, by definition, serves someone.

And that someone probably won't be here.

We need to change.  And not, I think, the way everyone seems to want us to do it.

Ideas?