U.S. GDP weighed down by Taxes and Regulations is what you and I are witnessing in America today. Watch how by expanding on a basic linear equation we can solve for all the potentialities that occur when mis-managing the federal government. It’s a shame that economics is not a required subject to graduate from high school or receive a college degree. Ignorance in this area is a major driver behind making terribly destructive public policy decisions by many elected to serve in Washington. Everyone can benefit from an understanding of basic economic principles and it’s too bad these idiots weren’t made to pass a test before serving!

I found a sketch of this information on my laptop recently. I must have saved it after responding to a comment on a social media site years ago. After dusting off the information and expanding on the model I noticed it is very applicable to what is going on in America today so please share this with everyone you know. There has been way too much government spending since the Democrats controlled Congress and the White House making this a good time to re-visit some lessons in Macroeconomics. Here is one lesson taught early on in any college level class on the subject. By reading this you will know 99% more than any Democrat across the nation, plus you will understand why the tax, spend and increasing regulations policies that has been the mantra of the Democrats will have the U.S. economy continuing to underperform.

The Basic Model –
U.S. GDP = C + I + G +E,
A simple linear equation where Gross Domestic Product [or total output of all goods and services in our economy] depends on a few factors such as Consumption “C” (personal expenditures), Investment “I” (plant, equipment and capital goods), Government spending “G” (which has exploded over the past three years) and Exports “E” (both goods and services). Now I am going to expand the basic model in order to point some interesting things out –

First of all, we need to debunk one myth floating around out there [and for years] that all Government spending is bad. The truth is that a reasonable amount of Government spending, [a limited amount], is not a bad thing as it can add to U.S. economic growth, however any beneficial effects appear to occur, only in the very short term.

A rewrite of the equation above is meant to isolate the effect that government spending has on total U.S. output,
GDP – G = C + I + E. This rewrite of the basic formula shows that if we raise Government spending by too much we will actually crowd out private investment which is the problem we are witnessing right now in the United States. It might not be super clear why to you yet but Government spending requires tax receipts to feed it so we will expand the model to show the tax affect [or increasing taxes] to make my point clear-er-er… or something like that. 🙂

Expanding on the Basics –
So expanding the basic formula to breakdown variables while still maintaining model integrity, we have
GDP = [C x (1-t)] + [I x (1-t)] + G + E. I hope you can see what I see, any increases in the tax rate [both personal and corporate] will reduce both Personal Consumption and Private Investment in capital goods, plant and equipment.

However, if you’re still feeling skeptical and left wondering about all this I’m going to expand the model even further. This final lesson will provide you with all the information that you need to know to go to the polls and vote for you and your family’s well-being in this country. Let’s introduce increased Government Regulation (r) into the model which acts like an additional tax, especially on business operations & planned endeavors. I will rewrite the model taking this “r” into effect as we are all aware how much Democrats love to increase regulations in this country. Expanding on taxes and regulations leads us to an opportunity to rewrite the Macro model.

Macro Model Rewritten –
GDP= [C x (1 – (t + r))] + [I x (1 – (t + r))] + G + E,
Wow, that even looks ominous, looks like taxes and regulations impose a huge burden on economic output to me!

I won’t let you go without arming you with a few real life examples as I put these rules between components of GDP to work. Let’s assign values to these variables in order to demonstrate first how too much government spending will crowd out real economic output, factors making up Personal Consumption and Business Investment:
C = Consumption
I = Investment
G = Government Spending
E = Exports

So GDP = C + I + G + E, where the value of GDP again represents the total output of the economy thus we assign it the value of 1.0, for 100%. For purposes of this illustration, all other variables will be expressed as a percentage of total output as well.
G = .1, I = .2, E = .05, and we will solve for C, Consumption:
GDP = C + I + G + E
GDP – G = C + I + E
GDP – .1 = C + .2 + .05
GDP – C = .1 + .2 + .05
GDP – C = .35
GDP -.35 = C
1.0 – .35 = .65, Solving for C, Consumption makes up 65% of total U.S. output in this example. Personal expenditures in the U.S. had been hovering around 70% for some years so we’re not at Toxic levels here yet.

Now we will increase government spending “G” from .1 to .5 [ from 10% to 50% of GDP] while holding the other variables constant. Watch what happens this time to Personal Consumption Expenditures,
GDP = C + I + G + E
GDP – G = C + I + E
GDP – .5 = C + .2 + .05
GDP – C = .5 + .2 + .05
GDP – C = .75
1.0 – .75 = C
.25 = C
We now see where Personal Consumption, “C” has fallen drastically, to 25% of total output in this case due to a crowding out effect from an increase in Government Spending. This is somewhat similar to your Biden Crime Family economy, or really any other Democrat in office.

Expanding on the Macro Model Further –
Now we will place values inside the variables once again to illustrate how increases in taxes and regulations affect GDP by reducing Personal Consumption and Investments in plant, equipment, and capital goods. Using arbitrary values for the other variables in the model where C = .70, I = .20, E = .05, t = Tax rates of .10 and r = an increase in Regulations on business, .10. We will now solve for G to find out how increases in taxes and regulations impact consumption and business investment.
GDP = C + I + G + E
GDP – G = C + I + E
GDP – G = [C x (1 – (t + r))] + [I x (1 – (t + r))] + E
GDP – G = [.7 x (1 – (.1 + .1))] + [.2 x (1 – (.1 + .1))] + .05
GDP – G = [.7 x .8] + [.2 x .8)] + .05
GDP – G = .56 + .16 + .05
GDP – G = .77
1.0 – .77 = G, G = .23

In this example Government Spending makes up 23% of total output in the country which seems high to me. In reality, U.S. federal government spending has been at this level for about three years now and climbing higher as long as Democrats control the White House and the Senate.

Lastly –
Want to see what happens when U.S. tax rates increase from 10% to 30% and regulations in the United States increase from 10% to 20%? I do want to know what effect it will have on Personal Consumption, Business Investment, and Government Spending!
GDP – G = C + I + E
GDP – G = [C x (1 – (t + r))] + [I x (1 – (t + r))] + E
GDP – G = [.7 x (1 – (.3 + .2))] + [.2 x (1 – (.3 + .2))] + .05
GDP – G = [.7 x .5] + [.2 x .5] + .05
GDP – G = .35 + .10 + .05
GDP – G = .50
1.0 – .50 = G, G = .50

Conclusion –
It doesn’t get much clearer-er-er. 🙂 Due to an increase in taxes and regulations Personal Consumption fell from .56 to .35, Business Investment fell from .16 to .10 and Government Spending increased from 13% of GDP to 50% of GDP. Your federal government just got a GREAT BIG Raise under the Democrats! And all Americans are feeling the pain… in their paychecks. Basically, life sucks in America and you have no one else to blame but the Left, the Socialists, the Democrats.

Bottomline –
Never ever vote for a Democrat Socialist Liberal Progressive Woke, or whatever name they attach themselves to these days. In order for America to prosper and grow we need people serving in all levels of government who put America’s Interests First, are pro-U.S. Constitutional Laws, are pro-Law Enforcement, are pro-Border Security and pro-Business!