Graph #1: Base-Year Conversion |
To convert Potential GDP from Base Year 2000 dollars to Base Year 2009, I have to switch the numbers around, like this:
Graph #2: 2007-vintage Potential GDP (red) restated in 2009 Dollars |
And, apparently, the data between 1980 and 2010 was revised up.
Now I want to multiply my revised red data by the GDP Deflator, to convert real potential GDP to nominal potential GDP. And I'll change the blue line to show recent (nominal) GDP:
Graph #3: GDP (blue) and a 2007 estimate of Future GDP (red) |
So far there should be no surprises, even if you have not seen the numbers used as I'm using them here. I'm sure you've seen output gaps many times. Then too, converting from one base year to another is nothing special. And using potential GDP as an estimate of future GDP, well I'm sure I'm not the first guy to think of that!
But I do have a particular task in mind. And I used the numbers I did in the way I did so that I'd have what I need to complete my task.
You know how people always look at debt to GDP? This is my task. This is what I'm going to do. But I want to look at debt relative to GDP two ways: relative to GDP as things turned out (the blue line) and relative to GDP as it might have been if the economy didn't slow down after the Great Recession (red).
What debt to use? Doesn't matter. I'll use the Gross Federal debt, because so many people look at that one.
Here's what I got:
Graph #4: Federal Debt to GDP, for Actual GDP (blue) and 2007 Estimate (red) |
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