Depending on what comes up in your Google search for "What will be the effect on GDP of the fiscal cliff" you get answers ranging from a drop of about 1.4 percent (NASDAQ) up to four percent (Washington Post).
Most of the guesses fall in the 3 - 3.5 percent range.
No matter how much the economy might contract as it free falls down the fiscal cliff, this much is true:
We now have proof that the U.S. economy is totally - totally - dependent on federal government spending.
The sequestration piece of the cliff calls for spending cuts of $1.2 trillion over the next 8 years - an average of $150 billion per year.
According to the White House website, the first time the Federal government spent more than a billion dollars in a single year was in 1917 when we spent just under $2 billion having entered World War I in April of that year. The next two years of full-blown involvement saw spending of $31 billion to pay for the war.
Fifteen billion in 1917 dollars would be about $180 billion today. That's a far, far cry from the $3.8 trillion estimated for FY 2013 in which we currently reside. In fact it's just under five percent of this year's budget outlays.
In 1944 and 1945 - the two highest years for spending during World War II we averaged about $92.5 billion. In today's money that would be about $946 billion - still less than 25% of today's outlays.
To get this relative spending, I am using a site called www.measuringworth.com. The numbers I'm citing are using what is known as the GDP deflator. There are other measurements including commodity costs, income, and wealth.
The first time the Federal government spent a half trillion dollars was in 1979 ($504 billion) and the magic trillion dollar barrier was first crossed in 1987 at $1.007 trillion.
Just to tie a bow on all this spending we first spent $2 trillion in 2002 and hit the $3 trillion mark in 2009.
I understand that the world in 2012 (or 2013 in fiscal years) is a far, far cry from the world in 1917. And, I am not arguing that we return to the abject lack of any meaningful safety nets.
Getting back to the $150 billion a year in spending cuts under sequestration, they equal only about four percent of estimated outlays for FY 2013.
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