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does this account for government deficit spending? Because we are adding nearly 2 trillion to the deficit this year alone, around 8% of GDP. The numbers I see

does this account for government deficit spending? Because we are adding nearly 2 trillion to the deficit this year alone, around 8% of GDP. The numbers I see coming out about the state of the economy just seem more and more out of sync with reality on the ground. Legit 5% GDP growth should mean a booming economy with people feeling good, yet people are struggling to cover their basic needs and pessimism seems high. I work remote so I see this in both the bubble of the tech world and in the "real world" outside of tech

elicash 3y ago
GDP measures the value of goods and services produced in the country. For the question you're interested in, you'd want to look at other measures like the deficit as a share of GDP. Which is trending badly in large part due to lower revenues (variety of non-ideological reasons).
brookst 3y ago
Yes, GDP by definition includes government spending. I agree that GDP is a poor measure of “on the ground” experience, but not sure what that has to do with deficit spending.
- ren_engineer 3y ago
  basically, I'm wondering if we'd go into a recession immediately if the government was forced to cut spending to sustainable levels. The debt is finally hitting a point of no return where we have to cut, next year we'll spend more on debt interest payments than our military the main argument that the economy is doing well is that "the labor market is strong" and unemployment is low, but how many jobs are tied to government deficit spending via contracts or direct employment? If that spending is cut back, I'd imagine the jobs numbers will quickly start to decline
  - mwbajor 3y ago
    Imagine how much it will "grow" when we get involved in 2+ simultaneous wars.
    - GiorgioG 3y ago
      It will likely "grow" into 1 large war.
      - barkerja 3y ago
        I think they were referring to the two wars we spent decades in that increased spending. OIF and OEF.
  - nofinator 3y ago
    The government has been reducing spending since all the COVID support in 2020 and 2021. At its peak, government spending was over $7 trillion, which was over 30% of GDP in 2020. It appears to be trending back to the pre-COVID ratio: ~20% of the GDP is government spending. https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/#spending-trends-over-time-and-the-us-economy https://fiscaldata.treasury.gov/americas-finance-guide/feder...
    - jonhohle 3y ago
      But at the same time has the largest non-COVID deficit ever. `22 and `23 defectors are trending higher, not lower.[0] 0 - https://www.reuters.com/world/us/us-budget-deficit-jumps-23-nearly-17-trillion-social-security-health-costs-rise-2023-10-20/ https://www.reuters.com/world/us/us-budget-deficit-jumps-23-...
  - criddell 3y ago
    > sustainable levels That's really the key thing. What level is sustainable? I've come around to the idea that the main danger of deficit spending is inflation (because of the idea that government debt is private sector wealth). The big levers the government have access to are spending and taxes. The first adds wealth, the second subtracts. In this way, government debt is really nothing like household debt that you and I have.
    - xedrac 3y ago
      Inflation is their primary lever actually. Why bother paying down the debt when you can simply make it worth less? It's fiscally irresponsible, but that's how it works.
    - jonhohle 3y ago
      You seem to agree with Keynes. Assuming you’re in the lower 99%, are you wealthier in proportion to increases costs over the past quarter? I personally don’t buy it. When other country’s start divesting from US treasury ties, the party will be over. Already prices are rising faster than income. What did Germany, Zimbabwe, and Argentina, Venezuela, etc. do wrong, that the US is doing right?
      - criddell 3y ago
        A better question is to ask what is Japan doing right since they are a lot farther down this path. Their debt to GDP ratio is something like 230% which is almost 2x the US ratio.
        seanmcdirmid 3y ago
        The answer is that Japan isn't doing it right. People struggle, taxes are high and pay is generally low (but for tourists, Japan is incredibly affordable). They still do OK, but we shouldn't see Japan as a model of how to do things.
        criddell 3y ago
  - Certhas 3y ago
    The money is coming from somewhere. If it wasn't lent to the government, it would be spent in other ways. So the only reason that it should cause a recession is if the government is spending it in better ways to grow the economy than the private sector would/could (e.g. because the best investments are infrastructure related). But if it's actually providing a boost to economic growth, it also means the debt isn't actually unsustainable. If you boost economic growth this year by 0.1%, and afterward it returns to previous growth rates, then the economy will stay 0.1% larger than it otherwise would have been perpetually. If your interest rates are comparable to the base line economic growth (true now, last decade they have been lower), and you take a twenty-year view, then taking on 5% of GDP in debt to generate a one off 1% growth boost to the economy is a no-brainer. The real issue is to understand when the government (vis a vis the private sector) actually can spend money to generate genuine extra growth, and when it cannot (e.g. if it only shifts growth that would happen anyway forward you would expect growth to dip after the initial boost, but that would be true whether the deficit spending stops or not). The argument against debt is often not based in economic sense or sound science (remember the debacle when a widely cited study on the problems with high debt turned out to be based on an Excel mistake?). In my view, it's based on an aversion to the government having too much spending power. After all, a version of the argument, above was used by conservatives to sell tax cuts that were supposed to pay for themselves. They didn't because the tax cuts did not actually generate growth, they merely redistributed wealth to the top. For deficit spending, the evidence that it can boost economic growth is much more robust. The real debt crisis will hit once countries start to seriously shrink...
    - fuoqi 3y ago
      >it would be spent in other ways Or it would've been placed in the reverse REPO facility at delicious interest rates paid straight from the printing press. A lot of COVID spending was sanitized this way, without it inflation would've been much higher. And this money has started to get back into the economy.
- roflyear 3y ago
  Agreed that GDP in isolation is a poor measure, but when you take it in context (every report is done the same way) and with other financial data it can help paint a picture (still an imperfect picture).
__alexs 3y ago
5% GDP growth when inflation is 1% is quite different from 5% GDP growth when inflation is 10%.
- deleted 3y ago
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- alexb_ 3y ago
  This number is inflation adjusted.
  - stormfather 3y ago
    Adjusted according to whose measurement of inflation? The party in power's?
    - MagnumOpus 3y ago
      The Bureau of Labor Statistic. Non-partisan enough, the methodology hasn't changed from the last administration. And take it from a non-US-based inflation expert: it is accurate enough, some gripes about "quality adjustment" of electronics and about using owners' equivalent rent instead of house prices notwithstanding.
  - Enginerrrd 3y ago
    They are, but that's assuming that the GDP deflator is accurate. I for one don't agree with the CPI substitutions and gamesmanship and when CPI was suggesting 7-8% I calculated my personal basket had inflated ~15% YOY over the previous two years. There are all kinds of reasons why this figure might be politically influenced. The reality on the ground is we've had to make significant cuts to our standard of living just to maintain spending flat even with wage increases. The wage increases have been on the order of 3% per year and not tracking with inflation for both my wife and I.
- dsugarman 3y ago
  what do you mean by this? that inflation is currently 1% or 10%? it's ~3.5% right now
jghn 3y ago
> The numbers I see coming out about the state of the economy just seem more and more out of sync with reality on the ground. What are those numbers?
- coliveira 3y ago
  Inflation still rampant, unaffordable cars, unaffordable homes, salaries growing slower than inflation. In other words, things that don't affect the rich (that's why the numerical growth in GDP), but are essential for the middle class (the majority).
  - sarchertech 3y ago
    Inflation is way down, salaries have been growing faster than inflation all year, unemployment is very low, car prices have been dropping since late 2022, and home prices are finally starting to decline. So when you talk about numbers “you see coming out” you’re at least a year out of date. I’m assuming you’re going to just start saying “the numbers aren’t real man”. But in that case why talk about the “numbers you see coming out”.
    - edgyquant 3y ago
      Core Inflation is down but that doesn’t account for food or energy, which are the two biggest complaints people have. Id like to see your proof that housing prices are going down, that’s news to me. > I’m assuming you’re going to just start saying “the numbers aren’t real man”. Nice way to prove you are arguing in partisan favor and not discussing anything in good faith.
      - sarchertech 3y ago
        No it’s a nice way of heading off what I guarantee was going to be the response. There is literally nothing you can say to sway the “inflation numbers aren’t real crowd” in the same way you can’t argue with a conspiracy theorist. I don’t care about partisanship. I think the economy would be in roughly the same state it’s in regardless of which party won most recently. Core inflation doesn’t include housing and fuel. But fuel is down 10% from its peak last year and the median home price in July 2023 was 2% below the median price in July 2022. Inflation is going down, wages are going up. You can’t argue that “the numbers coming out” are showing the opposite because they aren’t.
grumple 3y ago
Raise all prices by 4.9%, GDP grows by 4.9%, with no additional production. And we'll all effectively be poorer.
- alexb_ 3y ago
  4.9% is inflation adjusted. God, don't any of you RTFA anymore?
  - ModernMech 3y ago
    Did anyone ever?
  - deleted 3y ago
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  - jurgenaut23 3y ago
    Ouch, that hurts. But indeed, that shows that most people have the attention span of a gold fish.
    - alexb_ 3y ago
      It's astonishing how nearly every single comment below this type of thing is "well inflation is up so this number isn't real". Nearly everything, on every platform. People don't want to believe the economy can possibly be good.
      - coliveira 3y ago
        Official inflation figures might be misleading and designed to mask the real impact of inflation. So it makes sense to ask if this "inflation adjusted growth" is real or not.
  - SantalBlush 3y ago
    A lot of users just chime in to brandish their pitchforks after reading the headline. I hope that is changing, because some of the discussion can be pretty good.
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coliveira 3y ago
Yes, the gov is spending 8% in deficit to achieve 4% in GPD growth. This doesn't sound like good economic policy to me. The growth should at least match to make this even workable. Of course, Washington doesn't even know how to calculate basic things anymore, everything is distorted to help the party in power at the moment.
- AtlasBarfed 3y ago
  Apparently just giving money to the rich isn't a very good way to build an economy
  - roflyear 3y ago
    Careful saying that around here ;)
  - djbusby 3y ago
    The best way to build economy is to give money to those without. Then they spend it. Trickle Down is bullshit. Bubble Up is the one that works. The rich still get theirs - but less and after the money has passed through a few hands.
    - BobbyJo 3y ago
      We just tried that and inflation exploded.
      - SketchySeaBeast 3y ago
        Somehow a lot of haves were mixed in there too, which may have been the problem.
      - deleted 3y ago
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      - dfxm12 3y ago
        It sucks that we had to pay 1.5x as much for a dozen eggs during and shortly after that global pandemic, but put blame where it is due, and it is not really due to your neighbors getting pandemic relief. https://thehill.com/business/economy/4057722-greedflation-is-the-new-inflation-as-corporate-profits-balloon-report/ https://thehill.com/business/economy/4057722-greedflation-is...
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zitterbewegung 3y ago
Look torward higher borrowing costs and inflation and while GDP can rise the economic situation can be people are unable to afford to buy a home and making ends meet is primarily a inflation problem. But, that doesn't mean the the economy overall is seeing growth so we can hold all three things can be true.
anovikov 3y ago
That's the thing - according to most polls, people ARE feeling good, but at the same time certain that everyone else - the public in general - are struggling to cover basic needs. There's a wide disconnect caused by negativity in media, mostly stirred up for political reasons. Like this: https://www.axios.com/2023/08/18/americans-economy-bad-personal-finances-good https://www.axios.com/2023/08/18/americans-economy-bad-perso... TL;DR: 71% say economy is bad and 51% say it's getting worse, while for 60% people in the same poll their personal financial situation is just fine. There are many similar polls, all point to the same thing.
- coliveira 3y ago
  It all depends on what kind of social group you're in. Upper middle class and higher are still doing just fine. People like you most probably don't have friends who are living in the streets or cannot afford to buy cars anymore. Just look at the statistics of people living in the streets of big cities and the situation looks more like the great depression.
  - anovikov 3y ago
    Homelessness is on a long term decline and since 2007, it's down from 0.21% to 0.17% population. It's probably just concentration in the certain area because of police doing a bad job cleaning the streets. Also, economic growth in U.S. is now mostly concentrated in lower income groups. It seems that high middle class (statistical one, i.e. top 10-20% of population - "people just out of poverty" if you look at it honestly), are on the losing side now. Hard numbers are hard to come by but once the tax season is over we will see them next year.
  - MattGaiser 3y ago
    > Just look at the statistics of people living in the streets of big cities and the situation looks more like the great depression. https://usafacts.org/articles/how-many-homeless-people-are-in-the-us-what-does-the-data-miss/ https://usafacts.org/articles/how-many-homeless-people-are-i... There are fewer homeless than before 2008, which was a period of economic boom.
skywhopper 3y ago
Deficit spending is still spending. But anyway economic activity isn’t evenly distributed. You may not live in a booming area, but there certainly are many booming areas. I recently moved from one mid-sized city to another, in different states but not all that far apart, and the difference in how the local economy feels is remarkable. One place feels stable but gradually deteriorating and the other is dynamic and growing fast. Besides regional differences, it’s also the case that more and more economic activity is being captured by fewer and fewer people. So, if the richest billionaires grow their stash fast enough, the rest of the country will probably feel less dynamic.
epistasis 3y ago
How would you "account" for this? Seriously? I think a lot of people feel bad about the economy because they are told to feel bad about the economy. Which, if your job is hiring people, might be the case because wages are going up for those on the lower end.
csomar 3y ago
I believe we are in the first stages of the implosion of the US dollar and the US financial system but since it's a huge system it's happening in a motion that the typical brain does not understand. People think it'll happen in a matter of hours but that might not be the case. It might be happening right in front of our eyes but we have never had such an event so we don't know what it looks like. Until maybe 5-10 years later.
- nemo44x 3y ago
  Well, the world is increasingly becoming more unstable which is good news for the dollar. The US financial system will continue to excel so long as global demand for dollars remains strong.
  - xtian 3y ago
    Demand for dollars will remain strong as long as they are the least onerous way to conduct international trade for essential goods. The US makes very few of these goods domestically. Eventually the mountains of sanctions, central bank asset seizures, endless debt and money printing, and policy of foreign meddling will tip the scales.
- matthewfelgate 3y ago
  No. The USA is set to succeed in the next 10 years because of geographic and demographics. Perhaps you're a pessimist.
  - csomar 3y ago
    I am not a pessimist. I don't believe the geography/demographics argument. Brazil had that and yet the performed really badly. Argentina has a great geography with no demographic tensions and have performed catastrophically. Also, the US is coming from a high point, not 0.
    - oytis 3y ago
      It's also that the U.S. is a developed country. Most countries are either developed or have good geography, demography and access to natural resources. U.S. has all or it.
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WendyTheWillow 3y ago
There are people who think the job market never recovered from the ‘08 crash, just because they can’t find a job, so sentiment is probably not a useful measure of economic activity in the US. People will never “feel good” about the US economy again.
- throwaway5959 3y ago
  Fuck their “feelings”. I’m so tired of hearing about people’s feelings when it comes to how the economy is doing. The only thing that matters is the data.
  - hotpotamus 3y ago
    It turns out people live in a nation and not an economy. Tying someone's kids' healthcare to their employer who could fire them for no cause at any moment sure has a way of making people nervous about the future. I guess it gets results out of them, but it doesn't seem to make them happy.
    - WendyTheWillow 3y ago
      But what the hell does that have to do with quarterly measurements of economic growth?! Wildly conflating every issue into different random grievances helps nobody, and arguably delegitimizes an otherwise very real problem. Making everything about everything is an extremely effective way to paralyze any potential improvements. It’s unhelpful and exactly what I’d do if I wanted nothing to change.
      - throwaway5959 3y ago
        Can’t upvote this enough.
      - hotpotamus 3y ago
        With massive inequality, those in the lower classes fall ever behind the top quintile or so. Do you think they enjoy hearing about how much better the economy does as they see their and especially their childrens' standard of living fall?
AnimalMuppet 3y ago
True, but... How much deficit did we add last year? The year before? OK, two years ago means they are Covid numbers, so... five years ago? How much did the economy grow in those years? I'm not sure that you can say anything as simple as "the growth is because of the deficit". I suspect (but I don't currently have the numbers) that there have been lots of years when the US ran a large deficit and did not grow.
MattGaiser 3y ago
> with people feeling good Because growth likely means inflation in this case, so that causes uncertainty.
kouru225 3y ago
This literally always happens during a Democrat presidency: the numbers are good but everyone goes “well it doesn’t FEEL that way so I’m gonna ignore it.” At what point are you gonna admit that your feelings are a crap metric? The fact of the matter is the feelings of public are the feelings of the rich propagandists who, on principle, don’t want a leftist in power, regardless of whether he’s good for the economy or not.
- aftbit 3y ago
  Counter-argument: my father generally votes right, but he claimed the best economic times of his life occurred during the Clinton presidency.
- thereddaikon 3y ago
  Maybe these metrics are what's crap? GDP doesn't mean much for people day to day. Neither does how high a score the stock market happened to hit in its arbitrary magic points system. People care about the job market, the cost of living, direction effects of inflation on buying goods and services. When people say they economy sucks they mean they can't buy a car right now because the bank will only give them an ass interest rate even with great credit and the price of groceries has skyrocketed. I've believed for awhile now the stock market has been a poor measure of the economy because its become decoupled from the "real" economy, ie: the things I listed above.
  - csours 3y ago
    There's a saying "All Politics are Local" Maybe "All Economics are Local" too. Obviously neither of those are true in a general sense - but the local situation is what feels most important.
  - dfxm12 3y ago
    When people say they economy sucks they mean they can't buy a car right now because the bank will only give them an ass interest rate even with great credit and the price of groceries has skyrocketed. With regards to grocery prices, what does corporate greed have to do with the president? As for the car, the FED has a big hand in interest rates, and yeah, Biden did choose to re-nominate Powell, but Powell was originally appointed by Trump, so I don't know how voters can really say the republican would have done better. The American economy is bad for people under a certain line, yes. The question is why does the media always overplay the economy when Republicans are in power and downplay it when Democrats are?
jonnycomputer 3y ago
Government spending contributed to 0.8pp of the growth. Pretty significant. But the main driver is consumer spending, especially on durable goods. These are the good times that the government should use pay to pay off debt by taxing more and spending less. I don't put much stock in your feelings about the economy. My feeling is, I see people shopping at the mall, I see them filling the bars, and I see them buying new cars. The problem some people may be having is that they over-extended themselves and now owe too much. For example, while their real wages have actually gone up, they may have underestimated how much inflation would erode the real value of their nominal wage increases (I did this, in fact). So they took out loans they thought would be easy to pay, at interest rates that were higher than they were used to, and found that they had made the wrong bet. The disatisfaction, imo, is all about disappointed expectations, not the actual living conditions people have. I got a 20k raise, but now it feels more like a 12k raise, and meanwhile I took out a loan for a kitchen remodel.
- s1gnp0st 3y ago
  Most people in this country are much poorer than the people remodeling their kitchens. You're speaking from a solidly middle-class perspective.
  - jonnycomputer 3y ago
    Are you saying that poor people could not have under-estimated inflation relative to their (very real) income gains and acquired debt that they could not, as it turns out, pay for? The point is that uncertainty increased, and many people made the wrong bet, e.g. your hourly wage went from $10 to $15, a 50% increase. You buy a car (yes, even poor people buy cars), but the used car market spiked in price, and the interest rates too, and besides, everything just got more expensive. And so, it turns out that your wage increase feels more like a $2/hr increase instead of a $5/hr increase, and you're stuck trying to pay off more car than you can actually afford. Yes, I am fortunate enough to earn a middle-class income for my family. I grew up poor in a poor neighborhood with a lot of crime. Sometimes you can climb the ladder.
    - deleted 3y ago
fuoqi 3y ago
Yeap, this spending is clearly unsustainable and sugar rush from it will be relatively short lived. To better demonstrate this point: imagine a country with struggling economy, government then issues a huge amount of debt at crowding out interest levels, it then build a huge dynamite statue and blows it up. In the near term you see a very pleasant spike in GPD, you have to manufacture dynamite, pay workers to assemble the statue, etc. You even get a bit more taxes from this activity. But after the dynamite was blown up, you end up with economy in an even worse shape and additional public debt burden. Obviously, the US government deficit spending is somewhat better than building dynamite statues (but only somewhat) and we can expect some degree of returns, but I highly doubt that the spending is efficient enough to outpace raising debts and the crowding out effect of the private sector.
justin66 3y ago
> Legit 5% GDP growth should mean a booming economy with people feeling good, yet people are struggling to cover their basic needs and pessimism seems high. Is it so hard to believe that people's negativity is often not about hard numbers and facts?
jjk166 3y ago
The deficit for 2023 is $1.7 Trillion total. Do not conflate the deficit, how much expenses exceed revenue, with debt, the cumulative sum of deficits running back decades. We have only added $300 Billion to the deficit this year. The US deficit spending this year is 6.6% of GDP. Last year the deficit spending of $1.4 Trillion was 5.5% of GDP. In other words, if there were no growth except that caused by government deficit spending, and that government spending was a wash - $1 of government spending for $1 of economic growth - you'd expect an annualized GDP growth of 1.1%. Further, GDP growth fueled by deficit spending is still legit GDP growth, the same way that taking out a loan to remodel your home still creates a legitimate growth in your home's value. That remodeling may not have been the optimal investment, it might not even be a profitable investment, but it still is an investment.
- bilsbie 3y ago
  > GDP growth fueled by deficit spending is still legit GDP growth That feels like a super bold claim that needs a lot of justification. Sorry I won’t just go with the hokey household metaphor.
  - IG_Semmelweiss 3y ago
    why? you can pay someone to dig ditches for no reason. then pay to fill them back. both count as legit GDP growth, even if the value of either action is $0
  - deleted 3y ago
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  - trts 3y ago
    if GDP growth fueled by deficit spending is still legit GDP growth, then couldn't we easily have double, triple, or 100x growth just by more deficit spending? Why limit it to single-digit percentages? Let's really get things cooking.
    - jjk166 3y ago
      Yeah, you can 100x growth, you just need to find someone to give you a $170 trillion loan, and then service the interest. That's a bit tough when world GDP is $95 trillion.
lamontcg 3y ago
It isn't government spending. We're just seeing the result of corporations successfully capturing all the post-pandemic money that was floating around which is propping up GDP numbers. The higher interest rates haven't had time to dig into corporations yet, but the consumer really is faltering (e.g: https://www.forbes.com/sites/antoniopequenoiv/2023/10/21/americans-are-overdue-with-their-car-payments-at-highest-rate-in-nearly-30-years/?sh=7198360433d0 https://www.forbes.com/sites/antoniopequenoiv/2023/10/21/ame...) Once the consumer buckles and spending drops then the GDP should drop, pulling the US into a recession, that should cause rounds of severe across-the-board layoffs (not just isolated to tech) which then cause housing to buckle. And at some point commercial real estate should detonate as the loans there hit their maturity dates and roll over.
asfdgionoino 3y ago
When every single objective fact contradicts people's feelings, it isn't the universe that's wrong. Remember: the nation's largest propaganda machine is dedicated to making people believe the economy is in shambles, because a booming economy fueled by government spending in green energy and protecting families falsifies their ideology.
dzdt 3y ago
Part of the "pessimism seems high" story is there is a very intentional concerted effort by republican politicians and their media backers to sow the feeling of pessimism. This is not negligable!

elicash 3y ago

GDP measures the value of goods and services produced in the country. For the question you're interested in, you'd want to look at other measures like the deficit as a share of GDP. Which is trending badly in large part due to lower revenues (variety of non-ideological reasons).

brookst 3y ago

Yes, GDP by definition includes government spending. I agree that GDP is a poor measure of “on the ground” experience, but not sure what that has to do with deficit spending.

ren_engineer 3y ago
basically, I'm wondering if we'd go into a recession immediately if the government was forced to cut spending to sustainable levels. The debt is finally hitting a point of no return where we have to cut, next year we'll spend more on debt interest payments than our military the main argument that the economy is doing well is that "the labor market is strong" and unemployment is low, but how many jobs are tied to government deficit spending via contracts or direct employment? If that spending is cut back, I'd imagine the jobs numbers will quickly start to decline
- mwbajor 3y ago
  Imagine how much it will "grow" when we get involved in 2+ simultaneous wars.
  - GiorgioG 3y ago
    It will likely "grow" into 1 large war.
    - barkerja 3y ago
      I think they were referring to the two wars we spent decades in that increased spending. OIF and OEF.
- nofinator 3y ago
  The government has been reducing spending since all the COVID support in 2020 and 2021. At its peak, government spending was over $7 trillion, which was over 30% of GDP in 2020. It appears to be trending back to the pre-COVID ratio: ~20% of the GDP is government spending. https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/#spending-trends-over-time-and-the-us-economy https://fiscaldata.treasury.gov/americas-finance-guide/feder...
  - jonhohle 3y ago
    But at the same time has the largest non-COVID deficit ever. `22 and `23 defectors are trending higher, not lower.[0] 0 - https://www.reuters.com/world/us/us-budget-deficit-jumps-23-nearly-17-trillion-social-security-health-costs-rise-2023-10-20/ https://www.reuters.com/world/us/us-budget-deficit-jumps-23-...
- criddell 3y ago
  > sustainable levels That's really the key thing. What level is sustainable? I've come around to the idea that the main danger of deficit spending is inflation (because of the idea that government debt is private sector wealth). The big levers the government have access to are spending and taxes. The first adds wealth, the second subtracts. In this way, government debt is really nothing like household debt that you and I have.
  - xedrac 3y ago
    Inflation is their primary lever actually. Why bother paying down the debt when you can simply make it worth less? It's fiscally irresponsible, but that's how it works.
  - jonhohle 3y ago
    You seem to agree with Keynes. Assuming you’re in the lower 99%, are you wealthier in proportion to increases costs over the past quarter? I personally don’t buy it. When other country’s start divesting from US treasury ties, the party will be over. Already prices are rising faster than income. What did Germany, Zimbabwe, and Argentina, Venezuela, etc. do wrong, that the US is doing right?
    - criddell 3y ago
      A better question is to ask what is Japan doing right since they are a lot farther down this path. Their debt to GDP ratio is something like 230% which is almost 2x the US ratio.
      - seanmcdirmid 3y ago
        The answer is that Japan isn't doing it right. People struggle, taxes are high and pay is generally low (but for tourists, Japan is incredibly affordable). They still do OK, but we shouldn't see Japan as a model of how to do things.
        criddell 3y ago
- Certhas 3y ago
  The money is coming from somewhere. If it wasn't lent to the government, it would be spent in other ways. So the only reason that it should cause a recession is if the government is spending it in better ways to grow the economy than the private sector would/could (e.g. because the best investments are infrastructure related). But if it's actually providing a boost to economic growth, it also means the debt isn't actually unsustainable. If you boost economic growth this year by 0.1%, and afterward it returns to previous growth rates, then the economy will stay 0.1% larger than it otherwise would have been perpetually. If your interest rates are comparable to the base line economic growth (true now, last decade they have been lower), and you take a twenty-year view, then taking on 5% of GDP in debt to generate a one off 1% growth boost to the economy is a no-brainer. The real issue is to understand when the government (vis a vis the private sector) actually can spend money to generate genuine extra growth, and when it cannot (e.g. if it only shifts growth that would happen anyway forward you would expect growth to dip after the initial boost, but that would be true whether the deficit spending stops or not). The argument against debt is often not based in economic sense or sound science (remember the debacle when a widely cited study on the problems with high debt turned out to be based on an Excel mistake?). In my view, it's based on an aversion to the government having too much spending power. After all, a version of the argument, above was used by conservatives to sell tax cuts that were supposed to pay for themselves. They didn't because the tax cuts did not actually generate growth, they merely redistributed wealth to the top. For deficit spending, the evidence that it can boost economic growth is much more robust. The real debt crisis will hit once countries start to seriously shrink...
  - fuoqi 3y ago
    >it would be spent in other ways Or it would've been placed in the reverse REPO facility at delicious interest rates paid straight from the printing press. A lot of COVID spending was sanitized this way, without it inflation would've been much higher. And this money has started to get back into the economy.
roflyear 3y ago
Agreed that GDP in isolation is a poor measure, but when you take it in context (every report is done the same way) and with other financial data it can help paint a picture (still an imperfect picture).

__alexs 3y ago

5% GDP growth when inflation is 1% is quite different from 5% GDP growth when inflation is 10%.

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alexb_ 3y ago
This number is inflation adjusted.
- stormfather 3y ago
  Adjusted according to whose measurement of inflation? The party in power's?
  - MagnumOpus 3y ago
    The Bureau of Labor Statistic. Non-partisan enough, the methodology hasn't changed from the last administration. And take it from a non-US-based inflation expert: it is accurate enough, some gripes about "quality adjustment" of electronics and about using owners' equivalent rent instead of house prices notwithstanding.
- Enginerrrd 3y ago
  They are, but that's assuming that the GDP deflator is accurate. I for one don't agree with the CPI substitutions and gamesmanship and when CPI was suggesting 7-8% I calculated my personal basket had inflated ~15% YOY over the previous two years. There are all kinds of reasons why this figure might be politically influenced. The reality on the ground is we've had to make significant cuts to our standard of living just to maintain spending flat even with wage increases. The wage increases have been on the order of 3% per year and not tracking with inflation for both my wife and I.
dsugarman 3y ago
what do you mean by this? that inflation is currently 1% or 10%? it's ~3.5% right now

jghn 3y ago

> The numbers I see coming out about the state of the economy just seem more and more out of sync with reality on the ground. What are those numbers?

coliveira 3y ago
Inflation still rampant, unaffordable cars, unaffordable homes, salaries growing slower than inflation. In other words, things that don't affect the rich (that's why the numerical growth in GDP), but are essential for the middle class (the majority).
- sarchertech 3y ago
  Inflation is way down, salaries have been growing faster than inflation all year, unemployment is very low, car prices have been dropping since late 2022, and home prices are finally starting to decline. So when you talk about numbers “you see coming out” you’re at least a year out of date. I’m assuming you’re going to just start saying “the numbers aren’t real man”. But in that case why talk about the “numbers you see coming out”.
  - edgyquant 3y ago
    Core Inflation is down but that doesn’t account for food or energy, which are the two biggest complaints people have. Id like to see your proof that housing prices are going down, that’s news to me. > I’m assuming you’re going to just start saying “the numbers aren’t real man”. Nice way to prove you are arguing in partisan favor and not discussing anything in good faith.
    - sarchertech 3y ago
      No it’s a nice way of heading off what I guarantee was going to be the response. There is literally nothing you can say to sway the “inflation numbers aren’t real crowd” in the same way you can’t argue with a conspiracy theorist. I don’t care about partisanship. I think the economy would be in roughly the same state it’s in regardless of which party won most recently. Core inflation doesn’t include housing and fuel. But fuel is down 10% from its peak last year and the median home price in July 2023 was 2% below the median price in July 2022. Inflation is going down, wages are going up. You can’t argue that “the numbers coming out” are showing the opposite because they aren’t.

grumple 3y ago

Raise all prices by 4.9%, GDP grows by 4.9%, with no additional production. And we'll all effectively be poorer.

alexb_ 3y ago
4.9% is inflation adjusted. God, don't any of you RTFA anymore?
- ModernMech 3y ago
  Did anyone ever?
- deleted 3y ago
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- jurgenaut23 3y ago
  Ouch, that hurts. But indeed, that shows that most people have the attention span of a gold fish.
  - alexb_ 3y ago
    It's astonishing how nearly every single comment below this type of thing is "well inflation is up so this number isn't real". Nearly everything, on every platform. People don't want to believe the economy can possibly be good.
    - coliveira 3y ago
      Official inflation figures might be misleading and designed to mask the real impact of inflation. So it makes sense to ask if this "inflation adjusted growth" is real or not.
- SantalBlush 3y ago
  A lot of users just chime in to brandish their pitchforks after reading the headline. I hope that is changing, because some of the discussion can be pretty good.

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coliveira 3y ago

Yes, the gov is spending 8% in deficit to achieve 4% in GPD growth. This doesn't sound like good economic policy to me. The growth should at least match to make this even workable. Of course, Washington doesn't even know how to calculate basic things anymore, everything is distorted to help the party in power at the moment.

AtlasBarfed 3y ago
Apparently just giving money to the rich isn't a very good way to build an economy
- roflyear 3y ago
  Careful saying that around here ;)
- djbusby 3y ago
  The best way to build economy is to give money to those without. Then they spend it. Trickle Down is bullshit. Bubble Up is the one that works. The rich still get theirs - but less and after the money has passed through a few hands.
  - BobbyJo 3y ago
    We just tried that and inflation exploded.
    - SketchySeaBeast 3y ago
      Somehow a lot of haves were mixed in there too, which may have been the problem.
    - deleted 3y ago
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    - dfxm12 3y ago
      It sucks that we had to pay 1.5x as much for a dozen eggs during and shortly after that global pandemic, but put blame where it is due, and it is not really due to your neighbors getting pandemic relief. https://thehill.com/business/economy/4057722-greedflation-is-the-new-inflation-as-corporate-profits-balloon-report/ https://thehill.com/business/economy/4057722-greedflation-is...

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zitterbewegung 3y ago

Look torward higher borrowing costs and inflation and while GDP can rise the economic situation can be people are unable to afford to buy a home and making ends meet is primarily a inflation problem. But, that doesn't mean the the economy overall is seeing growth so we can hold all three things can be true.

anovikov 3y ago

That's the thing - according to most polls, people ARE feeling good, but at the same time certain that everyone else - the public in general - are struggling to cover basic needs. There's a wide disconnect caused by negativity in media, mostly stirred up for political reasons. Like this: https://www.axios.com/2023/08/18/americans-economy-bad-personal-finances-good https://www.axios.com/2023/08/18/americans-economy-bad-perso... TL;DR: 71% say economy is bad and 51% say it's getting worse, while for 60% people in the same poll their personal financial situation is just fine. There are many similar polls, all point to the same thing.

coliveira 3y ago
It all depends on what kind of social group you're in. Upper middle class and higher are still doing just fine. People like you most probably don't have friends who are living in the streets or cannot afford to buy cars anymore. Just look at the statistics of people living in the streets of big cities and the situation looks more like the great depression.
- anovikov 3y ago
  Homelessness is on a long term decline and since 2007, it's down from 0.21% to 0.17% population. It's probably just concentration in the certain area because of police doing a bad job cleaning the streets. Also, economic growth in U.S. is now mostly concentrated in lower income groups. It seems that high middle class (statistical one, i.e. top 10-20% of population - "people just out of poverty" if you look at it honestly), are on the losing side now. Hard numbers are hard to come by but once the tax season is over we will see them next year.
- MattGaiser 3y ago
  > Just look at the statistics of people living in the streets of big cities and the situation looks more like the great depression. https://usafacts.org/articles/how-many-homeless-people-are-in-the-us-what-does-the-data-miss/ https://usafacts.org/articles/how-many-homeless-people-are-i... There are fewer homeless than before 2008, which was a period of economic boom.

skywhopper 3y ago

Deficit spending is still spending. But anyway economic activity isn’t evenly distributed. You may not live in a booming area, but there certainly are many booming areas. I recently moved from one mid-sized city to another, in different states but not all that far apart, and the difference in how the local economy feels is remarkable. One place feels stable but gradually deteriorating and the other is dynamic and growing fast. Besides regional differences, it’s also the case that more and more economic activity is being captured by fewer and fewer people. So, if the richest billionaires grow their stash fast enough, the rest of the country will probably feel less dynamic.

epistasis 3y ago

How would you "account" for this? Seriously? I think a lot of people feel bad about the economy because they are told to feel bad about the economy. Which, if your job is hiring people, might be the case because wages are going up for those on the lower end.

csomar 3y ago

I believe we are in the first stages of the implosion of the US dollar and the US financial system but since it's a huge system it's happening in a motion that the typical brain does not understand. People think it'll happen in a matter of hours but that might not be the case. It might be happening right in front of our eyes but we have never had such an event so we don't know what it looks like. Until maybe 5-10 years later.

nemo44x 3y ago
Well, the world is increasingly becoming more unstable which is good news for the dollar. The US financial system will continue to excel so long as global demand for dollars remains strong.
- xtian 3y ago
  Demand for dollars will remain strong as long as they are the least onerous way to conduct international trade for essential goods. The US makes very few of these goods domestically. Eventually the mountains of sanctions, central bank asset seizures, endless debt and money printing, and policy of foreign meddling will tip the scales.
matthewfelgate 3y ago
No. The USA is set to succeed in the next 10 years because of geographic and demographics. Perhaps you're a pessimist.
- csomar 3y ago
  I am not a pessimist. I don't believe the geography/demographics argument. Brazil had that and yet the performed really badly. Argentina has a great geography with no demographic tensions and have performed catastrophically. Also, the US is coming from a high point, not 0.
  - oytis 3y ago
    It's also that the U.S. is a developed country. Most countries are either developed or have good geography, demography and access to natural resources. U.S. has all or it.

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WendyTheWillow 3y ago

There are people who think the job market never recovered from the ‘08 crash, just because they can’t find a job, so sentiment is probably not a useful measure of economic activity in the US. People will never “feel good” about the US economy again.

throwaway5959 3y ago
Fuck their “feelings”. I’m so tired of hearing about people’s feelings when it comes to how the economy is doing. The only thing that matters is the data.
- hotpotamus 3y ago
  It turns out people live in a nation and not an economy. Tying someone's kids' healthcare to their employer who could fire them for no cause at any moment sure has a way of making people nervous about the future. I guess it gets results out of them, but it doesn't seem to make them happy.
  - WendyTheWillow 3y ago
    But what the hell does that have to do with quarterly measurements of economic growth?! Wildly conflating every issue into different random grievances helps nobody, and arguably delegitimizes an otherwise very real problem. Making everything about everything is an extremely effective way to paralyze any potential improvements. It’s unhelpful and exactly what I’d do if I wanted nothing to change.
    - throwaway5959 3y ago
      Can’t upvote this enough.
    - hotpotamus 3y ago
      With massive inequality, those in the lower classes fall ever behind the top quintile or so. Do you think they enjoy hearing about how much better the economy does as they see their and especially their childrens' standard of living fall?

AnimalMuppet 3y ago

True, but... How much deficit did we add last year? The year before? OK, two years ago means they are Covid numbers, so... five years ago? How much did the economy grow in those years? I'm not sure that you can say anything as simple as "the growth is because of the deficit". I suspect (but I don't currently have the numbers) that there have been lots of years when the US ran a large deficit and did not grow.

MattGaiser 3y ago

> with people feeling good Because growth likely means inflation in this case, so that causes uncertainty.

kouru225 3y ago

This literally always happens during a Democrat presidency: the numbers are good but everyone goes “well it doesn’t FEEL that way so I’m gonna ignore it.” At what point are you gonna admit that your feelings are a crap metric? The fact of the matter is the feelings of public are the feelings of the rich propagandists who, on principle, don’t want a leftist in power, regardless of whether he’s good for the economy or not.

aftbit 3y ago
Counter-argument: my father generally votes right, but he claimed the best economic times of his life occurred during the Clinton presidency.
thereddaikon 3y ago
Maybe these metrics are what's crap? GDP doesn't mean much for people day to day. Neither does how high a score the stock market happened to hit in its arbitrary magic points system. People care about the job market, the cost of living, direction effects of inflation on buying goods and services. When people say they economy sucks they mean they can't buy a car right now because the bank will only give them an ass interest rate even with great credit and the price of groceries has skyrocketed. I've believed for awhile now the stock market has been a poor measure of the economy because its become decoupled from the "real" economy, ie: the things I listed above.
- csours 3y ago
  There's a saying "All Politics are Local" Maybe "All Economics are Local" too. Obviously neither of those are true in a general sense - but the local situation is what feels most important.
- dfxm12 3y ago
  When people say they economy sucks they mean they can't buy a car right now because the bank will only give them an ass interest rate even with great credit and the price of groceries has skyrocketed. With regards to grocery prices, what does corporate greed have to do with the president? As for the car, the FED has a big hand in interest rates, and yeah, Biden did choose to re-nominate Powell, but Powell was originally appointed by Trump, so I don't know how voters can really say the republican would have done better. The American economy is bad for people under a certain line, yes. The question is why does the media always overplay the economy when Republicans are in power and downplay it when Democrats are?

jonnycomputer 3y ago

Government spending contributed to 0.8pp of the growth. Pretty significant. But the main driver is consumer spending, especially on durable goods. These are the good times that the government should use pay to pay off debt by taxing more and spending less. I don't put much stock in your feelings about the economy. My feeling is, I see people shopping at the mall, I see them filling the bars, and I see them buying new cars. The problem some people may be having is that they over-extended themselves and now owe too much. For example, while their real wages have actually gone up, they may have underestimated how much inflation would erode the real value of their nominal wage increases (I did this, in fact). So they took out loans they thought would be easy to pay, at interest rates that were higher than they were used to, and found that they had made the wrong bet. The disatisfaction, imo, is all about disappointed expectations, not the actual living conditions people have. I got a 20k raise, but now it feels more like a 12k raise, and meanwhile I took out a loan for a kitchen remodel.

s1gnp0st 3y ago
Most people in this country are much poorer than the people remodeling their kitchens. You're speaking from a solidly middle-class perspective.
- jonnycomputer 3y ago
  Are you saying that poor people could not have under-estimated inflation relative to their (very real) income gains and acquired debt that they could not, as it turns out, pay for? The point is that uncertainty increased, and many people made the wrong bet, e.g. your hourly wage went from $10 to $15, a 50% increase. You buy a car (yes, even poor people buy cars), but the used car market spiked in price, and the interest rates too, and besides, everything just got more expensive. And so, it turns out that your wage increase feels more like a $2/hr increase instead of a $5/hr increase, and you're stuck trying to pay off more car than you can actually afford. Yes, I am fortunate enough to earn a middle-class income for my family. I grew up poor in a poor neighborhood with a lot of crime. Sometimes you can climb the ladder.
  - deleted 3y ago

fuoqi 3y ago

Yeap, this spending is clearly unsustainable and sugar rush from it will be relatively short lived. To better demonstrate this point: imagine a country with struggling economy, government then issues a huge amount of debt at crowding out interest levels, it then build a huge dynamite statue and blows it up. In the near term you see a very pleasant spike in GPD, you have to manufacture dynamite, pay workers to assemble the statue, etc. You even get a bit more taxes from this activity. But after the dynamite was blown up, you end up with economy in an even worse shape and additional public debt burden. Obviously, the US government deficit spending is somewhat better than building dynamite statues (but only somewhat) and we can expect some degree of returns, but I highly doubt that the spending is efficient enough to outpace raising debts and the crowding out effect of the private sector.

justin66 3y ago

> Legit 5% GDP growth should mean a booming economy with people feeling good, yet people are struggling to cover their basic needs and pessimism seems high. Is it so hard to believe that people's negativity is often not about hard numbers and facts?

jjk166 3y ago

The deficit for 2023 is $1.7 Trillion total. Do not conflate the deficit, how much expenses exceed revenue, with debt, the cumulative sum of deficits running back decades. We have only added $300 Billion to the deficit this year. The US deficit spending this year is 6.6% of GDP. Last year the deficit spending of $1.4 Trillion was 5.5% of GDP. In other words, if there were no growth except that caused by government deficit spending, and that government spending was a wash - $1 of government spending for $1 of economic growth - you'd expect an annualized GDP growth of 1.1%. Further, GDP growth fueled by deficit spending is still legit GDP growth, the same way that taking out a loan to remodel your home still creates a legitimate growth in your home's value. That remodeling may not have been the optimal investment, it might not even be a profitable investment, but it still is an investment.

bilsbie 3y ago
> GDP growth fueled by deficit spending is still legit GDP growth That feels like a super bold claim that needs a lot of justification. Sorry I won’t just go with the hokey household metaphor.
- IG_Semmelweiss 3y ago
  why? you can pay someone to dig ditches for no reason. then pay to fill them back. both count as legit GDP growth, even if the value of either action is $0
- deleted 3y ago
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- trts 3y ago
  if GDP growth fueled by deficit spending is still legit GDP growth, then couldn't we easily have double, triple, or 100x growth just by more deficit spending? Why limit it to single-digit percentages? Let's really get things cooking.
  - jjk166 3y ago
    Yeah, you can 100x growth, you just need to find someone to give you a $170 trillion loan, and then service the interest. That's a bit tough when world GDP is $95 trillion.

lamontcg 3y ago

It isn't government spending. We're just seeing the result of corporations successfully capturing all the post-pandemic money that was floating around which is propping up GDP numbers. The higher interest rates haven't had time to dig into corporations yet, but the consumer really is faltering (e.g: https://www.forbes.com/sites/antoniopequenoiv/2023/10/21/americans-are-overdue-with-their-car-payments-at-highest-rate-in-nearly-30-years/?sh=7198360433d0 https://www.forbes.com/sites/antoniopequenoiv/2023/10/21/ame...) Once the consumer buckles and spending drops then the GDP should drop, pulling the US into a recession, that should cause rounds of severe across-the-board layoffs (not just isolated to tech) which then cause housing to buckle. And at some point commercial real estate should detonate as the loans there hit their maturity dates and roll over.

asfdgionoino 3y ago

When every single objective fact contradicts people's feelings, it isn't the universe that's wrong. Remember: the nation's largest propaganda machine is dedicated to making people believe the economy is in shambles, because a booming economy fueled by government spending in green energy and protecting families falsifies their ideology.

dzdt 3y ago

Part of the "pessimism seems high" story is there is a very intentional concerted effort by republican politicians and their media backers to sow the feeling of pessimism. This is not negligable!