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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
by 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 agoApparently just giving money to the rich isn't a very good way to build an economy
- roflyear 3y agoCareful saying that around here ;)
- djbusby 3y agoThe 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 agoWe just tried that and inflation exploded.
- SketchySeaBeast 3y agoSomehow a lot of haves were mixed in there too, which may have been the problem.
- deleted 3y ago[deleted]
- dfxm12 3y agoIt 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...
- BobbyJo 3y agoI don't get what point you're attempting to make. Your comment suggests you think inflation came from from pandemic (a loss in productivity?), the the link is about corporations sopping up the extra cash that was floating around via raising prices. The latter would fall into the bucket of government handouts to the bottom cause inflation, would it not? If you're skipping the monetary interaction and saying "it's not the handout, it's the greed", then I'd like to point out that companies have been behaving the same way forever (trying to maximize profits), yet inflation has been low for a decade. That corporations would take advantage of poor people having more money to spend is intended behavior, and something that needs to be accounted for in functional monetary policy.
- KittenInABox 3y ago> companies have been behaving the same way forever (trying to maximize profits), yet inflation has been low for a decade This isn't true. Companies only started to maximize profits under shareholder value recently. Corporations originally were thought to have a responsibility to society at large, thus with things like pensions being provided to their employees. Additionally, the small handouts to the poor are much more dwarfed by handouts to the employers at the time. Which made it baffling that large employers then raised prices anyways, when they already got the vast majority of covid relief money. No, it is pure greed.
- djbusby 3y agoYea. Tax those corporate profits and tax those wealthy C-suites. Then the taxes help those on the bottom rung; and the circle continues. Accumulation at the top blocks the flow.
- xedrac 3y agoThis says nothing of economic output. If you just hand out money to people, that has an economic output of zero. Short term this might work, but long term, I believe it would shrink the economy, and leave it saddled with people that don't produce according to the markets' demands. Why would they?
- coliveira 3y agoPeople who don't produce anything and live from getting money to spend... I think you just described the rich!
- nickpp 3y agoHow did they become rich then?
- djbusby 3y agoWhy wouldn't they? Do you think folk would just sit on ass after getting the handout? Would you? Some, perhaps - but they sit on ass now - and have no social safety net or anything, they outdoors. The human condition is to endeavour. Even with free money the majority of folk will work, or do something to improve their situation.
- xedrac 3y agoI would certainly keep myself engaged and busy with my hobbies. But that is unlikely to produce anything of real value for anyone else.
- tekla 3y agoOK, what numbers do you propose are the ones we should trust if they're basic?
- ren_engineer 3y agoI think you'd at least want to get a 1-1 ratio for spending to drive growth and ideally an actual ROI. The government is operating like a VC funded startup right now
- edge17 3y agoI think what the comment is saying is, if the government is spending a lot of money inefficiently (i.e. spending $100,000 on a weapon that has $10,000 in raw materials plus layers of bureaucracy that are hard to quantify as costs) and accruing a lot of debt in the process, it is hard to understand what your cost is for basic things.
- sebzim4500 3y agoI don't understand why there should be any relation between deficit (which is a percentage of government revenue) and gdp growth (which is a percentage of total gdp of the whole country).
- rory 3y agoThe 8% deficit listed above _is_ a percentage of total GDP of the whole country (although the Fed has it at only 5.3%). The numbers are directly comparable. https://fred.stlouisfed.org/series/FYFSGDA188S https://fred.stlouisfed.org/series/FYFSGDA188S
- zeroonetwothree 3y agoOne is a rate of growth and the other is a rate of spending. It would be like comparing that you spend 8% of your income on food and that you got a 4% raise this year. The two numbers have nothing to do with each other other than using the same unit.
- rory 3y agoNo, that's a bad analogy. It's more like I borrowed 8% of my annual income this year, and then bought 4% more than last year. If I hadn't borrowed all that money, I wouldn't have been able to buy that much. It's both intuitively obvious and empirically demonstrable that government deficits stimulates economic growth in the immediate term, since most government expenditure happens in the domestic economy.
- 1980phipsi 3y agoIt is also unsustainable in the long-run for the primary budget deficit (I.e excluding taxes interest costs) to grow faster than GDP growth.
- HideousKojima 3y agoBecause tax revenue is fairly consistent as a percentage of GDP as well, so if deficit as a percentage of GDP exceeds faster than GDP growth then our debts are growing faster than our ability to repay them.
- s1artibartfast 3y agoI dont I think that is the right way to think about this, but I agree that the government grossly overspends. A one time expense of 8% GDP for a 4% growth is great. That means it would get paid back in two years, or faster if you consider compounding. The problem is determining if the 8% spending is related to the 4% growth (and how much. Another way to to frame the whole topic is that the US government spends %40 of GDP in taxes, plus another 8% borrowed, per year. Even this could be a good deal, but it comes down to how much of the growth is causes by govt spending, which types of spending, and if the growth is permanent.
- tcgv 3y ago> A one time expense of 8% GDP for a 4% growth is great. That means it would get paid back in two years (...) Not quite. The payback time will depend on the growth in government revenues, which should be correlated to GDP growth, but a fraction of it.
- everforward 3y agoIt's also ignoring interest.
- s1artibartfast 3y agoBorrowing $8 to make $4/year is a good investment as long as interest is less than 50%
- s1artibartfast 3y agoeven if it doesnt increase revenue, it can be a good investment. The purpose of the government isnt grow, it is to serve the people
- yogthos 3y agoGovernment debt is completely irrelevant as long as the debt the government has is in its own currency that it can print more of. US government can print however much money it wants. It will never default because it can just create the credit. That’s what the Federal Reserve did with its zero interest rate policy. It distorts the economy, and the economy can shrink and be torn apart, but the government can always pay its debt by simply printing the money. The real problem lies with private debt, and that's what's actually leading to a default. When people default on their debt, they end up forfeiting property to the creditors. What we’re seeing now is a large scale transfer of property such houses and cars that people had bought, and so on, that they can no longer keep making payments on. this results in a transfer of income from the 90% to the 10%. The wealth transfer means that the working majority is pushed ever further to the margins. US is already in a situation where around half the population has no meaningful savings. https://www.cnbc.com/2023/10/03/americans-are-saving-less-in-2023-im-concerned-top-economist-says.html https://www.cnbc.com/2023/10/03/americans-are-saving-less-in... Having no savings puts people in a position where they're not able to absorb further unexpected expenses. This is what's making the economy so fragile.
- Lolaccount 3y agoWhat are the absolute numbers? The percentages don't appear comparable here. They also don't allow for future multiplier effects from the spending. No agenda, just holding that sentence up to a little scrutiny.
- bushbaba 3y agoFuture money is cheaper than current money. The approach totally works in a low rate environment. But as rates get higher in relationship to inflation expectations it becomes unsustainable
- BurningFrog 3y agoIf you're rounding, the growth is 5%. Not that comparing those two numbers is at all meaningful.
- Certhas 3y agoIf you spend 8% and the GDP is boosted by 4% once, and then grows at the normal rate afterwards, then the GDP will stay 4% larger indefinitely. That 8% debt would generate 4% more economic output this year, next year, the year after, the year after that, etc... If your 8% debt only generates 0.5% of extra growth once, and then we get back to a baseline 3.5% growth, the additional economic output will equal the debt in 16 years and continue generating economic output afterwards. But it's also completely unclear why, as a government, you should care about the ratio of debt to growth. The two numbers are of an entirely different nature. That economic output corresponds to things produced by the economy. The 8% debt corresponds only to who has control of which money pile (in particular, it includes the promise that the government will redirect a large chunk of money to the lenders in the future, which you might or might not find problematic). It doesn't take anything away from the total sum. So by shuffling money around, you have created real economic output. That's great!
- cadlin 3y agoBoth of those numbers are wrong. It's more like 6% deficit and 8% GDP growth.