I'm just blowing steam here, but it feels like the economy and it's measures has been decoupled from a large segment of society.
If you destroy a city, GDP is not affected, but then if you rebuild it GDP gets a huge boost. In the end you're back where you started, but the numbers look great.
Of course it is. Cities are engines for producing GDP. New construction, rolling infrastructure upgrades, the wages of all the people employed in it, the profits of corporations based in it, all add to GDP. Take away the city and all that GDP disappears off the books with it.
We can write this kind of thing off as a statistical quirk, but if we actually attempt to increase GDP via policy changes, then there are definitely some perverse incentives that arise.
I would find it hard to believe that the GDP of Puerto Rico, including reconstruction, has increased overall. It may depend on the scale though. A storm that knocks down a few trees and damages some buildings might generate a net gain if it’s not too disruptive but that gain must come from somewhere. Maybe increased future insurance costs, borrowing, increased taxation etc which would be difficult to quantify.
This is the big flaw i see against Keynes, that the political discipline and foresight it takes to pay forward is very hard. Instead it becomes another round of the too much debt cycle. Unfortunately I don't have any alternative. (many would put their pet economic hobby horse here)
Edit: I noticed a problem with my comment, I said pay forward but Keynes has a pay back what you borrowed earlier.
The key argument for approval voting - right here.
If your state is debt-free, that's great; you have X years to borrow and spend your way out of trouble. If your state owes even $1, better pay it off quick to reset your Keynesian pump-priming capacity! And if your state can't pay off its debt, the younger generations aren't forced into austerity to pay for the excesses of the elders.
Lending terms will tighten up as the jubilee deadline approaches. If it's only 5 years away, lenders will not even bother calculating payoff periods further than 5 years into the future, minus the amount of time required to file and collect on any lawsuits for nonpayment.
If a state actually hits a jubilee with debt still on its books, it will quickly find that borrowing becomes a much weaker tool in its fiscal toolbox. It might also help to make all persons holding elected office with budgeting or spending authority at any time during the state's indebtedness to become ineligible to hold such offices for Y years after a jubilee.
Reducing government debt will result in bad times for the private sector. Ever wonder why Clinton's surplus resulted in large private sector debt and then a crash? This is why.
Until it can't. It's an interesting gambit because while carrying high levels of debt is easier to do during periods of low interest, the second-order effect of taking on that debt is the pain it'll bring you to service it when interest rates rise.
Unless you have certainty on future economic conditions (which nobody does), it's prudent to cap your debt level such that can be paid down within a relatively short time frame. That way when tough times inevitably arrive, you have an escape plan. But even then, enacting that escape plan (paying off the debt) causes a shockingly sudden lack of available funds to go anything else (i.e. austerity).
This doesn't mean debt, well-applied, isn't a hugely valuable tool. Provided it's used for investment in suitable force multipliers (infrastructure) that help ensure your future ability to service the debt, and profit beyond. But infrastructure isn't well funded and there doesn't seem to be suitable proposals to make it happen, so if debt's not being increased towards that end....
It already couldn't, thus monetary easing (aka, inflation, aka increasing the money supply). Governments always default on their debts through inflation. In the US it was called "QE"
Without QE, the treasury auctions would have yielded higher rates of borrowing for the feds. Instead, QE pushed the yields down and money rushed into risk assets (stock market). We're in uncharted economic territory. How do we unwind? Right now, they're slowly letting the balance sheet shrink, but not significantly.
Keynesianism just doesn't work exactly because no politician ever finds themselves in a position where they can apply the savings side of it.
Alternatively we (govt) should be taking advantage of historically low interest rates to spend money on infrastructure maintenance that we KNOW needs to be fixed. This provides stimulus (or wealth transfer, depending on your perspective) through creating jobs and fixes a looming problem before it stops looming. We'll have to pay the price one way or another, and right now the price is at a discount.
I read a report claiming that the tax-cuts are in effect demonstrating short-term stimulus spending. Based on my anecdotal observations from trying to read/hear viewpoints from across the political spectrum, lower-income conservatives ARE seeing a difference in their paychecks, and they like it. So the not-fiscally-conservative conservatives are proving the point the fiscally-conservative conservatives don't believe in, at the risk of proving the fiscally-conservative conservatives right about the longer-term costs because of the methods chosen.
I do feel bad for those that are truly fiscally-conservative: They've not really had anyone to vote for in a long time.
+1 on the lack of true fiscally conservative. The choice is between tax-and-spend and cut-tax-and-spend. Of those choices, the tax-and-spend is the fiscal conservative.
The price is generally at a discount in bad times, when there's a lot of people and companies looking for work. And it's not like the central banks around the world are going to increase interest rates in a downturn.
I understand that modern governments generally do have this same problem, but how do they do slightly better than the US?
And it's not a partisan issues. Both democrats and republicans love debt, just like they love defense spending. It's politically expedient.
Obama increased the debt tremendously. And now Trump is doing the same. Our debt went from around $10 trillion to $21 trillion in 10 years.
Think interest rates are going to increase much anytime soon? Yeah me neither.
I’d argue that the good times are not good to begin with. Americans don’t save. Everyone is heavily indebted and creditors keep lending without restriction. How can economy be healthy if people don’t buy capital goods and are indebted in order to buy consumer goods? It’s quite the opposite.
Some people are trusted with credit more than they should be (empirically speaking), while other more reasonable people are misled by systemic incentives (e.g. home appraisals).
The system isn't perfect, but in historical context, nothing has ever been better. I find it unlikely that public figures whose day job is to complain without offering solutions are capable of improving anything.
We stand on the shoulders of giants; ancestors that were more thoughtful then us. We shouldn't reject the foundation they laid so willingly.
For average wage earners, no matter how hard it is, this really is the good times, as good as they're ever going to be. It won't be better. It will be worse. Be prepared, winter is coming.
Mainly this is due to the increasing costs of health insurance and other employer provided benefits.
Main question for me is how well do previous indicators of this kind of activity predict the CURRENT state of things. Which fundamental cascade effects have we missed? Most of the time the things that cause the crisis are not the contagion problems you predict (obviously). If I could see it, I'd be hedging :)
If I had to guess, I'd say more like the Savings and Loan crisis than 2008, but I'm an optimist.
If this is what our economy has to offer in the "good times" then............. maybe something is fundamentally wrong with it.
I don’t believe reality agrees with your assumption here.
It’s true that an average wage worker can’t afford to live in any city of their choice, and there are some markets that are out of reach for most.
It’s also true that an average wage earner today enjoys a higher standard of living than at any point in history - bigger house, more cars, tvs, and luxury items.
I really disagree with that. I'm a 35 year old single man with no kids and a well payed software developer, better paid than 90% of the population. At this point in life my father had a stay at home wife, 2 kids and was working for near minimum wage as a cleaner.
He had a huge 4 bedroom house, double garage, large backyard with a swimming pool, 2 cars etc and was close to paying off the house at my age. Meanwhile I'm looking forward to pay off a tiny studio apartment in a few years.
Yes we've got bigger TV's and smart phones now, but they don't contribute to a high standard of living.
Which is to say, I completely disagree that there is no other option.
It IS scarce in the short term. Not everyone can get treatment right away, someone will have to wait. And the wait times seem to gradually trend upward, which would indicate (at first glance at least) that it cannot keep up. There's no magical solution to getting everyone timely care.
You make it sound so scary, but you make no mention of health outcomes. I don't care if an appointment happens in 10 minutes or 10 weeks, so long as the outcomes are positive. Wait times alone are not a meaningful metric to me.
Your comment belies a belief that peoples time or comfort are worth nothing. Should my children wait a year or more to have a specialist examine a chronic skin condition that thus far cannot be treated and causes severe itching? In Canada the answer is yes. Ever dealt with a toddler that can't sleep and you can't help?
Acute care here is the same. People die waiting at emergency. 24 hour waits for patients not bleeding out on the floor happen (but usually we can keep it down to 12).
You mention nothing about comfort, just wait times, which is essentially my point. Are people being left in extreme discomfort? If so, that is a problem. Health outcomes help paint that picture, and in most first world systems outcomes are good.
That sucks for there to be long waits, but the alternative being evaluated (the USA's system) has lots of people not ever getting treatment.