[we need] policies that restore a situation where reasonable growth and reasonable interest rates can coincide. To start, this means ending the disastrous trends toward ever less government spending and employment each year
By 2038, CBO projects, federal spending would increase to 26 percent of GDP under the assumptions of the extended baseline*, compared with 22 percent in 2012 and an average of 20½ percent over the past 40 years.
Did you two visit the same country?
*The “extended baseline” is an unrealistic scenario, which includes spending cuts that are embedded in current law but unlikely to be retained by Congress. The more realistic “alternative fiscal scenario” projects even higher spending relative to GDP.
We need to get control of a government that can’t even control itself. Then summers’ non sequiturs will be relevant to debate. The nice thing is we can put the important out of our minds and debate minutiae or watch kardashians. So how is federalizing a dog catcher going to help exactly in a psst world?
Thank you.
It seems like a mundane point to have to repeat, but I keep running into otherwise credible people who speak as if the U.S. has low spending right now. In reality, we haven’t spent this high since World War II.
Sometimes it is “politically” necessary for an academic to assume his own facts.
To be fair, Summers said “government spending” and the CBO in your quote is talking about “federal government spending.” The charitable approach to take is that Summers is talking about spending on all levels and is concerned that even if federal spending rises it will be insufficient to make up for the decline in state and local spending. Taking this into account, there is a projected decline in the spending to GDP ratio of ALL levels of government out to 2018 according to this site: http://www.usgovernmentspending.com/us_20th_century_chart.html
Of course, this is slow return to late 90s levels of spending, which was associated with strong economic growth and strong employment numbers.
Locals don’t have a money press.
So, I think “shovel-ready” should be local, bonded, a discrete accounting units (so that if revenues don’t come in, then bankruptcies are internalized), not to mention actual public goods with spending time horizons and minimal constituencies.
To be extra clear, can Summers prove that Federal funding/spending isn’t crowding out local spending? One might say “look, municipalities aren’t going bankrupt, so there is no risk of them going bankrupt” but that doesn’t work.
Depressing how the former Harvard president and presidential economic adviser can be so out is space on such a big item like this. So many important decision makers are hostages to their biases.
Great bunch of posts the last two days! Spot on with the answers yesterday
GDP can be a “faulty” as the pitot tubes on an Airbus.
But – if “real” GDP over the years has increased at an average rate of, say, 2%, and over that same period the public sector activity (spending) has increased from 18 % to 26% annually, what is happening to the rest of the activities?
Or, take a given year: If GDP increases 1.8% and Gov’t spending as a portion of that GDP has increased from 24% to 26%, what has happened to the “real” economy?