Category: Economic Policy

Federal government expenditures comprised  20% of the US GDP.

Creative Destruction and the Social Contract

We are rightly proud of the economic achievements capitalism and hard work has brought to the US, but free market capitalism is not a flawless mechanism. I have posted elsewhere about income inequality. Here I want to focus on a flaw in creative destruction.   Here’s the definition from MIT economics. Creative destruction refers to…

Missing Side of Budget Debates

Net worth

(Text, originally composed in 2005) Every year, all year, we hear about the United States federal deficit (this was written only three years ago and, although happily the yearly budgetary deficit is gone, the exclusive focus on the yearly income-outgo budget is still a flaw). The federal budget is worth serious and sober discussion, but…

Republican Tax Cut GDP Impact

Consumption by household income level

Only part of tax reduction flows through to GDP growth. There are two main components to investigate—increase of spendable income to households and increases to businesses. Purpose of Republican Tax Bill The question that a tax bill should answer is – will tax cuts help or hurt residents of the country, not does it right…

Bottom-Up Tax Cut

Consumption by income

Tax cuts should go to the lowest income earners. When they pay less to the tax man— they will still be paying FICA, property, and sales taxes— they spend that extra cash. More money will flow through all levels of the economy. This will grow GDP, because consumer expenditures comprise 75% of all GDP activity.…

Unemployment Rate by Schooling Level

It’s also interesting to see the unemployment rate by schooling level (p.23 of the National Center for Education Statistics study). Unemployed in 2012 (11% total of the 2002 high school sophomore class) less than high school completion (25.9%) high school diploma or equivalent (15.0%) post-secondary attendance but no post-secondary credential (14.1%) undergraduate certificate (11.8%) associate’s…

OPEC Extra Cost

High Prices

Not stressed enough is the effect the oil price had on economic activity from 1973 to last year. The artificially high price of oil and energy caused GDP growth to be less each year that the economy labored on OPEC-inflated oil costs.

Fed Call for 2 Per Cent Inflation

The Fed’s call for 2% inflation is an indication that economists don’t have a complete economic theory that explains both production and price changes. If they did, they would advocate 0% inflation.

The great bulk of real inflation since 2009 has been in the stock market, making people who already own stock wealthier.