[quote=harvey]
Why use government debt as the only measure of economic success? The US has seen very healthy economic growth in the past 30 years. There has been lots of wealth created. Many don’t see it, because we are generally bad at remembering the past (we’re talking 1982 here, the peak of the “rust-belt” industrial collapse), and most of of the wealth that was created has been accumulating at the top.[/quote]
Total debt including private debt has exploded as well during the same period. If we include that it makes it even worse (53 trillion in total debt versus a GDP of about 14 trillion) Think about what debt is to the other side of the balance sheet. Promises for future productivity are indeed somebody’s asset. So for everybody that goes into debt there’s somebody holding that debt as an asset. As debt expanded the other side of the balance sheet expands as well, so obviously there has to be somebody very rich holding those assets.
Forget about money for a second and realize the economy is the total goods and services available. We want to grow the total goods and services available and the government approach has typically been to take those goods and services, promise future payback, and give them to people that would otherwise be unable to afford them (manufacture demand that wouldn’t otherwise exist). Maybe we should try an approach that encourages those that cannot afford them to produce more goods and services so that they can afford them.
Most goods and services have a pretty short shelf life so it’s pretty difficult to store excess productivity in assets. You can store some but since most has to be consumed rather quickly or quickly depreciate you look for something else to store those assets in. A warehouse of walkmans isn’t very valuable today. We’ve gravitated to debt in the past 30-40 years.
How does a retired consumer get the productivity they need from a producer in the economy. The producer can voluntarily give it away (kids supporting parents). The consumer can trade some asset of value to the producer (I’ll sell my house and downsize) and either take payment right away or settle for a long term debt. The government can take it from the producer by force and give it to the consumer. Remember that the producer will likely put themselves first in any situation. They’ll provide for themselves and their family before anybody else. There’s only so much excess productivity available that consumers must compete for. Taking more from the producers by government force leaves less available for the sale of assets and as this has happened we’ve made increasing promises for our future productivity.
