[quote=briansd1][quote=davelj]
[quote=briansd1]
Krugman is right that government debt and spending is contributing a positive sum to GDP, right now. The government could contribute more if it weren’t for political obstruction.
[/quote]
The operative words being “right now”. That debt will have to be paid back one day, thus one day the servicing of that debt will be a drag on “future” GDP. File under: Kick The Can Down The Road, Additional Ways To.[/quote]
Yes, “one day the servicing of that debt will be a drag on “future” GDP” but the productive capability we are building today will continue to contribute in the future and will make paying down the debt easier.
There will be a drag on future economy growth, but that drag will be lower than the momentum we are creating today. That will thus result in a positive sum. That’s the magic of debt and capitalism. ;)[/quote]
Empirically incorrect. There was a period of time (several decades back) during which, arguably, debt was accretive to GDP – that is every $1 of incremental debt was creating more than $1 of incremental GDP. That relationship broke down… I believe back around 1980 (could’ve been the 1970s, I can’t recall exactly). Now we’re at the point where it takes several dollars of incremental debt to create one additional dollar of GDP (thank you Federal Government). That’s patently obvious in the debt-to-GDP charts that you see so often (even thought they’re typically wrong). We are well beyond the point where we can simply leverage our way out of the current mess – the math is not at all complicated.
