I do know that over the past 30 years of various stimulus spending exercises we’ve never gotten GDP to grow faster than government debt for any length of time. Look at any GDP vs debt chart and it’s rather clear.[/quote]
You might want to check what “you know.”
We haven’t been doing stimulus spending for the past 30 years – we’ve barely, and half-heatedly, been doing it for about 3 years. And there is some evidence that it has helped.
In the aggregate, the economy has done rather well in the past 30 years – e.g. we’ve gone from the Apple II to the internet in that time. The accumulating debt in that time period is a problem, but cutting taxes surely isn’t going to solve that problem.
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Actually, we have been engaging in stimulus spending for the past 30 years – the Powers That Be just didn’t realize it or label it with that name.
A lot of research has been done on how much GDP growth over the last few decades has been the result of debt accumulation and the results vary from 40 bps to 90 bps annually, which is a pretty large number when you’re talking about an average of 300 bps of real annual GDP growth. So, now we know that, in fact, we’ve been engaged in stimulus spending for a very long time and the drag of servicing the debt that’s built up is considerable.
Bottom line: much of the G [in G+C+I+N(Ex)] has been fueled by additional debt over the last several decades. (Of course, this applies to the “C” as well.)
One of my issues with the reporting of GDP is that it’s only an income statement number. It should be reported alongside a balance sheet as well. You don’t see companies getting away with just reporting results from the income statement without an accompanying balance sheet, but that’s exactly what we let the PTB get away with, and we’ve been doing so for time immemorial.
So, arguably some portion of the economic strength over the last 30 years has been a mirage, resulting merely from increasing liabilities. It’s still been a nice run… but not nearly as nice as it “appears” in the absence of a balance sheet.
This is a good article on the effects of too much debt (a level which we’re well beyond):
