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Comment by ren_engineer | Hacker News Reader

does this account for government deficit spending? Because we are adding nearly 2 trillion to the deficit this year alone, around 8% of GDP.

The numbers I see coming out about the state of the economy just seem more and more out of sync with reality on the ground. Legit 5% GDP growth should mean a booming economy with people feeling good, yet people are struggling to cover their basic needs and pessimism seems high. I work remote so I see this in both the bubble of the tech world and in the "real world" outside of tech

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The deficit for 2023 is $1.7 Trillion total. Do not conflate the deficit, how much expenses exceed revenue, with debt, the cumulative sum of deficits running back decades. We have only added $300 Billion to the deficit this year.

The US deficit spending this year is 6.6% of GDP. Last year the deficit spending of $1.4 Trillion was 5.5% of GDP. In other words, if there were no growth except that caused by government deficit spending, and that government spending was a wash - $1 of government spending for $1 of economic growth - you'd expect an annualized GDP growth of 1.1%.

Further, GDP growth fueled by deficit spending is still legit GDP growth, the same way that taking out a loan to remodel your home still creates a legitimate growth in your home's value. That remodeling may not have been the optimal investment, it might not even be a profitable investment, but it still is an investment.

> GDP growth fueled by deficit spending is still legit GDP growth

That feels like a super bold claim that needs a lot of justification. Sorry I won’t just go with the hokey household metaphor.

why?

you can pay someone to dig ditches for no reason. then pay to fill them back. both count as legit GDP growth, even if the value of either action is $0

if GDP growth fueled by deficit spending is still legit GDP growth, then couldn't we easily have double, triple, or 100x growth just by more deficit spending? Why limit it to single-digit percentages? Let's really get things cooking.

Yeah, you can 100x growth, you just need to find someone to give you a $170 trillion loan, and then service the interest. That's a bit tough when world GDP is $95 trillion.

It's not that crazy, e.g. the freeway system

What is your issue with this claim?

If a government takes out a loan to build a $100 million bridge, is that bridge any different from a $100 million bridge that was funded by taking money out of the coffers?

A bridge will pay dividends for many years. Currently, the government is borrowing at 5.5% mainly to fund medicare that keeps 83 year olds alive and drawing on debt-funded social security for an extra 2 years.

Medicare and social security aren't bad things, but funding them with debt is pure consumption rather than a long term investment in US growth and productivity.

That's true, but your GP is suggesting that infrastructure investments are unproductive as well.

> Medicare and social security

These two are often lumped together, though are quite different. SS deficit can be fixed with slight increase of retirement age and slight payout reduction and slight contribution increase. Medical spend is completely broken and unfixable without going after the medical cartels.

The fact that it can be fixed doesn't matter if its currently not fixed. Those are the two biggest budget items, so it's what the government is spending the most money on.

Technology developed that goes into keeping 83 year olds alive actually does have second order effects on productivity and being able to work for longer.

The 83 year olds aren't having dollar bills ground up and pumped into their bloodstream. That money is being paid to doctors, hospitals, medical manufacturers, etc. All of these entities are then going and spending those dollars on the inputs they need. Increasing hospital capacity is as legitimate a thing to spend money on as reducing traffic congestion.

More to the point though, if you spend $20k keeping grandma alive, is she any less alive because that $20k was loaned versus pulled out of her mattress?

GDP is not a measure of how optimally money is being spent, it's just a measure of how much economic activity is going on.

If you project the first three quarters of GDP growth, the US should end the year with $27.6 Trillion of GDP. The annualized rate is 8.5% without adjusting for inflation. Inflation adjusted, the annual rate of growth is 3.75% in the first three quarters.

In that case, the $1.7 Trillion deficit is 6.1% of GDP, so actually a half-percent lower than your calculations.

This literally always happens during a Democrat presidency: the numbers are good but everyone goes “well it doesn’t FEEL that way so I’m gonna ignore it.” At what point are you gonna admit that your feelings are a crap metric?

The fact of the matter is the feelings of public are the feelings of the rich propagandists who, on principle, don’t want a leftist in power, regardless of whether he’s good for the economy or not.

Counter-argument: my father generally votes right, but he claimed the best economic times of his life occurred during the Clinton presidency.

Maybe these metrics are what's crap? GDP doesn't mean much for people day to day. Neither does how high a score the stock market happened to hit in its arbitrary magic points system.

People care about the job market, the cost of living, direction effects of inflation on buying goods and services. When people say they economy sucks they mean they can't buy a car right now because the bank will only give them an ass interest rate even with great credit and the price of groceries has skyrocketed.

I've believed for awhile now the stock market has been a poor measure of the economy because its become decoupled from the "real" economy, ie: the things I listed above.

There's a saying "All Politics are Local"

Maybe "All Economics are Local" too.

Obviously neither of those are true in a general sense - but the local situation is what feels most important.

When people say they economy sucks they mean they can't buy a car right now because the bank will only give them an ass interest rate even with great credit and the price of groceries has skyrocketed.

With regards to grocery prices, what does corporate greed have to do with the president?

As for the car, the FED has a big hand in interest rates, and yeah, Biden did choose to re-nominate Powell, but Powell was originally appointed by Trump, so I don't know how voters can really say the republican would have done better.

The American economy is bad for people under a certain line, yes. The question is why does the media always overplay the economy when Republicans are in power and downplay it when Democrats are?

Anti-monopoly policy is one lever the president has and has been essentially ignored since the 70s in favor talking about the fed the fed the fed all the time.

As one example the meat packing industry has become highly consolidated, squeezing both farmers and consumers while extracting massive profits. But across the entire economy many industries have become highly consolidated and subsequently raised their profit margins to the detriment of everyone but shareholders.

OK, even if one thinks this is specifically failing of Biden (or a generic democratic president) then, realistically, what is a republican going to do about this? Trump in fact favored corporate consolidation in his 2020 Economic Report of the President.

The media obviously wasn't talking about this when they were talking about how good the stock market was under Trump...

Do you think I'm saying this because I'm a Republican? Biden has actually been the best president of my lifetime for these issues but that just speaks to how pathetic the Democrats have been on economic issues for decades. Barely opposition at all economically speaking, they differentiate themselves more by wearing Kente cloth and engaging in divisive culture war stuff these days.

>With regards to grocery prices, what does corporate greed have to do with the president?

Most people aren't extracting the root causes to high prices. They watch the news, hear there is inflation and go to the store and see prices are high. Even if they had an inclination to, that kind of economic education is not standard. The population at large is very ignorant to how the economy works. They blame the prices on inflation and companies looking to gouge prices know this and take advantage of it.

But, corporate greed and monopolies have a lot to do with the president. At least Teddy Roosevelt thought it did. And he did something about it. It's not unreasonable to ask why Biden doesn't. There was a point, brief as it may have been where it at least seemed like our institutions cared more about how the economy effected the common man.

>The American economy is bad for people under a certain line, yes. The question is why does the media always overplay the economy when Republicans are in power and downplay it when Democrats are?

I should have made this more clear in my first post. But my core point is, public sentiment doesn't care about economic reports. It cares about tangible every day things like prices of goods and interest rates. It doesn't care nor understand the root causes. It blames the guy in charge. For better or worse POTUS is always to blame for the current state of the economy. It comes with the job. Instead of saying the public is stupid, I think its more productive to accept it and work out how best to deal with it.

And I don't think they downplay for republicans and exaggerate for democrats. The large media corps are selling a product and outrage helps. The kind of outrage the sells best depends on a lot of things. When trump was president, it was effective to just sell him as the outrage product. Biden is a much more dour and boring person. You have to focus on other things than the personality at the top. Before 9/11, Bush was getting attacked for the economy. He presided over the dot com bust. But with GWOT most criticism for him switched to that. The 2008 recession happened while Obama was in office and had long since left the news cycle by the time he left so duh.

There's sticker shock but the jobs numbers are great.

Unemployment is way down, real wages are up even compared to before Covid-19, and inflation is back to normal levels.

The large majority of people are doing well. When people say the economy sucks they are largely not talking about their own economic situation. Most people believe that they, personally, are doing well, but that some nebulous "the economy" is doing badly. We have a nation of thriving people who believe everything is falling apart.

https://www.nytimes.com/2023/09/07/opinion/economy-inflation...

I'm going to copy paste a comment I made elsewhere to get my point across.

People don't think of inflation quarter to quarter or even FY to FY. They think of it in terms of what they are calibrated to think "normal" prices are. For most people that's going to be pre-pandemic. Since prices have not returned to pre-pandemic levels the economy is bad. Especially so since their wages haven't gone up comparably to match. This is why the numbers are largely useless at gauging public sentiment. Nobody cares that this quarter the rate of inflation has slowed. They care that chicken breasts cost double what it should. They care that a Ford Mustang GT can cost $50k when they were pretty sure they were $30k. They care that fast food costs as much as a sit down restaraunt should and the sit down costs as much as a nice one should.

Now you can all explain that with numbers and reports but sentiment doesn't care about that. Public opinion is an inherently irrational thing. But it is still incredibly important because elections are decided by it. It doesn't matter if GDP is positive and inflation is good right now if everyone thinks we are in a recession and the prices of everything are too damn high. You will get voted out. I'm not sure why this is a hard concept to grasp.

> Especially so since their wages haven't gone up comparably to match.

The economic data indicates that average income has gone up more than prices have since the start of the pandemic. If you look at Real Personal Income (https://fred.stlouisfed.org/series/RPI) it's up 5% relative to the end of 2019.

And if you think inflation is way higher than is being adjusted for, you're simply wrong. The MSRP for a 2023 Mustang GT is $38,345 (https://www.kbb.com/ford/mustang/2023/). The 2020 was $38,320 (https://www.kbb.com/ford/mustang/2020/). The price of Chicken Breast is up 38%, not 100% (https://fred.stlouisfed.org/series/APU0000FF1101).

Yes, public opinion is irrational, but the more obvious political question is why public opinion is so wrong now, when often it is not so pessimistic about the economy.

You have data all wrong.

In 2020 I could get Mustang GT for $8k off MSRP. In 2023 Mustang GT MSRP is $42,495 and there is only $500 off.

https://www.ford.com/cars/mustang/models/gt-fastback/

Unfortunately I could not find data on prices after discounts -- I would love if you could point me to some! I find it hard to believe the average discount in 2019/20 was $8k off on a base trim GT, but if you actually bought one with that discount then fair enough. Note that's still a significantly smaller increase than my parent comment indicated.

You didn't even get MSRP for 2023 right. Try to learn google or bing or something.

The link you gave me is the 2024 MSRP, not 2023. No need to be rude, especially if you're not going to actually read my comments or your own links.

>average income has gone up

To that I would say there is likely a problem with average. I didn't see a break down of the data in your link, but admittedly its my lunch break and I didn't have the time to really dig for it either. But its entirely possible that some groups saw an outsized growth in wages while others didn't.

>The MSRP for a 2023 Mustang GT is $38,345

The MSRP of a Mustang GT is $42k before options https://shop.ford.com/configure/mustang/model/customize/ecob... The GT Premium is $47k

Apples to apples here -- the 2020 GT Premium was $43,315. So we're still not looking at nearly the same size of increase.

You think the average income is being computed incorrectly? Or that there is just a lot of variance so many people are worse off? It is true that wage increases have been uneven, but they are actually much larger at the low end -- this is why you see the most inflation in low-wage service-heavy categories like restaurants.

> Now you can all explain that with numbers and reports but sentiment doesn't care about that. Public opinion is an inherently irrational thing.

Is it public opinion being irrational or governments around the world playing games with "basket of goods", "core" inflation and other bullshit designed to convince their citizens to trust magic math formulas instead of their own eyes?

I'd argue such voters are significant because they will potentially impact the results of an election, but I'm not sure they're important in the sense of being worth any politician's time trying to address. There's no realistic way prices across the board are going to significant deflate (i.e. return to pre-pandemic levels) absent some economic catastrophe, especially when the people demanding it mostly seem to be over-estimating how much the price of things actually went up (like Ford Mustangs and chicken breasts). And it's definitely not something any elected official has the power to actually achieve. Increases in real spending power could help people generally concerned about purchasing power, but it doesn't help for the people you're describing who are anchored by past absolute dollar prices.

That literally always happens with every presidency.

Good luck gaslighting the working class into believing their day to day situation is something it's not. "Don't believe your lying eyes. Your grocery bills and rent and gas and car and healthcare didn't go up, and you're closer to owning a house than before! It's the bad people telling you otherwise. Trust Us. Four Legs Good, Two Legs Bad."

Great account name to go with this comment. Ministry of truth trying to tell you your dollar isn’t evaporating on a daily basis.

Rents around me are going down. Gas is under $3/gal here. I filled up my ICE about a week ago for ~$2.75. Lots of staple foods have dropped closer to pre-pandemic price levels but many do remain high but have seemed to stabilize.

I'm obviously only looking at a small part of the overall US, but if we're going to go by what we as individuals see the numbers I'm personally seeing largely match the trends I see from the BLS.

The right seems to be able to do it constantly. The right takes control and the white working class goes “oh the economy is so good” while they privatize the services that the working class rely on and then strip them of all their assets . The white working class doesn’t ever seem to mind then.

This sort of thing happens with subjects where it's difficult, time consuming, expensive, or risky to get the actual information you want.

Feelings are more present and real. It's a mistake to expect that anyone will ignore their feelings. The question is how to get upstream of those feelings.

I had a big anger problem when I was a kid - my dad told me that if someone can make you angry, they control you. It's hard to tell someone they are being controlled while they are angry though.

Sometimes people are happy to be angry because it makes the world simpler. All I have to do is be angry, and this guy will fix things for me. And maybe that guy fixes things, or fixes one thing, but later things get worse again, because just being angry and trusting someone to fix things doesn't work.

Humans are very smart animals, but the world is very complicated.

> This literally always happens during a Democrat presidency: the numbers are good but everyone goes “well it doesn’t FEEL that way so I’m gonna ignore it.”

A common and easily mocked media meme. On the New York Times Pitchbot humor account, an hour ago: "We're not in a recession. So why does it feel like we are?"

One thing I do like about Democratic presidencies is that it makes the Republican party care about the deficit again. Every time we elect a Republican president they explode the deficit and lie to our face that deficits don't matter.

No one cares about the deficit. It’s just a talking point.

The Republicans are willing to shut down the government over it, and set it up such that they get to have this battle over and over again just to make the point.

How does temporarily shutting down the government help the deficit? When they had all three branches of government they didn’t do squat about the deficit, in fact they cut taxes making it worse.

The Democrats don't care about the deficit at all. The Republicans also don't care about the deficit, except when they're not the predominant party. Then all they do is talk about the deficit.

Debtors really don't care about the deficit. There's not a lot of places to park large quantities of cash. Even if the US Treasury was offering a measly 1% most bond buyers would still take that over any higher yielding riskier debt. It still confounds the typical US taxpayer that other countries buy our sovereign debt because that is how they insure their currency.

You are correct that Republicans only talk about the deficit. When it comes to financing more deficit spending, the House Rs keep passing debt limit increases and CRs to kick the can down the road. Yes, it is all talk and the actions are more spending.

>the numbers are good

The numbers are meaningless, even if they are accurate, which I sincerely doubt. GDP is up 5%? My salary hasn't gone up 5%, but my grocery bill has gone up way more than 5%. Health insurance costs went up more than 5%. Maybe all those increases in prices are boosting GDP, but wages aren't keeping up. Maybe the numbers are hand-waving nonsense.

People know whether they are doing okay or not. GDP is a blunt instrument metric of little value except as a broad comparison. But noting that it "happens during a Democrat presidency" is quite telling.

Do you even remember 2008? If this is a bad economy for you, imagine actually entering a recession and you lose your job + house.

I don't want 2008 to be the benchmark for a good economy.

It’s a benchmark of a truly _bad_ economy.

If you make $100k and your grocery bill is $10k a year, a 5% increase in groceries (to $10.5k) only needs an 0.5% increase in salary to offset.

Why stop at $100K? Why not $250K? $500K?

If you're in the top 1-2% of income earners you feel things differently, this is understood.

Ah I see. Then let's do the median. That's $74580 from the census. So your income has to rise by 0.67% to compensate for a 5% rise in grocery prices.

For one, grocery prices have risen by more than 5%. (My own experience is more like 30-40% just in the past year.) For two, grocery prices are one metric among many in the cost of living, e.g. you also have to account for housing prices, energy prices, etc. And, of course, wages are not rising commensurate with the overall CoL, they have been essentially flat for decades.

So while your math is good, it's not meaningful. I find it very weird the lengths people will go to in trying to make one-off metrics reflect a different reality than what is very clear from people's experiences.

Did you switch jobs? A voluntary job switch is an average ~20% bump in salary. Job switchers and union members are getting the vast majority of the gains. A low unemployment rate makes switching easy, and low end workers were switching at a much higher rate then normal.

But job switchers (rightly) give themselves the credit for their salary boost. OTOH the government gets the blame for inflation and job loss. It's a crap job, you get blamed for the bad stuff, but don't get credit for the good stuff.

Feelings of the public matter when groceries start costing double, or triple in some cases. What once filled my entire fridge now gets me one shelf. Rich propagandists don't feel this. Everybody in my life that I talk to however, do.

Your truthiness sensor needs adjusting!

Government spending contributed to 0.8pp of the growth. Pretty significant. But the main driver is consumer spending, especially on durable goods.

These are the good times that the government should use pay to pay off debt by taxing more and spending less.

I don't put much stock in your feelings about the economy. My feeling is, I see people shopping at the mall, I see them filling the bars, and I see them buying new cars. The problem some people may be having is that they over-extended themselves and now owe too much. For example, while their real wages have actually gone up, they may have underestimated how much inflation would erode the real value of their nominal wage increases (I did this, in fact). So they took out loans they thought would be easy to pay, at interest rates that were higher than they were used to, and found that they had made the wrong bet. The disatisfaction, imo, is all about disappointed expectations, not the actual living conditions people have. I got a 20k raise, but now it feels more like a 12k raise, and meanwhile I took out a loan for a kitchen remodel.

Most people in this country are much poorer than the people remodeling their kitchens. You're speaking from a solidly middle-class perspective.

Are you saying that poor people could not have under-estimated inflation relative to their (very real) income gains and acquired debt that they could not, as it turns out, pay for? The point is that uncertainty increased, and many people made the wrong bet, e.g. your hourly wage went from $10 to $15, a 50% increase. You buy a car (yes, even poor people buy cars), but the used car market spiked in price, and the interest rates too, and besides, everything just got more expensive. And so, it turns out that your wage increase feels more like a $2/hr increase instead of a $5/hr increase, and you're stuck trying to pay off more car than you can actually afford.

Yes, I am fortunate enough to earn a middle-class income for my family. I grew up poor in a poor neighborhood with a lot of crime. Sometimes you can climb the ladder.

Yes, the gov is spending 8% in deficit to achieve 4% in GPD growth. This doesn't sound like good economic policy to me. The growth should at least match to make this even workable. Of course, Washington doesn't even know how to calculate basic things anymore, everything is distorted to help the party in power at the moment.

Apparently just giving money to the rich isn't a very good way to build an economy

Careful saying that around here ;)

The best way to build economy is to give money to those without. Then they spend it. Trickle Down is bullshit. Bubble Up is the one that works. The rich still get theirs - but less and after the money has passed through a few hands.

We just tried that and inflation exploded.

Somehow a lot of haves were mixed in there too, which may have been the problem.

It sucks that we had to pay 1.5x as much for a dozen eggs during and shortly after that global pandemic, but put blame where it is due, and it is not really due to your neighbors getting pandemic relief.

https://thehill.com/business/economy/4057722-greedflation-is...

I don't get what point you're attempting to make. Your comment suggests you think inflation came from from pandemic (a loss in productivity?), the the link is about corporations sopping up the extra cash that was floating around via raising prices.

The latter would fall into the bucket of government handouts to the bottom cause inflation, would it not?

If you're skipping the monetary interaction and saying "it's not the handout, it's the greed", then I'd like to point out that companies have been behaving the same way forever (trying to maximize profits), yet inflation has been low for a decade.

That corporations would take advantage of poor people having more money to spend is intended behavior, and something that needs to be accounted for in functional monetary policy.

> companies have been behaving the same way forever (trying to maximize profits), yet inflation has been low for a decade

This isn't true. Companies only started to maximize profits under shareholder value recently. Corporations originally were thought to have a responsibility to society at large, thus with things like pensions being provided to their employees.

Additionally, the small handouts to the poor are much more dwarfed by handouts to the employers at the time. Which made it baffling that large employers then raised prices anyways, when they already got the vast majority of covid relief money. No, it is pure greed.

Yea. Tax those corporate profits and tax those wealthy C-suites. Then the taxes help those on the bottom rung; and the circle continues. Accumulation at the top blocks the flow.

This says nothing of economic output. If you just hand out money to people, that has an economic output of zero. Short term this might work, but long term, I believe it would shrink the economy, and leave it saddled with people that don't produce according to the markets' demands. Why would they?

People who don't produce anything and live from getting money to spend... I think you just described the rich!

How did they become rich then?

There are all kinds of ways of getting rich. Working is the least efficient in terms of effort.

All top 10 richest men in the US are self made. And they worked damn hard at it. Of course they worked smart too, and took chances - that's the part most people miss.

Why wouldn't they? Do you think folk would just sit on ass after getting the handout? Would you? Some, perhaps - but they sit on ass now - and have no social safety net or anything, they outdoors.

The human condition is to endeavour. Even with free money the majority of folk will work, or do something to improve their situation.

I would certainly keep myself engaged and busy with my hobbies. But that is unlikely to produce anything of real value for anyone else.

OK, what numbers do you propose are the ones we should trust if they're basic?

I think you'd at least want to get a 1-1 ratio for spending to drive growth and ideally an actual ROI. The government is operating like a VC funded startup right now

I think what the comment is saying is, if the government is spending a lot of money inefficiently (i.e. spending $100,000 on a weapon that has $10,000 in raw materials plus layers of bureaucracy that are hard to quantify as costs) and accruing a lot of debt in the process, it is hard to understand what your cost is for basic things.

I don't understand why there should be any relation between deficit (which is a percentage of government revenue) and gdp growth (which is a percentage of total gdp of the whole country).

The 8% deficit listed above _is_ a percentage of total GDP of the whole country (although the Fed has it at only 5.3%). The numbers are directly comparable.

https://fred.stlouisfed.org/series/FYFSGDA188S

One is a rate of growth and the other is a rate of spending. It would be like comparing that you spend 8% of your income on food and that you got a 4% raise this year. The two numbers have nothing to do with each other other than using the same unit.

No, that's a bad analogy. It's more like I borrowed 8% of my annual income this year, and then bought 4% more than last year. If I hadn't borrowed all that money, I wouldn't have been able to buy that much. It's both intuitively obvious and empirically demonstrable that government deficits stimulates economic growth in the immediate term, since most government expenditure happens in the domestic economy.

It is also unsustainable in the long-run for the primary budget deficit (I.e excluding taxes interest costs) to grow faster than GDP growth.

Because tax revenue is fairly consistent as a percentage of GDP as well, so if deficit as a percentage of GDP exceeds faster than GDP growth then our debts are growing faster than our ability to repay them.

Tax renevues were down 9% for the 2022 fiscal year which is part of why we saw a larger increase in the deficit. Part of that decrease is due to tax delays related to disaster relief and will come in during the 2023 year so the numbers are skewed.

The deficit is on percentage of GDP! Part of this GDP is direct consequence of government deficit spending. If you remove the 8% deficit you remove a big chunk of this GDP growth (probably all). But the situation shows that the gov is spending way more than the resulting growth, so this means it is a completely inefficient investment. You should expect at least 1 to 1.

In 2019, the US economy grew by 2.3% and the federal deficit as percent of GDP was 4.6%.

So isn't the situation today exactly the same as four years ago, before Covid, under a Republican administration?

Yet somehow I never heard this argument that GDP growth is a function of the deficit back in 2019.

I have always pointed out this, be it a republican or democrat government. They all use the same tricks to inflate GDP by borrowing. Now, I'm not against borrowing for the sake of economic growth, but you cannot keep borrowing 6% to get 3% growth, in the end this policy will not work.

If your assets, lets say your house of value grew by 5% , you would say yay me.

However, to make things simpler assume you don't have cash, for example, because you are unemployed.

So, if you are making the mortgage payments using the credit card and the total CC payments this year alone are 8% of the value of the house, you can see problem.

Eventually, the debt becomes due, and no amount of house will repay the incurred debt.

So the relationship is, you may buy any house (assets) that grows in any amount, but if your CC hole is growing faster, you are actually worse than you started out.

Analogies comparing household finances to government finances are pretty apples to oranges. A household can’t easily get unsecured loans below prime, print money to cover debts, or do many other things that governments can.

Government is just a large group of people

Financing and even currency issuance depends on trust.

I can get a 0% from family and friends if i needed for far more my net worth. With connections I could also get counterfeit and pass it around.

It comes down to the fraud triangle: opportunity, incentive, rationalization.

The government may have more leeway to commit fraud than an individual. But the comparison is still apt, the fraud is the same, whether its a house being paid with CC or GPD with govt bonds. Ignore that at your own peril

The dynamics are similar in many ways, but not the same. Scale and occupying a significant part of a market create their own qualities. Government bonds are closer to shares in a company than personal debt, or even corporate debt for that matter. Many people want to own government debt as a stable store of value. Even moreso as the global military hegemon, where other countries want to own the government's debt as a stable store of value.

Conversely, the US government has also spent the last 40+ years abusing the fallacy that loaning money is completely different than spending, which has grotesquely distorted the financial industry and the housing market. So the sooner we shove off these misguided notions, like that the government's balance sheet is anything like a private balance sheet (and even worse, that the Federal Reserve's balance sheet is somehow distinct from the government's!), the better. Modern Monetary Theory is more in line with the actually-conservative Austrian School than the hybrid catastrophe of the past four decades.

Still, there's no free lunch. You can see this clearly with smaller nations that try those strategies. If the US government has to do those things then there are negative repercussions in the form of distorted interest rates, inflation, capital misallocation, etc. All else equal it's obviously beneficial to have a balanced budget, low debt, and organic economic growth from dynamic markets. The federal government still has the exorbitant privilege of the USD as the global reserve currency, so can export much of its inflation across the world. Though at the end of the day these trends matter, and the long term debt cycle, coupled with worsening domestic issues, does not bode well with increasingly powerful strategic rivals and proxy wars.

But what if you can set the CC rates as you please (let's say to 0% because why not and we've been doing that for the better part of last 12 years). And if push comes to shove you can just get infinite "loan" from a biggy bank that you happens to have.

Technically you are correct that the govt can set the rates.

But that's just like you demanding to have a 0% CC from a financial institution. If you are Bezos, you may be able to swing that.

But that demand only follows your credit rating. You can demand 0%, but that doesnt mean you will get it. If Bezos is suddenly bankrupt, bet he's not getting the same CC, or even any CC.

Making the bet that the USG can set rates as they please forever just because they have for 12 years is just saying "I'm a turkey and life is good, this nice farmer feeds me every day!"

Thanksgiving always comes.

I don't think this captures the point I was trying to make, the US government have ultimate control over Federal Reserve and its policies.

Thanksgiving will always arrive but the government is not going to be the turkey with its debts, in this case, it could be a global stagflation. The US government can always make good on however many debt it has as long as it is denoted in US dollars.

Well, the idea of spending more, is working more, which the latter is reflected by GDP.

If the government spends more, it should cause more work, which should lead to higher GDP.

This is one simple way to look at it.

If the government is spending more, but GDP isn't growing by the same, it might be a sign that the governments expenditures are wasted.

Now, I'm not saying that's happened, but it could be. Government spending is historically the most likely to be wasteful, in comparison to individual/retail/business spending.

The answer is that GDP simply includes the government spending in itself, by definition: https://en.wikipedia.org/wiki/Gross_domestic_product#Compone...

I have "opinions", but if you are interested in this topic, rather than me dumping it here, it can be worth reading up a bit on GDP, then googling around for GDP criticisms. I think there's a sense in which it measures something useful, but it isn't measuring what people think it is and what the media sort of pushes it as meaning; it is correlated to the health of an economy but it is by no means a measure of the health of the economy, and the fact government expenditures are simply straight-up added to the GDP has such an obvious way for the government to manipulate the numbers that I can't hardly even call it an exploit. Whether they are doing that, I'll leave that to the reader to decide.

Another relatively obvious issue is that the GDP number waved around in the popular press is generally not adjusted for inflation. That's not just the US GDP in 2023, it's any GDP the press will talk about, anywhere and anytime, so I'm not trying to make any stealth political point here. It's something to be aware of in any context a "GDP" comes up, look to see if it's inflation-adjusted or not. Such measures exist and more serious economists definitely use them. The wikipedia page I linked to above has a wide variety of other interesting definitions and that's still a Wikipedia overview itself, of course, not the fullness of econometrics.

What do you think why there is a deficit? Government spending is the income of others.

The more they spend, the more others earn, leads to higher GDP.

I dont I think that is the right way to think about this, but I agree that the government grossly overspends.

A one time expense of 8% GDP for a 4% growth is great. That means it would get paid back in two years, or faster if you consider compounding.

The problem is determining if the 8% spending is related to the 4% growth (and how much.

Another way to to frame the whole topic is that the US government spends %40 of GDP in taxes, plus another 8% borrowed, per year. Even this could be a good deal, but it comes down to how much of the growth is causes by govt spending, which types of spending, and if the growth is permanent.

> A one time expense of 8% GDP for a 4% growth is great. That means it would get paid back in two years (...)

Not quite. The payback time will depend on the growth in government revenues, which should be correlated to GDP growth, but a fraction of it.

It's also ignoring interest.

Borrowing $8 to make $4/year is a good investment as long as interest is less than 50%

even if it doesnt increase revenue, it can be a good investment.

The purpose of the government isnt grow, it is to serve the people

Government debt is completely irrelevant as long as the debt the government has is in its own currency that it can print more of. US government can print however much money it wants.

It will never default because it can just create the credit. That’s what the Federal Reserve did with its zero interest rate policy. It distorts the economy, and the economy can shrink and be torn apart, but the government can always pay its debt by simply printing the money.

The real problem lies with private debt, and that's what's actually leading to a default. When people default on their debt, they end up forfeiting property to the creditors. What we’re seeing now is a large scale transfer of property such houses and cars that people had bought, and so on, that they can no longer keep making payments on. this results in a transfer of income from the 90% to the 10%.

The wealth transfer means that the working majority is pushed ever further to the margins. US is already in a situation where around half the population has no meaningful savings.

https://www.cnbc.com/2023/10/03/americans-are-saving-less-in...

Having no savings puts people in a position where they're not able to absorb further unexpected expenses. This is what's making the economy so fragile.

Government internal debt is a problem too because while, sure, you can print your way out of it, you are still devaluing the currency repaid.

Take social security for example. You can print money to repay all the money borrowed from the fund, but in doing so, you have debased the currency it pays out.

If a retiree is owed 100$, you pay it with printed money, so in theory they are made whole, but it no longer has the same purchasing power. It is a rug pull for the retiree.

That's not how fiat currency works. There is no direct relationship between the amount of currency in circulation and the value of the currency as expressed in the price of goods and services. The prices are set by people who own businesses based on how much they believe their consumers are willing to pay them.

nonsense. Double the currency in circulation and hold goods constant and you will deflate your currency. There is a clear and direct relationship.

You can expand the money supply and amounts in circulation without inflation in the exact case where you expand the value goods and services in equal measure.

Even then, the purchasing power of currency holders is less than the counterfactual where the money supply was not expanded and you had deflation as a result.

Money drop a million printed dollars on each consumer, and prices will skyrocket.

Are you trying to tell me that the expansion of the money supply in Venezuela has no direct relation to inflation.

Once again, inflation is a result of business owners choosing to raise the prices. If money that's created goes directly to consumers, then it allows business owners to raise prices on goods. However, that's not what's happening when US government is printing money to pay off its debts. You appear to have an incredibly superficial understanding of how money supply works, and you appear to be just regurgitating tropes you've memorized.

>If money that's created goes directly to consumers, then it allows business owners to raise prices on goods. However, that's not what's happening when US government is printing money to pay off its debts.

This is exactly what happens when the government expand the money supply to repay debt. It send out social security checks, pay workers, and buys goods. This puts money directly in the hands of consumers.

You even agreed we are talking about an increase in the money in circulation. Are you walking that back and saying that money in circulation doesn't give consumers more money? The creditor of Government debt Is citizen consumers with benefit obligations.

What about Venezuela? Consumers don't have more currency there either?

> This is exactly what happens when the government expand the money supply to repay debt. It send out social security checks, pay workers, and buys goods. This puts money directly in the hands of consumers.

Not really, because most government debt isn't consumer debt. US isn't increasing money supply to pay for social security or to pay workers. It's increasing things like military contracts for large corporations.

> You even agreed we are talking about an increase in the money in circulation. Are you walking that back and saying that money in circulation doesn't give consumers more money? The creditor of Government debt Is citizen consumers with benefit obligations.

I'm not walking anything back. I'm saying that the currency that's being created isn't going to the hands of regular people. This is obvious from the fact that majority of the working population can't even afford to live on the salaries they make forcing them to take on debt to buy essentials

https://finance.yahoo.com/news/jaw-dropping-stats-state-cred...

> What about Venezuela? Consumers don't have more currency there either?

Venezuela is under a brutal blockade by the US, and that's the actual source of most of the problems there.

>Not really, because most government debt isn't consumer debt. US isn't increasing money supply to pay for social security or to pay workers. It's increasing things like military contracts for large corporations.

You are confusing the debt owner, and where the money was spent. The governments make create internal debt for a military contract, but the debt is held either by the public (e.g bonds), or intragovernmental ( e.g. borrowed from the social security fund) When these get paid back, they go into circulation.

Besides, Most government spending goes to salaries and benefits.

I'm not, as the link I provided you with clearly explains, personal wealth in US is decreasing. It's now at the point where people have negative assets because they're forced to borrow to meet their basic needs.

If what you claim was happening then we wouldn't be seeing this happening. If money went to salaries and benefits, then workers wouldn't be under water financially the way they are right now.

"You appear to have an incredibly superficial understanding of how money supply works, and you appear to be just regurgitating tropes you've memorized."

The irony is off the charts.

an amazing counterpoint you've mustered there

There is no relationship between money and inflation because the money doesn't go to the pockets of people who can spend money. The extra money goes usually (the covid programs are an aberration) to the pockets of the financial elite, and they become stocks and other financial assets. The price of these assets go up, so there is asset inflation, but not real product inflation. The characteristics of fiat money work because the created money is really going to the pockets of the rich to inflate their net worth.

Sure, that's part of it, and the other half of the equation is that when economic crashes happen the rich use their liquid assets to buy up physical assets that everyone else if forced to let go this concentrating tangible wealth with the capital owning class.

What are the absolute numbers?

The percentages don't appear comparable here. They also don't allow for future multiplier effects from the spending.

No agenda, just holding that sentence up to a little scrutiny.

Future money is cheaper than current money. The approach totally works in a low rate environment. But as rates get higher in relationship to inflation expectations it becomes unsustainable

If you're rounding, the growth is 5%.

Not that comparing those two numbers is at all meaningful.

If you spend 8% and the GDP is boosted by 4% once, and then grows at the normal rate afterwards, then the GDP will stay 4% larger indefinitely.

That 8% debt would generate 4% more economic output this year, next year, the year after, the year after that, etc...

If your 8% debt only generates 0.5% of extra growth once, and then we get back to a baseline 3.5% growth, the additional economic output will equal the debt in 16 years and continue generating economic output afterwards.

But it's also completely unclear why, as a government, you should care about the ratio of debt to growth. The two numbers are of an entirely different nature. That economic output corresponds to things produced by the economy. The 8% debt corresponds only to who has control of which money pile (in particular, it includes the promise that the government will redirect a large chunk of money to the lenders in the future, which you might or might not find problematic). It doesn't take anything away from the total sum. So by shuffling money around, you have created real economic output. That's great!

Both of those numbers are wrong. It's more like 6% deficit and 8% GDP growth.

Yes, GDP by definition includes government spending.

I agree that GDP is a poor measure of “on the ground” experience, but not sure what that has to do with deficit spending.

basically, I'm wondering if we'd go into a recession immediately if the government was forced to cut spending to sustainable levels. The debt is finally hitting a point of no return where we have to cut, next year we'll spend more on debt interest payments than our military

the main argument that the economy is doing well is that "the labor market is strong" and unemployment is low, but how many jobs are tied to government deficit spending via contracts or direct employment? If that spending is cut back, I'd imagine the jobs numbers will quickly start to decline

Imagine how much it will "grow" when we get involved in 2+ simultaneous wars.

It will likely "grow" into 1 large war.

I think they were referring to the two wars we spent decades in that increased spending. OIF and OEF.

The government has been reducing spending since all the COVID support in 2020 and 2021. At its peak, government spending was over $7 trillion, which was over 30% of GDP in 2020. It appears to be trending back to the pre-COVID ratio: ~20% of the GDP is government spending. https://fiscaldata.treasury.gov/americas-finance-guide/feder...

But at the same time has the largest non-COVID deficit ever. `22 and `23 defectors are trending higher, not lower.[0]

0 - https://www.reuters.com/world/us/us-budget-deficit-jumps-23-...

> sustainable levels

That's really the key thing. What level is sustainable? I've come around to the idea that the main danger of deficit spending is inflation (because of the idea that government debt is private sector wealth).

The big levers the government have access to are spending and taxes. The first adds wealth, the second subtracts. In this way, government debt is really nothing like household debt that you and I have.

Inflation is their primary lever actually. Why bother paying down the debt when you can simply make it worth less? It's fiscally irresponsible, but that's how it works.

You seem to agree with Keynes. Assuming you’re in the lower 99%, are you wealthier in proportion to increases costs over the past quarter?

I personally don’t buy it. When other country’s start divesting from US treasury ties, the party will be over. Already prices are rising faster than income. What did Germany, Zimbabwe, and Argentina, Venezuela, etc. do wrong, that the US is doing right?

A better question is to ask what is Japan doing right since they are a lot farther down this path. Their debt to GDP ratio is something like 230% which is almost 2x the US ratio.

The answer is that Japan isn't doing it right. People struggle, taxes are high and pay is generally low (but for tourists, Japan is incredibly affordable). They still do OK, but we shouldn't see Japan as a model of how to do things.

Do you think if the government had less debt, all of those problems would be less severe?

That is impossible to say in isolation of just that one factor. My only claim is that Japan shouldn't be considered to be doing well.

The USD is in quite a unique place that makes this formula a lot more complex. For example, a mixture of being the global reserve currency, as well as the largest consumer market in the world helps the US to effectively 'export its inflation.' A quick search [1] on that term can turn up a bunch more hits than this brief(?) post.

Think about Carland, a country that makes lots of nice cars, and largely sells them to the US. Imagine the US decides to print a bunch of money, weakening our currency relative to Carland's. Carland's cars now cost more for Americans to buy. This might sound nice at first (for a Carlandian car peddler), but in reality what's going to happen is less cars are going to be sold, and your cars are likely to become less competitive than those from other countries. So the Carland government has a major incentive to try to weaken their own currency, and start doing exactly that. So other countries effectively end up absorbing much of our inflation, helping to greatly minimize the impact of any given batch of money-printing.

So if the USD hits a point where we're no longer able to effectively export our inflation, the result's not going to just be inflation. That's a SHTF moment, because it means we'll have reached a point where we're inflating so much that other countries simply can't afford to absorb it without or imperiling their own economies, or have become okay with not exporting much to the US. Given how extremely dependent we are on imports, this is going to be a catastrophe.

Beyond this there are lots of self-feedback effects to consider, especially with borrowing, but this post is already long enough!

[1] - https://search.brave.com/search?q=exporting+inflation&source...

The money is coming from somewhere. If it wasn't lent to the government, it would be spent in other ways. So the only reason that it should cause a recession is if the government is spending it in better ways to grow the economy than the private sector would/could (e.g. because the best investments are infrastructure related).

But if it's actually providing a boost to economic growth, it also means the debt isn't actually unsustainable. If you boost economic growth this year by 0.1%, and afterward it returns to previous growth rates, then the economy will stay 0.1% larger than it otherwise would have been perpetually. If your interest rates are comparable to the base line economic growth (true now, last decade they have been lower), and you take a twenty-year view, then taking on 5% of GDP in debt to generate a one off 1% growth boost to the economy is a no-brainer. The real issue is to understand when the government (vis a vis the private sector) actually can spend money to generate genuine extra growth, and when it cannot (e.g. if it only shifts growth that would happen anyway forward you would expect growth to dip after the initial boost, but that would be true whether the deficit spending stops or not).

The argument against debt is often not based in economic sense or sound science (remember the debacle when a widely cited study on the problems with high debt turned out to be based on an Excel mistake?). In my view, it's based on an aversion to the government having too much spending power. After all, a version of the argument, above was used by conservatives to sell tax cuts that were supposed to pay for themselves. They didn't because the tax cuts did not actually generate growth, they merely redistributed wealth to the top. For deficit spending, the evidence that it can boost economic growth is much more robust.

The real debt crisis will hit once countries start to seriously shrink...

>it would be spent in other ways

Or it would've been placed in the reverse REPO facility at delicious interest rates paid straight from the printing press. A lot of COVID spending was sanitized this way, without it inflation would've been much higher. And this money has started to get back into the economy.

Agreed that GDP in isolation is a poor measure, but when you take it in context (every report is done the same way) and with other financial data it can help paint a picture (still an imperfect picture).

It isn't government spending. We're just seeing the result of corporations successfully capturing all the post-pandemic money that was floating around which is propping up GDP numbers.

The higher interest rates haven't had time to dig into corporations yet, but the consumer really is faltering (e.g: https://www.forbes.com/sites/antoniopequenoiv/2023/10/21/ame...)

Once the consumer buckles and spending drops then the GDP should drop, pulling the US into a recession, that should cause rounds of severe across-the-board layoffs (not just isolated to tech) which then cause housing to buckle. And at some point commercial real estate should detonate as the loans there hit their maturity dates and roll over.

Look torward higher borrowing costs and inflation and while GDP can rise the economic situation can be people are unable to afford to buy a home and making ends meet is primarily a inflation problem.

But, that doesn't mean the the economy overall is seeing growth so we can hold all three things can be true.

GDP measures the value of goods and services produced in the country.

For the question you're interested in, you'd want to look at other measures like the deficit as a share of GDP. Which is trending badly in large part due to lower revenues (variety of non-ideological reasons).

Part of the "pessimism seems high" story is there is a very intentional concerted effort by republican politicians and their media backers to sow the feeling of pessimism. This is not negligable!

Deficit spending is still spending. But anyway economic activity isn’t evenly distributed. You may not live in a booming area, but there certainly are many booming areas. I recently moved from one mid-sized city to another, in different states but not all that far apart, and the difference in how the local economy feels is remarkable. One place feels stable but gradually deteriorating and the other is dynamic and growing fast.

Besides regional differences, it’s also the case that more and more economic activity is being captured by fewer and fewer people. So, if the richest billionaires grow their stash fast enough, the rest of the country will probably feel less dynamic.

There are people who think the job market never recovered from the ‘08 crash, just because they can’t find a job, so sentiment is probably not a useful measure of economic activity in the US.

People will never “feel good” about the US economy again.

Fuck their “feelings”. I’m so tired of hearing about people’s feelings when it comes to how the economy is doing. The only thing that matters is the data.

It turns out people live in a nation and not an economy. Tying someone's kids' healthcare to their employer who could fire them for no cause at any moment sure has a way of making people nervous about the future. I guess it gets results out of them, but it doesn't seem to make them happy.

But what the hell does that have to do with quarterly measurements of economic growth?! Wildly conflating every issue into different random grievances helps nobody, and arguably delegitimizes an otherwise very real problem.

Making everything about everything is an extremely effective way to paralyze any potential improvements. It’s unhelpful and exactly what I’d do if I wanted nothing to change.

Can’t upvote this enough.

With massive inequality, those in the lower classes fall ever behind the top quintile or so. Do you think they enjoy hearing about how much better the economy does as they see their and especially their childrens' standard of living fall?

Again, from the standpoint of economics, what difference do their feelings make? Should we adjust economic data to how people feel in any given day? Maybe we could do that for businesses too. “The CEO FEELS great about the company so we’re going to use Leader Adjusted EBITDA to say profits were 20% higher than what the CFO says they are.”

I bet it sucks to hear things are going well for others and not them, but that’s not what economic growth is supposed to measure.

Also it isn’t largely accurate, so the fact that they feel it is disconnected from reality, which is kind of my point anyway. For some it’s probably true, nothing is ever 100% good, but for the vast majority of people who feel that way they’re a) not helpless but indeed complicit based on their voting (or lack thereof) and purchasing choices and b) their lives are indeed improving even if they refuse to accept that.

> The U.S. is failing less-educated people given the dismal life expectancy prospects they face compared to their more educated peers, researchers said.

https://www.axios.com/2023/10/16/life-expectancy-educated-ad...

Their lives are literally shorter. How do you think that data makes them feel?

I get that the privileged are too isolated to understand the issues facing the unprivileged these days; it seems like yet another self-reinforcing doom-loop that will eventually lead to some sort of national breakup/collapse. At which point the GDP will probably fall and then there may be some concern. I've never been much of an optimist though; maybe everything will just work out somehow.

So your argument has shifted to "Some people are suffering" from "everyone is suffering." On that point, I agree, but to claim that the economy is terrible for everyone, or even most people, is not accurate.

Further, to conflate "many people are generally unhappy" with "the economy and choices related to the economy are what is making many people unhappy" is unhelpful. The economy can be doing well (the subject of this submission), and people can, separately, be struggling for non-economic reasons. It's unhelpful, however, to constantly bring it up when it's irrelevant, such as right now.

If you can find where I said that "everyone is suffering", I'd be surprised, but I suppose I'd own it. I've been pretty explicit about lower classes, though of course that's always a bit hard to pin down. As the article above showing the literal huge divide in life expectancy demonstrates, college education is one rather simple way of differentiating. And yes, I'm saying that the economy can in fact be doing well, but if only a minority of people are benefiting from those economic gains (like for instance, living almost a decade longer), then perhaps it's at least worth considering that those at the bottom might not be so thrilled about the situation. Something is certainly pissing them off.

What's the point of the economy, though? If a bunch of people think the economy's not doing well, that seems like a pretty strong indication that it in-fact is not in terms that matter, regardless of what GDP growth et c look like.

To pick an extreme to illustrate the point: if GDP shoots up 100%(!) but it's all a dozen people trading with each other a whole lot and everyone else is now impoverished, is that better? GDP is better! GDP/capita is better, too! But the economy is definitely worse.

Another exaggerated example to illustrate the point: if GDP is outpacing consumer inflation—let's say 4% growth in a quarter, and 2% inflation in the same—but only because we've made the "basket of goods" to calculate inflation qualitatively worse, and meanwhile several important things that aren't part of that basket have gone up 1,000% and everyone rightly reports feeling poorer—is the economy doing well?

Both of your examples presume the sentiment is justified, but that isn’t a given. How do you account for a generally poor outlook that externally influences sentiment despite a well functioning economy?

Maybe everyone is miserable because they’re newly aware of the violence and injustice in the world generally. How is that useful when trying to understand the state of the economy specifically? It’s important to understand how people feel as a society, but this isn’t supposed to be that. How do you filter out the “noise”?

We can’t really use “vibes” to determine if interest rates should go back down, for example. That would be disastrous.

Exactly, take for example this graph.

https://www.pewresearch.org/politics/wp-content/uploads/site...

The economy suddenly was awesome once a Republican was back in office, according to Republicans. Just turned on a dime.

Everyone is miserable because of interest rates and inflation. It's hitting the consumer right now and those are really obvious indicators how things are going. McDonalds costs as much as a meal at a proper restaurant did before the pandemic. That's not good.

Everyone is decidedly not miserable, and even if they were, your choice of highlighting inflation, a number that has been steadily decreasing for some time now, is curious.

You act like people would finally be happy if inflation were just under some number. No. People will just find the next thing to be miserable about. That’s how people are now.

People that watch Fox News/MSNBC and/or are addicted to social media.

> McDonalds costs as much as a meal at a proper restaurant did before the pandemic. That's not good.

This is not exactly true. They raised their prices, but they have a permanent 30% off coupon on their app.

Again, an individual “feeling” like the economy doing well shouldn’t be used as a measure for how an economy is actually doing. Like when they interview people on the streets to see how they “feel” the economy is doing.

God I feel like I’m in the Twilight Zone.

>If a bunch of people think the economy's not doing well, that seems like a pretty strong indication that it in-fact is not

People radically misreport this stuff for political reasons. "The economy is doing well" numbers will change radically in a week when a different party takes the White House, typically in a purely partisan fashion [1]. The economy didn't get better in that week, it's just that people "feel" differently about things when their preferred (resp. disfavored) candidate takes office.

[1] https://news.gallup.com/poll/1609/consumer-views-economy.asp...

The reality is that for republicans, "how good the economy feels" is tied directly to the letter next to the guy in the white house. It's not even based on who controls the senate, where their senators have spent the last 5 decades ruining the economy every single time they have had a chance.

"But gas prices are low" so whatever apparently.

People's feelings matter a hell of a lot at the ballot box.

True, but...

How much deficit did we add last year? The year before? OK, two years ago means they are Covid numbers, so... five years ago?

How much did the economy grow in those years?

I'm not sure that you can say anything as simple as "the growth is because of the deficit". I suspect (but I don't currently have the numbers) that there have been lots of years when the US ran a large deficit and did not grow.

> The numbers I see coming out about the state of the economy just seem more and more out of sync with reality on the ground.

What are those numbers?

Inflation still rampant, unaffordable cars, unaffordable homes, salaries growing slower than inflation. In other words, things that don't affect the rich (that's why the numerical growth in GDP), but are essential for the middle class (the majority).

Inflation is way down, salaries have been growing faster than inflation all year, unemployment is very low, car prices have been dropping since late 2022, and home prices are finally starting to decline.

So when you talk about numbers “you see coming out” you’re at least a year out of date.

I’m assuming you’re going to just start saying “the numbers aren’t real man”. But in that case why talk about the “numbers you see coming out”.

Core Inflation is down but that doesn’t account for food or energy, which are the two biggest complaints people have. Id like to see your proof that housing prices are going down, that’s news to me.

> I’m assuming you’re going to just start saying “the numbers aren’t real man”.

Nice way to prove you are arguing in partisan favor and not discussing anything in good faith.

No it’s a nice way of heading off what I guarantee was going to be the response. There is literally nothing you can say to sway the “inflation numbers aren’t real crowd” in the same way you can’t argue with a conspiracy theorist. I don’t care about partisanship. I think the economy would be in roughly the same state it’s in regardless of which party won most recently.

Core inflation doesn’t include housing and fuel. But fuel is down 10% from its peak last year and the median home price in July 2023 was 2% below the median price in July 2022.

Inflation is going down, wages are going up.

You can’t argue that “the numbers coming out” are showing the opposite because they aren’t.

But that person didn’t say inflation numbers aren’t real. That is a strawman you’re attacking.

It’s not a strawman. The person I was responding to has been all over the thread saying official inflation numbers are designed to be misleading.

People don't think of inflation quarter to quarter or even FY to FY. They think of it in terms of what they are calibrated to think normal prices are. For most people that's going to be pre-pandemic. Since prices have not returned to pre-pandemic levels the economy is bad. Especially so since their wages haven't gone up comparably to match.

This is why the numbers are largely useless at gauging public sentiment. Nobody cares that this quarter the rate of inflation has slowed. They care that chicken breasts cost double what it should. They care that a Ford Mustang GT can cost $50k when they were pretty sure they were $30k. They care that fast food costs as much as a sit down restaraunt should and the sit down costs as much as a nice one should.

> prices have not returned to pre-pandemic levels

Are you saying people are expecting CPI deflation? I don't think that's accurate, and it's also definitely not gonna happen.

Consciously? No. Like I said, public sentiment doesn't work that way. People don't want deflation. They want reasonable prices. Its not rational. The only sensible way to achieve that is to get wages increasing so the relative cost of living goes back down.

The health food bowl I like to get for lunch was $11 and is now $15

A chipotle burrito with carne asada steak and guac is now $17

Amy’s frozen pizza was $6.99 and is now $10 (don’t buy it any more, I’ll be dammed if I spend 10 bucks on frozen pizza)

I looked up buying a Chipolte Carne Asada Steak and Guac, after tax it was $15. FWIW, I normally get chicken no guac, I think was like $8 or so after tax now its $9.31 after tax.

I looked up the price for Amy's Vegan Supreme pizza at my local Kroger, in-stock for $7.99. No sales tax on that item, so just that price.

Must be where you live

> It doesn't matter if GDP is positive and inflation is good right now if everyone thinks we are in a recession and the prices of everything are too damn high. You will get voted out. I'm not sure why this is a hard concept to grasp.

Because they're two different concepts. Public sentiment is generally a lagging indicator on the economy. People will think we're still in a high even after the economy has started to falter. And people will still think times are bad even after the economy starts to come back.

You are correct that public sentiment is on what people vote. That doesn't mean they are accurately assessing the economy.

I’m not talking about public sentiment. I’m responding to someone who was talking about “the numbers they are seeing coming out”. When someone responded what numbers, they listed the things I rebutted.

Someone’s belief was causing them to invent numbers coming out to justify that belief.

I said numbers, not headlines. What are the data that show the economy is otherwise bad?

EDIT: I don't necessarily disagree, but it's important to not let general sentiment get in the way. Sentiment is often a lagging indicator.

Just curious, do you expect prices to return to pre-pandemic levels? If so, how do you think that will happen? Disinflation is very different from deflation, and nobody should be rooting for deflation.

When every single objective fact contradicts people's feelings, it isn't the universe that's wrong.

Remember: the nation's largest propaganda machine is dedicated to making people believe the economy is in shambles, because a booming economy fueled by government spending in green energy and protecting families falsifies their ideology.

> Legit 5% GDP growth should mean a booming economy with people feeling good, yet people are struggling to cover their basic needs and pessimism seems high.

Is it so hard to believe that people's negativity is often not about hard numbers and facts?

That's the thing - according to most polls, people ARE feeling good, but at the same time certain that everyone else - the public in general - are struggling to cover basic needs. There's a wide disconnect caused by negativity in media, mostly stirred up for political reasons.

Like this: https://www.axios.com/2023/08/18/americans-economy-bad-perso... TL;DR: 71% say economy is bad and 51% say it's getting worse, while for 60% people in the same poll their personal financial situation is just fine. There are many similar polls, all point to the same thing.

It all depends on what kind of social group you're in. Upper middle class and higher are still doing just fine. People like you most probably don't have friends who are living in the streets or cannot afford to buy cars anymore. Just look at the statistics of people living in the streets of big cities and the situation looks more like the great depression.

Homelessness is on a long term decline and since 2007, it's down from 0.21% to 0.17% population. It's probably just concentration in the certain area because of police doing a bad job cleaning the streets.

Also, economic growth in U.S. is now mostly concentrated in lower income groups. It seems that high middle class (statistical one, i.e. top 10-20% of population - "people just out of poverty" if you look at it honestly), are on the losing side now. Hard numbers are hard to come by but once the tax season is over we will see them next year.

> Just look at the statistics of people living in the streets of big cities and the situation looks more like the great depression.

https://usafacts.org/articles/how-many-homeless-people-are-i...

There are fewer homeless than before 2008, which was a period of economic boom.

> with people feeling good

Because growth likely means inflation in this case, so that causes uncertainty.

How would you "account" for this? Seriously?

I think a lot of people feel bad about the economy because they are told to feel bad about the economy.

Which, if your job is hiring people, might be the case because wages are going up for those on the lower end.

I believe we are in the first stages of the implosion of the US dollar and the US financial system but since it's a huge system it's happening in a motion that the typical brain does not understand. People think it'll happen in a matter of hours but that might not be the case. It might be happening right in front of our eyes but we have never had such an event so we don't know what it looks like. Until maybe 5-10 years later.

Well, the world is increasingly becoming more unstable which is good news for the dollar. The US financial system will continue to excel so long as global demand for dollars remains strong.

Demand for dollars will remain strong as long as they are the least onerous way to conduct international trade for essential goods. The US makes very few of these goods domestically. Eventually the mountains of sanctions, central bank asset seizures, endless debt and money printing, and policy of foreign meddling will tip the scales.

No. The USA is set to succeed in the next 10 years because of geographic and demographics.

Perhaps you're a pessimist.

I am not a pessimist. I don't believe the geography/demographics argument. Brazil had that and yet the performed really badly. Argentina has a great geography with no demographic tensions and have performed catastrophically. Also, the US is coming from a high point, not 0.

It's also that the U.S. is a developed country. Most countries are either developed or have good geography, demography and access to natural resources. U.S. has all or it.

5% GDP growth when inflation is 1% is quite different from 5% GDP growth when inflation is 10%.

This number is inflation adjusted.

Adjusted according to whose measurement of inflation? The party in power's?

The Bureau of Labor Statistic. Non-partisan enough, the methodology hasn't changed from the last administration. And take it from a non-US-based inflation expert: it is accurate enough, some gripes about "quality adjustment" of electronics and about using owners' equivalent rent instead of house prices notwithstanding.

They are, but that's assuming that the GDP deflator is accurate. I for one don't agree with the CPI substitutions and gamesmanship and when CPI was suggesting 7-8% I calculated my personal basket had inflated ~15% YOY over the previous two years.

There are all kinds of reasons why this figure might be politically influenced. The reality on the ground is we've had to make significant cuts to our standard of living just to maintain spending flat even with wage increases. The wage increases have been on the order of 3% per year and not tracking with inflation for both my wife and I.

what do you mean by this? that inflation is currently 1% or 10%? it's ~3.5% right now

Raise all prices by 4.9%, GDP grows by 4.9%, with no additional production. And we'll all effectively be poorer.

4.9% is inflation adjusted. God, don't any of you RTFA anymore?

Did anyone ever?

Ouch, that hurts. But indeed, that shows that most people have the attention span of a gold fish.

It's astonishing how nearly every single comment below this type of thing is "well inflation is up so this number isn't real". Nearly everything, on every platform. People don't want to believe the economy can possibly be good.

Official inflation figures might be misleading and designed to mask the real impact of inflation. So it makes sense to ask if this "inflation adjusted growth" is real or not.

A lot of users just chime in to brandish their pitchforks after reading the headline. I hope that is changing, because some of the discussion can be pretty good.

Adjusted by what? Official inflation figures. Look at official inflation and they restrict the measurement to items that are probably less than half of what the average person needs to buy. So inflation adjusted GPD is really misleading in times of high inflation. We might be close to zero growth and the official statistics would still show economic growth.

>Adjusted by what? Official inflation figures. Look at official inflation and they restrict the measurement to items that are probably less than half of what the average person needs to buy.

Here's the basket that the bls uses for cpi: https://www.bls.gov/cpi/tables/relative-importance/2022.htm

What specific issues do you have with it?

It's not inflation adjusted. It's GDP Price Deflator adjusted. Like CPI this measurement has a number of ways to game it lower than reality and a great deal of political incentive to do so.

Write a short story for me and charge me $1 trillion. I'll draw a picture for you that's worth $1 trillion to cover that debt.

We just raised GDP by $2 trillion!

Don't forget to pay taxes!

Forgot to add - we are both churches and the artwork is all divinely inspired artifacts.

Yeap, this spending is clearly unsustainable and sugar rush from it will be relatively short lived. To better demonstrate this point: imagine a country with struggling economy, government then issues a huge amount of debt at crowding out interest levels, it then build a huge dynamite statue and blows it up. In the near term you see a very pleasant spike in GPD, you have to manufacture dynamite, pay workers to assemble the statue, etc. You even get a bit more taxes from this activity. But after the dynamite was blown up, you end up with economy in an even worse shape and additional public debt burden.

Obviously, the US government deficit spending is somewhat better than building dynamite statues (but only somewhat) and we can expect some degree of returns, but I highly doubt that the spending is efficient enough to outpace raising debts and the crowding out effect of the private sector.

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