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.
I agree that GDP is a poor measure of “on the ground” experience, but not sure what that has to do with deficit spending.
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
0 - https://www.reuters.com/world/us/us-budget-deficit-jumps-23-...
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.
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?
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...
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...
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.