Monday , November 18 2019
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Pay attention to what people are not talking about

Summary:
The Treasury Department just released the budget figures for fiscal 2019, and they are mind-boggling: Revenues increased by 4%, roughly in line with nominal GDP.  Spending soared by 8.25%, more than twice as fast as NGDP.  The budget deficit increased from 9 billion to 4 billion. Normally, spending grows faster than NGDP during recessions and slower than NGDP during booms.  Thus you’d expect federal spending to be growing at less than 4%/year.  It’s very unusual that spending is growing at twice the rate of NGDP during a period of peace and prosperity. You would expect there to be a lot of commentary about the explosion in federal spending: What are Republicans saying about the explosion in federal spending? What are Democrats saying about the explosion in

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The Treasury Department just released the budget figures for fiscal 2019, and they are mind-boggling:

Pay attention to what people are not talking about

Revenues increased by 4%, roughly in line with nominal GDP.  Spending soared by 8.25%, more than twice as fast as NGDP.  The budget deficit increased from $779 billion to $984 billion.

Normally, spending grows faster than NGDP during recessions and slower than NGDP during booms.  Thus you’d expect federal spending to be growing at less than 4%/year.  It’s very unusual that spending is growing at twice the rate of NGDP during a period of peace and prosperity.

You would expect there to be a lot of commentary about the explosion in federal spending:

What are Republicans saying about the explosion in federal spending?

What are Democrats saying about the explosion in federal spending?

What are economists saying about the explosion in federal spending?

What is the media saying about the explosion in federal spending?

As far as I can tell, the answer to all four questions is, “almost nothing”.

The issues that we should be focusing on are the ones that no one is talking about, not the issues with which the media and politicians are obsessed.

I see lots of recent articles about the need for fiscal stimulus.  Do they not know that we are already doing an almost unprecedented fiscal stimulus?

Perhaps people are not talking about this explosion in federal spending because it would be inconvenient to do so.  If you are a Republican, then you don’t want to highlight your hypocrisy on the issue.  If you are a Democrat, then you want to make the GOP seem like meanies who are unwilling to spend money to help people.  If you are a mainstream economist, then you want people to believe that more spending will boost economic growth. (Even though the Fed offsets fiscal stimulus.) If you are in the media, then you follow the lead of Republicans, Democrats and economists.  If they aren’t talking about the issue, then it’s not an “issue”.

For instance, neither party is talking about the kidney shortage that kills tens of thousands of people each year due to price controls on kidney donations, so it’s not an issue worth discussing in the media.  And neither party is talking about the explosion of federal spending, so it’s like that tree in the forest that no one hears falling.

Pay attention to what people are not talking about

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

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