Sound Economic Policy at Full Employment

I am tired of ranting, although if Congress decides to go back to an assault on Health Insurance, I will be writing Congresspeople about my views of that.

Today, I thought I would state something that I learned in Economic 45 years ago.  When an economy is at full employment you do not need deficit spending, you need a budget surplus to pay down the debt you ran up during the period of higher unemployment.  Yet, the U.S. still has a $500 billion or so budget deficit.  I would say most of that is probably defense spending for the War on Terror, that has never been given a dime of current funding by the Congress.  Yet, that is only 2.5% of GDP which is about what the gross (real growth plus inflation) growth rate has been.

It would be better with unemployment below 5% and baby boomers retiring by the millions every year if we were currently in a budget surplus paying down our debt which is roughly 100% of GDP.

But what does this GOP Congress want to do?  Cut taxes, but not spending.  They are dressing up tax cuts as tax reform, but there is no reform if you don't change the structure of tax expenditures (tax breaks for special interests), and there is no sign that the GOP wants net tax changes to = changes in spending.  The GOP Congress wants to increase the deficit by $1.5 trillion over the next 10 years.

How irresponsible can they be?  Apparently, very irresponsible.

The one thing I thought I could count on the GOP for was responsible stewardship of the economy.  Instead, we have gotten laws being written to favor wealthy campaign contributors and little else.

Meanwhile, a tax cut that benefits the wealthy in California, Texas, Illinois, New York, New Jersey, Connecticut and Massachusetts is not going to create jobs in Appalachia or the rural midwest.

Meanwhile, David Brooks has identified something I have felt but did not have adequate words to message.  He does.  Trump's success in the election was not Russian influence but rather his creation of an American myth. Make America Great Again.  The Democrats had no answer for that and still do not.  That is there challenge heading into 2018 and 2020.

Link to Brook's column on the importance of Myths