Rx for a Healthy Economy: Cold and Unhealthy Consumers

Regarding the nasty GDP report for last quarter,  a Bloomberg reporter commented, “American consumers were a lone bright spot as households spent more to heat their homes and access health care.”  In other words, if it were not for greater hardships that befell consumers, namely an unusually colder winter and a greater scarcity of health care,  the U.S. economy would not have performed as well as it did in the first quarter of 2014.   According to this topsy turvy Keynesian  logic, it would have been  better for the U.S. economy if the winter had been even more severe and health care even more expensive, stimulating U.S. consumers to spend more trying to stay warm and remain healthy.  This is Bastiat’s broken window fallacy on steroids and it is inherent in modern macroeconomics, which holds that spending, especially consumer spending, keeps the economy from plunging into recession.

Comments

  1. Business suffers from an inefficiency which doesn’t apply to government.

    What business spends is not automatically GDP. Business output is the value-added market value of what it produces. Someone has to buy it voluntarily for it to be GDP, and we must subtract the value of purchased inputs. This is unreliable and complicated. Sometimes, a business can even reduce GDP if it loses enough money.

    No one can really tell if government produces GDP, so it has decided that everything it spends qualifies. There is no need for anyone to buy or value the output. It won’t make a profit under this rule, but there are no losses either. It is a safe, reliable method to make GDP.

    So, it is always good to take taxes or value (through inflation) to increase government spending. GDP goes up safely and reliably with no risk. Plus, we are assured that production goes up by a multiple of 1.5 to 4 times government spending. It is a mystery that we don’t have the government spend everything, so that we could all be rich. But, I guess they are busy doing their current volume of work.

    Current figures (United States of regulation) report regulation costing about 10% of GDP. FedGov collects 20% and borrows/spends an additional 10% (approximately). That is a huge amount of work going to accomplish little.

    GDP is now a flawed, even idiotic representation of the production which actually benefits people. Why are economists not complaining en masse? Their children will have to live in the distorted world being created today by bad analysis and political grasping? Why are so many intelligent people working to strengthen the emperor?

    EasyOpinions.blogspot.com

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