The mystery of Millennial politics

[David Horn]

(02-24-2017, 11:01 AM)TeacherinExile Wrote:

(02-23-2017, 03:17 PM)David Horn Wrote:

(02-22-2017, 11:11 AM)TeacherinExile Wrote: ... I have suggested before on the previous forum that there is a singular, deft, and bold stroke that either the Democrats or Republicans could have proposed before the last election, a fiscal stimulus that would have accomplished two objectives: 1) provide an immediate boost to GDP growth, perhaps even achieving the elusive "escape velocity" to lift our economy out of its "secular stagnation," and 2) weds a huge segment of the Millennial cohort to the political party brave enough to enact it.

The entire fiscal stimulus loop has been analyzed to death.  Yes, it gives a huge initial boost, but triggers a lot of inflation too.  Unless the stimulus also creates huge gains in productivity, it will be subsumed in short order.  Of course, that kind of stimulus can be enacted, but rent-seeking tends to kick in early, making it far less than what it should be.

I certainly don't trust Trump or his cronies to do this anywhere near right and the Dems are cowards, so I doubt it will happen.

Pundits and politicians, mainly in conservative quarters, have been predicting for years now the return of inflation due to our ballooning federal debt.  Such misplaced fear has justified austerity and sequestration, blunting GDP growth at precisely the time that a heavy dose of neo-Keynesian stimulus could have revived our moribund economy--and at record-low interest rates.  Paul Krugman, with whom I've often disagreed about politics, has been very right on this issue.  So where is this oft-predicted inflation spike that fiscal (GOP) chicken hawks have long forewarned us is just around the corner?  Nowhere.  We have been mired in a mild deflationary trap since the Crash of 2008.  It's only with an unprecedented monetary stimulus (ZIRP, QE) that we have dodged outright deflation like that experienced in the Great Depression.  

There has been much hypocrisy about federal deficits in the past, mainly coming from the GOP when they're out of power.  Once they are ensconced in the White House (Reagan), and sometimes with the added plus of a Congressional majority (Bush the Younger), then it's no longer "Katy bar the door."  The floodgates of fiscal "red ink" open once again--military spending, tax cuts--and we hear nary a word from the Republican party and its media mouthpieces about the looming specter of hyperinflation.  Is there any doubt that Trump, with his proposed infrastructure spending and tax cuts, is poised to run up our federal debt even further?

So here's my question.  As long as we're going to add another trillion dollars or so to the federal debt, what spending measure would give our economy the most bang for the buck?  I have my own idea about that.

I don't see us escaping from an inflation wave this time.  The economy is already pretty tight.  The real question is how far the prime movers in the private sector will push their newly won freedoms.  I see this riding high for a short while, then crashing for the second time in less than 20 years.

There are many worthwhile projects that need attention and soon.  I'm betting that this rent-seekers holiday will suck up all the money and none of the important things will be done.  Then, the Dems will be hired to fix things like typical adults, the populace will be mad that they have to actually pay for it, and will them fire them in favor of the GOP again.  Unless this crash is huge, and even the RW will have trouble blaming it on anyone but themselves, this could repeat, ad nauseam.