Joined: 28 Dec 2005
|Posted: Tue Sep 15, 2015 10:38 am Post subject: Crowding-Out
Is there a better time to raise the minimum wage than when the labor market is strengthening with disinflation?
However, I wouldnít place the entire burden on businesses, particularly small businesses.
So, we should also remove and reduce some of the $2 trillion a year in federal regulations and cut middle class taxes.
We can help the working poor, bring more people into the workforce, facilitate business start-ups and expansions, and turn entitlement spending into tax revenue.
The total effect depends upon how much growth you get in the crowding-in period and how much growth you lose in the crowding-out period.
Higher interest rates on a larger national debt crowds-out growth.
Paul Mathis, thereís more crowding-out than you think.
Paying interest on the national debt crowds-out other government spending, unless government borrows more or raises taxes.
If borrowing and spending or taxes doesnít generate enough economic growth, like the past six years, interest payments on the national debt will eventually rise and crowd-out more growth.
Itís not realistic to assume interest rates will continue to fall, below zero, to offset more and more debt.
Baffling, GDP includes private investment and government. The point I was making is when over $5 trillion is borrowed, in six years, for little GDP growth, thereís a cost.
The cost will be a larger share of the federal budget going into interest payments (assuming interest rates canít go much lower and begin to rise) or higher taxes. The result would be slower GDP growth.
Iíve explained before why growth has been so slow over this ďrecovery.Ē When one foot is on the accelerator and the other foot is on the brake, you either ease off the brake or floor the accelerator. Itís a lot cheaper to ease off the brake.
Baffling, Iím not saying what youíre saying. Iím saying what Iím saying.
The federal government, on a massive scale, borrowed and spent, while the Fed bought bonds, also on a massive scale, to crowd-in growth. Yet, the result was very weak growth.
The addition of more anti-growth policies to stimulative policies is one explanation why growth was so weak.
Now, thereís much more government debt with a huge Fed balance sheet, in this on-going depression, which will crowd-out and constrain future growth. It certainly wonít help.