'..If the U.S. economy were on trend, real per capita GDP would be approximately $73,000, almost $13,000 higher than the actual level. RRR also argued that the deleterious effects of high debt levels would build even before reaching the 90% threshold, and indeed they did. This finding leads to the causal explanation that the overuse of debt reflects the law of diminishing returns.''Two different rigorous studies, one completed in 2011 and the other in 2012, each using different methodologies, both concluded government fiscal policy actions that either increase the size of government relative to GDP or increase the government debt relative to GDP significantly weaken the trend rate of economic growth. The evidence, from more than a decade since this research was published, confirms those findings and indicates that the government multiplier is
becoming increasingly negative.
The passage of time is a spectacular vindication that the methodology of these studies is sound, and that the direct effect of fiscal policy action was properly isolated from the shifting initial conditions, feedback effects (known as endogeneity or the influence of economic activity upon government size/debt) and movements induced by monetary and other non-fiscal policy actions.
Bergh and Henrekson. Andreas Bergh and Magnus Henrekson (BH), writing in the peer-reviewed
Journal of Economic Surveys in 2011, determined that a one-percentage point increase in government size reduces the annual growth rate in real per capita GDP by 0.05% to 0.1% per year. Increases in government size means that more of the economy is being shifted away from the high positive multiplier private sector into the negative multiplier government sector.
When President Nixon closed the Gold Window, the 20-year moving average of the ratio of government size relative to GDP was 25.2% while the real per capita GDP/GDI average growth rate was 2.2%, which coincided with the average real per capita GDP growth rate since 1870. Based on the comparable numbers in early 2023, government size was a considerably higher 34.3%, and the growth in the real per capita GDP/GDI average was a much slower 1.3%. Thus, government size increased 9.1 percentage points and the real per capita GDP/GDI average growth lost 0.9% per year (Chart 3). Thus, the actual results, twelve years of which were beyond BH’s publication date, means the negative impact on economic performance was within 0.1% of BH’s top of the range.
Reinhardt, Reinhardt and Rogoff (RRR). The Reinhardts (Carmen and Vincent) and Kenneth Rogoff, published in the
Journal of Economic Perspectives in 2012, found that when gross government debt exceeds 90% of GDP for more than five years, then economies lose 1/3 of the trend rate of growth. Gross U.S. government debt moved decisively above this 90% threshold ten years ago. As previously stated, the trend rate of growth of real per capita GDP since 1870 is 2.2%. Over the last twenty years the average growth rate has fallen to 1.3%, a loss of slightly more than 1/3 of the yearly growth rate even though the last twenty years included some years in which the debt ratio was not above 90%. If the U.S. economy were on trend, real per capita GDP would be approximately $73,000, almost $13,000 higher than the actual level. RRR also argued that the deleterious effects of high debt levels would build even before reaching the 90% threshold, and indeed they did. This finding leads to the causal explanation that the overuse of debt reflects the law of diminishing returns.'
- Dr. Hunt,
Second Quarter 2023, July 21, 2023, pp. 4 & 5
Context (Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'[Thomas Hoenig] has a Dire Warning About Where We’re Headed - '..Household Expense Data .. for 80 Years'The war against inflation is a long way away from being won - Euro-Area Core Inflation Quickened..(Global Stagflation)(QE Was a Colossal Policy Mistake) - '..wage earners have to get a 14.8 per cent wage increase just to hold even with this kind of inflation..''.."financial slavery" that grips the world .. are of high human and personal cost..'(Project C - Phase II 2022 - 2032) - Eye Opener, To Heal in The Electric Universe(To Heal)(Focus Fusion)(Eye Opener)(Abundance) - '..we plan to start the tests with pB11 fuel in September.'