If you think a $1 trillion infrastructure boondoggle and allowing mega-corps to repatriate trillions in overseas funds tax-free is going to Make America Great Again, you are delusional. Hussman provides some inconvenient truth.
Guest Post by John P. Hussman
“My advice would be that several principles should be taken into account as you make these judgments. First of all, the economy is operating relatively close to full employment at this point, so in contrast to where the economy was after the financial crisis, when a large demand boost was needed to lower unemployment, we’re no longer in that state. CBO’s assessment is that there are longer-term fiscal challenges; that the debt/GDP ratio at this point looks likely to rise as the baby boomers retire and population aging occurs; and that longer-run deficit problem needs to be kept in mind. In addition with the debt/GDP ratio at around 77%, there’s not a lot of fiscal space should a shock to the economy occur; an adverse shock that did require fiscal stimulus.
“I think what’s been very disappointing about the economy’s performance since the financial crisis, or maybe going back before that, is that the pace of productivity growth has been exceptionally slow: the last 5 years, a half percent per year; the last decade, one and a quarter percent per year. The previous two decades before that were about a percentage point higher, and that’s what ultimately determines the pace of improvement in living standards. So my advice would be as you consider fiscal policies, to keep in mind and look carefully at the impact those policies are likely to have on the economy’s productive capacity, on productivity growth, and to the maximum extent possible, choose policies that would improve that long-run growth and productivity outlook.”
Janet Yellen, 11/17/16 testimony to the Joint Economic Committee
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