[h=2]Disproving Liberal Economic Theory in One Chart[/h]by Katie Nielsen 5 comments
January 3, 2014
In early December, President Obama gave a speech on the economy. He blamed “the rich” for slowing economic growth by concentrating their wealth in savings and investment rather than spending it on consumption.
Heritage Foundation economist Salim Furth explains why the President’s claim is misguided:
What is proven to contribute to a healthy economy is fairer, more open, and more dynamic competition in the American economy. The new edition of Heritage’s new Index of Economic Freedom, to be released later this month, will show how America stacks up against the rest of the world on this front.
Do you think it’s important to encourage economic freedom about consumerism?
January 3, 2014
In early December, President Obama gave a speech on the economy. He blamed “the rich” for slowing economic growth by concentrating their wealth in savings and investment rather than spending it on consumption.
Heritage Foundation economist Salim Furth explains why the President’s claim is misguided:
The President apparently believes that consumer spending, rather than savings and investment, drives economic growth. But, as this chart shows, personal consumption is at a post-war high as a share of national expenditure. If consumer spending really did drive the economy, it would be booming.
All that consumption comes at the expense of net investment, which shows a clear downward trend since the 1950s. Net savings tracks investment closely.
The President also blames income inequality for the decline in growth, but Furth concludes based on the literature that “there are much stronger forces in the economy. The President’s theory does not account for the basic macroeconomic facts.”All that consumption comes at the expense of net investment, which shows a clear downward trend since the 1950s. Net savings tracks investment closely.
What is proven to contribute to a healthy economy is fairer, more open, and more dynamic competition in the American economy. The new edition of Heritage’s new Index of Economic Freedom, to be released later this month, will show how America stacks up against the rest of the world on this front.
Do you think it’s important to encourage economic freedom about consumerism?
Sure I can. The blue line is the year to year percent change of government spending and the red line is the year to year percent change in Real GDP. The chart clearly shows that we have increased spending every year for the last 40 years and GDP has increased at high levels even during times of large increases in spending. Completely invalidating your claim that increasing spending has never worked.
In his eight years as President, Clinton reduced federal spending to 18.2 percent of GDP from 22.1 percent [the largest reduction in federal spending in the past 60 years as measured in percentage of GDP] . Clinton and the Republicans in Congress cut spending on domestic discretionary programs as well as entitlement spending through welfare reform. Clinton also
Clinton also cut capital gains taxes and of course saw job gains and steady GDP growth.
The idea that you need to spend a lot of money for economic growth is laughable and preposterous.
Of course when you're a 23 year old kid who, well, wasn't really there for the Clinton Presidency, you type stupid shit on the Internet.
- “cut” (reduced the growth rate of) Medicare spending by $115 billion;
- “cut” Medicaid spending by $14 billion;
- cut other mandatory spending by $40 billion;
Clinton also cut capital gains taxes and of course saw job gains and steady GDP growth.
The idea that you need to spend a lot of money for economic growth is laughable and preposterous.
Of course when you're a 23 year old kid who, well, wasn't really there for the Clinton Presidency, you type stupid shit on the Internet.
