the GDP measure in the US has a far different meaning now than in the 50s. In the 50s, most of the GDP was represented by infrastructure and manufacturing output. In theory, these types of outputs have inherent value. As our economy has transformed, GDP has increased via paper wealth and investments. If Worldcom stocks drops from $80 to $0, you have nothing to show from the supposed GDP. In comparison, if you had manufactured tractors and went bankrupt, you would still have the manufactured tractors existing somewhere in the economy. We are in currently in highly uncharted territority. The deregulation of the economy by republicans makes the water even murkier because business are essentially for regulating themselves and outsiders have almost no oversight of the accounting practices. In addition, a large portion of GDP growth had been mortgage equity, which resulted from skyrocketing housing and property costs. In fact, if it you wondered why reported economic data seemed better than actual conditions, now you know.
Nonetheless, this rebate will stimlate the economy some. Supply side tax cuts have very diffuse effects, especially now that we have global stock and currency markets. The greater the income disparities the less stimulated the economy is as the super rich spend much smaller % of income on consumer goods.
Perhaps, the bigger problem in the US is private debt. While always high, it shot up around Reagan's preidency and it has shot through the roof during the bush presidency, partly because of the extremely artifically low interest rates and the deregulated banking industry.
Another type of debt, which is not included in any of the above graphs is the deterioration in our physical infrastructure (roads, bridges, dams, water and sewer infrastructure). Most of this was built 50 years ago or more and in dire need of costly repairs. (imagine tearing out the streets of Manhattan to fix the sewer underneath.)
All in all, we are at the precipice of a debt cliff looking down into an abyss. Our economic indicators are out of whack because the rapid increase in debt has masked the stagnation in houesehold wage rates. The national debt is very concerning, but private debt is the real sword of Damocles hanging above our heads IMO. we'll see.
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