Before I became single parent, and when I understood mainstream economic theory, policy models declared the following:
1. A market based economy could effectively function with a defict at 2 to 2.5% of GDP.
2. Any more than that and the economy would sustain long term and permanant structural damage.
3. The effects of the long term and permanent structural damage would include the following:
a. Economic displacement.
b. Erosion of infrastructure.
c. Increased and more severe business cycles.
d. Permanent decline of the middle class.
e. Increased reliance on deficit spending.
When Shrub became President, I became increasingly despondent. As we cut taxes, initiated a two front war, and entered the financial crisis, the deficit, as a percentage of GDP, grew from a budget surplus, to 2, 5, and 10% of GDP.
Last year the deficit took 3% of GDP, near the top of a business cycle, and above the magic 2.5%.
The upshot, based on my understanding of economics, is that we continue to cause long structural and permanent damage to the economy.
From the standpoint of economic policy, one reason that I was not overly enthused about the 2016 election is that I did not think it would make much difference as to who was elected President. That is, we would be on our way to becoming a third world country, regardless of who won.
I do not relish the idea of living in a third world country. Given my limited understanding about economics, I see no way of avoiding it.
If our country is going to become a third world nation, I want it to be as slowly as possible. Like it or not, data indicates the economy has peaked and is slowing. I blieve will see 0 growth by August or September.
My hunch is that Trump’s tax plan is going to blow up the deficit to an even greater percentage of GDP than during Shrub’s years in office. The best case scenario is that we bandage the unsustainable for a few years. The more likely scenario I think is that we suffer negative growth, with high interest, and high inflation.
In short Trump’s tax plan will take us off a leisurely stroll on the road to Brazil and put us on high speed rail to Buenos Aires. And that is not acceptable to me. Who sees a way out of this insidious circle?