Let's review the breathtaking economic history illiteracy expounded here with some data:
1. $3tn = 12% of US GDP. FDR's New Deal spent 40.9% of 1929's peak GDP.
2. Federal spending in 1944 alone was 44% of GDP (getting the Germans and Japanese to destroy thosse ships, tanks and planes we built so we could build them again was expensive). So at war's end the US debt/GDP ratio was 125%. By 1981, before Reagan, Stockmann, Laffer & Co. blew up the deficit, debt/GDP ratio had declined to 35%. Simple explanation, to paraphrase James Carville: "it's the denominator, stupid!" Or remember Dick Cheney, who said "Reagan proved that deficits don't matter", leaving out the key point about the denominator. If the deficit is incurred for productive investment with a high return, the debt/GDP ratio drops. The TVA in the 1930s did exactly that by multiplying regional GDP/capita 15x in 20 years.
3. More about the denominator: In 1815 Britain's debt/GDP ratio was 225%. The UK could still issue 100 year Consols with 4% coupons. Edmund Burke said he'd rather have the Turk as master than this debt pile. By 1900 the UK debt/GDP ratio was 30%. Again, the denominator made the compounding of 4% coupons irrelevant. Busler is as wrong as Burke was 200 years ago. The error of this austerian ideology is reliably and unvariably permanent.
4. Examples of federally funded growth: Google's algorithm, GPS, DARPA, mobile phones, EV batteries, land grant colleges, NIH grants that led to CRISPR and the genomic revolution. The list goes on and on. It includes an early stage med device startup we invested in that's lived off $8m in SBIR grants in 2013. Will US taxpayers get a penny in royalties if I get six or seven figure payout at exit in 2025? Nope. So it's socialism for angels and VCs and capitalism for poor single mothers who can't work because there's no affordable child care. Listen to Mariana Mazzucato about the entrepreneurial state's role as investor of first resort in innovative high risk tech that the private sector won't touch until it's derisked: https://www.youtube.com/watch?v=cVM91WzUeXk&t=11s .
Our investor group would never have invested before the SBIR grants had derisked PDT's tech. A fair system would give the SBIR some of the equity at the same valuations the angel investors got. But, for now, it's only us angel investors and VCs who get socialism. So we pay you salaries taxpayer readers only with thank you notes. FB, AAPL, AMZN, GOOG, NFLX and TWTR all exist thanks to DARPA and the taxpayer funded Pentagon budget. But they pay nothing back. Trillions in socialism for billionaire founders is ok, but $300 in childcare tax credits for single mothers is wasteful inflationary SOCIALISM!!!!!!
5. The unfunded tax cuts of 2017, which helped people like me pad their bank accounts, but contributed nothing to growth, were perfectly fine. As a 67 year old retired expat prof, I contribute nothing to the velocity of money or productivity. No trickle down growth from me. But somehow capital gains tax cuts for me contribute to growth, but child tax credits and universal pre-K to interrupt the school to prison pipeline, are wasteful.
6. There's more social mobility and vitality in startup ecosystems in Stockholm, Tallinn, Helsinki and Berlin than the USA precisely because founders have a safety net to fall back on if they fail. The Nordic safety net is a growth engine and not inflationary.
No matter how repeatedly wrong these Austrian economics austerians are, they come back again and again with same data-free nonsense. Let's end the debate with follow the money:
Von Hayek predicted a depression in the late 40s. John Maynard Keynes was the best investor of his generation: 12% compounded annual returns from 1921-46 when he managed the Chest Fund, the endowments of the universities of Oxford and Cambridge in the most difficulit years of the 20th century. Who would you bet your money on?
But if you want to see the debate in the most entertaining format, here's a link to the Keynes vs Hayek rap videos: https://www.youtube.com/watch?v=d0nERTFo-Sk&t=4s .
They're much more entertaining than reading either of us profs.
