WSJ: 5 Macroeconomic Myths
Nobel economist Edward Prescott addresses 5 macroeconomic myths in today's WSJ:
Myth #1: Monetary policy causes booms and busts. It doesn't.
Myth #2: GDP growth was extraordinary in the 1990s. It was average.
Myth #3: Americans don't save. Measured by economic wealth, we save as much as we always have, and it's the right amount.
Myth #4: The U.S. government debt is big. As a percent of GDP, the deficit this year will be about 2%, below historical average.
Myth #5: Government debt is a burden on our grandchildren. It's not.
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Myth #4: It's easy to use the national debt as a percentage of GDP as a smokescreen.
Consider this though: The interest on the national debt was 400+ billion dollars in FY 2006. That's the third largest expenditure behind Health and Human Services at $600+ billion dollars and the Defense Department at $500+ billion dollars in the federal budget. And, that's for interest alone--nothing goes to the principle!
I doubt that even a billionaire would take his third highest expenditure for granted regardless of what percentage of his net worth it amounted to. After all, he did not get to be rich or stay rich by ignoring good business sense. Doesn't the public deserve the same acuity from their elected officials?
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