By Steven Hanke – Re-Blogged From http://www.Silver-Phoenix500.com
Economic policy is subject to fads and fashions. The most recent economic-policy fad is public infrastructure. Its advocates include progressives on the “left” – like President Obama, Hillary Clinton, and Bernie Sanders – and populists on the “right” – like President-elect Trump. They tell us to take the chains off fiscal austerity and spend – spend a lot – on public works. They allege that this elixir will cure many, if not all, of our economic ills. Let’s take a look at their arguments and evidence.
Economic growth remains muted throughout the world. The U.S. provides an important example. It has been over eight years since Lehman Brothers collapsed and the Great Recession commenced. But, the U.S. has failed to bounce back. The economy is still struggling to escape from a growth recession – a recession in which the economy is growing, but growing below its trend rate of growth. The U.S. aggregate demand, which is best represented by final sales to domestic purchasers (FSDP), is only growing in nominal terms at a 2.75 percent rate (see the accompanying chart). This rate is well below the trend rate of 4.73 percent.