WEBVTT 00:00.080 --> 00:03.140 Hello, this is Mark Thornton from the Mises Institute. 00:03.840 --> 00:10.600 As we begin to think about a new year and our future, please reflect on the mission and importance 00:10.600 --> 00:12.100 of the Mises Institute. 00:12.720 --> 00:18.360 You know that the Institute's wide-ranging work is the vanguard of the ideas of sound 00:18.360 --> 00:21.580 money, private property, world peace and prosperity. 00:22.260 --> 00:27.620 Thank you for sharing episodes of this podcast with your friends and on social media. 00:28.080 --> 00:35.300 Today, please consider taking a tangible step in your support and participation with those ideas 00:35.300 --> 00:38.800 by donating to the Institute's Fall Campaign. 00:39.540 --> 00:46.220 With your $25 donation or more, you qualify to receive the December Bundle Special, 00:47.180 --> 00:50.700 which includes our President, Tom DiLorenzo's latest work, 00:51.200 --> 00:55.300 Axis of Evil, America's Three Worst Presidents. 00:55.900 --> 00:59.520 Just go to the unique link for the Minor Issues Podcast, 01:00.340 --> 01:04.620 mises.org slash minorissues24. 01:05.520 --> 01:10.720 Thank you for your material support of this podcast and the work of the Institute. 01:13.440 --> 01:17.580 Hello and welcome to another episode of the Minor Issues Podcast. 01:18.000 --> 01:20.800 I'm Mark Thornton at the Mises Institute. 01:21.760 --> 01:28.220 Well, it is looking increasingly unlikely that my prediction for an official recession 01:28.220 --> 01:31.880 beginning in late 2024 will materialize. 01:32.680 --> 01:41.180 Of course, we won't know for another six months the normal delay of the NBER dating committee. 01:42.660 --> 01:48.760 President Trump's victory has had some immediate positive effects on the economy. 01:49.400 --> 01:56.620 Stocks are up, gold is down, and the vital small capitalization stocks are also up big. 01:58.220 --> 02:02.640 Now, this is surely the result of many factors. 02:02.940 --> 02:07.700 One, just having the election over with and all the uncertainty that that brings. 02:08.580 --> 02:13.060 Two, having a clear winner in the contest with no lingering disputes. 02:13.880 --> 02:20.340 And three, Trump is a pro-business and pro-growth president. 02:21.260 --> 02:27.740 We've had a good unemployment report and new job openings in the economy were up 02:28.280 --> 02:30.260 rather than continuing down. 02:32.040 --> 02:36.460 And there is a fair share of really good jobs in those new openings. 02:36.700 --> 02:41.980 So it would appear that there was some pent-up demand to expand businesses 02:42.710 --> 02:45.800 that President Trump's victory has unleashed. 02:47.040 --> 02:52.500 Over this past year, we have looked at many factors that have kept the expansion going 02:52.870 --> 02:57.320 in stocks moving higher, mainly monetary policy. 02:57.920 --> 03:05.100 But here we look at the impact of fiscal policy or government spending on GDP or gross 03:05.100 --> 03:10.540 domestic product, a measure of the overall economic activity in the economy, 03:10.860 --> 03:14.800 which is related to, of course, employment and stock prices. 03:16.760 --> 03:18.560 Fiscal following. 03:19.500 --> 03:25.760 What I hope to explain is that increased government spending not only explains 03:25.760 --> 03:32.520 ongoing wayward increases in GDP, employment, and stock price numbers, 03:33.240 --> 03:40.320 but why also many people decided to vote against the incumbent, 03:41.180 --> 03:47.240 President Biden and Vice President Harris, in favor of the challenge or Donald Trump, 03:47.680 --> 03:53.820 normally incumbents that preside over an economic expansion get re-elected, 03:53.900 --> 03:55.500 whether they deserve it or not. 03:56.100 --> 04:01.060 The key variable is that government spending in GDP statistics 04:01.660 --> 04:08.940 may not reflect true economic value the way your own personal spending does. 04:10.540 --> 04:13.380 The big expansion of government spending, 04:14.460 --> 04:17.280 beyond the regular trend line in the economy, 04:18.040 --> 04:23.660 included the COVID response period, but also afterwards it included one, 04:24.000 --> 04:30.180 the American Rescue Plan, two, the Bipartisan Infrastructure Law, 04:30.760 --> 04:38.320 three, the Chips in Science Act, and four, the Inflation Reduction Act. 04:39.300 --> 04:44.340 Now, these policies released trillions of spending and borrowed money 04:44.340 --> 04:49.220 that saw the national debt of the government explode upwards. 04:49.220 --> 04:58.300 If we look at the thread graph that shows federal government current expenditures, 04:59.060 --> 05:02.200 we can see that the previous trend line to the left, 05:02.760 --> 05:07.940 followed by the double peak expansion of COVID-related spending, 05:08.600 --> 05:13.640 and then to the right, we see a return to a new trend line. 05:14.320 --> 05:19.140 Notice that after the double peak, the trend line is both at a higher level 05:19.640 --> 05:22.460 and a higher rate of increase over time. 05:23.140 --> 05:30.200 So from the fourth quarter of 2019, which was before COVID on the old trend line, 05:30.380 --> 05:35.160 to the third quarter of 2024 on the new trend line, 05:35.460 --> 05:44.360 the level of GDP increased by $7.4 trillion, or 33.8 percent. 05:44.940 --> 05:52.700 Now, over that same time period, federal spending increased by 2.26 trillion, or 47 percent. 05:53.500 --> 06:00.760 Increased federal spending dollars directly accounted for over 30 percent of the increased 06:00.760 --> 06:10.520 GDP dollars at the Q3 2024 levels, the last quarter we have statistics for. 06:11.700 --> 06:15.060 Now, this might suggest that the critics were right. 06:15.420 --> 06:20.280 In particular, the infrastructure, chips, and inflation reduction acts 06:20.640 --> 06:26.660 were criticized as unnecessary, ineffective, and misdirected spending. 06:27.360 --> 06:30.980 They could also be criticized for putting large sums of money 06:30.980 --> 06:36.180 into the pockets of a narrow, politically favored constituency. 06:37.720 --> 06:44.880 Critics further argued that the spending did not increase the economy's productive capacity 06:45.720 --> 06:51.360 and might have actually harmed it, even with the subsidies to the private sector, 06:52.000 --> 06:55.620 and yet it added mightily to the national debt. 06:56.660 --> 07:02.340 Now, this brings us to a critical point that's emphasized by Austrian economists. 07:03.140 --> 07:09.980 Government spending dollars added to GDP statistics are not the same thing 07:10.580 --> 07:16.780 as shoes and stakes and razor blades that are produced in the private sector and then valued 07:16.780 --> 07:24.620 by consumer dollars at the checkout counter. Government spending might not be worth anything 07:24.620 --> 07:31.100 at all. It can't even be negative or downright destructive to human flourishing. 07:31.760 --> 07:38.060 It is possible that people put some value on government spending, but not in the relevant 07:38.060 --> 07:46.680 manner of voluntarily paying for it. Now, Doge ought to earnestly consider this last point. 07:47.300 --> 07:55.260 Most government spending contributes nothing to the economic value and nothing to the productive 07:55.260 --> 08:04.140 capacity or efficiency of the U.S. economic system. Most government programs contribute nothing 08:04.140 --> 08:10.900 positive and just generate paychecks in higher employment and higher GDP numbers. 08:10.900 --> 08:20.260 In fact, most government programs are downright drags on economic performance in our standard of living.