How much of a drag is the current deficit on GDP growth?
Question/Comment: Can you elaborate on the pro and con arguments behind our current account deficit? How much of a drag is it on GDP growth?
Paul Solman: Pro: We get to buy more now than it costs us now.
Con: We have to pay for it later.
How much of a drag on growth? Opinions vary drastically, but it seems reasonable to argue that if we’re borrowing to spend instead of saving to invest, we’ll be putting some damper on economic growth and be worse off in the long run. (On the other hand, if we save too much …)
These are not easy issues. The so-called macro-economy has all sorts of variables operating on it. Their interaction has all the predictability of a weather system.