1. #1

    [Economics] Increases in technology & Budget deficits

    Alright, so I am an economics student, 2nd year of university. I've been doing several macroeconomics courses now, and I was thinking about something. Most models seem to indicate that, given improvements in technology, the natural rate of output will continue to go up. Now please do correct me if I am wrong, but would this not mean that we do not need to worry about government deficits today?

    I suppose there must be something flawed with my logic, or is there actually something to say for this?

  2. #2
    The Unstoppable Force Rukentuts's Avatar
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    This is why major economic statistics are always presented as a % of GDP.
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  3. #3
    Quote Originally Posted by Benjamin12 View Post
    Alright, so I am an economics student, 2nd year of university. I've been doing several macroeconomics courses now, and I was thinking about something. Most models seem to indicate that, given improvements in technology, the natural rate of output will continue to go up. Now please do correct me if I am wrong, but would this not mean that we do not need to worry about government deficits today?

    I suppose there must be something flawed with my logic, or is there actually something to say for this?
    you will understand whtn you get to 4th year of universtiy.

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    The Insane Reeve's Avatar
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    Quote Originally Posted by Benjamin12 View Post
    Alright, so I am an economics student, 2nd year of university. I've been doing several macroeconomics courses now, and I was thinking about something. Most models seem to indicate that, given improvements in technology, the natural rate of output will continue to go up. Now please do correct me if I am wrong, but would this not mean that we do not need to worry about government deficits today?

    I suppose there must be something flawed with my logic, or is there actually something to say for this?
    Productivity may improve as technology improves, but that doesn't necessarily mean lower deficits. For example, as technology improves, people live longer and have greater medical expenses, which then negatively impacts our governmental budgets. Also, people in the US are currently more productive than they have been at any time in history, but part of the cost of that is that there are fewer jobs available, so we have higher unemployment, and our government ends up having to pay unemployment and other benefits to the people who otherwise would have had a job if people were less productive individually.
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  5. #5
    Quote Originally Posted by Reeve View Post
    Productivity may improve as technology improves, but that doesn't necessarily mean lower deficits. For example, as technology improves, people live longer and have greater medical expenses, which then negatively impacts our governmental budgets. Also, people in the US are currently more productive than they have been at any time in history, but part of the cost of that is that there are fewer jobs available, so we have higher unemployment, and our government ends up having to pay unemployment and other benefits to the people who otherwise would have had a job if people were less productive individually.
    This, when you just start to study economics you are told to just look at one thing at a time. The further you study, you realize that everything is connected so even changing a small thing has greater effects through out the economy and beyond.

  6. #6
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    Quote Originally Posted by Benjamin12 View Post
    Alright, so I am an economics student, 2nd year of university. I've been doing several macroeconomics courses now, and I was thinking about something. Most models seem to indicate that, given improvements in technology, the natural rate of output will continue to go up. Now please do correct me if I am wrong, but would this not mean that we do not need to worry about government deficits today?

    I suppose there must be something flawed with my logic, or is there actually something to say for this?
    Every economist worth their salt knows exactly what the first world nations need to do (and some are doing it) in order to stave off another global recession and make sure to attain a higher growth of GDP than China. Educational subsidies into STEM (Science Technology Engineering Mathematics), huge infrastructure upgrades paid for via the federal government, a large fund for state and municipal governments to help in paying for local services, and subsidizing medical school for more primary care doctors.

    This process can and has been the solution the last century, the reason some western countries are having trouble doing it again is because of regressive conservatives grasping for power as their voting rolls dwindle away.

    There is literally no economic, financial, or logical reason for first world country's, like the US, should even be worried about our national debt. We produce too much, our economy as a whole is being under-utilized, we have too much decrepit infrastructure, and inflation isn't even an issue. Economists have been pushing for the US to stimulate all sectors through new infrastructure projects and to start a fund for municipal and state governments to help aid their critical services instead of lay-offs.

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