Posted on 12/25/2014 7:39:51 AM PST by Son House
I am Alice and this is Wonderland.
We’ve been grubered!!
I wondered about the “price of gas” explanation. If people save money on gas only to spend it on other goods and services, then it increases the amount spent on those goods and services, but it reduces the amount spent on gas. To first order, the effect on the GDP should be a wash.
Perhaps lower energy costs stimulates spending beyond the immediate savings from fuel. For example, people might be inspired to buy a new SUV if they thought energy prices were going to remain low for a time. Or they might decide they can pay a higher mortgage payment so they trade up to a bigger house. Or an industrial company might decide to buy new equipment based on their energy savings.
Or, as this article suggests, the growth is illusory, stimulated by greater mandated spending on health care.
I should have put “health care” in quotes in my previous comment. The money goes not to health care but to more expensive health insurance.
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