Fed Policy Erodes Productivity Gains
From Streettalk Off The Street
December 26, 2012 - 11:04am
December 26, 2012
By: Richard Rahn
How is it possible that the government can spend almost twice as much as it takes in without having high inflation? The fact is that over a long period of time, it can’t. In the short run, which can be a few years, the government can paper over its fiscal irresponsibility by expropriating most of the productivity gains in the private sector through regulatory and central bank actions. This is precisely what has been happening in the United States.
The reason real, after-tax, per capita incomes have been able to increase year by year for most Americans for the past two centuries is that productivity has been growing — that is, the amount of goods each worker produces per hour has risen steadily. The reason productivity rises is that workers tend to be better trained, the amount of productive capital per worker rises, and there is a s...Continue reading this article »