Tuesday, January 22, 2013

I've got it!

If you look around the internet, you can find a whole lot of charts that show how real GDP has been pretty consistently lagging behind potential GDP, to the tune of about $1 trillion per year.  So, now we're sitting on a cumulative loss of production of about $4 trillion.  For some reason, I was always thinking that the government was trying to get the lower line on those charts, the real GDP line, to rise up to the potential GDP line.  Turns out, I've come up with the logical and perhaps the real method the government is using to close the gap between potential and real GDP.

Instead of bringing real GDP up to potential, we're going to lower potential GDP.  Problem solved!

I know what you're thinking: How is the government going to lower potential GDP?  Good question, but it's really simpler than it seems.  We can reduce the amount of human capital.

We're already doing a pretty good job of that.  Some people, notably older more experienced workers, are giving up looking for jobs.  That's a good start, but clearly isn't enough.  We need to do more.  And this is where the plan gets truly devious: we reduce the value of education, while leading people to believe that we're actually increasing it.

So, the government creates a situation where everybody believes they need to go to college, and can afford to go to college.  Further, we encourage and pay for people to go to college to learn useless skills.  Finally, we make sure that everyone passes, even if their work is not even on par with what we used to expect from high school students.

The result will be an entire generation of people with no really useful abilities.  Productivity will fall, and along with it potential GDP.  It won't take long and we'll see the convergence between potential and real GDP.  And it's unlikely that anyone will be smart enough to even question why the top line went down instead of the bottom line going up.

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