This is a subject that whole books can be and are written about but I think I can summarize our national economic policy in just a couple of sentences. Economic growth will be driven by consumer spending which will in turn be driven by expanding consumer credit.
You can break that down a little farther. Consumer spending has several components: durables and consumables, healthcare spending, education spending, housing, and so on. By far the largest of those is housing. Here’s their average annual amounts for 2012:
|Category||Average annual expenses|
|Apparel and services||1,736|
|Personal insurance and pensions||5,591|
Multiply that by the 124,416,000 “consumer units” they’re counting and that’s the private personal economy.
Basically, that’s the reason so much policy is directed towards subsidizing housing. As long as you’re going to depend as heavily as we do on consumer spending it makes a certain amount of sense to subsidize home ownership and home purchasing.
Going back to my previous post on GDP, there are only a certain number of options available for boosting economic activity—consumer spending, business investment, government spending, lowering imports, increasing exports. I think the practical reality is that we need to reduce imports and increase domestic business investment. Those are my preferences but that’s not the direction of policy. Policy is geared towards housing, increased government spending, and increased exports.