Focusing on infrastructure would at least get us thinking about the real economy, asking hard questions about what will increase real productivity, helping people who are expanding companies rather than hedge funds.
The recent sharp fall in gasoline and energy prices will increase real incomes by a modest amount (about $150 billion), but the losses of real disposable income and thus falling consumption from other sources (wealth, income, debt servicing ratios) are much larger and more significant.
It will increase the real value of the creditors' claims, because it restores the confidence of investors and thus the economy's ability to meet its obligations.However, Mr Rajan doubts the relevance of this idea to the beneficiaries of the G8's proposal.
"The overall impact is that total health spending – the Department of Health's budget – will increase in real terms, at 2015-16 prices, by £6bn between 2014-15 and 2020-21.
Kevin M. Murphy, a professor of economics at the University of Chicago's Graduate School of Business, estimates that the extra costs of stricter security at airports, coupled with the added waiting time at airports, will increase the real cost of air travel by $20 billion.
Without a miraculous spurt of growth, this is more than the government is ever likely to be able to repay – and by lowering wages and prices, the harsh deflation that has been imposed as a condition for this loan will increase the real value of that debt.
An analysis by the President's Council of Economic Advisors shows that lowering the growth rate of health care costs by 1.5 percentage points per year will increase the real income of middle-class families by $2,600 in 2020; $10,000 in 2030; and $24,300 by 2040.
Economic theory argues that WTP for most goods (e.g., environmental protection) will increase if real income increases.
If we do nothing, there is little reason to believe that the economic and power arrangement that currently exist will deliver increased real incomes for the 99percentt.
He said: "We should be clear that the … drop will flow quickly through to consumers and increase real disposable income and is a net positive for the UK economy".
