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Rx for a Healthy Economy: Cold and Unhealthy Consumers

May 1, 2014 in Economics

By Joseph Salerno

Regarding the nasty GDP report for last quarter,  a Bloomberg reporter commented, “American consumers were a lone bright spot as households spent more to heat their homes and access health care.”  In other words, if it were not for greater hardships that befell consumers, namely an unusually colder winter and a greater scarcity of health care,  the U.S. economy would not have performed as well as it did in the first quarter of 2014.   According to this topsy turvy Keynesian  logic, it would have been  better for the U.S. economy if the winter had been even more severe and health care even more expensive, stimulating U.S. consumers to spend more trying to stay warm and remain healthy.  This is Bastiat’s broken window fallacy on steroids and it is inherent in modern macroeconomics, which holds that spending, especially consumer spending, keeps the economy from plunging into recession.

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