August 22, 2023

The last days of summer mean a slow-down in quality reporting.

The economy is still churning along, however. As economists are on vacation, they tend to think too much about how great their analysis was this year with some very rose tinted glasses.

There debate rages on what to use as a good measure of government debt. Is it too big or is there room to continue to borrow.

The right wing thinks that debt-to-GDP is the ratio to use (except when they are in power).

The centre-right thinks that a better measure is the ratio of inflation-adjusted interest payments to GDP.

So the far right are impressed by big numbers and a growing concern over the "size of the debt". The centre-right is interested in the change in the ability to pay the interest on the debt given the growth in the economy.

Sure, that second one sounds less stupid. I am not sure the value of either one except in some broad talking point.

All the talk of the size of the debt excludes the externalized debt that is climate change. We are heading into a full-grown El Niño this Fall and we are already starting at the hottest summer on record.

The impact of the forest fires on CO2 production cannot be understated as well.

The current climate does raise the question about how much we need to spend and how quickly are going to be forced to spend it just responding to these climate-related crises.

The biggest costs for the USA tend to be hurricanes (and we are not in that season yet). But, fires and floods are also up there.

In 2022, there were 18 $1B+ climate-related events in the USA alone. That is important because there used to be only one to three a year on average pre-1980.

• 2022 costs: $165B.
• Compare that to Hurricane Ian (2018), responsible for $114B alone.

Annual costs from disasters have exceeded $100 billion in five of the last six years. And That's not even counting things like the pandemic.

You might think that all the discussion around how to measure debt would start to include this out-sized impact on the economy of climate change mitigation and response. Unfortunately, economists are not that forward thinking.

The reality is, accounting for all the problems we know are coming, we have not even started the transition to a lower-carbon economy.