Potential GDP, another statistical fraud

Here Menzie Chinn uses the old canard, we are not spending as much federally as potential GDP would allow.

First, the ratio should remain the same, even if the economy is stagnating.  That is the null hypothesis, and he has inserted a prior assumption.

Second, Economists like to take long term straight line estimates as potential GDP, but unfortunately we have recessions every eight years and we have a long term negative trends. So, they take the current inflation adjusted GDP and that becomes erroneous because we do not adjust for long term inflation except when we notice it.  Well we have notice long term inflation and out economy is in the pits and potential GDP sucks.  Use the red line above, it reflects the ratio of federal spending relative to what we know, not what we wish to know.