While this is clear enough in principle, making it operational presents problems. The most prominent of these has been concern about “moral hazard”. Moral hazard arises “when someone can reap the rewards from their actions when things go well but not suffer the full consequences when things go badly”13.
Turning to growth, the U.S. economy slowed significantly last year, with real gross domestic product rising at a below-trend pace of 0.9 percent. Although consumer spending appears to be expanding at a solid pace this quarter, other recent indicators point to subdued growth of spending and production. Activity in the housing sector continues to weaken, largely reflecting higher mortgage rates.