Back To $1 Trillion Dollar Deficits

[dismal]

Spending is up? Massive increase in military spending. Cost of wars Bush II lied us into. Rise in population. tax cuts are the problem in large part. Starting with Bush II's stupid ta cuts to the rich.

https://en.wikipedia.org/wiki/Economists'_statement_opposing_the_Bush_tax_cuts

The Economists' statement opposing the Bush tax cuts was a statement signed by roughly 450 economists, including ten of the twenty-four American Nobel Prize laureates alive at the time, in February 2003 who urged the U.S. President George W. Bush not to enact the 2003 tax cuts; seeking and sought to gather public support for the position. The statement was printed as a full-page ad in The New York Times and released to the public through the Economic Policy Institute. According to the statement, the 450 plus economists who signed the statement believe that the 2003 Bush tax cuts will increase inequality and the budget deficit, decreasing the ability of the U.S. government to fund essential services, while failing to produce economic growth.<sup>[1][2]

...

But Bush and the GOP went ahead anyway and ignored the experts. And trump is following in Bush's foot steps.</sup>

Back in reality, defense spending has been decreasing in inflation adjusted dollars, as a share of federal spending, and as a share of GDP since 2007.

That said, I'm happy to subject it to the same 24% cut as everything else.

It's worth noting you could cut military spending to zero and still not cover the growth in federal spending above inflation since 2007, so it's odd (or at least inumerate) that someone would consider it "the problem".

 

[Jason Harvestdancer]

Actually I'm quite surprised the creditors of the United States are willing to fund deficits at this level. I expected "transaction declined" long before now.

Every republican administration since Reagan has stated that deficits don't matter. I think the motivation is that if there's money there, take it. If there isn't money there, borrow it and keep it. That sums up republican debt management.

You miss the point of my post entirely.

In order for the US to borrow, someone must lend. I'm surprised the lenders haven't said "no" yet.

 

[T.G.G. Moogly]

Actually I'm quite surprised the creditors of the United States are willing to fund deficits at this level. I expected "transaction declined" long before now.

Every republican administration since Reagan has stated that deficits don't matter. I think the motivation is that if there's money there, take it. If there isn't money there, borrow it and keep it. That sums up republican debt management.

You miss the point of my post entirely.

In order for the US to borrow, someone must lend. I'm surprised the lenders haven't said "no" yet.

If a person is socially liberal and fiscally conservative it appears to be a game of hot potato. But the game is rigged, don't you think?

 

[Keith&Co.]

In order for the US to borrow, someone must lend. I'm surprised the lenders haven't said "no" yet.

Well, we're good for the interest payments, at least. And our lenders aren't depending on Social Security for THEIR retirement, so they don't have any reason to say 'no.'

 

[dismal]

In order for the US to borrow, someone must lend. I'm surprised the lenders haven't said "no" yet.

Well, we're good for the interest payments, at least. And our lenders aren't depending on Social Security for THEIR retirement, so they don't have any reason to say 'no.'

Generally these problems are solved thru inflation, which is not the bond holder's friend. At some point the US cost of borrowing will dramatically increase in both real and nominal terms.

It seems like more a question of "when" than "if" at this point to me. Our government has had a relentless ability to increase spending faster than inflation and GDP for some decades now. This can't be sustained forever, and that which can't be sustained won't.

 

[Horatio Parker]

A currency issuer can always pay any deb denominated in its currency.

Bid ratios are over 2, meaning that twice as many buyers want them as will receive them.

US Treasuries are still considered the safest asset on the planet.

I wouldn't look for doomsday anytime soon.

Also remember that debt issuance is a policy, not a necessity. The govt can spend without borrowing, and in fact it spends before it borrows. You can't have a reserve drain without a reserve add.

 

[SimpleDon]

Actually I'm quite surprised the creditors of the United States are willing to fund deficits at this level. I expected "transaction declined" long before now.

This is a failure of Econ 101, it doesn't try to explain the economy that we have, it describes an economy that its adherents wish that we could have. It is a fantasy economy.

The US dollar is the world's reserve currency. This means that the world has a stake in maintaining the value of the dollar.

The US banks have a considerable stake in maintaining the value of the dollar. By US law the Fed can force the banks to buy government bonds to support the dollar. As a last resort, the Fed can use its ability to create money out of thin air to buy the bonds. Like they did to raise the money to bail out the banks and numerous select countries' central banks in 2008 and like they did to support the stock market in each of the QEs, continuing up to today in fact.

The current account deficit, the trade deficit plus the monetary instrument balance of payments, which is almost always in our favor as foreigners buy our real estate, stock, and bonds, but it is never enough to balance the trade deficit, appears as government debt also. Not in the budget deficit of course, but in the 22+ trillion dollars national debt.

What do you think about Trump nominating Stephen Moore and Judy Sloan, two goldbugs, to the board of governors of the Federal Reserve? That is one of the aims of the Libertarian Party and, for that matter, the Republican Party too, to put the US back on the gold (&, for some, silver) standard for money, isn't it? Do you think that Trump realizes that if the US was on the gold standard at this point in time, that the Fed would have to be raising interest rates because the price of gold is currently going up?

Trump wants the Fed to lower the interest rate to heat up the economy so that he can claim that his tax cut for the rich is working for everyone.

There is a lot of discussion among mainstream economists about why there is so little inflation at a time when unemployment is so low. The Philips curve is flattening, which leaves it useless. (I picked a Libertarian source for the definition so that you would feel comfortable with it.) Perhaps you could offer some insight to them from the perspective of your economics understanding.

 

[SimpleDon]

In order for the US to borrow, someone must lend. I'm surprised the lenders haven't said "no" yet.

Well, we're good for the interest payments, at least. And our lenders aren't depending on Social Security for THEIR retirement, so they don't have any reason to say 'no.'

Generally these problems are solved thru inflation, which is not the bond holder's friend. At some point the US cost of borrowing will dramatically increase in both real and nominal terms.

It seems like more a question of "when" than "if" at this point to me. Our government has had a relentless ability to increase spending faster than inflation and GDP for some decades now. This can't be sustained forever, and that which can't be sustained won't.

No, it doesn't mean any such of a thing. See Parker's post just below yours. He is correct. As I explained to Jason your Econ 101 is limited because it describes a fantasy economy that many people wish that we could have, not the economy that we have. This limits its ability to predict what the real economy will do and why.

 

[Jason Harvestdancer]

Actually I'm quite surprised the creditors of the United States are willing to fund deficits at this level. I expected "transaction declined" long before now.

This is a failure of Econ 101, it doesn't try to explain the economy that we have, it describes an economy that its adherents wish that we could have. It is a fantasy economy.

The US dollar is the world's reserve currency. This means that the world has a stake in maintaining the value of the dollar.

Of course, that means the US dollar will always be the world's reserve currency, because nobody will notice their dollar holdings being deflated through inflation. Once a currency achieves reserve currency status, it will hold it forever.

 

[Loren Pechtel]

Tax collections are at record highs, at least in nominal terms.

Spending keeps growing far faster than inflation, largely due to decisions that predate Trump.

For example, in 2007 revenues were 2,568 billion and spending was 2,729 billion. In 2018 revenues were 3,330 billion and spending was 4,109 billion.

That's a 29% increase in revenues and a 51% increase in spending. Cumulative inflation was about 21% over the period.

https://www.cbo.gov/about/products/budget-economic-data#1

As you say, nominal terms. It's fallen in constant dollars.

 

[Loren Pechtel]

I must have missed dismal making the same comments in 2016. All I can remember him saying was that the US survived on its budget in 2007, why can’t we just use that same budget.

Well, those of us old enough to remember the dark times of 2007 have no wish to go back there.*shudder*.

But if we did adjust 2007 numbers for inflation they'd be revenues of 3,107 billion and spending of 3,302 billion. So we'd need to cut taxes about 7% and cut spending about 24% to get there.

Except you also need to consider the close to 10% population growth since then.

Not to mention the aging of the baby boomers that has increased the social security/medicare spending.

 

[Ford]

Actually I'm quite surprised the creditors of the United States are willing to fund deficits at this level. I expected "transaction declined" long before now.

This is a failure of Econ 101, it doesn't try to explain the economy that we have, it describes an economy that its adherents wish that we could have. It is a fantasy economy.

The US dollar is the world's reserve currency. This means that the world has a stake in maintaining the value of the dollar.

The US banks have a considerable stake in maintaining the value of the dollar. By US law the Fed can force the banks to buy government bonds to support the dollar. As a last resort, the Fed can use its ability to create money out of thin air to buy the bonds. Like they did to raise the money to bail out the banks and numerous select countries' central banks in 2008 and like they did to support the stock market in each of the QEs, continuing up to today in fact.

The current account deficit, the trade deficit plus the monetary instrument balance of payments, which is almost always in our favor as foreigners buy our real estate, stock, and bonds, but it is never enough to balance the trade deficit, appears as government debt also. Not in the budget deficit of course, but in the 22+ trillion dollars national debt.

What do you think about Trump nominating Stephen Moore and Judy Sloan, two goldbugs, to the board of governors of the Federal Reserve? That is one of the aims of the Libertarian Party and, for that matter, the Republican Party too, to put the US back on the gold (&, for some, silver) standard for money, isn't it? Do you think that Trump realizes that if the US was on the gold standard at this point in time, that the Fed would have to be raising interest rates because the price of gold is currently going up?

Trump wants the Fed to lower the interest rate to heat up the economy so that he can claim that his tax cut for the rich is working for everyone.

There is a lot of discussion among mainstream economists about why there is so little inflation at a time when unemployment is so low. The Philips curve is flattening, which leaves it useless. (I picked a Libertarian source for the definition so that you would feel comfortable with it.) Perhaps you could offer some insight to them from the perspective of your economics understanding.

It is also worth noting that the majority of US debt is held by the US itself. Foreign investors and governments only hold 30%.

 

[RVonse]

It seems like more a question of "when" than "if" at this point to me. Our government has had a relentless ability to increase spending faster than inflation and GDP for some decades now. This can't be sustained forever, and that which can't be sustained won't.

I used to think this too Dismal. But the gold bugs have been predicting doom and glooom for years and each and every year the can just gets kicked further down the road. I predict next year will be no different.

More to the point brought up by Jason.....Im not sure we have any real creditors to worry about anyway. All of the world banks are in one big cartel to make sure no one sinks. Its all about shuffling the fiat paper to the right places. If the world bank wants a European country to have negative interest rates, its going to happen.

 

[RVonse]

Actually I'm quite surprised the creditors of the United States are willing to fund deficits at this level. I expected "transaction declined" long before now.

This is a failure of Econ 101, it doesn't try to explain the economy that we have, it describes an economy that its adherents wish that we could have. It is a fantasy economy.

The US dollar is the world's reserve currency. This means that the world has a stake in maintaining the value of the dollar.

The US banks have a considerable stake in maintaining the value of the dollar. By US law the Fed can force the banks to buy government bonds to support the dollar. As a last resort, the Fed can use its ability to create money out of thin air to buy the bonds. Like they did to raise the money to bail out the banks and numerous select countries' central banks in 2008 and like they did to support the stock market in each of the QEs, continuing up to today in fact.

The current account deficit, the trade deficit plus the monetary instrument balance of payments, which is almost always in our favor as foreigners buy our real estate, stock, and bonds, but it is never enough to balance the trade deficit, appears as government debt also. Not in the budget deficit of course, but in the 22+ trillion dollars national debt.

What do you think about Trump nominating Stephen Moore and Judy Sloan, two goldbugs, to the board of governors of the Federal Reserve? That is one of the aims of the Libertarian Party and, for that matter, the Republican Party too, to put the US back on the gold (&, for some, silver) standard for money, isn't it? Do you think that Trump realizes that if the US was on the gold standard at this point in time, that the Fed would have to be raising interest rates because the price of gold is currently going up?

Trump wants the Fed to lower the interest rate to heat up the economy so that he can claim that his tax cut for the rich is working for everyone.

There is a lot of discussion among mainstream economists about why there is so little inflation at a time when unemployment is so low. The Philips curve is flattening, which leaves it useless. (I picked a Libertarian source for the definition so that you would feel comfortable with it.) Perhaps you could offer some insight to them from the perspective of your economics understanding.

It is also worth noting that the majority of US debt is held by the US itself. Foreign investors and governments only hold 30%.

True.

But its also worth noting almost all the gold that was once in Fort Knox is gone now.

 

[Ford]

It is also worth noting that the majority of US debt is held by the US itself. Foreign investors and governments only hold 30%.

True.

But its also worth noting almost all the gold that was once in Fort Knox is gone now.

Yes it's all been bought up by Glenn Beck's listeners who are preparing for the apocalypse.

 

[Elixir]

The Republicans will come to their senses and reclaim their values and sound the alarm on the national debt...on Day 1 of the next Democrat administration.

I'm up for a 24% spending cut ...

Can we take it from the military?

and a 7% tax cut now...

..to mainly benefit the middle class rather the ultra rich whose effective rates are already lower than a WalMart worker's?

Glad to have your support.

Likewise.

 

[Cheerful Charlie]

It seems like more a question of "when" than "if" at this point to me. Our government has had a relentless ability to increase spending faster than inflation and GDP for some decades now. This can't be sustained forever, and that which can't be sustained won't.

I used to think this too Dismal. But the gold bugs have been predicting doom and glooom for years and each and every year the can just gets kicked further down the road. I predict next year will be no different.

More to the point brought up by Jason.....Im not sure we have any real creditors to worry about anyway. All of the world banks are in one big cartel to make sure no one sinks. Its all about shuffling the fiat paper to the right places. If the world bank wants a European country to have negative interest rates, its going to happen.

Not just the goldbugs. I remember when Bush I worked with the Democrats in Congress avoid the vast deficits that were going to swamp the US. Nutty Newt Gingrich, Trent Lott and a whole bunch of right winged Republicans were claiming the budget deal would cause a recession, no!, a depression. Massive unemployment and run away inflation. They were dead wrong of course. Then came Clinton. Whose budget passed without a single GOP senate vote. And here came the Republican clowns again, lead by Nutty Newt, looking very angry and shaking his fat face at the TV cameras. They again predicted recession, massive unemployment, hyper inflation, the end of Anerian civilization, and shrieked and shrieked and shrieked. And again, were dead wrong.

It always amazes me to see Nutty the Newt's fat ugly face grimacing on the screen when bloviating about the economy and economic policy. He knows about as much about any of that as a billy goat. And despite his record of being dead wrong repeatedly, he still gets air time. He is not the only republican that has been dead wrong about all of this for years, decades even.

 

[Patooka]

Just to point out a little bit of US Republican hypocrisy when it comes to fiscal responsibility:

Rand Paul stops unanimous passage of 9/11 first responders funding bill

It seems an odd place to put a line in the sand. A hugely unnecessary tax cut for the mega wealthy that places an even bigger strain on the deficit? Sure, no problems. Ensuring that the most politically exploited group in America in recent times gets semi-decent health care? We need to think about that.

 

[dismal]

It seems like more a question of "when" than "if" at this point to me. Our government has had a relentless ability to increase spending faster than inflation and GDP for some decades now. This can't be sustained forever, and that which can't be sustained won't.

I used to think this too Dismal. But the gold bugs have been predicting doom and glooom for years and each and every year the can just gets kicked further down the road. I predict next year will be no different.

More to the point brought up by Jason.....Im not sure we have any real creditors to worry about anyway. All of the world banks are in one big cartel to make sure no one sinks. Its all about shuffling the fiat paper to the right places. If the world bank wants a European country to have negative interest rates, its going to happen.

Well, it's a certainty that you can't grow debt/GDP forever, which by the fundamental laws of ratios you are doing as long as you grow debt faster than GDP.

There's a chart of debt/gdp in this article that illustrates the trend. The trend can't continue.

https://www.cnbc.com/2019/02/13/tha...r-is-huge-but-heres-what-it-really-means.html

 

[Horatio Parker]

It seems like more a question of "when" than "if" at this point to me. Our government has had a relentless ability to increase spending faster than inflation and GDP for some decades now. This can't be sustained forever, and that which can't be sustained won't.

I used to think this too Dismal. But the gold bugs have been predicting doom and glooom for years and each and every year the can just gets kicked further down the road. I predict next year will be no different.

More to the point brought up by Jason.....Im not sure we have any real creditors to worry about anyway. All of the world banks are in one big cartel to make sure no one sinks. Its all about shuffling the fiat paper to the right places. If the world bank wants a European country to have negative interest rates, its going to happen.

Well, it's a certainty that you can't grow debt/GDP forever, which by the fundamental laws of ratios you are doing as long as you grow debt faster than GDP.

There's a chart of debt/gdp in this article that illustrates the trend. The trend can't continue.

https://www.cnbc.com/2019/02/13/tha...r-is-huge-but-heres-what-it-really-means.html

Japan's been doing it for decades, GDP/debt currently at 236%. Betting on Japan's demise is being deemed a widowmakers position.

The real question is are there enough goods and services to spend those dollars on. If we're at full capacity, can't produce more, can't employ anyone else, than yes increasing that ratio is dangerous. If, OTOH, there is an output gap, a demand deficiency, then the economy will absorb the extra spending.