Trump Hits A New High-Water Mark: The Biggest Federal Deficit In 6 Years

[PyramidHead]

I'll bash Trump for a lot of things, but I'm not partisan enough to suddenly care about federal budget deficits just because they occur under a Republican president. Deficit spending by itself is not a cause for alarm.

If the deficit goes up during a boom market, that's cause for alarm. If the deficit isn't going down during the boom market every voter should be up in arms smashing the panic button. But hey, that's just me.

You may be right, but I'm not seeing why. If the economy is thriving, then running a big deficit seems like something that's easier to manage since revenues will also be higher, no?

 

[Horatio Parker]

I'll bash Trump for a lot of things, but I'm not partisan enough to suddenly care about federal budget deficits just because they occur under a Republican president. Deficit spending by itself is not a cause for alarm.

If the deficit goes up during a boom market, that's cause for alarm. If the deficit isn't going down during the boom market every voter should be up in arms smashing the panic button. But hey, that's just me.

You may be right, but I'm not seeing why. If the economy is thriving, then running a big deficit seems like something that's easier to manage since revenues will also be higher, no?

The magic word is "counter-cyclical". Govt fiscal policy typically is suppposed to be counter to what the economy is doing. In a recession, spend more, in boom times, spend less. Pro-cyclical fiscal policy during an upturn increases the chances of overheating i.e. inflation. During a recession, otoh, private spending is down so increased govt spending takes its place.

 

[Jimmy Higgins]

I'll bash Trump for a lot of things, but I'm not partisan enough to suddenly care about federal budget deficits just because they occur under a Republican president. Deficit spending by itself is not a cause for alarm.

If the deficit goes up during a boom market, that's cause for alarm. If the deficit isn't going down during the boom market every voter should be up in arms smashing the panic button. But hey, that's just me.

You may be right, but I'm not seeing why. If the economy is thriving, then running a big deficit seems like something that's easier to manage since revenues will also be higher, no?

Revenues higher? Because of the tax cut? Revenues are lower by about 10% from 2017. Since May of this year, each month has seen lower tax revenue in 2018 than in the corresponding month in 2017. Spending in up about 7ish percent.

 

[PyramidHead]

You may be right, but I'm not seeing why. If the economy is thriving, then running a big deficit seems like something that's easier to manage since revenues will also be higher, no?

The magic word is "counter-cyclical". Govt fiscal policy typically is suppposed to be counter to what the economy is doing. In a recession, spend more, in boom times, spend less. Pro-cyclical fiscal policy during an upturn increases the chances of overheating i.e. inflation. During a recession, otoh, private spending is down so increased govt spending takes its place.

I think I understand that, but are booms and recessions objectively defined or can a boom time be considered a recession from a different perspective, and vice versa? Regardless of how the economy is doing now relative to the downturn 10 years ago, for example, it is still pointed out frequently that millenials are spending less and taking jobs that force them to share their homes and cars. The GDP could be rising thanks to profits that continue to skyrocket for the rich, but there is still a lot of room for targeted deficit spending (which probably entails redistribution of those profits). Are we in an era of economic prosperity, uncontroversially, such that inflation is a likely outcome of too much spending, or does that come down to a matter of opinion?

 

[southernhybrid]

I'll bash Trump for a lot of things, but I'm not partisan enough to suddenly care about federal budget deficits just because they occur under a Republican president. Deficit spending by itself is not a cause for alarm.

If the deficit goes up during a boom market, that's cause for alarm. If the deficit isn't going down during the boom market every voter should be up in arms smashing the panic button. But hey, that's just me.

You may be right, but I'm not seeing why. If the economy is thriving, then running a big deficit seems like something that's easier to manage since revenues will also be higher, no?

Nope that's backwards. When the economy is tanking, deficit spending is needed to stimulate growth. When the economy is booming, it's a good time to bring down the deficit, because once the economy tanks again, you don't want the deficit to be too large because you're going to need to add to it to stimulate growth.

The reason the deficit has grown so much under Trump is due to the huge corporate tax break. And, yes. The Republicans are extremely hypocritical. When they are in power, they allow the deficit to rise by raising military spending and lowering taxes on the wealthiest segments of society. When the Democrats are in power, they scream about any increase in spending because it will raise the deficit.

 

[Horatio Parker]

You may be right, but I'm not seeing why. If the economy is thriving, then running a big deficit seems like something that's easier to manage since revenues will also be higher, no?

The magic word is "counter-cyclical". Govt fiscal policy typically is suppposed to be counter to what the economy is doing. In a recession, spend more, in boom times, spend less. Pro-cyclical fiscal policy during an upturn increases the chances of overheating i.e. inflation. During a recession, otoh, private spending is down so increased govt spending takes its place.

I think I understand that, but are booms and recessions objectively defined or can a boom time be considered a recession from a different perspective, and vice versa? Regardless of how the economy is doing now relative to the downturn 10 years ago, for example, it is still pointed out frequently that millenials are spending less and taking jobs that force them to share their homes and cars. The GDP could be rising thanks to profits that continue to skyrocket for the rich, but there is still a lot of room for targeted deficit spending (which probably entails redistribution of those profits). Are we in an era of economic prosperity, uncontroversially, such that inflation is a likely outcome of too much spending, or does that come down to a matter of opinion?

Second quarter GDP was 4.2%, which is considered good. There haven't been any negative quarters in a while(two consecutive negative quarters is a recession). This is why the Fed is raising rates. Raising rates is considered counter-cyclical(tho not everyone agrees with that - due to interest rate income channels).

Whether or not the current economy is good depends on who you are. If you're a large bank, you're probably fat and happy. But there are still large numbers of people who have left the work force and so aren't counted as unemployed. I agree distribution is skewed to the top.

How GDP is calculated is another issue.

 

[DrZoidberg]

I'll bash Trump for a lot of things, but I'm not partisan enough to suddenly care about federal budget deficits just because they occur under a Republican president. Deficit spending by itself is not a cause for alarm.

If the deficit goes up during a boom market, that's cause for alarm. If the deficit isn't going down during the boom market every voter should be up in arms smashing the panic button. But hey, that's just me.

You may be right, but I'm not seeing why. If the economy is thriving, then running a big deficit seems like something that's easier to manage since revenues will also be higher, no?

Running on deficit is like living on your credit card. That's fine and dandy as long as you still have a job. But if something very serious happens you've got zero buffer. USA has been living with very little buffer for a long time. Remember Katrina when New Orleans was under water? It would have been easily avoided if the levies had been invested in. That money hasn't existed for a long time. USA is already scraping the bottom of the barrel. And has ever since Reagan. If a small country would behave like USA they'd be ripped apart by the World Bank in no time. The only reason USA gets away with this insanely irresponsible fiscal policy is it's size, power and big army.

 

[bilby]

You may be right, but I'm not seeing why. If the economy is thriving, then running a big deficit seems like something that's easier to manage since revenues will also be higher, no?

Running on deficit is like living on your credit card. That's fine and dandy as long as you still have a job. But if something very serious happens you've got zero buffer. USA has been living with very little buffer for a long time. Remember Katrina when New Orleans was under water? It would have been easily avoided if the levies had been invested in. That money hasn't existed for a long time. USA is already scraping the bottom of the barrel. And has ever since Reagan. If a small country would behave like USA they'd be ripped apart by the World Bank in no time. The only reason USA gets away with this insanely irresponsible fiscal policy is it's size, power and big army.

It's not a job you need, in order to live on your credit cards; It's an INCOME. And the income of the US Government is tax revenue.

The GOP keep going to the boss and demanding a pay cut. They have no need to do this; But they do it, and then act surprised when the projected credit card payments start to outstrip their ability to pay.

The solution - and for an effectively immortal entity with an ever growing economy, it's a simple solution - is to demand a raise.

Repeal the past tax cuts during the boom times when the economy can afford to pay more into the budget. It's a no brainer. But the morons do the reverse and act like the deficit is a huge surprise and an intractable problem.

I demanded a pay cut, and when I couldn't pay my loan payments, I decided the only solution was to stop feeding the kids so that I could ask for another pay cut next year.

Because that's the only solution.

 

[DrZoidberg]

You may be right, but I'm not seeing why. If the economy is thriving, then running a big deficit seems like something that's easier to manage since revenues will also be higher, no?

Running on deficit is like living on your credit card. That's fine and dandy as long as you still have a job. But if something very serious happens you've got zero buffer. USA has been living with very little buffer for a long time. Remember Katrina when New Orleans was under water? It would have been easily avoided if the levies had been invested in. That money hasn't existed for a long time. USA is already scraping the bottom of the barrel. And has ever since Reagan. If a small country would behave like USA they'd be ripped apart by the World Bank in no time. The only reason USA gets away with this insanely irresponsible fiscal policy is it's size, power and big army.

It's not a job you need, in order to live on your credit cards; It's an INCOME. And the income of the US Government is tax revenue.

The GOP keep going to the boss and demanding a pay cut. They have no need to do this; But they do it, and then act surprised when the projected credit card payments start to outstrip their ability to pay.

The solution - and for an effectively immortal entity with an ever growing economy, it's a simple solution - is to demand a raise.

Repeal the past tax cuts during the boom times when the economy can afford to pay more into the budget. It's a no brainer. But the morons do the reverse and act like the deficit is a huge surprise and an intractable problem.

I demanded a pay cut, and when I couldn't pay my loan payments, I decided the only solution was to stop feeding the kids so that I could ask for another pay cut next year.

Because that's the only solution.

The most depressing thing about this is that a country which is the tits when it comes to balancing the books... China. It's a depressing world where the most fiscally sensible country is communist.

Both the Democrats and Republicans are guilty of the same crime. They're buying votes by promising the voters they're going to be fiscally irresponsible, so they'll keep being able to buy all that shit they can't afford. The difference between them is simply on what are they going to waste their money. The question should be, and isn't, "how are we going to balance the books?".

 

[PyramidHead]

It's not a job you need, in order to live on your credit cards; It's an INCOME. And the income of the US Government is tax revenue.

The GOP keep going to the boss and demanding a pay cut. They have no need to do this; But they do it, and then act surprised when the projected credit card payments start to outstrip their ability to pay.

The solution - and for an effectively immortal entity with an ever growing economy, it's a simple solution - is to demand a raise.

Repeal the past tax cuts during the boom times when the economy can afford to pay more into the budget. It's a no brainer. But the morons do the reverse and act like the deficit is a huge surprise and an intractable problem.

I demanded a pay cut, and when I couldn't pay my loan payments, I decided the only solution was to stop feeding the kids so that I could ask for another pay cut next year.

Because that's the only solution.

The most depressing thing about this is that a country which is the tits when it comes to balancing the books... China. It's a depressing world where the most fiscally sensible country is communist.

Both the Democrats and Republicans are guilty of the same crime. They're buying votes by promising the voters they're going to be fiscally irresponsible, so they'll keep being able to buy all that shit they can't afford. The difference between them is simply on what are they going to waste their money. The question should be, and isn't, "how are we going to balance the books?".

I wouldn't go too far with the household and credit card analogies. I mean, you could, but you'd have to stipulate that bilby's loan payments were owed in bilby-bucks, which he could arbitrarily create and destroy on his computer. Or that the credit card company wanted more Zoidberg-dollars to extend his term of repayment, and Zoidberg-dollars were just whatever Zoidberg had on hand nearby at any given time. Tax revenue is not 'income' for a country in any relevant sense, from everything I have tried to learn from the more educated members here, it's simply a mechanism of destroying excess currency and providing incentives for public activities that take place in a market economy. The idea that we need to 'balance the books' or we will somehow run out of money fuels the Republican bogeyman that money is something the country needs to earn and squire away under the mattress.

Now, don't misconstrue me as saying this amounts to an excuse for the current administration's policies. Even if the deficit isn't a problem in itself and the fix is as simple as taking some bilby-bucks out of circulation so you can create more next year to pay the loan officer without devaluing the currency too much, it doesn't make a difference if the people in charge are unwilling to perform the fix. I just want to be accurate about the nature of the problem, which (unless I am mistaken about a fundamental concept, which is totally possible given my general economic illiteracy) is not the deficit itself and not really anything like a household being unable to pay the bills.

 

[DrZoidberg]

It's not a job you need, in order to live on your credit cards; It's an INCOME. And the income of the US Government is tax revenue.

The GOP keep going to the boss and demanding a pay cut. They have no need to do this; But they do it, and then act surprised when the projected credit card payments start to outstrip their ability to pay.

The solution - and for an effectively immortal entity with an ever growing economy, it's a simple solution - is to demand a raise.

Repeal the past tax cuts during the boom times when the economy can afford to pay more into the budget. It's a no brainer. But the morons do the reverse and act like the deficit is a huge surprise and an intractable problem.

I demanded a pay cut, and when I couldn't pay my loan payments, I decided the only solution was to stop feeding the kids so that I could ask for another pay cut next year.

Because that's the only solution.

The most depressing thing about this is that a country which is the tits when it comes to balancing the books... China. It's a depressing world where the most fiscally sensible country is communist.

Both the Democrats and Republicans are guilty of the same crime. They're buying votes by promising the voters they're going to be fiscally irresponsible, so they'll keep being able to buy all that shit they can't afford. The difference between them is simply on what are they going to waste their money. The question should be, and isn't, "how are we going to balance the books?".

I wouldn't go too far with the household and credit card analogies. I mean, you could, but you'd have to stipulate that bilby's loan payments were owed in bilby-bucks, which he could arbitrarily create and destroy on his computer. Or that the credit card company wanted more Zoidberg-dollars to extend his term of repayment, and Zoidberg-dollars were just whatever Zoidberg had on hand nearby at any given time. Tax revenue is not 'income' for a country in any relevant sense, from everything I have tried to learn from the more educated members here, it's simply a mechanism of destroying excess currency and providing incentives for public activities that take place in a market economy. The idea that we need to 'balance the books' or we will somehow run out of money fuels the Republican bogeyman that money is something the country needs to earn and squire away under the mattress.

Now, don't misconstrue me as saying this amounts to an excuse for the current administration's policies. Even if the deficit isn't a problem in itself and the fix is as simple as taking some bilby-bucks out of circulation so you can create more next year to pay the loan officer without devaluing the currency too much, it doesn't make a difference if the people in charge are unwilling to perform the fix. I just want to be accurate about the nature of the problem, which (unless I am mistaken about a fundamental concept, which is totally possible given my general economic illiteracy) is not the deficit itself and not really anything like a household being unable to pay the bills.

Money is imaginary. It only has value as long as we respect that value. The US dollar is right now the equivalent of homeopathy. Well.. so is all money. But the US dollar is it more so. When that happens to smaller nations, is that it reaches a point where people stop trading in the national currency, and switch to other stuff... like US dollar. At that point the country has lost all their fiscal management tools in one fell swoop.

It's also good to foster a culture of saving and only investing your savings. That's why Germany is so economically successful. That's the only reason. They save more and spend less. It's a tried and tested formula. China did it to. But did it through state intervention. Germany has done it by just having a culture like that. We can call it... non-consumerist.

Sweden was like Germany until the 00-ies. And now take loans like crazy. It makes Sweden superficially affluent, but very sensitive to outside manipulation.

Living on loans is not a problem if you use the loan to invest. Not even that is a guarantee. Your investments have to be sensible. Post-colonioal Africa is a warning example of how that can go wrong. But if you use it for consumption... you're losing future compound interest. Which will make you poor in the long run.

 

[Horatio Parker]

PyramidHead is right; by itself the larger deficit is of no consequence. The US can always pay any debts denominated in US dollars, period. Deficit hawks will claim that if the bond markets balk, the cost of servicing the debt will baloon. But this ignores the reality that the Treasury can simply direct the Fed to buy new issues until it achieves whatever yield it desires.

Allowing the bond markets to dictate fiscal policy is a choice IOW political. There's nothing intrinsically economic about it.

And the debt issued is not debt in the ordinary consumer or citizen sense. It's a swap; interest bearing for non interest bearing. The govt spends first, then taxes. It does not need revenue from taxes or debt issuance to spend. So our trading partners who have decided it's good policy to swap their products for our dollars prefer a interest bearing asset(a treasury) to a non interest bearing asset(cash).

The important thing to realize with export economies such as Germany's is they require import economies to sell to. A world with all trading partners running trade surpluses isn't possible. Another point is that export economies must practice domestic austerity, limit their consumption, in order to keep their prices competitive.

The US opened its markets to keep its partners in the free world(with the added perk of suppressing domestic labor). The unintended result is that the dollar has become the premier currency, I think some 70% of global transactions are denominated in dollars. We couldn't become an exporter if we wanted to; dollars are too much in demand, the world would have no choice but to undercut us to obtain dollars to pay their debts.

 

[Tom Sawyer]

And that's only the case until people decide to use something other than US dollars for global transactions. At that point, the Ponzi scheme ends. That's not much of a concern at the moment, but the more the US's debts pile up while it isolates itself from the world and pisses off its allies and other countries, the more of a concern it could quickly become.

 

[Jimmy Higgins]

And that's only the case until people decide to use something other than US dollars for global transactions. At that point, the Ponzi scheme ends. That's not much of a concern at the moment, but the more the US's debts pile up while it isolates itself from the world and pisses off its allies and other countries, the more of a concern it could quickly become.

The GOP is like a private equity firm that buys someone like Toys R Us. Something that was working and was the product of the sweat and blood of other people. But they leverage the buyout, which puts the company under stress that is not of its own causing. Then the company is bankrupt because the private equity firm put all of their fucked up business decisions on its ledger, not their own.

Trump and the GOP are toying with the hard earned US standing in the global economy, because in the end, they have theirs and most of them will be drooling older fools when the final bill comes.

 

[Horatio Parker]

And that's only the case until people decide to use something other than US dollars for global transactions. At that point, the Ponzi scheme ends. That's not much of a concern at the moment, but the more the US's debts pile up while it isolates itself from the world and pisses off its allies and other countries, the more of a concern it could quickly become.

It'll end gradually, I'd guess, but I dunno. Trump is terrible at managing the brand, that's for sure. And we continue to fail to invest in our own society.

 

[jonatha]

I'll bash Trump for a lot of things, but I'm not partisan enough to suddenly care about federal budget deficits just because they occur under a Republican president. Deficit spending by itself is not a cause for alarm.

If the deficit goes up during a boom market, that's cause for alarm. If the deficit isn't going down during the boom market every voter should be up in arms smashing the panic button. But hey, that's just me.

You may be right, but I'm not seeing why. If the economy is thriving, then running a big deficit seems like something that's easier to manage since revenues will also be higher, no?

The deficit is spending - revenues, so the higher revenues are already taken into account.

 

[bilby]

It's not a job you need, in order to live on your credit cards; It's an INCOME. And the income of the US Government is tax revenue.

The GOP keep going to the boss and demanding a pay cut. They have no need to do this; But they do it, and then act surprised when the projected credit card payments start to outstrip their ability to pay.

The solution - and for an effectively immortal entity with an ever growing economy, it's a simple solution - is to demand a raise.

Repeal the past tax cuts during the boom times when the economy can afford to pay more into the budget. It's a no brainer. But the morons do the reverse and act like the deficit is a huge surprise and an intractable problem.

I demanded a pay cut, and when I couldn't pay my loan payments, I decided the only solution was to stop feeding the kids so that I could ask for another pay cut next year.

Because that's the only solution.

The most depressing thing about this is that a country which is the tits when it comes to balancing the books... China. It's a depressing world where the most fiscally sensible country is communist.

Both the Democrats and Republicans are guilty of the same crime. They're buying votes by promising the voters they're going to be fiscally irresponsible, so they'll keep being able to buy all that shit they can't afford. The difference between them is simply on what are they going to waste their money. The question should be, and isn't, "how are we going to balance the books?".

I wouldn't go too far with the household and credit card analogies. I mean, you could, but you'd have to stipulate that bilby's loan payments were owed in bilby-bucks, which he could arbitrarily create and destroy on his computer. Or that the credit card company wanted more Zoidberg-dollars to extend his term of repayment, and Zoidberg-dollars were just whatever Zoidberg had on hand nearby at any given time. Tax revenue is not 'income' for a country in any relevant sense, from everything I have tried to learn from the more educated members here, it's simply a mechanism of destroying excess currency and providing incentives for public activities that take place in a market economy. The idea that we need to 'balance the books' or we will somehow run out of money fuels the Republican bogeyman that money is something the country needs to earn and squire away under the mattress.

Now, don't misconstrue me as saying this amounts to an excuse for the current administration's policies. Even if the deficit isn't a problem in itself and the fix is as simple as taking some bilby-bucks out of circulation so you can create more next year to pay the loan officer without devaluing the currency too much, it doesn't make a difference if the people in charge are unwilling to perform the fix. I just want to be accurate about the nature of the problem, which (unless I am mistaken about a fundamental concept, which is totally possible given my general economic illiteracy) is not the deficit itself and not really anything like a household being unable to pay the bills.

Yes, I agree that the analogy between a sovereign currency issuing nation and a household is very weak, and badly overused.

I would also question whether balancing the books is necessarily desirable (for that very reason). Unlike a household, a nation is immortal and its earning abilities are literally endless. It won't become too old to work, it won't retire, it won't get sick or lose its job. In such an environment, a certain amount of (perpetually rolling) debt is a good thing - money SHOULD be borrowed to invest in infrastructure, and then paid back over the long period that that infrastructure is productive. Why should we buy our grandchildren an expensive bridge, when they can FAR more easily afford to pay for it than we can?

What have our descendants done for us, that we should be so generous to them? The folks in 2068 are far wealthier than we are, just as we are far wealthier than the folks in 1968 were; Let them pay for their infrastructure (while borrowing to build infrastructure for their grandkids to use and pay for).

 

[Elixir]

The folks in 2068 are far wealthier than we are

Nope. DJT stole all their money and used it to for weapons that went boom and instantly became worthless. Teh Donald has to have fun - those poor suckers who decided not to inherit $400m each will just have to suffer the consequences of their own stupidity.