Trump: "Who the Hell Cares about the Budget?"

[Florida Man for Crime]

Obviously, there needs to be some form of forgiveness for all the debt, because it's impossible to pay down even a third. More importantly, there need to be spending cuts, especially on defense, and tax reform that taxes top incomes properly and closes tax loopholes. Just priniting more money is no solution at all and will sooner or later cause high inflation.

Let's take your last sentence/point:

On your last point "Just printing more money is no solution at all and will sooner or later cause high inflation."

This is right in some circumstances, but not right in others. It is worth clarifying how those circumstances differ.


Case 1 ---

Suppose that the Government passes/signs into law a massive 20 trillion (per year) increase in government spending (note this is about equal to 100% of US GDP - I chose a very large # just so that the case would be clear), and that the law is also changed to allow this to be financed by "printing money" rather than issuing bonds.

Would this be inflationary? Yes, for sure. This would mean that there were suddenly a huge increase in nominal demand for output, well beyond the availability of real resource to produce that output in real terms.


Case 2 ---

Suppose that the Federal Reserve buys a great many, or even all, of the currently outstanding US government bonds. This would be simply a policy of large scale quantitative easing.

Would this be inflationary? No. Unlike in the previous case, there is no direct increase in demand for real output stemming from this (much less above the availability of unused real resources to provide for it). Nor is there any secondary mechanism by which it indirectly causes an increase in demand for real output (if you think there is such a mechanism, please feel free to say what it is).

In fact, it would actually be deflationary. The reason it would be deflationary is because it means that the Government would no longer be paying any interest on government bonds (a reduction in the Government's budget deficit). Note that a lot of economists thought after 2008 that large QE would be hugely inflationary, but this was (and is) entirely incorrect, and is just a manifestation of the fact that they don't know what they are talking about. In reality it was/is deflationary.



Now, step back and consider what is the difference between those two cases, and what is similar. In both cases, there is a large increase in the amount of "money" in the economy. The difference is that in the first case, there is a large increase in demand. In the second case, there is no increase in demand (demand actually decreases).

The difference between these two cases, in fact, does not depend at all on whether government spending is financed by bonds or via "printing money." Consider case 1B, which is the same as Case 1B, except it is financed with bonds rather than printing money:



Case 1B ---

Suppose that the Government passes/signs into law a massive 20 trillion (per year) increase in government spending (note this is about equal to 100% of US GDP - I chose a very large # just so that the case would be clear), and that this is financed as usual under current US law, by issuing bonds.

Would this be inflationary? Yes, for sure. This would mean that there were suddenly a huge increase in nominal demand for output, well beyond the availability of real resource to produce that output in real terms. This is so just as in Case 1, despite no "printing money" in this case.



In sum, what is (or is not) inflationary is if extra demand injected into the economy by government deficit spending is sufficiently large as to outstrip the possibility of the economy to provide real output to fill the extra demand from that government spending. But it doesn't particularly matter whether that extra demand is financed by bonds or from "printing money."

So if you are concerned about inflation, what you should be concerned about is not "printing money," you should be concerned about whether the government budget deficit is too large (or too small).

[Florida Man for Crime]

... You, the citizen, are now worse off than you were at the start. Rather than having property (a $500 government bond), you now have nothing at all. Moreover, since the purpose of raising taxes was not for the government to re-spend anything back into the economy, no additional spending occurs, and nobody else in the economy is any better off either.

The interest on the national debt is how much the federal government must pay on outstanding public debt each year. The interest on the debt is about $500 Billion dollars.
Yes, half of one trillion dollars EVERY SINGLE YEAR, goes to simply paying for interest on the outstanding debt. And this amount, obviously increases every year, with estimations being around $800 Billion in 2026.

Not only that, but the percentage of the total budget that goes to paying interest is also increasing at an alarming rate. Here in this table, you can see this ...

https://i.ibb.co/4T0XwnV/national-debt-and-interest.jpg

First of all, there is no reason why the Government needs to issue bonds or (if it does issue bonds) to pay interest on bonds in the first place. And just for the record, if the government doesn't issue any bonds at all, that doesn't meanmonetary policy cannot be conducted. It can still be conducted by the Fed by paying interest on reserves, rather than by open market operations.

That aside though, assume that the Government does choose to issue bonds and chooses for whatever reason to pay interest on them.

Step back and ask yourself, who is it that pays interest on the "national debt"? Is it you, the citizen?

No. It is the Federal Government.

If you, the citizen, pay anything, you pay taxes. The implicit assumption you are making is that when the government pays interest on the national debt, it will also simultaneously raise your taxes.

But that is not necessarily the case - there is no direct connection between (government spending without the government collecting taxes is, after all, the definition of what deficit spending is, and we are talking about deficit spending here).

Why should the government raise your taxes if inflation is not a problem? There is no reason for it to do so. The calculus is the same as in my previous post that you partially quoted. If the government raises your taxes - whether to reduce the government budget deficit by paying interest, or by buying back bonds - the effect is the same. The effect is that your wealth is reduced (if you pay $500 more in taxes, then you have $500 less wealth). And because your wealth is reduced, there is some negative effeect on your spending, so your demand for output goes down.

This is something that would make sense for the government to do, in either case, if there is too much demand in the economy (exceeding the capability of the real resources in the economy to produce real output to the point that it is having a significant effect on inflation) and something that would not make sense for the government to do if there is not too much demand in the economy.

But that doesn't have anything in particular to do with the government's policy choice of paying interest on bonds (which IMO is a dumb policy that just transfers wealth to rentiers for no good reason, but which is a policy that some people do support - i.e. because they want to pay interest to retirees and pension funds to support retirees through another mechanism as opposed to increasing social security benefits).

If and when other nations and businesses lose confidence in our ability to repay such massive debt, will lead to increases in the interest percentage for government securities. This will then lead to a possible increases in inflation.
This could eventually lead to a run-away disaster on our economy and financial system.
Go and ask Italy if they ever feared their "big and bad scary number"? And ask the Italian citizenry if it was "nothing more" than just a minor inconvenience to their everyday way of living.

Yes, the US economy and the Italian situation is different. But how long can we continue to say this with such astronomical and continuous increases, and will it eventually catch-up-to-us?

As I mentioned in a post above, Italy is in a very different situation to the USA. Italy is in a comparable situation to a US State government (let's say the state of California), and if California's state government were to run large and persistent budget deficits, it would run into the same sorts of problems as Italy and other southern European did in the recent past.

The difference between California and the US Federal Government is that they have a very different relationship to the central bank (the Fed). The State of California has a comparable relationship to the Fed as you, me, or a corporation like Microsoft or Exxon has. The US Federal Government has a very different relationship to the Fed (the Fed is really a part of the Federal Government, although there is some pretending that goes on under the Federal Reserve Act that the Federal Reserve is semi-private or maybe a public-private partnership, this is simply because of how Congress chose to set it up, and Congress could change the law whenever it wanted to by passing alterations to the law).

[gottsu]

https://www.youtube.com/watch?v=Ua8VFeoTJDY

typical GOP since last 60 years

[Meclazine for Israel]

Step back and ask yourself, who is it that pays interest on the "national debt"? Is it you, the citizen?

No. It is the Federal Government.

Total US debt is $75 trillion. Government debt is $23 trillion.

What proportion of the difference, $52 trillion, is corporate debt vs individual debt?

[Florida Man for Crime]

Step back and ask yourself, who is it that pays interest on the "national debt"? Is it you, the citizen?

No. It is the Federal Government.

Total US debt is $75 trillion. Government debt is $23 trillion.

What proportion of the difference, $52 trillion, is corporate debt vs individual debt?

If your point is that private debt is a problem if it gets to be too much, yes indeed, it is! (However, one should not go overboard to conclude that all private debt is everywhere and always a problem - for example, it is normal for businesses to take on some loans/debt to finance new investment).

That doesn't have anything in particular to do with Federal government debt though.

Indeed, if the US Federal Government tries to pay down its debt by raising taxes or decreasing spending, then that tends to increase private debt further.

Suppose that a U.S. citizen has college tuition + mortgage + auto loan debt of $300,000

The citizen is planning to pay down their debt by $1000, down to $299,000. But then the government raises taxes on the citizen by $1000 to "pay down the national debt." In that case, the citizen doesn't have $1000 to pay down their own private debt, which remains at $300,000. So the citizen is worse off.

[Meclazine for Israel]

Step back and ask yourself, who is it that pays interest on the "national debt"? Is it you, the citizen?

No. It is the Federal Government.

Total US debt is $75 trillion. Government debt is $23 trillion.

What proportion of the difference, $52 trillion, is corporate debt vs individual debt?

If your point is that private debt is a problem if it gets to be too much, yes indeed, it is! (However, one should not go overboard to conclude that all private debt is everywhere and always a problem - for example, it is normal for businesses to take on some loans/debt to finance new investment).

That doesn't have anything in particular to do with Federal government debt though.

Indeed, if the US Federal Government tries to pay down its debt by raising taxes or decreasing spending, then that tends to increase private debt further.

Suppose that a U.S. citizen has college tuition + mortgage + auto loan debt of $300,000

The citizen is planning to pay down their debt by $1000, down to $299,000. But then the government raises taxes on the citizen by $1000 to "pay down the national debt." In that case, the citizen doesn't have $1000 to pay down their own private debt, which remains at $300,000. So the citizen is worse off.

Your intelligence is only surpassed by your intuition, because that is exactly where I was going.

Clearly I would be more comfortable with Google, Apple, Facebook, Microsoft and Amazon paying off their debts through increased economic power in the market, as opposed to an unemployed student on the streets of San Francisco with a $150,000 student debt and $20,000 on their credit card.

Thanks for the replies. Appreciated.

[Southern Senator North Carolina Yankee]

It is to the property of the citizen, and not to the demands of the creditor of the state, that the first and original faith of civil society is pledged.

 The fortunes of individuals, whether possessed by acquisition or by descent or in virtue of a participation in the goods of some community, were no part of the creditor's security, expressed or implied. [...] [T]he public, whether represented by a monarch or by a senate, can pledge nothing but the public estate; and it can have no public estate except in what it derives from a just and proportioned imposition upon the citizens at large.

Everyone should care about the deficit.

OK, Edmund Burke says...

It is to the property of the citizen, and not to the demands of the creditor of the state, that the first and original faith of civil society is pledged.

Take two minutes to actually think about this. This Edmund Burke quote is saying that we should be concerned about the property of the citizen. OK, let's think about what happens to the property of citizens if you try to "pay down the national debt."


So... Let's say you are a citizen. You own $500 of Federal government bonds. That $500 of government bonds is your property.

However, some economic policy-maker comes along and decides it would be great to get rid of the national debt. So the economic policy-maker raises your taxes by $500.

In order to pay the extra $500 in taxes, you sell your government bond for cash, and now have $500 in cash rather than $500 in government bonds.

You then use that $500 in cash to pay your $500 in extra taxes to the government.

You, the citizen, are now worse off than you were at the start. Rather than having property (a $500 government bond), you now have nothing at all. Moreover, since the purpose of raising taxes was not for the government to re-spend anything back into the economy, no additional spending occurs, and nobody else in the economy is any better off either.

What has been accomplished by making you worse off? Nothing, except for making you less likely to go out and spend money on something (let's say, a chocolate cake from a bakery). That makes you worse off, because you don't end up with a chocolate cake, and you are not as well off as you would be if you had one. It also makes the baker that you would have bought the cake from worse off, because they have less business than they otherwise would. If enough people like you who would otherwise have bought cakes don't, because you are poorer now, then eventually the baker will have to fire some employees or possibly shut down business entirely. All of which is bad for the economy, and makes everyone worse off.

In conclusion, you should, as Burke says, be concerned about the property of citizens. If you raise taxes on citizens to try to "pay down" the so-called "national debt," you are simply taking property away from citizens in order to sooth your irrational and unfounded fear of a big bad scary number. Nothing more, nothing less.

It is to the property of the citizen, and not to the demands of the creditor of the state, that the first and original faith of civil society is pledged.

The property to which you refer (owning a government bond) as being of paramount concern, is referred to by Burke as the "demands of the creditor".

The claim of the citizen is prior in time, paramount in title, superior in equity.

And Burke responds by saying that the claim of the citizen tax payer is paramount in title and superior in quality.

The holder of a bond is creditor against the interest of the state. There "asset" requires interest payments, payments which over time are money investments diverted from things like education and infrastructure.

What would be accomplished by paying off the debt, is freeing $500 billion in interest from being sent to bond holders and instead being able to spend that money on internal improvements.

Constantly running deficits larger by percent of GDP than GDP growth itself is a ticket to having your budget consumed entirely by interest on the debt, crowding out public spending.

[Southern Senator North Carolina Yankee]

Step back and ask yourself, who is it that pays interest on the "national debt"? Is it you, the citizen?

No. It is the Federal Government.

Total US debt is $75 trillion. Government debt is $23 trillion.

What proportion of the difference, $52 trillion, is corporate debt vs individual debt?

If your point is that private debt is a problem if it gets to be too much, yes indeed, it is! (However, one should not go overboard to conclude that all private debt is everywhere and always a problem - for example, it is normal for businesses to take on some loans/debt to finance new investment).

That doesn't have anything in particular to do with Federal government debt though.

Indeed, if the US Federal Government tries to pay down its debt by raising taxes or decreasing spending, then that tends to increase private debt further.

Suppose that a U.S. citizen has college tuition + mortgage + auto loan debt of $300,000

The citizen is planning to pay down their debt by $1000, down to $299,000. But then the government raises taxes on the citizen by $1000 to "pay down the national debt." In that case, the citizen doesn't have $1000 to pay down their own private debt, which remains at $300,000. So the citizen is worse off.

Auto loans are a scam to keep people poor. Buy used on the aftermarket, put the money in the bank and just keep cycling through used cars when they break. You will have saved thousands upon thousands of dollars and that is more valuable then driving around in a status symbol that loses value from the minute it is acquired.

Student loans as administered have served to dump millions of people with worthless degrees into saturated fields by promising them a pot of gold at the end of the rainbow at graduation, from the time they were toddlers.

[Southern Senator North Carolina Yankee]

The difference between California and the US Federal Government is that they have a very different relationship to the central bank (the Fed). The State of California has a comparable relationship to the Fed as you, me, or a corporation like Microsoft or Exxon has. The US Federal Government has a very different relationship to the Fed (the Fed is really a part of the Federal Government, although there is some pretending that goes on under the Federal Reserve Act that the Federal Reserve is semi-private or maybe a public-private partnership, this is simply because of how Congress chose to set it up, and Congress could change the law whenever it wanted to by passing alterations to the law).

The problem with this is that it assumes that the relationship of the US Dollar to the rest of the world is etched in granite, it is note.

The Dollar is the worlds reserve currency and oil is also denominated in Dollars. However, this status has shielded us from reality and enabled us to think we are "exceptional in our finance" and ironically is this American Exceptionalism that that left has chosen to embrace. America is not exceptional and it is not immune from the rules of global finance, we are just cashing in the advantages accrued to us from our role in winning World War II.

The Fed is not a get out of jail free card and the Fed understands this. Therefore it will take action to preserve the stability of the dollar and its international status and that will mean higher interest rates and a much higher cost for everyone who has taken on debt.

Now on the other hand if the Fed were to be hijacked by an irresponsible left-wing governing majority, and lets say such status was lost, the market itself would drive up interest rates because we would have greater difficulty selling treasury bonds as the risk would have substantially increased, leading to the crowding out effect stated in a previous post.


A lot of people don't understand how the intersection of outsourcing, and the dollar's international status have worked to remove inflation from the US and reduce our interest rates. This has created the impression that we can deficit spend as much as we want to on both sides of the aisle. We simply cannot do the things proscribed without risking that international relationship to the dollar and thus by extension bringing back the very problems that are stated that we don't have to worry about.

[Green Line]

We already knew Donald Trump didn't care about the deficit.  He's just being honest for once.

[Inmate Trump]

This should be an impeachable offense.

There's probably a Trump tweet from the Obama era saying exactly the same thing.

[Southern Senator North Carolina Yankee]

This should be an impeachable offense.

There's probably a Trump tweet from the Obama era saying exactly the same thing.

There is always a tweet.

[Southern Senator North Carolina Yankee]

The one thing that bothers me about Imperial Spectator is assuming that it is a binary choice between running irresponsible deficits or have massive cuts that leave people to die in the streets. This is a false choice in my opinion and in the long run only serves to make everyone worse off including the poor, who are far more susceptible to commodity prices that are set by international markets.

Certainly a weaker dollar can be beneficial at points and certainly you need to deficit spend at points. But I have long said that are long term appropriations and all entitlements must have dedicated revenue streams. No one in this thread to my eyes said balance the budget and pay off the debt tomorrow.

However, because of our unique advantages obtained that I mentioned in previous posts, if we were to keep our deficit below 2% of GDP or about $400 billion on average, we would be in a very sustainable position long term.

[Florida Man for Crime]

The one thing that bothers me about Imperial Spectator is assuming that it is a binary choice between running irresponsible deficits or have massive cuts that leave people to die in the streets. This is a false choice in my opinion and in the long run only serves to make everyone worse off including the poor, who are far more susceptible to commodity prices that are set by international markets.

Certainly a weaker dollar can be beneficial at points and certainly you need to deficit spend at points. But I have long said that are long term appropriations and all entitlements must have dedicated revenue streams. No one in this thread to my eyes said balance the budget and pay off the debt tomorrow.

However, because of our unique advantages obtained that I mentioned in previous posts, if we were to keep our deficit below 2% of GDP or about $400 billion on average, we would be in a very sustainable position long term.

I was going to let this thread lie, but since it is still going I think I should correct some apparent misconceptions.

This is not about left vs right. I didn't say anything about "massive cuts that leave people to die in the streets" or anything of the sort. This is not about any sort of political preference for government spending as opposed to tax cuts (and is also not really about tax cuts for the rich vs tax cuts for the poor/middle class), and is not about spending on things like social security or health care as compared to things like military spending.

The argument I made that fairly large federal government budget deficits are normal/needed/unavoidable (and are not "irresponsible," but rather are the only responsible policy) is no different whether those deficits come from left wing spending on social programs, right wing spending on the military or other things Conservatives like, or tax cuts which Conservatives like.


Also, Congress' budget policy has only a limited amount to do with the size of the Federal budget deficit - the Federal budget deficit depends to a great degree not on budget policy, but on the state of the economy. When the economy grows, tax revenues go up, which causes the government budget deficit as a share of GDP to shrink. If this is allowed to go on too long without increasing the deficit again, then eventually growth will stop and there will be a recession.

Large Federal government budget deficits (note I did not say State/local government budgets, which are a very different matter, or Italian government budget deficits, because Italy is effectively the equivalent to a US State since it is a member of the Euro) are a normal feature of the economy, and are a requirement for the world economy to grow sustainably (though it is possible for an individual country to grow without government budget deficits, particularly if it is a smaller country in the global economy, unlike the USA). If you don't have persistent government budget deficits while the economy is growing, a bubble/recession/depression will occur, and because the economy shrinks and stops growing in that case, tax revenues decrease and the Federal government budget deficit will go up that way instead.

[Southern Senator North Carolina Yankee]

The one thing that bothers me about Imperial Spectator is assuming that it is a binary choice between running irresponsible deficits or have massive cuts that leave people to die in the streets. This is a false choice in my opinion and in the long run only serves to make everyone worse off including the poor, who are far more susceptible to commodity prices that are set by international markets.

Certainly a weaker dollar can be beneficial at points and certainly you need to deficit spend at points. But I have long said that are long term appropriations and all entitlements must have dedicated revenue streams. No one in this thread to my eyes said balance the budget and pay off the debt tomorrow.

However, because of our unique advantages obtained that I mentioned in previous posts, if we were to keep our deficit below 2% of GDP or about $400 billion on average, we would be in a very sustainable position long term.

I was going to let this thread lie, but since it is still going I think I should correct some apparent misconceptions.

This is not about left vs right. I didn't say anything about "massive cuts that leave people to die in the streets" or anything of the sort. This is not about any sort of political preference for government spending as opposed to tax cuts (and is also not really about tax cuts for the rich vs tax cuts for the poor/middle class), and is not about spending on things like social security or health care as compared to things like military spending.

The argument I made that fairly large federal government budget deficits are normal/needed/unavoidable (and are not "irresponsible," but rather are the only responsible policy) is no different whether those deficits come from left wing spending on social programs, right wing spending on the military or other things Conservatives like, or tax cuts which Conservatives like.


Also, Congress' budget policy has only a limited amount to do with the size of the Federal budget deficit - the Federal budget deficit depends to a great degree not on budget policy, but on the state of the economy. When the economy grows, tax revenues go up, which causes the government budget deficit as a share of GDP to shrink. If this is allowed to go on too long without increasing the deficit again, then eventually growth will stop and there will be a recession.

Large Federal government budget deficits (note I did not say State/local government budgets, which are a very different matter, or Italian government budget deficits, because Italy is effectively the equivalent to a US State since it is a member of the Euro) are a normal feature of the economy, and are a requirement for the world economy to grow sustainably (though it is possible for an individual country to grow without government budget deficits, particularly if it is a smaller country in the global economy, unlike the USA). If you don't have persistent government budget deficits while the economy is growing, a bubble/recession/depression will occur, and because the economy shrinks and stops growing in that case, tax revenues decrease and the Federal government budget deficit will go up that way instead.

Isn't that the presumption though when it comes the notion that it is "needed, normal, unavoidable"? I was basing my response of an earlier response of yours that seemed to indicate that was the case.

Frankly, I think both sides are dead wrong regardless of what the huge deficit is for and aside from recessions, large deficits should be curtailed as practical, long term expenditures should move towards sustainable funding mechanisms.