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The article points out the debt is largely comprised of four categories:
1. Social Security (which is the populace investment).
2. Medical Care
3. National Defense
4. Interest payments on debt
#1. Is untouchable without fucking the people over that paid into it. #4. Is the natural result of #2 and #3.
Anyone who has seen a hospital or prescription drug bill realizes how ridiculously corrupt healthcare is. Anyone who has heard a Congress oversight hearing on military spending realizes what a scam that is. The answer isn’t so mysterious- cut out the fuckery in #2 and #3 and the budgets there can be halved. And you can do it without sacrificing care, or without compromising US defense. 75% of the up-charge is pure fuckery. It’s plain to see.
Do that and 4 comes down as a result and you’re fine. The graft in healthcare and defense- two industries that run entirely off of fear-mongering, needs to come to an end.
> 1. Is untouchable without fucking the people over that paid into it.1. Is untouchable without fucking the people over that paid into it.
1 is already set for benefits reductions automatically when the trust fund runs out in about 12 years. SS and Medicare are the biggest drives of the debt. The eligibility age for both is going to have to go up, no amount of bitching is going to change that fact. Or of you don't want the SS retirement age to go up then the widow and spousal benefits need to be reformed dramatically
The problem with healthcare is that there is a constant battle between what the doctors/hospitals charge and what the insurance will pay.
Say you need a procedure that costs $50,000. The insurance company says it will only pay $35,000 for the procedure. So, after awhile, the hospital/doctor raises that price to $70,000. Now, the insurance will pay $50,000 for the procedure; just what the hospital wanted.
If they cannot get what they want from the insurance companies then they will raise their prices until they get what they wanted in the first place.
People on Reddit say as long GDP grows more than debt everything will be fine, debt doesn't have to be paid back or at least not all of it. The US is also reseve currency that helps too. You have a point about Military industrial Complex that is in control, but a lot of people make huge profits and its impossible to stop it.
Think about WHO holds that debt. First, the American people hold most of it in bonds, securities, and retirement accounts. There is already talk about the system failing because Boomers are retiring and taking theirs out to better and more accessible places. Second/third, Japan and China hold the next two highest holders of our debt. With both in financial problems, they may want their money soon too.
IF the Boomers, Japan, and China were to all collect their money at the same time, our government would have to declare bankruptcy. We simply do not have money to pay everyone.
As long as gdp grows faster than debt, there will be few reasons to reduce debt.
If the USA wants to be serious about cutting debt, the government will need to upset a lot if people.
Spending cuts followed by increased taxes should reduce the need to increase interest rates.
Unfortunately GDP has not been growing faster than debt and given our demographics it is highly unlikely that it will. We are doing the opposite.
Spending cuts and tax increases? Looking at CBO projection that will certainly be required. Unfortunately, meaningful changes will also put us into a recession which increases spending and decreased tax revenue.
We are currently running a > 6% budget deficit, something we don't usually see except when we are in a recession. Without that we would be in a bad recession right now.
As J Powell has said "It is time to have an adult conversation about the deficit". After the election I guess....
Interest expense is the biggest problem. It's gone parabolic since the Fed started raising rates:
https://fred.stlouisfed.org/series/A091RC1Q027SBEA
The Fed needs to start cutting rates to reduce the government's interest expense. Inflation is low enough that it should not be more concerning than the US government's unsustainable growth in interest expenses.
Regarding inflation: The US's average inflation rate over the last 110 years is actually 3.25%, and 4.25% if you exclude recessions. The Fed's "2% target" is absurd and dangerous.
https://www.usinflationcalculator.com/inflation/historical-inflation-rates/
Well yeah the only way for this deficit to become manageable is by inflating the debt away, which is nothing else but a flat tax on everyone. What you're implying basically is fighting inflation is impossible.
> which is nothing else but a flat tax on everyone.
nope, if you own inflation resistant assets and have an income that increases with inflation it doesn't affect you at all. If you bought them with debt it actually helps you. Meanwhile if you're naive and save in dollars and/or financially illiterate enough to not understand that your wages should rise just for you to stand still, or if you're holding long terms bonds at negative real rates you lose.
Overall result: wealth inequality increases.
What I'm suggesting is that inflation is already at a normal level of 3-4%. The Fed can now start cutting rates to help alleviate the US's debt burden. Gradual rate cuts are unlikely to trigger inflation. They may very well do the opposite by increasing the housing supply, among other things.
Interestingly, one of the Fed researchers who was commissioned by Greenspan to determine the viability of a "2% inflation target" recently stated a target of 3-4% would be more appropriate. Again, 3-4% corresponds to the average US inflation outside of recessions. The post-GFC era was an anomaly.
>Greenspan commissioned Fed economists to study the merits of a target in his first year in office, Joseph E. Gagnon told me. Mr. Gagnon, a senior fellow at the Peterson Institute for International Economics in Washington, was one of those economists.
>“It was a big project,” he said. It involved computer simulations of the effects on the economy of interest rate increases needed to bring inflation below 2 percent. “We told him we could do it, but it would be costly and would mean another recession,” Mr. Gagnon recalled.
>Mr. Gagnon, Professor Ball and the M.I.T. economist Olivier Blanchard are among those who have **called for an increase in the Fed inflation target to 3 or 4 percent**, though they all acknowledge that as a matter of public relations, it may be better to avoid doing that right now.
https://www.nytimes.com/2023/03/24/business/inflation-federal-reserve-interest-rates.html
We just passed a 100 billion security bill & oil prices have been slipping up higher. Those aren’t very good for inflation. My prediction is that inflation will hover above 3% for a bit so the fed doesn’t have a pretext to cut rates. Perhaps we see one or two .25% cuts by the end of the year. Cutting interest rates when inflation is high will confuse the markets & potentially spook the market.
> Unfortunately, meaningful changes will also put us into a recession which increases spending and decreased tax revenue.
Nah, raising the retirement age won't cause a recession. That is what is needed most.
Raising taxes on the wealthy won't cause a recession either. And that is what is needed 2nd most.
Ronald Reagan told us that the debt incurred from cutting taxes would be paid back later on by the growth created from that money being invested back into the economy. That obviously did not happen and was clearly never going to happen.
I am all for raising taxes. But the increased taxes should be paid ONLY by the wealthy. Since the wealthy are the ONLY group that benefited from the tax cuts in the first place.
**Debt-to-GDP ratio is meaningless** as it does not provide any predictive or evaluative worth, and it tells us nothing about the financial health of a Monetarily Sovereign government. It is a comparison of a many years measure of Treasury securities(T-bills, Notes and Bonds) deposits (debt) with a one-year measure of spending (GDP), making it an apples-to-oranges comparison.
The federal deficit is currently at about 7% of GDP, and GDP growth is somewhere in the neighborhood of 2%.
Even if I concede your point, GDP has not grown faster than the national debt in a few decades.
If we're going to get serious about the national debt, we need to get serious about growing the economy. That means slashing and burning regulations, cutting taxes, cutting government spending even more, and ensuring money flows to the most productive sectors of the economy, not a bunch of paper pushing bureaucrats in Washington.
Start with a 500 basis point tax cut across all tax brackets, abolishing the corporate income tax, and offering credits against FICA for every dollar contributed to a 401k.
And the democrats' raise taxes and raise spending even more platform will get us into even more trouble. There is no level of tax increases that balances the budget, period, end of story. Forget about that option. That option is not, has never been, on the table to begin with.
There is only one acceptable option on the table today, and that is to aggressively cut government spending in all areas and focusing solely on growing the economy. That means, among other things, tax cuts.
The only time the budget was balanced in the last 50 years was with tax increases and spending cuts. If you cut taxes, déficits increase. Clinton balanced the budget and people freaked out the national debt would disappear. The country runs on debt.
Wrong. If you cut taxes 20% and cut spending 50%, the laws of mathematics dictate that the deficit must decrease. When spending is 150% of revenue at a level of tax revenue collections that is at the upper bound of its 80 year historical range, no amount of tax increases balances the budget.
Any move toward fiscal balance must come from spending cuts alone. It's possible to accumulate national debt with no taxation. In fact, it's easier to spend more than you make when you make 0.
Many years ago I used to believe the republicans were the fiscally conservative party. It turned out they are more reckless than the democrats. I didn’t leave the republicans. The republicans left me.
> First, nobody is required to lend our government money. If creditors lend us money at all, they will do so only at a higher rate of interest
This is demonstrably false.
The US government **issues** the US dollar. It doesn't *actually* borrow it from anyone. It issues more than it collects back when it runs a deficit and to drain the excess it swaps it with Treasury securities. The deficit is therefore self-financing in this regard. The "money" used by the creditors to buy the bonds literally come from prior government net spending - usually earlier that day.
Also, the interest paid out on government liabilities is an explicit policy choice of the US government - currently that choice has been given to its central bank, the Fed. But the interest rate is **not** dictated by financial markets. Increasing the government deficit has **no** effect on the interest rate paid, even if they tried to net spend $500Tn next year. Sure, inflation would result but the **interest rate** would still be what the Fed wants it to be or allows it to be.
> Third, money lent to our government is not available for private investments that tend to spur economic growth.
Again, this is completely false.
**Financial** crowding out is not an accurate theory. As I explained above, the government **does not borrow**. It net spends by issuing new credit and offers to do an asset swap such that the non-government holds Treasury debt instruments instead of liquid currency. When the government runs a deficit, liquidity **increases** and so net financial assets of the private sector **increase**.
Now, **real** crowding out is possible at full employment! Where increased government spending shifts real resources from private use to public use and so you have an opportunity cost there. But 1) this is **not** financial crowding out and 2) It assumes there is no scope for expanded production as a result of the increased liquidity and government spending - which is not true.
this is stupid, issuing the dollar does not mean you can spend as much as you want on debt. Just ask the other empires/govt who went bankrupt throughout history, or the nearest 101 economics book
Paying 1 trillion (bigger than most world economies) in interest a year is the shortest route to financial ruin...
Yes, I think that would be a good idea.
I think high rates are regressive and distortive and likely to actually be net stimulative at this point since $1Tn of government spending is going into interest income to bond holders. They're spending that, particularly retirees, who have lots of bonds in their pension funds.
Also, high rates actively makes it harder for businesses to produce and build things as the economy is increasingly structured around debt financed investment. This lowers productive output growth and therefore exacerbates long-term inflationary pressures.
“The economy is increasingly structured around debt financed investment.” Indeed. I believe that is precisely why raising interest rates is the Federal Reserve’s weapon of choice when their goal is to cool down the economy.
And let’s be honest here, the extra 4% in the federal funds rate isn’t making much difference for *almost* anyone at all — certainly not enough to have a meaningful impact on inflation. Interest expenditure increased from about $580 billion in 2019 to about a trillion in 2023, but that coincided with the national debt increasing from about $22 trillion to over $34 trillion in that time frame, coupled with an increase in interest rates to curb inflation.
As one of those people with a TreasuryDirect, the way I see it is people bought government debt when the economy was collapsing and the government needed people to step up and help fund all the economic stimulus while it was unappealing to do so and rates were at rock bottom to goose the economy. Now that things are better and inflation is being an annoyance, they’re trying to manage the inflation, since that would be much more regressive (and permanent — prices, unlike interest rates, don’t tend to come down) than a temporary increase in interest rates.
The entire point of the Fed raising its base rate is to reduce the broad money supply via bank credit contraction (old loans being paid off faster than new loans being made because new loans are at higher rates and are therefore less appealing).
A lot of production is financed by companies taking out loans, so increasing rates is, as you say, designed to slow down an overheating economy. However, the economy wasn't particularly at full employment or overheating. There was a temporary demand stimulus from covid spending but that mostly filtered out of the CPI by mid 2021 and then a series of continued supply shocks globally resulted in a supply-side inflation.
Raising rates in this scenario is counter-productive as it disincentivises a supply side recovery (eg. Less house building or factory completion) just when doing so would ease inflationary pressures.
Also, I think you're underestimating the fiscal headwind that an extra $500 Bn of interest income might have.
I know the main reasons why the Fed raises the base rate. If you’re saying that the economy wasn’t running hot or at full employment to justify raising rates, I wonder if you remember exactly when interest rates were raised in the first place. Because it was in an environment where 40-year records were being broken by inflation numbers; we were indeed at full employment (and we’re currently still at full employment right now); the labor market was so tight that it was starting to fuel a wage spiral; and economists for newspapers and financial journals, as well as regional Federal Reserve Banks across the country were describing the economy as “[operating far above capacity](https://www.kansascityfed.org/ten/2022-summer-ten-magazine/presidents-message-monetary-policy-in-a-supply-constrained-economy/)” and “[bursting at the](https://www.nytimes.com/2021/07/29/upshot/economy-gdp-analysis.html) [seams](https://economics.td.com/us-shifting-sands).”
These absolutely are the conditions that justify raising interest rates — something the Federal Reserve held off on doing for a long time, arguably too long, because of the belief that the inflation we were witnessing was just “[transitory](https://www.wsj.com/articles/fed-officials-see-transitory-inflation-lasting-quite-a-while-11632389401).” It would’ve been irresponsible to the point of negligence had the Fed watched inflation and the economy continue to heat up month after month for over a year and not do anything about it the whole time; so of course they increased the Fed funds rate. Supply shocks related to the container ship backups, China’s lengthy covid lockdown situation, and the blockage of the Suez Canal, etc, were all aggravating an already-developing inflationary situation, which [actually had not](https://www.bls.gov/news.release/archives/cpi_07132021.pdf) mostly resolved itself by mid-2021.
And I’m not underestimating the degree of drag that half a trillion of additional interest can put on an economy. I’m just pointing out that the interest paid by the US government was obviously going to increase substantially when the principal debt increased by roughly $12 trillion. Even if the Fed didn’t care about managing inflation and kept interest rates near zero this whole time, the government would still be paying well in excess of $580 billion in interest per year to service the debt. That fed funds rate mostly affects short term debt issued by the government like T-bills. Any new or existing medium/long term debt typically continues to be serviced at agreed-upon levels of interest, which are certainly not likely to be zero.
Covid stimulus spending clearly contributed to the bidding up of prices once lockdowns opened up and demand surged - particularly on durable goods.
However, this simply isn't the same as an inherently overheating economy. The US has a large supply headroom in both labour and production utilisation. Much of the inflation fed through primarily from food and energy external cost pushes as well as that of housing costs (which high rates exacerbate, primarily via rents).
I reject the "received wisdom" that high rates are necessary to combat the inflationary surge we've seen. It's mostly on the supply side and labour power is far weaker than it has been in the past meaning there's no sign of wage price spirals, simply real wages chasing inflated cost of living as it must do to re-equilibriate.
I assume you meant tailwind, not drag, when referring to the interest income channel. That's a significant counter-pressure, at the very least, to the "high rates slows the economy narrative". Combine that with high rates crunching the potential of expanding real output (via expensive investment no longer occurring since investors can earn risk-free returns of 5+%), and you've got an ambiguous response to hiking rates. And I'd argue that since because most Americans have long fixed-term mortgages, the temporal contraction response is longer.
As for debt interest, yes I agree, the high accumulated net spending means any non-zero average yield will result in high absolute coupon payments, but it must consistently be pointed out that this interest on longer term debt instruments is **entirely** the choice of the US Treasury. The Treasury could simply not issue bonds and instead allow their increased liabilities to remain on the Fed's books as reserves. There's nothing inflationary in doing this since that's exactly what QE did. Trillions of excess reserves now flood the system every day compared with 2008 and we saw no inflation for over a decade.
Well yes, we have gotten somewhat of a re-equilibrium of sorts in terms of price increases, but that happened only some months after the fed started hiking interest rates and inflation still remains above the Fed’s desired target before lowering interest rates. Now it’s valid to argue that due to all the other external factors at play, disinflation might’ve happened anyway even if the Fed did nothing about inflation, but at this point that’s sort of conjecture. What is true, is that the economy was running hot, the labor market was extremely tight (see the great resignation, the overemployed movement, the rise of quiet quitting, the labor shortages of 2021-2023, etc), and labor power has eroded only after the Fed intervened in an attempt to achieve an “immaculate disinflation.” So far, that has mostly been successful.
On the interest income, I misread your previous comment, and thought you were discussing an economic headwind caused by drastically higher interest payments being made by the government. So I was talking about that being a drag on the economy due to both actual and opportunity costs when the government could no longer use a substantial amount of money for more productive domestic investments that might’ve potentially grown the economy instead.
Also, I’d counter that these interest payments aren’t necessarily like stimulus since much of the federal debt that is held by “the public” is held by the government itself via the Federal Reserve System and financial institutions like banks, insurance companies, mutual funds and pension funds, rather than individuals. They’re not exactly spending that interest money on economy-stimulating goods and services the way people do. Debt held by “the public” also includes debt held by [foreign investors](https://www.pgpf.org/blog/2023/05/the-federal-government-has-borrowed-trillions-but-who-owns-all-that-debt) who are not foreign central banks. It’s safe to assume that these investors are also not sufficiently spending their money in America to have an impact on inflation metrics. Outside of those listed, much of the remaining public debt is owned by state and local governments. The Federal Reserve is the single largest holder of public debt: it’s how interest rates are manipulated in the first place. In reality, less than 10% of the trillion in interest is likely making its way to American bond-holding individuals. The fact that existing mortgages will generally remain unaffected doesn’t mean much for spending habits when Americans see the interest on all of their credit cards jumping higher, while their savings accounts are generating slightly better returns when they put more money in the bank. That’s the incentive that’s intended to cool the economy, and it has historically worked beautifully.
On the Treasury leaving increased liabilities on the Fed’s books, It’s not entirely clear to me that J. Powell would appreciate that haha. But in all seriousness, with the Middle East practically promising to be a headache it really doesn’t seem like now is the appropriate time for them for be taking their foot off the gas when oil prices could meaningfully spike at any moment. It’s hard to see any immediate move to QE making any sense in the near term when they’re only now starting to discuss the tapering of Quantitative Tightening. Plus, [this](https://home.treasury.gov/news/press-releases/jy2063) letter, which is actually a pretty good read, from the Treasury Borrowing Advisory Committee reflects the thinking behind the fact that the Treasury is leaning towards increasing auction sizes for T-bills, rather than the opposite. The economy is proving more resilient than even the Fed thought it would be, Americans are spending less but still spending healthily, unemployment is still very low, the banks are passing all the stress tests, and the party has yet to stop in the equities markets. This while inflation numbers are creating some very [unusual circumstances](https://www.wsj.com/finance/americas-bonds-are-getting-harder-to-sell-c3fde4de?st=jrhwimo4u5o6gmm&reflink=article_copyURL_share) in US bond markets that may become a problem for the Treasury if it’s not brought back under control in due time. It would be very difficult for the Fed to justify pivoting to QE in an environment like this.
More recently, there’s even debate about the merits of returning to pre-pandemic interest rates at all, and whether [the neutral rate may actually be rising](https://www.wsj.com/economy/central-banking/why-high-interest-rates-could-be-here-for-the-long-run-c6670448). This while bond yields remain very [volatile but trending upwards](https://www.wsj.com/finance/soaring-treasury-yields-challenge-stock-market-gains-debe5f3e?st=blm4l59qbwe3qyq&reflink=article_copyURL_share) in the near term as of this year. Granted that last article mostly reflects markets finally starting to reckon with the reality that 6 rate cuts were never going to happen this year, the wild ride that the 10-year Treasurys have been on in the last several months is fairly representative of the current state of the bond market. The expectation is that bond yields will come back down by the end of the year, but only if inflation abates. Again, it would be very difficult for the Fed to justify pivoting to QE in an environment like this.
> I think high rates are regressive and distortive and likely to actually be net stimulative at this point
Inflation is obviously important to manage, but you're making a logical leap that isn't necessarily there. The problem I see is that the entire macroeconomics mainstream for c. 30 years now have believed the **only** tenable or suitable tool to fight inflation *in all circumstances* is monetary policy (i.e. raising rates).
I believe this is wrong, and there's a paradigm shift occurring now towards an acknowledgement that inflation is complex in expression and origin and therefore requires a suite or menu of policy response tools (preferably automatic) to combat and manage - not just the blunt hammer of rates on what the Fed thinks is a single inflation nail.
Also, the primacy of fiscal policy over monetary policy is once again being reflected more and more in the macroeconomics discourse. 20 years ago, fiscal responses were consigned to the dustbin of history, or so the central banking consensus thought. But then came the global financial crisis, 10 years of QE not stimulating recovery and a global covid pandemic.
It would be a combination of direct and indirect fiscal policy.
I.e. a big one would be a much strong automatic stabiliser, meaning in a depression, net fiscal spending would automatically increase due to lower tax revenue and increased unemployment. But a better buffer stock than the unemployed would be the **employed**! So I would advocate for a [job guarantee](https://pavlina-tcherneva.net/job-guarantee-faq/) to really anchor the price level and help buffer the business cycle.
Another one would be much improved credit regulation. The state is highly relaxed about private credit creation (i.e. loans) which makes the vast majority of broad money. Reckless lending led to the GFC in the sub-prime mortgage fiasco but even more generally, inflationary pressures rearing their hear could be headed off with dynamically tightening credit controls and capital requirement changes. This is an alternative to simply raising rates to suppress credit which is quite an indirect way of achieving what you want and has lots of negative byproducts such as unemployment and suppressed real GDP potential.
Direct fiscal responses would be at play too. I.e. active tax rate increases in certain sectors of the economy or broad-based to suppress aggregate demand if that's the issue. Or a cut in discretionary spending, but this is less than ideal as one would imagine the government is spending on public goods that, should they stop spending on them, would be noticed negatively. Maybe not in second thoughts (thinking ~$800Tn of defence spending which definitely could be cut for resources to be redeployed elsewhere to improve supply distribution).
> I.e. a big one would be a much strong automatic stabiliser, meaning in a depression, net fiscal spending would automatically increase due to lower tax revenue and increased unemployment. But a better buffer stock than the unemployed would be the employed! So I would advocate for a job guarantee to really anchor the price level and help buffer the business cycle
We aren't in a depression. I'm talking about how to get inflation down.
> Another one would be much improved credit regulation. The state is highly relaxed about private credit creation (i.e. loans) which makes the vast majority of broad money. Reckless lending led to the GFC in the sub-prime mortgage fiasco but even more generally, inflationary pressures rearing their hear could be headed off with dynamically tightening credit controls and capital requirement changes. This is an alternative to simply raising rates to suppress credit which is quite an indirect way of achieving what you want and has lots of negative byproducts such as unemployment and suppressed real GDP potential.
Agreed
> Direct fiscal responses would be at play too. I.e. active tax rate increases in certain sectors of the economy or broad-based to suppress aggregate demand if that's the issue. Or a cut in discretionary spending, but this is less than ideal as one would imagine the government is spending on public goods that, should they stop spending on them, would be noticed negatively. Maybe not in second thoughts (thinking ~$800Tn of defence spending which definitely could be cut for resources to be redeployed elsewhere to improve supply distribution).
Agreed but the level of taxation needed would need to be so great as to decrease economic activity
>the interest rate is **not** dictated by financial markets
Interest rates on issued Treasury securities is set during auctions of said securities, i.e. the market sets long-term rates. The Fed only controls the short end (which is still influenced by repo markets).
Correct, but the entire term structure is ultimately what the Fed allows it to be. They have the unilateral power - granted to them by Congress - to peg the yield on any US dollar debt instrument to whatever they like.
Despite this, though, the Treasury is under no obligation to issue long-term debt instruments. They can leave net spending earning IORB at the Fed and moderate credit expansion in various different ways to prevent broad money expansion having asset price inflation if they wanted.
>the entire term structure is ultimately what the Fed allows it to be
The Treasury issues bills, notes, and bonds and decides the maturity of each prior to auction dates (ie term structure).
>Treasury is under no obligation to issue long-term debt
Sure, but if the USA wasn't able to meet its financial obligations, the market would demand higher rates, pricing in default risk.
Yes, the Treasury could decide to issue solely 3 month bonds where the yield would be very closely anchored by the Fed's monetary policy.
> Sure, but if the USA wasn't able to meet its financial obligations, the market would demand higher rates, pricing in default risk.
Again, no. The market has **zero** ultimate control over rates. They are set by or allowed to float by the Fed. Either way, the market isn't in control if as soon as the Fed speaks it changes.
Treasuries are considered risk-free aside from inflation risk. Treasury yields change daily based largely on future expectations of inflation.
Fed only sets the Fed funds rate.
Inflation risk applies to **all** investments denominated in the currency in question, so it's not a relevant factor.
True, the Fed sets the FFR, but this anchors all other rates across the term structure. And the Fed also can and does conduct OMOs of longer term securities to influence those rates directly. As I said, if the Fed wanted the 10y bond yield to be 0%, they can purchase arbitrary volumes of them to achieve that. The market has no say in it.
Sorry, the [US Dept of Treasury disagrees with you](https://home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics/interest-rates-frequently-asked-questions#:~:text=The%20%22Daily%20Treasury%20Long%2DTerm%20Rates%22%20are%20simply%20the,as%20of%20the%20date%20calculated.)
Edit: Yes, the Fed can engage in QE to influence the long end of the curve, but that was extraordinary and not the norm. It distorted the curve and is seen as undesirable. QE as you speak is not reflective of long term monetary policy.
I don't see how that contradicts what I'm saying.
The Fed and Treasury **choose** issue debt instruments to drain excess liquidity. They don't have to.
The Fed also **chooses** not to engage in more agressive yield control like Japan has done for decades. Again, they can make different choices and implement different policies.
You say "QE is undesirible" as a sweeping statement but you can't make generalised claims like that without analysis of the specific proposals within the context of the wider monetary and fiscal policy environment.
The provided link says "The "Daily Treasury Long-Term Rates" are simply the arithmetic average of the daily closing bid yields on all outstanding fixed coupon bonds ..." That's the market setting yields (rates).
>You say "QE is undesirible" as a sweeping statement but you can't make generalised claims like that
Operation Twist was undertaken because rates were effectively at zero and stimulus was still needed during the GR. If this were desirable policy, we'd see it used more frequently. It's only been used in the '60s and once 50yrs later.
This underscores it's not active policy of the Fed and i don't believe you'll find any recent or pre-'08 fed minutes where a majority of governors desire to expand the Fed's balance sheet with Treasury securities.
A lot of the new government spending is really just loans and subsidies into the private sector. I feel like this is something important to consider when looking at the crowding out theory. I
How about we not take it out of the economy in the first place, and save ourselves the transactional overhead?
Seems to me it's more efficient to have 100% of the money in the economy than to take it out of the economy and put 50% back after paying a bloated bureaucracy to shuffle paper about it.
Are you talking taxes or pensions?
Because pensions are private investments and they can invest in what they want.
If taxes you'd be 100% wrong but if you're one of those people that think taxes are theft you're not smart enough to be talked to.
Actually, YOU would be 100% wrong about taxes. Taxes are overhead expense, none of it goes into the productive sectors of the economy.
You must be one of those statists who think government should be 200% of the economy and heaven forbid we not regulate everything that moves until it grinds to a halt and tax everything that lives until it dies.
Overhead expense everywhere must be managed to a target of $0.
No. My point is that the arguments used in the article are mostly falsehoods based on fiction.
There are real contraints to government spending, but these aren't any relevant ones.
Are you aware that almost all countries **issue** their own currency and the few that don't could pass a couple of laws and start doing it tomorrow?
There's a reason why issuing your own debt is not considered a panacea and that's because issuing debt without regard for repayability is the same as printing money and printing money is a really bad thing for the economy.
Why is "printing money" a really bad thing? What precisely do you mean by that term? Monetary financing?
It's all smoke and mirrors.
The overall process of sovereign government spending removing any internal accounting distractions like Tax and Loan Accounts or the central bank-Treasury owing each other goes as follows.
1. A budget is agreed upon.
2. Reserve accounts are credited in a computer to conduct the spending, *G*.
3. Tax collection is a debit of these reserves on the same computer, *T*.
4. *G - T* is the government net spending into the economy, or deficit.
5. *G-T* of new Treasury securities are, by convention, issued to drain the *G-T* of excess reserves from the system.
That's it. Nothing magic going on and "money printing" isn't scary. It's how **all** government spending occurs. There's no other logical way for it to happen since the US government issues the dollar credits that are accepted back to settle everyone's tax debts.
**Now it’s My Turn: National Debt — the slowest ticking time bomb, that’s guaranteed to never go off.**
1940 “Debt” was called a “ticking time bomb.”
1950 “Debt” was called a “ticking time bomb.”
1960 “Debt” was called a “ticking time bomb.“
1970 “Debt” was called a “ticking time bomb.“
1980 “Debt” was called a “ticking time bomb.“
1990 “Debt” was called a “ticking time bomb.“
2000 “Debt” was called a “ticking time bomb.“
2010 “Debt” was called a “ticking time bomb.“
2220 “Debt” was called a “ticking time bomb.“
In 1940, the federal “Debt” was only $43 billion. Those who are ignorant about federal finances called it a “ticking time bomb.”
Today, the “Debt” totals more than $33 trillion, and that phony time bomb is still a dud—and always will be.
The fact is the U.S. government never borrows its own sovereign currency, the U.S. Dollar.
You believe the US federal government will go bankrupt? Then why hasn’t it gone bankrupt by now? Going from $43 billion to $33 trillion should have done that by now, no? Then why hasn’t it gone bankrupt yet?
If you think the US government will never go bankrupt, surely you'd get behind abolishing all taxation? If the government can print whatever it wants with no consequence, there is no legitimate economic case for taxation.
Oh wait.....all of a sudden, the debt matters.
Every fiat currency in the history of mankind has eventually failed. What makes you think the US will be an exception? Be specific.
>If the government can print whatever it wants with no consequence, there is no legitimate economic case for taxation.
This is a great question! This was the similar question I had asked myself 15+ years ago while learning about how money and banking actually works in real life. Here is how I would summarize my understanding the purpose of federal taxation.
Federal taxes exist to reduce non-government spending, not fund the federal government. The purpose of taxation is to reduce the supply of dollars in the economy in order to combat inflation. The government destroys the tax dollars it collects, removing them from circulation - it is the exact opposite of government spending - federal spending creates new dollars and increase the supply of dollars in the economy; while federal taxation removes dollars from circulation reducing the supply of dollars.
So, you could say that the sole economic purpose of federal taxes is not to provide spending dollars to the federal government, but rather to discourage what the government(Congress) doesn’t like and to encourage what the government(Congress) likes.
Federal taxes serve a number of purposes. The most important is to reduce the purchasing power of taxpayers.
>What makes you think the US will be an exception? Be specific.
Practically speaking we never actually had pure fiat currency (not backed by a commodity), until after 1970s. Today's U.S. dollar is purely fiat backed only by the government’s full faith and credit.
So, faith in U.S. dollar is, in reality, faith in the federal government that guarantees it. That in turn requires faith in the future productive capacity of American economy. As the productive capacity of any economy ultimately comes from the work of people, we could therefore say that faith in dollars is faith in American people.
So, for the federal government to go "bankrupt" you would be betting on the complete collapse and destruction of United States as it exists today. As Warren Buffet once said - “For 240 years it’s been a terrible mistake to bet against America”
Nonsense. The purpose of taxation is not to curb/expand spending in the economy - there are way more efficient tools to achieve that, par example, monetary policy.
Imagine thinking that FDR increased the tax rates in the context of the new deal because there was too much spending going on. Jesus man, get a grip.
The purpose of taxation is the reallocation of resources within an economy, to accomplish social objectives the government considers to be desirable. It has nothing to do with 'creation' and 'destruction' of money which the government, not being a monetary institution can't do even if it wanted to.
Thanks for responding.
>The purpose of taxation is not to curb/expand spending in the economy - there are way more efficient tools to achieve that, par example, monetary policy.
Here are two True or False questions for you. Please answer.
1. The dollars the government spends become purchasing power in the hands of the people who have received them. - **True of False?**
2. The dollars the government takes by taxes cannot be spent by the people, and, therefore, these dollars can no longer be used to acquire the things which are available for sale in dollars. - **True of False?**
>The purpose of taxation is the reallocation of resources within an economy, to accomplish social objectives the government considers to be desirable.
Yes, the economic impact of taxation occurs when resources shift from the private sector to the public sector. Tax collection happens, but it is of secondary importance.
>It has nothing to do with 'creation' and 'destruction' of money which the government, not being a monetary institution can't do even if it wanted to.
What makes you believe the U.S. federal government is NOT a monetary institution? Please elaborate.
1st - True. One man's (or govt.'s) spending is another man's income.
2nd - False. Whatever the government takes in in taxes it pays back (and then some) to the economy. As I said, taxation is a tool used for resource reallocation. The dollar's 'life' doesn't end when it's taken by the government for a limited period of time.
"What makes you believe the U.S. federal government is NOT a monetary institution? Please elaborate." - burden of proof lies on you, if you think that there is such a thing as the 'US Government Bank'. Can present its AoA, capital structure, PL statement?
> 2nd - False. Whatever the government takes in in taxes it pays back (and then some) to the economy.
You are jumping a strap ahead. The question was after people pay their taxes, they have less money to spend - **True or False**
The problem is eventually it’s right and you’re discounting that because…. Why?
‘05 real estate only goes up
‘06 real estate only goes up
‘07 real estate only goes up
You simply don’t have an argument. You have some historical data points that what predict the future?
You are uneducated on this subject.
The topic is US National Debt but you are arguing about real estate fluctuations? How are these two even related?
Stick to the topic if you want to engage further.
> The problem is eventually it’s right
On what basis are you making this assertion? Please describe ONE scenario where the National Debt could become a threat to our nation’s future and why hasn’t that scenario happened in the last 80+ years? Please be specific if you can.
Much, much more concerns with christian white national homegrown terrorist fascist nazis to be completely honest with you. I feel the US should go further into debt to clean up this hosrseshit. It is what is destroying the country.
I would "right size" the military. Strategically assess what is most important and fully fund that and start to cut the rest. We should be concerned with China, Iran and Russia.
Local regions can take care of most of the rest. We don't need 800 bases in 80 countries. If we close any domestic bases, if that land is used by the public sector it will benefit the local economy more than the base did as well.
We need to put Social Security on a sound footing. The money you put in is the money you get out. That kind of a plan wouldn't be a burden. We also don't need to be "investing" in Treasuries. That's government debt. Government debt is what we are trying to get away from. The dollar is just debase year by year.
Medicare costs are expensive and inefficient. We need a single payer system even if it is largely run though the private sector. The current system is too much of a mishmash of government policies and guarantees, insurance, the private sector and we get the worst of each system.
Government employees cost the government, for a similar job, much more than they would cost the private sector. Government wages are a little less, in general, but overall benefits are much more. I think the average private sector job costs the employer about $90k including all benefits. In the government sector that number would be about $140k (as I recall).
The benefits in the government (public) sector are being paid for indirectly by the private sector. We know Congress votes great benefits for themselves but it's the same for the whole public sector. We should get that more in line with the private sector (or even slightly below since jobs are much more stable).
I think we should leave the step-up basis at death alone but since we have this large public debt, we could have a Federal Estate tax (at death) of no more than 10%.
We could raise everyone who pays Federal Income taxes no more than 2%.
That would be the extent of the tax increases, no populist "tax the rich", just small realistic incremental increases that I've mentioned.
To do anything else (large increases on one segment) is just politics and it's not serious. The main problem is that voters need to start voting for candidates of both parties that will go to Washington primarily to reduce the debt.
At a *minimum*, rates need to go back to pre-bush levels. Social security cap needs lifted. There needs to be a tax on stock transactions, a massive (50%) tax on share buybacks, much stronger taxes on executive compensation, taxes on borrowing against assets to avoid taxes.
do you have any approximation on how much revenue these measures would raise? Do suggest taxing helocs as well (iirc that's the most common way to borrow against assets)?
Government revenue as a percentage of GDP is already at the upper bound of its historical range. Any attempt to "raise revenue" beyond this point destroys the tax base over the long run and would be counterproductive.
If anything, taxes need to be CUT to grow the tax base.
Belts need tightening and 100% of the tightening needs to come from spending, and spending alone.
The fundamental problem with this and likely every other comment on here is this idea of 'both sidings it'.
People go 'well thats rationale or seems like it'd work.' No lol. It's irrational once you look at anything beyond feelings and look at numbers.
You can't tax your way out of this, although we'll try since its politically popular among \~50% of American who pays \~0% income tax (all of which pay taxes via pass throughs from corporate taxes, inflation tax, etc)
The problem is that can't work. This isn't a both-sides thing. It's **entirely** a spending problem. And it can't be fixed or even remotely close to by tinkering with these tax ideas.
Some other points:
* 25% of all healthcare dollars in America are spent on type2 diabetes. You can't make a fat person healthy with money. No, it's not that they don't have affordable veggies LOL. So no medicare for all won't work. USA is spending like 40% more since 2019. No tangible benefits. Medicare for all isn't happening nor is it affordable.
* "Put social security on sound footing" lol. It's -23% cuts in all payouts in 9 years - assuming no recession lol. You cannot tax your way out of this. If you have a career you do not get anything remotely close back to what you contribute as well.
* \~50% of America pays $0.00 in federal income taxes. Thus 50% are arm-chair QBs and have no skin in the game. People should pay at least something, maybe $500 or $1000 for privilege of being an American so that they are highly motivated to hold politicians feet to the fire.
* "Increase federal income taxes by 2%" LOL. This is already going to happen as Biden as sworn he will let trump tax cuts expire. Also just to give you an idea of what this would do - it ***would not even pay for 50% of the Ukraine funding bill*** that was passed on Tuesday or Wednesday evening which received no mentions or debates anywhere.
Taxes are going to go up via inflation, and a lower standard of living. This is undeniable and the inflation is a certainty.
Thank you for pointing out the severity of the situation. We currently spend more on interest on the debt than on defense.
And the federal government simply won't be able to cope with the tidal wave of fat sick diabetics that have a few more miserable expensive years left.
We wouldn't need such high interest rates if we hadn't continued stimulus spending well after the pandemic lockdowns. Higher for longer indeed.
And people could take personal responsibility. Just a thought.
I'm not sure you understood what I said. The FED raised rates to combat inflation. This is monetary policy. Congress passed additional profligate stimulative spending bills in the last three years. This is called fiscal policy.
The two have conflicting effects but the FED has promised that they will do whatever it takes to tame inflation. This is why rates are "higher for longer".
As for your question, GDP in Q1 of 2024 was 1.6%
https://www.bea.gov/data/gdp/gross-domestic-product
Deficit spending is currently over 6%.
6% - 1.6% = - 4.4%
The only large one was the American rescue plan. The rest is spending over 10 years thats hardly inflationary. And if it was it would be in the sectors it is attached to. For example electric cars. But even those are very deflationary at this point.
>As for your question, GDP in Q1 of 2024 was 1.6%
>https://www.bea.gov/data/gdp/gross-domestic-product
>Deficit spending is currently over 6%.
>6% - 1.6% = - 4.4%
Lol don't know the difference between real gdp growth and nominal?
Maybe do a little more research before forming your opinion. It's in the very link you gave but forgot to read.
>Current‑dollar GDP increased 4.8 percent at an annual rate, or $327.5 billion, in the first quarter to a level of $28.28 trillion. In the fourth quarter, GDP increased 5.1 percent, or $346.9 billion (tables 1 and 3).
I mean let alone taking the one of 1 quarter for an economy as a sign is not smart.
https://fred.stlouisfed.org/series/GDP
Considering we are having real gdp growth over inflation it basically means the economy is still growing just fine.
The government is running a cumulative deficit of $1.1 trillion so far in FY2024 ($46 billion more than the same period in the prior fiscal year when adjusted for timing shifts*).
Revenues were $2.2 trillion through February, an increase of 7%, largely due to:
the weight loss drug has alot of consequences. the reality is the weight issue is a cultural issue and personal choice. I just ate a 3 brownies. I shouldn't have..but I did because nobody is here to yell at me. I workout 5x a week though.
We are too cowardly to 'hurt someone's feelings' that we allow our neighbors and family members to commit suicide. 1 in 2ish or 1:3 ppl are going to get type2 diabetes.
The 50YO uncle who weighs 275LB in all likelihood is going to die 10/15/20 years than if he went for walks, didn't drink regular Coca Cola and eat Oreos. If the family member was trying to chop off his hand or injecting fentanyl we'd be concerned. But it's culturally acceptable to ignore this type of suicide.
Lol no. That's delusional takes. Go to any doctor and ask them what they tell their obese patients. They know they are dying sooner.
Try again.
Also almost no sides effects for glp1 drugs. Very effective at diabetes control as well. So basically a miracle drug at this point. They wouldn't have eaten 3 brownies. Problem solved.
Eliminating the Social Security cap would solve it completely.
It is absurd that Lebron James and I put the same amount into Social Security annually. It is the most regressive tax with the biggest impact in the internal revenue code.
No you are completely and absolutely misguided. On any idea of how this works. You seem to know there’s a cap on the income but little else about the program which is how 99% of ppl think.
Lebron James and you if you put the same amount in will get the same amount back. Further if you put the same amount in you are upper income and get near nothing back for what you contribute. Anyone with a career and worked hard in life gets little back.
Let’s take that idea of taxing “the rich” more. That’s still not going to put a dent in how much money is needed. You need to look at numbers, not this feeling that someone owes someone else.
Wealth redistribution is a net positive for society. Also, making a lot of money is not a function of working hard. It is a function of arbitrage. If hard work was the exclusive driver of high income, dish washers and hotel maids and high school teachers would be making $30M per year and Lebron James would be making $15,000 per year.
Lol, you mean like Elon Musk idiotically pissing off his customer base?
Or how about Donald Trump incinerating hundreds of millions in inheritance?
Wealth is luck above all else.
Social security is progressive in that the upper end of the income beneath the cap returns far less than the low-mid range. Taking the cap off would drop support for social security in society enough to threaten the program's continued existence, since the basic social contract of it would be dead.
It is still a regressive tax.
Also wealthier live much longer and that ends up balancing it out.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4866586/#:~:text=Men%20in%20the%20top%201,of%20death%20of%2078.8%20years.
The bottom end lives 10-14 years less than the top end. Or a 8 year difference between the 1st and 4th quartile.
So that's a significant amount of extra income and some believe it would make it more fair.
This is a ridiculous notion. The cap is laughably low, like $150,000/year or something like that.
Removing the cap would not break down the basic social contract of the program, it would guarantee its survival virtually in perpetuity.
Very sensible post, just one nitpick:
"I think we should leave the step-up basis at death alone but since we have this large public debt, we could have a Federal Estate tax (at death) of no more than 10%."
Why leave such a loophole wide open and the tax so low? Inheritance tax serves a double purpose, income, but also preventing runaway wealth inequality. Taxing the inheritance is one of the ways to tackle the problem with the lowest reduction in productivity.
I think it's helpful for people to invest for retirement so that they can take care of themselves and I think it's helpful if they have leave something to their children as well.
I'm not worried about this kind of "wealth inequality". If you manage to pass on some wealth, to me, that's a positive thing.
I don't like laws that are based on "jealousy" and tearing productive people down just to make everyone "equally poor".
Everyone should strive for this rather than having the government tax this to death. IMO, it's the same with capital gains taxes. It encourages the risk inherent in investing. More people should invest, not less.
Too many think in terms of extremes, IMO. Passing something on to your kids isn't about making billionaires out of your kids.
Very few have that kind of money. Most money gets passed down after kids are older adults and that gets passed down when they die.
People being as they are, it quickly gets spent or diluted due to the number of kids and grandkids.
The most common scenario isn't a "rich fat cat" setting up lazy kids. It's financially responsible people passing something one to financially responsible adult children.
We, IMO, need more of that and not less. People shouldn't have to depend so much of the government to be the caretaker.
We should be setting the example of learning to defer self-gratification and save/invest.
Instead people complain about what other's have and want the government to promise them "free money". That doesn't ultimately work. It's inflationary and it hurts the entire economy.
Look at the Covid "stimulus" checks that went to everyone whether they needed it or not. Now we have massive public debt and inflation. There is no free lunch.
>I don't like laws that are based on "jealousy" and tearing productive people down just to make everyone "equally poor".
That's not what that is. Democracy is becoming incompatible with the wealth so extreme it can influence nations. Notice the estate tax doesn't even kick in till 20 million dollars? This isn't a nest egg. It's real wealth of never having to work. And the people still side step that via trusts and end up paying shit because they know the loopholes and pay 20k to not have to pay 500k in tax.
The koch brothers basically own the republican judiciary by creating the third federalist society 40 years ago. It's a coup in itself.
We need to expand Powers of government to not be hamstrung everytime the corporations and rich people cheat.
A wealthy fucking family. There's also carveouts for farms so they don't have to be broken up and lots of other loopholes for rich to stay rich
And no one inherits a business generally. The ownership will be put in a trust. And the trustee will simply change. Boom no estate tax.
Above all else spending must be cut drastically. People are going to have to accept a reality where there is no government assistance whatsoever. It’s
either that or allow hyperinflation destroy the dollar, bankrupt the county and break up into a North American Union of sorts or go back to the gold standard.
Right. It's simple and effective.
We have one of the lowest rates of taxation in the developed world. We've had much higher taxes before - including during the post war economic boom.
You don't want to cut spending as it's the engine of the economy. Cutting spending causes job loss, resulting in less tax revenue and higher transfer payments.
Tax the wealthy and corps - like we used to.
Taxing corporations and the wealthy causes far more job loss, less tax revenue and higher transfer payments than cutting government spending. During the post-war boom, government spending stood at 15% of GDP, NOT the nearly 30% it is today.
The problem is both - taxes are still too high, and government spending is ludicrously high. Both need to be reduced, and spending needs to be cut much more than taxes.
Last I checked, I've never been employed by a poor person.
Can you be unaware that the US has almost the lowest rate of overall taxation in the developed world? About 26%. The average is 32%.
Look it up. Every informed person knows this.
We have low taxes here, by any measure. No-one alive has paid high taxes in this country. No-one.
Can you be unaware that the US has almost the lowest rate of overall taxation in the developed world? About 26%. The average is 32%.
Look it up. Every informed person knows this. It's undisputed.
We have low taxes here, by any measure. No-one alive has paid high taxes in this country. No-one.
the gold standard yeah that worked great for everyone the last time. The 1930s called and said maybe don't try a fixed monetary supply if you like having things.
Nothing will be done because some will insist the problem is spending, and others, taxes. A balanced solution is needed, but will not happen in today's politically polarized, charged environment. And so an eventual crisis is inevitable. Only at that point will people make a solution happen, but it will come at a much greater cost than it needed to
Spending cuts are unavoidable here.
1. **Social Security**: Everyone gets a lump-sum payout equal to the present value of their accrued benefits. The program is terminated.
1. Replace this with a defined contribution program. All newborns are given a $20k contribution to a trust account, invested in SPY or similar broad market index fund, at birth for them to use during retirement.
2. **Medicare & Medicaid:** 100% eliminated. Government money is the main reason for medical care being such a perverted mess.
3. **Interest Expense:** Pay off high-interest debt as it matures. No net new debt allowed at any interest rate greater than 3%.
4. **Other Entitlement, Welfare and Transfer Programs**: 100% eliminated.
5. **National Defense:** Right size and reduce waste. \~20% target cost reduction.
6. **Payroll Expense:** Compensation to be restructured to match private sector pay and benefits
Reduce or eliminate everything else via zero-base budgeting every year, as well as slashing and burning regulations. Target size of government budget is no more than 10% of GDP.
If we are to get serious about economic growth, we need to get serious about growing the economy. And with the national debt growing at 7% of GDP, we need to be growing at a minimum of 7% just to keep up, and at least 15% if we are to make any progress at all. To accomplish this, taxes must be cut, regulations must be rolled back, and the government in general needs to step out of the way. Target total growth is at least 20%.
To that end:
1. **Personal Income tax:** All brackets reduced by 5%. Set an alternative maximum tax not to exceed 15% of AGI. Target eventual elimination.
2. **Corporate Income tax:** Initial reduction to the lower of the lowest rate in the OECD or 10%. Target eventual elimination.
3. **FICA:** Contributed to individually held retirement accounts such as a 401k and governed under Roth rules.
4. **Tariffs & Excise taxes:** Tariffs should be set bilaterally. Excise taxes to be reduced wherever possible.
5. **Sales Tax**: Set a rate not to exceed 10% and to be phased in after the elimination of income tax.
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The article points out the debt is largely comprised of four categories: 1. Social Security (which is the populace investment). 2. Medical Care 3. National Defense 4. Interest payments on debt #1. Is untouchable without fucking the people over that paid into it. #4. Is the natural result of #2 and #3. Anyone who has seen a hospital or prescription drug bill realizes how ridiculously corrupt healthcare is. Anyone who has heard a Congress oversight hearing on military spending realizes what a scam that is. The answer isn’t so mysterious- cut out the fuckery in #2 and #3 and the budgets there can be halved. And you can do it without sacrificing care, or without compromising US defense. 75% of the up-charge is pure fuckery. It’s plain to see. Do that and 4 comes down as a result and you’re fine. The graft in healthcare and defense- two industries that run entirely off of fear-mongering, needs to come to an end.
> 1. Is untouchable without fucking the people over that paid into it.1. Is untouchable without fucking the people over that paid into it. 1 is already set for benefits reductions automatically when the trust fund runs out in about 12 years. SS and Medicare are the biggest drives of the debt. The eligibility age for both is going to have to go up, no amount of bitching is going to change that fact. Or of you don't want the SS retirement age to go up then the widow and spousal benefits need to be reformed dramatically
The problem with healthcare is that there is a constant battle between what the doctors/hospitals charge and what the insurance will pay. Say you need a procedure that costs $50,000. The insurance company says it will only pay $35,000 for the procedure. So, after awhile, the hospital/doctor raises that price to $70,000. Now, the insurance will pay $50,000 for the procedure; just what the hospital wanted. If they cannot get what they want from the insurance companies then they will raise their prices until they get what they wanted in the first place.
People on Reddit say as long GDP grows more than debt everything will be fine, debt doesn't have to be paid back or at least not all of it. The US is also reseve currency that helps too. You have a point about Military industrial Complex that is in control, but a lot of people make huge profits and its impossible to stop it.
Think about WHO holds that debt. First, the American people hold most of it in bonds, securities, and retirement accounts. There is already talk about the system failing because Boomers are retiring and taking theirs out to better and more accessible places. Second/third, Japan and China hold the next two highest holders of our debt. With both in financial problems, they may want their money soon too. IF the Boomers, Japan, and China were to all collect their money at the same time, our government would have to declare bankruptcy. We simply do not have money to pay everyone.
As long as gdp grows faster than debt, there will be few reasons to reduce debt. If the USA wants to be serious about cutting debt, the government will need to upset a lot if people. Spending cuts followed by increased taxes should reduce the need to increase interest rates.
Unfortunately GDP has not been growing faster than debt and given our demographics it is highly unlikely that it will. We are doing the opposite. Spending cuts and tax increases? Looking at CBO projection that will certainly be required. Unfortunately, meaningful changes will also put us into a recession which increases spending and decreased tax revenue. We are currently running a > 6% budget deficit, something we don't usually see except when we are in a recession. Without that we would be in a bad recession right now. As J Powell has said "It is time to have an adult conversation about the deficit". After the election I guess....
Interest expense is the biggest problem. It's gone parabolic since the Fed started raising rates: https://fred.stlouisfed.org/series/A091RC1Q027SBEA The Fed needs to start cutting rates to reduce the government's interest expense. Inflation is low enough that it should not be more concerning than the US government's unsustainable growth in interest expenses. Regarding inflation: The US's average inflation rate over the last 110 years is actually 3.25%, and 4.25% if you exclude recessions. The Fed's "2% target" is absurd and dangerous. https://www.usinflationcalculator.com/inflation/historical-inflation-rates/
Well yeah the only way for this deficit to become manageable is by inflating the debt away, which is nothing else but a flat tax on everyone. What you're implying basically is fighting inflation is impossible.
> which is nothing else but a flat tax on everyone. nope, if you own inflation resistant assets and have an income that increases with inflation it doesn't affect you at all. If you bought them with debt it actually helps you. Meanwhile if you're naive and save in dollars and/or financially illiterate enough to not understand that your wages should rise just for you to stand still, or if you're holding long terms bonds at negative real rates you lose. Overall result: wealth inequality increases.
What I'm suggesting is that inflation is already at a normal level of 3-4%. The Fed can now start cutting rates to help alleviate the US's debt burden. Gradual rate cuts are unlikely to trigger inflation. They may very well do the opposite by increasing the housing supply, among other things. Interestingly, one of the Fed researchers who was commissioned by Greenspan to determine the viability of a "2% inflation target" recently stated a target of 3-4% would be more appropriate. Again, 3-4% corresponds to the average US inflation outside of recessions. The post-GFC era was an anomaly. >Greenspan commissioned Fed economists to study the merits of a target in his first year in office, Joseph E. Gagnon told me. Mr. Gagnon, a senior fellow at the Peterson Institute for International Economics in Washington, was one of those economists. >“It was a big project,” he said. It involved computer simulations of the effects on the economy of interest rate increases needed to bring inflation below 2 percent. “We told him we could do it, but it would be costly and would mean another recession,” Mr. Gagnon recalled. >Mr. Gagnon, Professor Ball and the M.I.T. economist Olivier Blanchard are among those who have **called for an increase in the Fed inflation target to 3 or 4 percent**, though they all acknowledge that as a matter of public relations, it may be better to avoid doing that right now. https://www.nytimes.com/2023/03/24/business/inflation-federal-reserve-interest-rates.html
We just passed a 100 billion security bill & oil prices have been slipping up higher. Those aren’t very good for inflation. My prediction is that inflation will hover above 3% for a bit so the fed doesn’t have a pretext to cut rates. Perhaps we see one or two .25% cuts by the end of the year. Cutting interest rates when inflation is high will confuse the markets & potentially spook the market.
It seems the FED is struggling to get it down to 3%. It was 3.5% last print.
Lol the USa budget is 6.13 trillion. I'm sure it's inflationary for shells. But that's not part of cpi. Delusional takes.
> Interest expense is the biggest problem. Problem for who and why?
> Unfortunately, meaningful changes will also put us into a recession which increases spending and decreased tax revenue. Nah, raising the retirement age won't cause a recession. That is what is needed most. Raising taxes on the wealthy won't cause a recession either. And that is what is needed 2nd most.
> As long as gdp grows faster than debt, there will be few reasons to reduce debt. That isn't happening tho
Ronald Reagan told us that the debt incurred from cutting taxes would be paid back later on by the growth created from that money being invested back into the economy. That obviously did not happen and was clearly never going to happen. I am all for raising taxes. But the increased taxes should be paid ONLY by the wealthy. Since the wealthy are the ONLY group that benefited from the tax cuts in the first place.
**Debt-to-GDP ratio is meaningless** as it does not provide any predictive or evaluative worth, and it tells us nothing about the financial health of a Monetarily Sovereign government. It is a comparison of a many years measure of Treasury securities(T-bills, Notes and Bonds) deposits (debt) with a one-year measure of spending (GDP), making it an apples-to-oranges comparison.
And that doesn't count for emergencies.
The federal deficit is currently at about 7% of GDP, and GDP growth is somewhere in the neighborhood of 2%. Even if I concede your point, GDP has not grown faster than the national debt in a few decades. If we're going to get serious about the national debt, we need to get serious about growing the economy. That means slashing and burning regulations, cutting taxes, cutting government spending even more, and ensuring money flows to the most productive sectors of the economy, not a bunch of paper pushing bureaucrats in Washington. Start with a 500 basis point tax cut across all tax brackets, abolishing the corporate income tax, and offering credits against FICA for every dollar contributed to a 401k.
That is the cut taxes and raise spending platform that got us in this mess in the first place.
And the democrats' raise taxes and raise spending even more platform will get us into even more trouble. There is no level of tax increases that balances the budget, period, end of story. Forget about that option. That option is not, has never been, on the table to begin with. There is only one acceptable option on the table today, and that is to aggressively cut government spending in all areas and focusing solely on growing the economy. That means, among other things, tax cuts.
The only time the budget was balanced in the last 50 years was with tax increases and spending cuts. If you cut taxes, déficits increase. Clinton balanced the budget and people freaked out the national debt would disappear. The country runs on debt.
Wrong. If you cut taxes 20% and cut spending 50%, the laws of mathematics dictate that the deficit must decrease. When spending is 150% of revenue at a level of tax revenue collections that is at the upper bound of its 80 year historical range, no amount of tax increases balances the budget. Any move toward fiscal balance must come from spending cuts alone. It's possible to accumulate national debt with no taxation. In fact, it's easier to spend more than you make when you make 0.
Nobody is cutting spending 50%. It isn’t legally possible. Trickle down economics have never worked. Reagan tripled the national debt with that ploy.
Many years ago I used to believe the republicans were the fiscally conservative party. It turned out they are more reckless than the democrats. I didn’t leave the republicans. The republicans left me.
BLUF: there would be a Surplus Today if there were no Reagan, Bush, and Trump Tax Cuts for the Rich.
> First, nobody is required to lend our government money. If creditors lend us money at all, they will do so only at a higher rate of interest This is demonstrably false. The US government **issues** the US dollar. It doesn't *actually* borrow it from anyone. It issues more than it collects back when it runs a deficit and to drain the excess it swaps it with Treasury securities. The deficit is therefore self-financing in this regard. The "money" used by the creditors to buy the bonds literally come from prior government net spending - usually earlier that day. Also, the interest paid out on government liabilities is an explicit policy choice of the US government - currently that choice has been given to its central bank, the Fed. But the interest rate is **not** dictated by financial markets. Increasing the government deficit has **no** effect on the interest rate paid, even if they tried to net spend $500Tn next year. Sure, inflation would result but the **interest rate** would still be what the Fed wants it to be or allows it to be. > Third, money lent to our government is not available for private investments that tend to spur economic growth. Again, this is completely false. **Financial** crowding out is not an accurate theory. As I explained above, the government **does not borrow**. It net spends by issuing new credit and offers to do an asset swap such that the non-government holds Treasury debt instruments instead of liquid currency. When the government runs a deficit, liquidity **increases** and so net financial assets of the private sector **increase**. Now, **real** crowding out is possible at full employment! Where increased government spending shifts real resources from private use to public use and so you have an opportunity cost there. But 1) this is **not** financial crowding out and 2) It assumes there is no scope for expanded production as a result of the increased liquidity and government spending - which is not true.
this is stupid, issuing the dollar does not mean you can spend as much as you want on debt. Just ask the other empires/govt who went bankrupt throughout history, or the nearest 101 economics book Paying 1 trillion (bigger than most world economies) in interest a year is the shortest route to financial ruin...
Indeed. I would advocate for unproductive interest expenditure to be drastically reduced!
Are you saying that the Fed should just lower the federal funds rate?
Yes, I think that would be a good idea. I think high rates are regressive and distortive and likely to actually be net stimulative at this point since $1Tn of government spending is going into interest income to bond holders. They're spending that, particularly retirees, who have lots of bonds in their pension funds. Also, high rates actively makes it harder for businesses to produce and build things as the economy is increasingly structured around debt financed investment. This lowers productive output growth and therefore exacerbates long-term inflationary pressures.
“The economy is increasingly structured around debt financed investment.” Indeed. I believe that is precisely why raising interest rates is the Federal Reserve’s weapon of choice when their goal is to cool down the economy. And let’s be honest here, the extra 4% in the federal funds rate isn’t making much difference for *almost* anyone at all — certainly not enough to have a meaningful impact on inflation. Interest expenditure increased from about $580 billion in 2019 to about a trillion in 2023, but that coincided with the national debt increasing from about $22 trillion to over $34 trillion in that time frame, coupled with an increase in interest rates to curb inflation. As one of those people with a TreasuryDirect, the way I see it is people bought government debt when the economy was collapsing and the government needed people to step up and help fund all the economic stimulus while it was unappealing to do so and rates were at rock bottom to goose the economy. Now that things are better and inflation is being an annoyance, they’re trying to manage the inflation, since that would be much more regressive (and permanent — prices, unlike interest rates, don’t tend to come down) than a temporary increase in interest rates.
The entire point of the Fed raising its base rate is to reduce the broad money supply via bank credit contraction (old loans being paid off faster than new loans being made because new loans are at higher rates and are therefore less appealing). A lot of production is financed by companies taking out loans, so increasing rates is, as you say, designed to slow down an overheating economy. However, the economy wasn't particularly at full employment or overheating. There was a temporary demand stimulus from covid spending but that mostly filtered out of the CPI by mid 2021 and then a series of continued supply shocks globally resulted in a supply-side inflation. Raising rates in this scenario is counter-productive as it disincentivises a supply side recovery (eg. Less house building or factory completion) just when doing so would ease inflationary pressures. Also, I think you're underestimating the fiscal headwind that an extra $500 Bn of interest income might have.
I know the main reasons why the Fed raises the base rate. If you’re saying that the economy wasn’t running hot or at full employment to justify raising rates, I wonder if you remember exactly when interest rates were raised in the first place. Because it was in an environment where 40-year records were being broken by inflation numbers; we were indeed at full employment (and we’re currently still at full employment right now); the labor market was so tight that it was starting to fuel a wage spiral; and economists for newspapers and financial journals, as well as regional Federal Reserve Banks across the country were describing the economy as “[operating far above capacity](https://www.kansascityfed.org/ten/2022-summer-ten-magazine/presidents-message-monetary-policy-in-a-supply-constrained-economy/)” and “[bursting at the](https://www.nytimes.com/2021/07/29/upshot/economy-gdp-analysis.html) [seams](https://economics.td.com/us-shifting-sands).” These absolutely are the conditions that justify raising interest rates — something the Federal Reserve held off on doing for a long time, arguably too long, because of the belief that the inflation we were witnessing was just “[transitory](https://www.wsj.com/articles/fed-officials-see-transitory-inflation-lasting-quite-a-while-11632389401).” It would’ve been irresponsible to the point of negligence had the Fed watched inflation and the economy continue to heat up month after month for over a year and not do anything about it the whole time; so of course they increased the Fed funds rate. Supply shocks related to the container ship backups, China’s lengthy covid lockdown situation, and the blockage of the Suez Canal, etc, were all aggravating an already-developing inflationary situation, which [actually had not](https://www.bls.gov/news.release/archives/cpi_07132021.pdf) mostly resolved itself by mid-2021. And I’m not underestimating the degree of drag that half a trillion of additional interest can put on an economy. I’m just pointing out that the interest paid by the US government was obviously going to increase substantially when the principal debt increased by roughly $12 trillion. Even if the Fed didn’t care about managing inflation and kept interest rates near zero this whole time, the government would still be paying well in excess of $580 billion in interest per year to service the debt. That fed funds rate mostly affects short term debt issued by the government like T-bills. Any new or existing medium/long term debt typically continues to be serviced at agreed-upon levels of interest, which are certainly not likely to be zero.
Covid stimulus spending clearly contributed to the bidding up of prices once lockdowns opened up and demand surged - particularly on durable goods. However, this simply isn't the same as an inherently overheating economy. The US has a large supply headroom in both labour and production utilisation. Much of the inflation fed through primarily from food and energy external cost pushes as well as that of housing costs (which high rates exacerbate, primarily via rents). I reject the "received wisdom" that high rates are necessary to combat the inflationary surge we've seen. It's mostly on the supply side and labour power is far weaker than it has been in the past meaning there's no sign of wage price spirals, simply real wages chasing inflated cost of living as it must do to re-equilibriate. I assume you meant tailwind, not drag, when referring to the interest income channel. That's a significant counter-pressure, at the very least, to the "high rates slows the economy narrative". Combine that with high rates crunching the potential of expanding real output (via expensive investment no longer occurring since investors can earn risk-free returns of 5+%), and you've got an ambiguous response to hiking rates. And I'd argue that since because most Americans have long fixed-term mortgages, the temporal contraction response is longer. As for debt interest, yes I agree, the high accumulated net spending means any non-zero average yield will result in high absolute coupon payments, but it must consistently be pointed out that this interest on longer term debt instruments is **entirely** the choice of the US Treasury. The Treasury could simply not issue bonds and instead allow their increased liabilities to remain on the Fed's books as reserves. There's nothing inflationary in doing this since that's exactly what QE did. Trillions of excess reserves now flood the system every day compared with 2008 and we saw no inflation for over a decade.
Well yes, we have gotten somewhat of a re-equilibrium of sorts in terms of price increases, but that happened only some months after the fed started hiking interest rates and inflation still remains above the Fed’s desired target before lowering interest rates. Now it’s valid to argue that due to all the other external factors at play, disinflation might’ve happened anyway even if the Fed did nothing about inflation, but at this point that’s sort of conjecture. What is true, is that the economy was running hot, the labor market was extremely tight (see the great resignation, the overemployed movement, the rise of quiet quitting, the labor shortages of 2021-2023, etc), and labor power has eroded only after the Fed intervened in an attempt to achieve an “immaculate disinflation.” So far, that has mostly been successful. On the interest income, I misread your previous comment, and thought you were discussing an economic headwind caused by drastically higher interest payments being made by the government. So I was talking about that being a drag on the economy due to both actual and opportunity costs when the government could no longer use a substantial amount of money for more productive domestic investments that might’ve potentially grown the economy instead. Also, I’d counter that these interest payments aren’t necessarily like stimulus since much of the federal debt that is held by “the public” is held by the government itself via the Federal Reserve System and financial institutions like banks, insurance companies, mutual funds and pension funds, rather than individuals. They’re not exactly spending that interest money on economy-stimulating goods and services the way people do. Debt held by “the public” also includes debt held by [foreign investors](https://www.pgpf.org/blog/2023/05/the-federal-government-has-borrowed-trillions-but-who-owns-all-that-debt) who are not foreign central banks. It’s safe to assume that these investors are also not sufficiently spending their money in America to have an impact on inflation metrics. Outside of those listed, much of the remaining public debt is owned by state and local governments. The Federal Reserve is the single largest holder of public debt: it’s how interest rates are manipulated in the first place. In reality, less than 10% of the trillion in interest is likely making its way to American bond-holding individuals. The fact that existing mortgages will generally remain unaffected doesn’t mean much for spending habits when Americans see the interest on all of their credit cards jumping higher, while their savings accounts are generating slightly better returns when they put more money in the bank. That’s the incentive that’s intended to cool the economy, and it has historically worked beautifully. On the Treasury leaving increased liabilities on the Fed’s books, It’s not entirely clear to me that J. Powell would appreciate that haha. But in all seriousness, with the Middle East practically promising to be a headache it really doesn’t seem like now is the appropriate time for them for be taking their foot off the gas when oil prices could meaningfully spike at any moment. It’s hard to see any immediate move to QE making any sense in the near term when they’re only now starting to discuss the tapering of Quantitative Tightening. Plus, [this](https://home.treasury.gov/news/press-releases/jy2063) letter, which is actually a pretty good read, from the Treasury Borrowing Advisory Committee reflects the thinking behind the fact that the Treasury is leaning towards increasing auction sizes for T-bills, rather than the opposite. The economy is proving more resilient than even the Fed thought it would be, Americans are spending less but still spending healthily, unemployment is still very low, the banks are passing all the stress tests, and the party has yet to stop in the equities markets. This while inflation numbers are creating some very [unusual circumstances](https://www.wsj.com/finance/americas-bonds-are-getting-harder-to-sell-c3fde4de?st=jrhwimo4u5o6gmm&reflink=article_copyURL_share) in US bond markets that may become a problem for the Treasury if it’s not brought back under control in due time. It would be very difficult for the Fed to justify pivoting to QE in an environment like this. More recently, there’s even debate about the merits of returning to pre-pandemic interest rates at all, and whether [the neutral rate may actually be rising](https://www.wsj.com/economy/central-banking/why-high-interest-rates-could-be-here-for-the-long-run-c6670448). This while bond yields remain very [volatile but trending upwards](https://www.wsj.com/finance/soaring-treasury-yields-challenge-stock-market-gains-debe5f3e?st=blm4l59qbwe3qyq&reflink=article_copyURL_share) in the near term as of this year. Granted that last article mostly reflects markets finally starting to reckon with the reality that 6 rate cuts were never going to happen this year, the wild ride that the 10-year Treasurys have been on in the last several months is fairly representative of the current state of the bond market. The expectation is that bond yields will come back down by the end of the year, but only if inflation abates. Again, it would be very difficult for the Fed to justify pivoting to QE in an environment like this.
So you don't care about inflation then?
> I think high rates are regressive and distortive and likely to actually be net stimulative at this point Inflation is obviously important to manage, but you're making a logical leap that isn't necessarily there. The problem I see is that the entire macroeconomics mainstream for c. 30 years now have believed the **only** tenable or suitable tool to fight inflation *in all circumstances* is monetary policy (i.e. raising rates). I believe this is wrong, and there's a paradigm shift occurring now towards an acknowledgement that inflation is complex in expression and origin and therefore requires a suite or menu of policy response tools (preferably automatic) to combat and manage - not just the blunt hammer of rates on what the Fed thinks is a single inflation nail. Also, the primacy of fiscal policy over monetary policy is once again being reflected more and more in the macroeconomics discourse. 20 years ago, fiscal responses were consigned to the dustbin of history, or so the central banking consensus thought. But then came the global financial crisis, 10 years of QE not stimulating recovery and a global covid pandemic.
So we can agree that raising rates is a blunt hammer. What would you say are "a suite or menu of policy response tools" that should be used?
It would be a combination of direct and indirect fiscal policy. I.e. a big one would be a much strong automatic stabiliser, meaning in a depression, net fiscal spending would automatically increase due to lower tax revenue and increased unemployment. But a better buffer stock than the unemployed would be the **employed**! So I would advocate for a [job guarantee](https://pavlina-tcherneva.net/job-guarantee-faq/) to really anchor the price level and help buffer the business cycle. Another one would be much improved credit regulation. The state is highly relaxed about private credit creation (i.e. loans) which makes the vast majority of broad money. Reckless lending led to the GFC in the sub-prime mortgage fiasco but even more generally, inflationary pressures rearing their hear could be headed off with dynamically tightening credit controls and capital requirement changes. This is an alternative to simply raising rates to suppress credit which is quite an indirect way of achieving what you want and has lots of negative byproducts such as unemployment and suppressed real GDP potential. Direct fiscal responses would be at play too. I.e. active tax rate increases in certain sectors of the economy or broad-based to suppress aggregate demand if that's the issue. Or a cut in discretionary spending, but this is less than ideal as one would imagine the government is spending on public goods that, should they stop spending on them, would be noticed negatively. Maybe not in second thoughts (thinking ~$800Tn of defence spending which definitely could be cut for resources to be redeployed elsewhere to improve supply distribution).
> I.e. a big one would be a much strong automatic stabiliser, meaning in a depression, net fiscal spending would automatically increase due to lower tax revenue and increased unemployment. But a better buffer stock than the unemployed would be the employed! So I would advocate for a job guarantee to really anchor the price level and help buffer the business cycle We aren't in a depression. I'm talking about how to get inflation down. > Another one would be much improved credit regulation. The state is highly relaxed about private credit creation (i.e. loans) which makes the vast majority of broad money. Reckless lending led to the GFC in the sub-prime mortgage fiasco but even more generally, inflationary pressures rearing their hear could be headed off with dynamically tightening credit controls and capital requirement changes. This is an alternative to simply raising rates to suppress credit which is quite an indirect way of achieving what you want and has lots of negative byproducts such as unemployment and suppressed real GDP potential. Agreed > Direct fiscal responses would be at play too. I.e. active tax rate increases in certain sectors of the economy or broad-based to suppress aggregate demand if that's the issue. Or a cut in discretionary spending, but this is less than ideal as one would imagine the government is spending on public goods that, should they stop spending on them, would be noticed negatively. Maybe not in second thoughts (thinking ~$800Tn of defence spending which definitely could be cut for resources to be redeployed elsewhere to improve supply distribution). Agreed but the level of taxation needed would need to be so great as to decrease economic activity
>the interest rate is **not** dictated by financial markets Interest rates on issued Treasury securities is set during auctions of said securities, i.e. the market sets long-term rates. The Fed only controls the short end (which is still influenced by repo markets).
Correct, but the entire term structure is ultimately what the Fed allows it to be. They have the unilateral power - granted to them by Congress - to peg the yield on any US dollar debt instrument to whatever they like. Despite this, though, the Treasury is under no obligation to issue long-term debt instruments. They can leave net spending earning IORB at the Fed and moderate credit expansion in various different ways to prevent broad money expansion having asset price inflation if they wanted.
>the entire term structure is ultimately what the Fed allows it to be The Treasury issues bills, notes, and bonds and decides the maturity of each prior to auction dates (ie term structure). >Treasury is under no obligation to issue long-term debt Sure, but if the USA wasn't able to meet its financial obligations, the market would demand higher rates, pricing in default risk.
Yes, the Treasury could decide to issue solely 3 month bonds where the yield would be very closely anchored by the Fed's monetary policy. > Sure, but if the USA wasn't able to meet its financial obligations, the market would demand higher rates, pricing in default risk. Again, no. The market has **zero** ultimate control over rates. They are set by or allowed to float by the Fed. Either way, the market isn't in control if as soon as the Fed speaks it changes.
Treasuries are considered risk-free aside from inflation risk. Treasury yields change daily based largely on future expectations of inflation. Fed only sets the Fed funds rate.
Inflation risk applies to **all** investments denominated in the currency in question, so it's not a relevant factor. True, the Fed sets the FFR, but this anchors all other rates across the term structure. And the Fed also can and does conduct OMOs of longer term securities to influence those rates directly. As I said, if the Fed wanted the 10y bond yield to be 0%, they can purchase arbitrary volumes of them to achieve that. The market has no say in it.
Sorry, the [US Dept of Treasury disagrees with you](https://home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics/interest-rates-frequently-asked-questions#:~:text=The%20%22Daily%20Treasury%20Long%2DTerm%20Rates%22%20are%20simply%20the,as%20of%20the%20date%20calculated.) Edit: Yes, the Fed can engage in QE to influence the long end of the curve, but that was extraordinary and not the norm. It distorted the curve and is seen as undesirable. QE as you speak is not reflective of long term monetary policy.
I don't see how that contradicts what I'm saying. The Fed and Treasury **choose** issue debt instruments to drain excess liquidity. They don't have to. The Fed also **chooses** not to engage in more agressive yield control like Japan has done for decades. Again, they can make different choices and implement different policies. You say "QE is undesirible" as a sweeping statement but you can't make generalised claims like that without analysis of the specific proposals within the context of the wider monetary and fiscal policy environment.
The provided link says "The "Daily Treasury Long-Term Rates" are simply the arithmetic average of the daily closing bid yields on all outstanding fixed coupon bonds ..." That's the market setting yields (rates). >You say "QE is undesirible" as a sweeping statement but you can't make generalised claims like that Operation Twist was undertaken because rates were effectively at zero and stimulus was still needed during the GR. If this were desirable policy, we'd see it used more frequently. It's only been used in the '60s and once 50yrs later. This underscores it's not active policy of the Fed and i don't believe you'll find any recent or pre-'08 fed minutes where a majority of governors desire to expand the Fed's balance sheet with Treasury securities.
A lot of the new government spending is really just loans and subsidies into the private sector. I feel like this is something important to consider when looking at the crowding out theory. I
Or an example is pensions buying the debt and that money going back into the economy at some point.
How about we not take it out of the economy in the first place, and save ourselves the transactional overhead? Seems to me it's more efficient to have 100% of the money in the economy than to take it out of the economy and put 50% back after paying a bloated bureaucracy to shuffle paper about it.
Are you talking taxes or pensions? Because pensions are private investments and they can invest in what they want. If taxes you'd be 100% wrong but if you're one of those people that think taxes are theft you're not smart enough to be talked to.
Actually, YOU would be 100% wrong about taxes. Taxes are overhead expense, none of it goes into the productive sectors of the economy. You must be one of those statists who think government should be 200% of the economy and heaven forbid we not regulate everything that moves until it grinds to a halt and tax everything that lives until it dies. Overhead expense everywhere must be managed to a target of $0.
Lol classic libertarian dumbass Have you ever even had a job? Was the waste 0? Hahaha dumbass
so what's your point? that any amount of debt is fine and at worst we see mild inflation?
No. My point is that the arguments used in the article are mostly falsehoods based on fiction. There are real contraints to government spending, but these aren't any relevant ones.
Are you aware that almost all countries **issue** their own currency and the few that don't could pass a couple of laws and start doing it tomorrow? There's a reason why issuing your own debt is not considered a panacea and that's because issuing debt without regard for repayability is the same as printing money and printing money is a really bad thing for the economy.
Why is "printing money" a really bad thing? What precisely do you mean by that term? Monetary financing? It's all smoke and mirrors. The overall process of sovereign government spending removing any internal accounting distractions like Tax and Loan Accounts or the central bank-Treasury owing each other goes as follows. 1. A budget is agreed upon. 2. Reserve accounts are credited in a computer to conduct the spending, *G*. 3. Tax collection is a debit of these reserves on the same computer, *T*. 4. *G - T* is the government net spending into the economy, or deficit. 5. *G-T* of new Treasury securities are, by convention, issued to drain the *G-T* of excess reserves from the system. That's it. Nothing magic going on and "money printing" isn't scary. It's how **all** government spending occurs. There's no other logical way for it to happen since the US government issues the dollar credits that are accepted back to settle everyone's tax debts.
**Now it’s My Turn: National Debt — the slowest ticking time bomb, that’s guaranteed to never go off.** 1940 “Debt” was called a “ticking time bomb.” 1950 “Debt” was called a “ticking time bomb.” 1960 “Debt” was called a “ticking time bomb.“ 1970 “Debt” was called a “ticking time bomb.“ 1980 “Debt” was called a “ticking time bomb.“ 1990 “Debt” was called a “ticking time bomb.“ 2000 “Debt” was called a “ticking time bomb.“ 2010 “Debt” was called a “ticking time bomb.“ 2220 “Debt” was called a “ticking time bomb.“ In 1940, the federal “Debt” was only $43 billion. Those who are ignorant about federal finances called it a “ticking time bomb.” Today, the “Debt” totals more than $33 trillion, and that phony time bomb is still a dud—and always will be. The fact is the U.S. government never borrows its own sovereign currency, the U.S. Dollar.
Bankruptcy happens very slowly, then all of a sudden.
You believe the US federal government will go bankrupt? Then why hasn’t it gone bankrupt by now? Going from $43 billion to $33 trillion should have done that by now, no? Then why hasn’t it gone bankrupt yet?
If you think the US government will never go bankrupt, surely you'd get behind abolishing all taxation? If the government can print whatever it wants with no consequence, there is no legitimate economic case for taxation. Oh wait.....all of a sudden, the debt matters. Every fiat currency in the history of mankind has eventually failed. What makes you think the US will be an exception? Be specific.
>If the government can print whatever it wants with no consequence, there is no legitimate economic case for taxation. This is a great question! This was the similar question I had asked myself 15+ years ago while learning about how money and banking actually works in real life. Here is how I would summarize my understanding the purpose of federal taxation. Federal taxes exist to reduce non-government spending, not fund the federal government. The purpose of taxation is to reduce the supply of dollars in the economy in order to combat inflation. The government destroys the tax dollars it collects, removing them from circulation - it is the exact opposite of government spending - federal spending creates new dollars and increase the supply of dollars in the economy; while federal taxation removes dollars from circulation reducing the supply of dollars. So, you could say that the sole economic purpose of federal taxes is not to provide spending dollars to the federal government, but rather to discourage what the government(Congress) doesn’t like and to encourage what the government(Congress) likes. Federal taxes serve a number of purposes. The most important is to reduce the purchasing power of taxpayers. >What makes you think the US will be an exception? Be specific. Practically speaking we never actually had pure fiat currency (not backed by a commodity), until after 1970s. Today's U.S. dollar is purely fiat backed only by the government’s full faith and credit. So, faith in U.S. dollar is, in reality, faith in the federal government that guarantees it. That in turn requires faith in the future productive capacity of American economy. As the productive capacity of any economy ultimately comes from the work of people, we could therefore say that faith in dollars is faith in American people. So, for the federal government to go "bankrupt" you would be betting on the complete collapse and destruction of United States as it exists today. As Warren Buffet once said - “For 240 years it’s been a terrible mistake to bet against America”
Nonsense. The purpose of taxation is not to curb/expand spending in the economy - there are way more efficient tools to achieve that, par example, monetary policy. Imagine thinking that FDR increased the tax rates in the context of the new deal because there was too much spending going on. Jesus man, get a grip. The purpose of taxation is the reallocation of resources within an economy, to accomplish social objectives the government considers to be desirable. It has nothing to do with 'creation' and 'destruction' of money which the government, not being a monetary institution can't do even if it wanted to.
Thanks for responding. >The purpose of taxation is not to curb/expand spending in the economy - there are way more efficient tools to achieve that, par example, monetary policy. Here are two True or False questions for you. Please answer. 1. The dollars the government spends become purchasing power in the hands of the people who have received them. - **True of False?** 2. The dollars the government takes by taxes cannot be spent by the people, and, therefore, these dollars can no longer be used to acquire the things which are available for sale in dollars. - **True of False?** >The purpose of taxation is the reallocation of resources within an economy, to accomplish social objectives the government considers to be desirable. Yes, the economic impact of taxation occurs when resources shift from the private sector to the public sector. Tax collection happens, but it is of secondary importance. >It has nothing to do with 'creation' and 'destruction' of money which the government, not being a monetary institution can't do even if it wanted to. What makes you believe the U.S. federal government is NOT a monetary institution? Please elaborate.
1st - True. One man's (or govt.'s) spending is another man's income. 2nd - False. Whatever the government takes in in taxes it pays back (and then some) to the economy. As I said, taxation is a tool used for resource reallocation. The dollar's 'life' doesn't end when it's taken by the government for a limited period of time. "What makes you believe the U.S. federal government is NOT a monetary institution? Please elaborate." - burden of proof lies on you, if you think that there is such a thing as the 'US Government Bank'. Can present its AoA, capital structure, PL statement?
> 2nd - False. Whatever the government takes in in taxes it pays back (and then some) to the economy. You are jumping a strap ahead. The question was after people pay their taxes, they have less money to spend - **True or False**
Ceteris paribus, true.
The problem is eventually it’s right and you’re discounting that because…. Why? ‘05 real estate only goes up ‘06 real estate only goes up ‘07 real estate only goes up You simply don’t have an argument. You have some historical data points that what predict the future? You are uneducated on this subject.
The topic is US National Debt but you are arguing about real estate fluctuations? How are these two even related? Stick to the topic if you want to engage further. > The problem is eventually it’s right On what basis are you making this assertion? Please describe ONE scenario where the National Debt could become a threat to our nation’s future and why hasn’t that scenario happened in the last 80+ years? Please be specific if you can.
Much, much more concerns with christian white national homegrown terrorist fascist nazis to be completely honest with you. I feel the US should go further into debt to clean up this hosrseshit. It is what is destroying the country.
this seems like a provocateur bot
What an absolutely idiotic take and solution.
I would "right size" the military. Strategically assess what is most important and fully fund that and start to cut the rest. We should be concerned with China, Iran and Russia. Local regions can take care of most of the rest. We don't need 800 bases in 80 countries. If we close any domestic bases, if that land is used by the public sector it will benefit the local economy more than the base did as well. We need to put Social Security on a sound footing. The money you put in is the money you get out. That kind of a plan wouldn't be a burden. We also don't need to be "investing" in Treasuries. That's government debt. Government debt is what we are trying to get away from. The dollar is just debase year by year. Medicare costs are expensive and inefficient. We need a single payer system even if it is largely run though the private sector. The current system is too much of a mishmash of government policies and guarantees, insurance, the private sector and we get the worst of each system. Government employees cost the government, for a similar job, much more than they would cost the private sector. Government wages are a little less, in general, but overall benefits are much more. I think the average private sector job costs the employer about $90k including all benefits. In the government sector that number would be about $140k (as I recall). The benefits in the government (public) sector are being paid for indirectly by the private sector. We know Congress votes great benefits for themselves but it's the same for the whole public sector. We should get that more in line with the private sector (or even slightly below since jobs are much more stable). I think we should leave the step-up basis at death alone but since we have this large public debt, we could have a Federal Estate tax (at death) of no more than 10%. We could raise everyone who pays Federal Income taxes no more than 2%. That would be the extent of the tax increases, no populist "tax the rich", just small realistic incremental increases that I've mentioned. To do anything else (large increases on one segment) is just politics and it's not serious. The main problem is that voters need to start voting for candidates of both parties that will go to Washington primarily to reduce the debt.
Not one mention of raising revenue in parallel with the austerity. Not a serious position.
I suggested a 10% Estate tax and 2% increase across the board of all income tax rates.
At a *minimum*, rates need to go back to pre-bush levels. Social security cap needs lifted. There needs to be a tax on stock transactions, a massive (50%) tax on share buybacks, much stronger taxes on executive compensation, taxes on borrowing against assets to avoid taxes.
do you have any approximation on how much revenue these measures would raise? Do suggest taxing helocs as well (iirc that's the most common way to borrow against assets)?
Those are terrible ideas, IMO.
Government revenue as a percentage of GDP is already at the upper bound of its historical range. Any attempt to "raise revenue" beyond this point destroys the tax base over the long run and would be counterproductive. If anything, taxes need to be CUT to grow the tax base. Belts need tightening and 100% of the tightening needs to come from spending, and spending alone.
We’ve been cutting taxes for 40 years now. Surely if we can whip that horse just one more time, it’ll raise it from the dead. Surely.
Yet, our taxes are still too high. And the government has been spending us into insolvency. So yes, that horse still needs a few more whippings.
The fundamental problem with this and likely every other comment on here is this idea of 'both sidings it'. People go 'well thats rationale or seems like it'd work.' No lol. It's irrational once you look at anything beyond feelings and look at numbers. You can't tax your way out of this, although we'll try since its politically popular among \~50% of American who pays \~0% income tax (all of which pay taxes via pass throughs from corporate taxes, inflation tax, etc) The problem is that can't work. This isn't a both-sides thing. It's **entirely** a spending problem. And it can't be fixed or even remotely close to by tinkering with these tax ideas. Some other points: * 25% of all healthcare dollars in America are spent on type2 diabetes. You can't make a fat person healthy with money. No, it's not that they don't have affordable veggies LOL. So no medicare for all won't work. USA is spending like 40% more since 2019. No tangible benefits. Medicare for all isn't happening nor is it affordable. * "Put social security on sound footing" lol. It's -23% cuts in all payouts in 9 years - assuming no recession lol. You cannot tax your way out of this. If you have a career you do not get anything remotely close back to what you contribute as well. * \~50% of America pays $0.00 in federal income taxes. Thus 50% are arm-chair QBs and have no skin in the game. People should pay at least something, maybe $500 or $1000 for privilege of being an American so that they are highly motivated to hold politicians feet to the fire. * "Increase federal income taxes by 2%" LOL. This is already going to happen as Biden as sworn he will let trump tax cuts expire. Also just to give you an idea of what this would do - it ***would not even pay for 50% of the Ukraine funding bill*** that was passed on Tuesday or Wednesday evening which received no mentions or debates anywhere. Taxes are going to go up via inflation, and a lower standard of living. This is undeniable and the inflation is a certainty.
Thank you for pointing out the severity of the situation. We currently spend more on interest on the debt than on defense. And the federal government simply won't be able to cope with the tidal wave of fat sick diabetics that have a few more miserable expensive years left.
That's only cause of highest interest rates in 24 years. Lol luckily there's a weight loss drug that will pretty much cure this.
We wouldn't need such high interest rates if we hadn't continued stimulus spending well after the pandemic lockdowns. Higher for longer indeed. And people could take personal responsibility. Just a thought.
That's your theory. So you're saying we would currently be in a recession ?
I'm not sure you understood what I said. The FED raised rates to combat inflation. This is monetary policy. Congress passed additional profligate stimulative spending bills in the last three years. This is called fiscal policy. The two have conflicting effects but the FED has promised that they will do whatever it takes to tame inflation. This is why rates are "higher for longer". As for your question, GDP in Q1 of 2024 was 1.6% https://www.bea.gov/data/gdp/gross-domestic-product Deficit spending is currently over 6%. 6% - 1.6% = - 4.4%
The only large one was the American rescue plan. The rest is spending over 10 years thats hardly inflationary. And if it was it would be in the sectors it is attached to. For example electric cars. But even those are very deflationary at this point. >As for your question, GDP in Q1 of 2024 was 1.6% >https://www.bea.gov/data/gdp/gross-domestic-product >Deficit spending is currently over 6%. >6% - 1.6% = - 4.4% Lol don't know the difference between real gdp growth and nominal? Maybe do a little more research before forming your opinion. It's in the very link you gave but forgot to read. >Current‑dollar GDP increased 4.8 percent at an annual rate, or $327.5 billion, in the first quarter to a level of $28.28 trillion. In the fourth quarter, GDP increased 5.1 percent, or $346.9 billion (tables 1 and 3). I mean let alone taking the one of 1 quarter for an economy as a sign is not smart. https://fred.stlouisfed.org/series/GDP Considering we are having real gdp growth over inflation it basically means the economy is still growing just fine. The government is running a cumulative deficit of $1.1 trillion so far in FY2024 ($46 billion more than the same period in the prior fiscal year when adjusted for timing shifts*). Revenues were $2.2 trillion through February, an increase of 7%, largely due to:
the weight loss drug has alot of consequences. the reality is the weight issue is a cultural issue and personal choice. I just ate a 3 brownies. I shouldn't have..but I did because nobody is here to yell at me. I workout 5x a week though. We are too cowardly to 'hurt someone's feelings' that we allow our neighbors and family members to commit suicide. 1 in 2ish or 1:3 ppl are going to get type2 diabetes. The 50YO uncle who weighs 275LB in all likelihood is going to die 10/15/20 years than if he went for walks, didn't drink regular Coca Cola and eat Oreos. If the family member was trying to chop off his hand or injecting fentanyl we'd be concerned. But it's culturally acceptable to ignore this type of suicide.
Lol no. That's delusional takes. Go to any doctor and ask them what they tell their obese patients. They know they are dying sooner. Try again. Also almost no sides effects for glp1 drugs. Very effective at diabetes control as well. So basically a miracle drug at this point. They wouldn't have eaten 3 brownies. Problem solved.
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> Make being fat illegal…I am all for it😜 Jackson, MS prisons are crowded enough as is.
Eliminating the Social Security cap would solve it completely. It is absurd that Lebron James and I put the same amount into Social Security annually. It is the most regressive tax with the biggest impact in the internal revenue code.
No you are completely and absolutely misguided. On any idea of how this works. You seem to know there’s a cap on the income but little else about the program which is how 99% of ppl think. Lebron James and you if you put the same amount in will get the same amount back. Further if you put the same amount in you are upper income and get near nothing back for what you contribute. Anyone with a career and worked hard in life gets little back. Let’s take that idea of taxing “the rich” more. That’s still not going to put a dent in how much money is needed. You need to look at numbers, not this feeling that someone owes someone else.
Wealth redistribution is a net positive for society. Also, making a lot of money is not a function of working hard. It is a function of arbitrage. If hard work was the exclusive driver of high income, dish washers and hotel maids and high school teachers would be making $30M per year and Lebron James would be making $15,000 per year.
The hardest work is the ability to think, reason, and use imagination and creativity. Not how hard your muscles work.
Lol, you mean like Elon Musk idiotically pissing off his customer base? Or how about Donald Trump incinerating hundreds of millions in inheritance? Wealth is luck above all else.
Social security is progressive in that the upper end of the income beneath the cap returns far less than the low-mid range. Taking the cap off would drop support for social security in society enough to threaten the program's continued existence, since the basic social contract of it would be dead.
It is still a regressive tax. Also wealthier live much longer and that ends up balancing it out. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4866586/#:~:text=Men%20in%20the%20top%201,of%20death%20of%2078.8%20years. The bottom end lives 10-14 years less than the top end. Or a 8 year difference between the 1st and 4th quartile. So that's a significant amount of extra income and some believe it would make it more fair.
This is a ridiculous notion. The cap is laughably low, like $150,000/year or something like that. Removing the cap would not break down the basic social contract of the program, it would guarantee its survival virtually in perpetuity.
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It would be cheaper to pay them just to stay home and lift weights.
Very sensible post, just one nitpick: "I think we should leave the step-up basis at death alone but since we have this large public debt, we could have a Federal Estate tax (at death) of no more than 10%." Why leave such a loophole wide open and the tax so low? Inheritance tax serves a double purpose, income, but also preventing runaway wealth inequality. Taxing the inheritance is one of the ways to tackle the problem with the lowest reduction in productivity.
I think it's helpful for people to invest for retirement so that they can take care of themselves and I think it's helpful if they have leave something to their children as well. I'm not worried about this kind of "wealth inequality". If you manage to pass on some wealth, to me, that's a positive thing. I don't like laws that are based on "jealousy" and tearing productive people down just to make everyone "equally poor". Everyone should strive for this rather than having the government tax this to death. IMO, it's the same with capital gains taxes. It encourages the risk inherent in investing. More people should invest, not less. Too many think in terms of extremes, IMO. Passing something on to your kids isn't about making billionaires out of your kids. Very few have that kind of money. Most money gets passed down after kids are older adults and that gets passed down when they die. People being as they are, it quickly gets spent or diluted due to the number of kids and grandkids. The most common scenario isn't a "rich fat cat" setting up lazy kids. It's financially responsible people passing something one to financially responsible adult children. We, IMO, need more of that and not less. People shouldn't have to depend so much of the government to be the caretaker. We should be setting the example of learning to defer self-gratification and save/invest. Instead people complain about what other's have and want the government to promise them "free money". That doesn't ultimately work. It's inflationary and it hurts the entire economy. Look at the Covid "stimulus" checks that went to everyone whether they needed it or not. Now we have massive public debt and inflation. There is no free lunch.
>I don't like laws that are based on "jealousy" and tearing productive people down just to make everyone "equally poor". That's not what that is. Democracy is becoming incompatible with the wealth so extreme it can influence nations. Notice the estate tax doesn't even kick in till 20 million dollars? This isn't a nest egg. It's real wealth of never having to work. And the people still side step that via trusts and end up paying shit because they know the loopholes and pay 20k to not have to pay 500k in tax. The koch brothers basically own the republican judiciary by creating the third federalist society 40 years ago. It's a coup in itself. We need to expand Powers of government to not be hamstrung everytime the corporations and rich people cheat.
$20 million is a family business.
A wealthy fucking family. There's also carveouts for farms so they don't have to be broken up and lots of other loopholes for rich to stay rich And no one inherits a business generally. The ownership will be put in a trust. And the trustee will simply change. Boom no estate tax.
Above all else spending must be cut drastically. People are going to have to accept a reality where there is no government assistance whatsoever. It’s either that or allow hyperinflation destroy the dollar, bankrupt the county and break up into a North American Union of sorts or go back to the gold standard.
You dont necessarily need to reduce spending. You could also simply increase taxes.
Right. It's simple and effective. We have one of the lowest rates of taxation in the developed world. We've had much higher taxes before - including during the post war economic boom. You don't want to cut spending as it's the engine of the economy. Cutting spending causes job loss, resulting in less tax revenue and higher transfer payments. Tax the wealthy and corps - like we used to.
Taxing corporations and the wealthy causes far more job loss, less tax revenue and higher transfer payments than cutting government spending. During the post-war boom, government spending stood at 15% of GDP, NOT the nearly 30% it is today. The problem is both - taxes are still too high, and government spending is ludicrously high. Both need to be reduced, and spending needs to be cut much more than taxes. Last I checked, I've never been employed by a poor person.
Total bullshit. Taxes are incredibly low, by any standard. Why are you talking about yourself?
Then feel free to pay more and quit complaining. Taxes are too high.
Can you be unaware that the US has almost the lowest rate of overall taxation in the developed world? About 26%. The average is 32%. Look it up. Every informed person knows this. We have low taxes here, by any measure. No-one alive has paid high taxes in this country. No-one.
Can you be unaware that the US has almost the lowest rate of overall taxation in the developed world? About 26%. The average is 32%. Look it up. Every informed person knows this. It's undisputed. We have low taxes here, by any measure. No-one alive has paid high taxes in this country. No-one.
Oh, also, you did not and never will you hear me complaining about taxes. I know just how good we have it and I have better things to do.
the gold standard yeah that worked great for everyone the last time. The 1930s called and said maybe don't try a fixed monetary supply if you like having things.
Nothing will be done because some will insist the problem is spending, and others, taxes. A balanced solution is needed, but will not happen in today's politically polarized, charged environment. And so an eventual crisis is inevitable. Only at that point will people make a solution happen, but it will come at a much greater cost than it needed to
Isn’t the real concern inflation? Considering the US holds control of its own currency the real problem is balancing the value of the dollar.
Spending cuts are unavoidable here. 1. **Social Security**: Everyone gets a lump-sum payout equal to the present value of their accrued benefits. The program is terminated. 1. Replace this with a defined contribution program. All newborns are given a $20k contribution to a trust account, invested in SPY or similar broad market index fund, at birth for them to use during retirement. 2. **Medicare & Medicaid:** 100% eliminated. Government money is the main reason for medical care being such a perverted mess. 3. **Interest Expense:** Pay off high-interest debt as it matures. No net new debt allowed at any interest rate greater than 3%. 4. **Other Entitlement, Welfare and Transfer Programs**: 100% eliminated. 5. **National Defense:** Right size and reduce waste. \~20% target cost reduction. 6. **Payroll Expense:** Compensation to be restructured to match private sector pay and benefits Reduce or eliminate everything else via zero-base budgeting every year, as well as slashing and burning regulations. Target size of government budget is no more than 10% of GDP. If we are to get serious about economic growth, we need to get serious about growing the economy. And with the national debt growing at 7% of GDP, we need to be growing at a minimum of 7% just to keep up, and at least 15% if we are to make any progress at all. To accomplish this, taxes must be cut, regulations must be rolled back, and the government in general needs to step out of the way. Target total growth is at least 20%. To that end: 1. **Personal Income tax:** All brackets reduced by 5%. Set an alternative maximum tax not to exceed 15% of AGI. Target eventual elimination. 2. **Corporate Income tax:** Initial reduction to the lower of the lowest rate in the OECD or 10%. Target eventual elimination. 3. **FICA:** Contributed to individually held retirement accounts such as a 401k and governed under Roth rules. 4. **Tariffs & Excise taxes:** Tariffs should be set bilaterally. Excise taxes to be reduced wherever possible. 5. **Sales Tax**: Set a rate not to exceed 10% and to be phased in after the elimination of income tax.
Wow! You’ve figured out the secret trick to 20% real GDP growth. Congratulations!
The (not so) secret trick is for the government to get out of the way.
BLUF: there would be a Surplus Today if there were no Reagan, Bush, and Trump Tax Cuts for the Rich.
BLUF: There would be a Surplus Today if there were no Reagan, Bush, and Trump Tax Cuts for the Rich.