Dean Baker makes some very good arguments that we are nowhere near the point where debt and deficits are a problem. In fact, there are good reasons to believe that the economy still has a demand shortfall, such as trade deficits, inequality, and prime age employment rates that are still much lower than pre recession levels.
We still have many people unemployed, or working low productivity jobs, and wages are still not rising as they should. Productivity growth has been stagnant, and I would argue the cause of low productivity growth, is an excess of cheap labor, and lack of demand.
Dean has much more to say:
http://cepr.net/blogs/beat-the-press/
5
Irresponsible fiscal governance is the kindest thing I can say.
Why would you cut taxes when children don't have adequate food, healthcare and education?
Why would you cut taxes when there is a debt to be serviced that is growing exponentially?
Why would you cut taxes when environmental disasters are depriving citizens of the basics of shelter and clean water?
Why would you cut taxes when our infrastructure is crumbling and much of our population doesn't have access to broad band internet?
Why? Why? Why?
Because lining the pockets of the rich who finance the elections is the game and those who have little are labeled as lazy and low class.
It is no different than feudalism.
Wake up! Time for a real revolution, folks.
21
Well researched article accompanied with good presentation by informative charts.
3
Republicans should remain in charge until the fallout from tax cuts and tariff wars meet an economic slowdown. It might take a while but when the economy worsens, federal services, Medicare and Social Security are ravaged, infrastructure crumbles, federal lands are exploited, the People will witness the full impact of Republican ideals and will be able to judge for themselves which party they want to support.
7
Thank you corporate America for defunding the government with the tax breaks you forced through congress with which you're now using to by back your own stock. It's all good for you, and who cares about anyone else....
17
We had money for a tax cut for the upper 1%. Trump thinks we have money for his wall. Now we see that our grandchildren will spend their life paying off the foolishness of this generation. We can't continue to grow and maintain our lifestyle as a debtor nation. The best days of the U.S. are behind us. We should be ashamed.
6
“turn out the lights, the party’s over”
1
All these years I’ve been under the impression that Republicans were the conservative, pro small government, anti deficit spending party in the U.S. It seems that either I misunderstood or that Republicans have misrepresented themselves the whole time.
12
Who holds all this debt? Maybe the people running it up stand to gain. The banks never seem to have a bad day regardless of what's happening big picture.
5
The federal reserve kept interest-rates low so Obama would not have to face the consequences of his deficit spending and increased debt.
The chickens had to come home to roost.
The federal government (except the military) could be cut in half and nobody would notice, except life would get better.
Deficits could disappear, as could the debt.
The private sector could benefit by making the displaced workers productive again.
For that to occur, Republicans need a 60 vote majority in the Senate. I don’t think that will occur in my lifetime, I’m 55.
So...MAGA or Make America Insolvent.
It’s your choice.
1
@Steve MD Trump and Republicans have turned the $9.4 trillion debt increase forecast for 2018-2027 they inherited from Obama into $13.4 trillion, a nearly 50% increase.
18
Don't the Chinese hold a huge amount of US bonds? Isn't a very big portion of the interest being paid to the Chinese?
2
Yes, this is their secret weapon. The Chinese and Saudi. We buy their products and pay them in cash. Then we borrow the cash we just paid them and continue to pay them interest for ions. I'd say the Chinese are pretty smart. If we are not working for them now we soon will be. All the Trump tariffs in the world won't change that China can pull our chain any time they want and we sent them OUR money to do it.
5
@Tom
Well we do buy their products. The products that we pay them to make on our behalf, I-phones for example. So we certainly outsourced the production which could potentially be brought back in-house causing a significant impact on their economy. As far as them pulling our chain: the only collateral they have on these bonds is full faith of the US government, not a house, not a car just our word. Worst case scenario is we don’t pay and then what a war, perhaps. Either way with the no end in sight mentality of all governments regarding debt the planet is in trouble. No different than some chump not paying a cc bill or maxing out a credit card and then paying it off for 20 years or worse never paying it back. The outlook is bleak no matter your party.
1
Deficit spending in bad times is necessary but right now Trump & Republicans are pouring gasoline on fire. To add insult to injury, they are siphoning the gasoline America needs to use to run her motor. A double whammy. It depends how many they could keep America high without crashing or worse, overdosing, before the panicky voters go to the Dems again. Then deficits matter again. And no money for airport maintenance or fixing roads & bridges - not that they are doing it.
Rinse, spin and repeat
8
This is exactly what repubs have been working towards for decades - run up massive debt thru over-spending and massive tax cuts and then claim they need to cut back on "entitlements " (you know, those accounts people have been paying into for 40 years so are "entitled" to use) to balance the budget.
17
This is an interesting article, but this reader has some major reservations..
First, there's nothing really new here. I remember, for example, listening to a very similar analysis by an eminent economist in 1985.
Second, there's a clear pattern which Mr. Schwartz seems to notice but not appreciate. Invariably, the only party that cares about the deficit and rising debt is the party that's not in the White House.
Third, and related. This is a bipartisan problem, but the author seems determined to cast all (maybe just most) of the blame on Republicans. "Democrat" appears 3 times. One mention points out that sometimes Democrats act as badly as Republicans. The other two portray Democrats as people offering sage advice. "Republican" appears 5 times -- in which the party is uniformly portrayed in pejorative terms.
The real problem is well known, but the government's response to the deficit/debt issue has been pursuit of short-term political advantage at the expense of the national interest.
So, in a nutshell, this analysis nicely summarizes some obvious facts the CBO (and others) have published for a very long time. The interpretive part offered is blaming the Republicans.
Bottom line: Schwartz has. if anything, made the problem even worse -- by participating in the short-term political advantage game.
1
Trump and Republicans have turned the $9.4 trillion debt increase forecast for 2018-2027 they inherited from Obama into $13.4 trillion, a nearly 50% increase. The good news is we can turn a serious deficit problem into a minor one by raising taxes moderately on just the top 1%. We can eliminate their tax expenditures and go back to Clinton rates, bringing in about $400 billion per year. We can cut the deficit, pay for two years of college, and subsidize much of our uninsured population this way.
We can then raise another $200 billion by removing the cap on the payroll tax; this would impact the top 6% of workers only. This step covers about 70% of the Social Security shortfall for 75 years.
9
The secret plan is to declare bankruptcy and make America pay for it.
7
Trump and Republicans will bankrupt the US like Trump did in all his businesses. It's the Art of the Con! Republicans do this every time they are in power and Democrats clean up the mess when they are elected.
17
No problem. Trump can cover it all with his graft and other GOP stolen money.
Budget - Schmudget.
2
It's coming along just as planned; soon it will be time to start trimming those social programs and entitlements. When this bill comes due, it's really going to hurt.
10
As an independent who wants both of the parties to start working together again, I'd like the Democratic candidates to ask every one of their Republican opponents this question:
Since when did the Republican Party embrace deficit spending with such vigor?
When recovering from the worst financial shock in a century, the prudent - the "conservative" thing to do - would be to rebuild depleted accounts, not give more money away and increase debt.
12
The Democrats joined the Republicans in passing the huge $716 billion defense allotment, so all of you who try to frame this in partisan terms are completely missing the point.
Both parties are war parties.
9
How, in any way, can you assign any amount of "the other side does it" to a Democrat led stimulus bill at a time when interest rates were effectively zero, and in danger of going negative? The Republican tax cut at a time of peak economic activity, particularly when one can argue that further stimulus might bring it to a calamitous end, and with the end goal being a further distribution of national wealth to the .1% is the height of irresponsibility, to say the least. The Democrat stimulus, albeit truncated by Republicans with their cries about the deficit, was saving the country from the Great Depression II.
9
No surprises here. Trump is the king of debt. What is surprising is how quickly the Republican Party gave up it’s claims to fiscal discipline for big tax cuts. The Laffer Curve has never quantitatively worked. It is a pipe dream. They invoke it when they want to buy votes. The sad part here is that by the time the next horrific recession hits Democrats will probably be in control of Congress and Republicans will blame them. Same deal as Obama who inherited their last financial crisis. The Republicans are becoming the party of Financial Crises.
14
Do I see the Trump's winning formula for success in action? Bankrupt a company(s) with such large excessive debts that no one will lend you money or do business with you? Unfortunately for America this is our government and we my find our government in the same disastrous position.
7
Short sighted idiocy is the sole description one could come up with for the current state. As quoted in the article, “It’s not so much a question of the wolf at the door, but termites in the woodwork.”
There is nothing remotely conservative about the tax cuts and spending increases. The GOP is rotten to the core.
9
And why, exactly, is the strength of the Military’s support base never part of the National Posture Review? The myopic view of the Military Industrial Complex can’t see that it requires a strong civic base.
5
I'm just saying this off my head as it's just a thought I had. Maybe someone in the media needs to look at how much debt the wealthiest people in the USA have compared to government debt. I'm guessing that since the USA government bailed out the wealthy corporates during the 2008 crash, that there wealth has increased since the government debt to GDP has gone up. What the wealthy should have got was a tax increase, not a decrease, so as to pay back the government bail outs during the 2008 crash.
Whilst Trump is looking outwards to avoid being introspective and analysing the problems internally, the wealthiest are getting richer while the government is getting poorer. So the solution is to tax the rich more as they are not paying their fair share of government taxes. Governments need taxes to run a nation efficiently, without taxes the USA would revert to tribalism. It is not patriotic if the ultra rich are not paying their fair share of taxation.
6
Sooner or later, the Democrats will not be able to facilitate a recovery from the Republican's fiscal responsibility. If the right wins across the board in November, we will begin to hear with increasing frequency and urgency the talk of cuts to "entitlement" programs. Get ready to hand over some Social Security, Medicare, and Medicaid benefits. We cannot sustain tax cuts to the wealthy and corporations for any length of time without cutting in other areas. I wish us luck...
12
All the Chinese need to do is to sit out a few of the monthly treasury auctions.
7
It's as simple as ABCD: All Bills Come Due.
4
Prepare for bankruptcy and war, I guess. Remember where your Congressman lives. You'll want to visit him soon.
2
Tax cuts = MORE REVENUE. NyTimes fails to mention that the govt has collected more money in taxes, since the cut. Our economy is dynamic, it’s not a static money in money out scheme. But since when do leftist care about the debt? Obama’s doubles the debt
Tax revenue is expected to increase yearly. FY2018 they are up less than 1%. And here's the rub: Income tax revenues are up, but corporate tax revenues plunged. Like, 40% plunged. Also, the increased tariffs (bascially, an extra tax fo consuners) have brought some additional revenue in.
And to address your other point (made entirely in bad faith), the debt ballooned under Obama because he put Bush's unfunded wars on the books and had to prop up the imploding economy. The federal budget was reduced every year under Obama after the markets stabilized.
20
This is just a small part of the long term damage that tRump has done to the USA.
In addition to the debt, he has harmed international relations, damaged trade, wrecked the environment, divided the nation, and made the US the laughing stock of the world, with the orange man-boy soiling the white house.
The worst hit will be the farmers that supported this moron. If they think China or anyone else is going to want future crops of soybeans etc they are dreaming. Once new suppliers are established they will not return to the unreliable and unfriendly USA.
The USA will not recover from highly dysfunctional president but it will sink in its world standing for decades to come.
Have fun paying all your taxes future Americans. Trump blew your future.
3
Somehow, I'm sure it's all connected to Hillary's e-mails.
6
Thank you GOP. Yet again, the people who already have lots of money will get more of it. Without lifting a finger. While the rest of us worry about paying healthcare bills, whether Soc Sec will keep up with the cost of living, whether housing prices/rents will exceed ability to pay. Making America Great Again - for the few.
5
Maybe USA needs an internal audit to look at waste in the military, and how the government can save money there.
There are no USA military in New Zealand territorial waters as we are a nuclear free, peaceful nation, that has goodwill and international relations with all nations, so we're not costing the USA military money. The USA costs us money as it gets us involved in its wars and most kiwis would rather we were not involved and only in positions of peacekeeping. NZ punches above its weight when involved in other nations overseas conflicts.
4
Yes, the US debt, and it's interest payments, has increased tremendously in the last decade, and will soon rival military expenditures. But don't let some neocon use that as an excuse for again increasing the US military's budget! We already spend *36% of the global total* and *three times* the amount spent by second-place China!
3
The answer will be to pass more tax cuts for the wealthy, then slash Medicare, Medicaid, and Social Security. The rich will continue to get richer, and they don't need the programs that will be cut. Simple. Scary. Probably the way it will pan out.
11
But most experts say that isn’t likely because the dollar is the world’s reserve currency.
Say what? And for how long. Even now Russia, China, and the EU are talking bartering to help Iran thru the Trump boycott. Do you really think that with Trump isolating us with tariffs and torn agreements that this is a lasting perk?
6
Bankruptcy is where we are headed and thankfully we have a President with the experience to weather it.
16
If we want to maintain the global order with the U.S. as the world’s policeman, then outsized defense budgets and deficits are the price that we will pay.
As an alternative, our NATO allies can meet their 2% commitment and spend an extra $100 billion per year, enabling us to cut our own defense budget by that much. If our Pacific allies including Japan, Australia, and New Zealand would do the same, we could cut another $100 billion in our own defense spending.
Even at $600 billion, we would be spending more than we can afford on defense, but it would at least cut our deficit by $200 billion.
“Restraint” by Barry Posen is a must-read for anyone interested in a new vision for U.S. defense spending.
4
When there was the last economic collapse in the USA the government bailed out the banks with corporate welfare. Since the last collapse in 2008 USA government debt to GDP has been steadily climbing. This time the crash will be even bigger as the government won't have the funds to bail out big business and lots of small shareholders will loose their pension money and investments.
I've read many articles recently about a pending financial collapse because of the huge amount of debt worldwide. It's like those ponzi schemes that come crashing down at some point in time.
7
The federal government is well on the way to its first $2 trillion deficit, as is described more fully in the article "A Reality Check On The Budget Outlook https://seekingalpha.com/article/4163940 . This could overheat the economy and cause inflation or could even cause the Federal Reserve to raise rates in order to punish what it considers to be profligate fiscal policy, even in the absence of higher inflation. The recently enacted tax law, which certainly exacerbated the deficit and debt problems, is not as inflationary as compared to other fiscal policy that might have resulted in similar increases in deficits. Borrowing money in the Treasury market to fund tax cuts for the rich is not as inflationary as borrowing the same amount of money to fund additional social welfare spending.
Whatever one's opinion on the widening inequality that the tax bill will cause, it is certain that the first order effect of shifting the tax burden away from the rich and onto the middle class is an increase in the amount of funds available to purchase securities..."
https://seekingalpha.com/article/4207412-outlook-mreits
1
What a perfect scheme. Divert the nation's wealth to rich businesses and individuals with a huge tax cut. Then obtain the missing operational funds from banks, instantiating huge interest payments to divert yet more of the nation's wealth into the pockets of the already-powerful (globally), producing no benefit for anyone else and further starving resources for spending on things that matter.
7
Thanks to the Republican / Trump led Tax Cuts for the rich, our deficit is much higher than it could be. What a bunch of frauds. Vote straight Democratic ticket this November. Get rid of the liars, cheats, sex offenders and criminals inhabiting the Trump administration.
9
@Tom :
You need to revisit your math classes. The tax cut is expected to add $1.6 trillion to the debt over 10 years, or an annualized cost of $160 billion per year. During the Obama Administration, we racked up over $10 Trillion in additional debt. That was as much as all other administrations (including both Bushes and Reagan) COMBINED. Half of the interest being paid this year is being paid to service that debt, at a cost of something close to $200 billion per year. So the tax cut will add $160 Billion per year for 10 years, but the interest on Obama era debt will add a minimum of nearly TWICE that much, every year, FOREVER. Why does it add to the debt? Because the funds used to pay the interest are no longer available for programs, so the government borrows more to support the programs, thereby increasing the debt, and the interest load. Since much of that debt was incurred in the earlier years of the Obama presidency, it's quite likely that the interest on Obama's debt run-up has ALREADY increased deficits by more than the Republican tax cuts.
So besides the HUGE difference in total cost to the country, here's another key difference. The tax cuts went primarily to businesses within the US. That at least sparked some domestic economic activity at home. A huge percentage of the interest is being paid to foreign governments, particularly the Chinese. That spending does NOTHING for the US economy.
Please consider that before you vote.
China will probably collapse the USA economy just before the elections and they'll do it legally. There's some Chinese proverb about a crouching tiger. China is very respectful nation and doesn't like being humiliated publicly on the world stage. (Just my opinion)
Not a good idea to publicly humiliate a nation that controls USA government debt. USA is not in a good position to be undiplomatic.
On a smaller scale, I'm a mortgage free home owner so I can say what I like!
8
Where does all the interest go to China? So the big tax reform is filling up someone’s pockets and the average citizen will pay for it. Is this America great debts again?
2
We once again finding ourselves in a situation where the party of “fiscal responsibility” has pushed us towards an economic conundrum: Lower taxes so much and remove financial safeguards so that when the crisis arrives, cutting and privatizing government programs will be the next step to “preserve” the economy.
And once again, it’ll be up to the Democrats to clean up the mess. When will we learn?
2
@Kerohde Democrats in the House and Senate overwhelmingly joined the Republicans in passing the latest military budget: $716 billion.
Both parties are war parties.
3
In a few years it will all come crashing down. The country will go bankrupt, which of course is a condition Mr. Trump is all too familiar with so it doesn't seem to bother him much.
However, in the process those who have little or nothing will have even less. Expect Social Security, Medicare, and all health insurance coverage to disappear
If the wealthy and large corporations paid their fair share of what it takes to run the country solvently there would be no problelm but that will never happen because there is no cure for rampant greed, a la Trump and the Republicans.
7
@Alex Vine Another way to put that is that the plan is to borrow as much as possible until the suckers catch onto the plan, and then default leaving the late entrants to the pyramid scheme holding the bag.
4
so what will happen when the democrats are back in the power seat? they will be excoriated for raising taxes and cutting military spending...
9
The tax cuts were fiscally irresponsible and should be repealed,
10
All problems could be resolved by taxing all income as ordinary income on the same rate tables as salaries workers
Charitable deductions should be capped
Executive pay above $500k should not non deductible corporate expenses with personal expenses capped as well
It is time for the wealthy people to pay the same rates as the worker bees along with full participation in Medicare and Medicaid.
All elected politicians should publish their taxes along with their tax rate
24
Allen Greenspan's famous comment that budget surpluses are bad for the economy are where we are with Republicans. This when the US economy was humming and Bush wanted get huge tax cuts through the Congress. Bush even had a gag rule placed on his administration. There were members of his gov't who wanted to comment that Bush wildly understated the effect of the cuts on the national debt. Trump could care less about the national debt. Or whether the economy was already performing very well. Just feed the rich and the defense department. 900 billion dollars a year to service the debt. The Laffer curve and supply side economics plainly gave the Greed is Good Rs the smoke screen to pretend that tax cuts for the wealthy always pay for themselves.
2
So, we needed a businessman to run the government like a business. Then we get the guy who headlined a fraudulent "university" scam, who had six massive bankruptcies in the billions of dollars, who was famous for stiffing the little guys and investors, and who lies compulsively. Why? Because he was "successful" (filthy rich) and had the right credentials (not female and not Black).
No one cared that Trump was the only one who profited; his companies, his investors, his employees, his contractors, and the government (tax revenue) all lost. Massively. They were sucked dry and their husks were dropped in the gutter.
Most Americans are being fed to the sharks. What chunks are left over will be sucked dry and cast off. File this under DUH.
9
I've noticed something very interesting about deficits and deficit hawks. Whenever a Democratic administration or Congress wants to spend money on programs or services that benefit non-wealthy Americans, the deficit hawks indignantly take wing. They circle around, emitting deafening shrieks and screams along with copious loads of stinky guano, and dive-bombing Democrats to peck their eyeballs at every opportunity.
But when Republicans want to increase the deficit even more for things that benefit wealthy donors-- particularly tax cuts, the most sanctified of conservative bulls-- those same deficit hawks sit quietly on their perches, preening themselves and cooing contentedly.
I would be tempted to call that "hypocrisy." But ever since Republicans and Fox News took control of political discourse in this country, that term now exclusively applies to liberals and Democrats. So it's not hypocrisy. But it's interesting.
17
Deficits and reality don't matter when Republican cultists are running the show.
It only matters when Democrats are in charge.
Republicans have left the surly bonds of truth to touch the face of fraud, greed and Trump University.
Welcome to Republican moral, intellectual and economic bankruptcy.
D to go forward; R for nationally-assisted suicide.
November 6 2018
22
This happens every time the Republicans are in power. Then, the Democrats take over, institute a more pay-as-you-go system with taxes paying the bills instead of debt -- and they're accused of being tax-and-spend. Nobody actually stops to consider that tax-and-spend is more responsible than borrow-and-spend.
18
Maybe when the next crisis hits, the asset purchases should be student loan debt instead of mortgage portfolios.
8
But the republicans tell us the social security and medicare are the problem
14
Spending so much money on the military without a perceptible return on investment sounds like bad business.
If we have to have such a powerful military, why not put them to work conquering, say Venezuela ( a la Crimea ) and grabbing the oil there.
4
"Within a decade, more than $900 billion in interest payments will be due annually..."
It is worth remembering that the Social Security trust fund is the largest creditor of the national debt. And it is not expected to run out of surplus funds until 2036, eighteen years after the debt service on accumulated debt exceeds our vast annual defense spending.
People need to stop saying Social Security is bankrupting the country and lay that at the feet of the real culprit. Unfettered defense spending has created our $21 trillion national debt way, way more than the Social Security "entitlement" program.
Reagan greatly increased payroll tax rates to pay for baby boomers taxing the system forty years down the road.
George W. Bush should have pushed for a big income tax increase to pay for the endless wars against extremism that he acknowledged the U.S. would be engaged in for decades as well.
Our current $21 trillion debt is the result of not enough income tax dollars to pay for the discretionary programs that are funded by those income tax revenues.
The last thing Americans needed was for Trump and the GOP to pass ANOTHER huge tax cut like the tax cut George W. Bush and the GOP passed. We need more revenue to pay for defense. Not fewer.
4
Social Security had a private fund for 3 years after it was created. After that 100% of this reserve was "loaned" to the US government. There was not a penny in the Social Security fund since even though so many claim that if you loan money to yourself you can actually make more. Go figure!
Does this mean that SS and medicare benefits will be cut? Does this mean that our infrastructure will continue to deteriorate. Does this mean that the 1% can continue to spend more with their luxuries with their tax cuts?
13
Tea Party: Feb 18, 2009 - Jan 20, 2017
Where’s the Tea Party again? Oh yeah, they immediately disbanded when Obama left the White House.
Their hatred for him clearly had nothing to do with the debt or deficits.
15
Sounds like the theft by federal student loans with huge interest rates and huge balance until the student dies.
1
Prices of Treasuries never crash.
Price of housing only goes up.
It's different this time.
Yeh, sure.
5
That maybe true however, what other country can fight and win in three different theaters around the world all at once ?
You guessed it, the United States
1
@Crossing Overhead
If we Americans want the largest military in the world, we have to acknowledge that we must pay for that military if we don't want to destroy our country with debt.
1
@Crossing Overhead
Win what, exactly?
3
Where did America fight and win? Afghanistan??
2
The national debt, simply explained:
A man staggers out of a bar drunk as he could be.
Five minutes later he returns and demands another drink.
The bartender gives it to him.
10
"Deficits don't matter." Dick Cheney.
7
People have been successfully brain washed by politicians from both parties to believe the federal government operates like a household budget. It does not. The only people one sees panicking over budget deficits are politicians and those who have drunk the koolaid of "national debt will be paid by our grandchildren". It doesn't work that way. A currency issuing government will always have the resources to pay its bills.
1
@PJ
And that works until nobody wants to buy those bonds.
What happens if China not only decides to quit buying our debt, but starts selling $80 billion a month to fund their Silk Road projects? It would be like Bernake's QE in reverse.
4
One question I’ve had for awhile; if China is holding...billions of our- say 1% - treasury notes, bills, and our interest rates go up (along with other economies) to...6%-7% or higher- who is going to buy those 1% notes? How much of a discount would be needed to find a buyer? And at 1%, how much discounting is even possible?
This is one side of the story. Left out is the”who” those investors are. All that money in interest being paid to China, to other foreign entities- not good. All that money being paid to Americans who want safe, secure (aka, non- stock market gambling) Treasury bonds, bills...who then recycle that money throughout our local economies, or save it for retirement, college...is a good thing.
During WWII, it was ‘buy war bonds’. I don’t think we sold war bonds to Japan, Germany. We ordinary citizens would love to see even a 6-7% interest rate on government issues, or on CDs. This article looks at one side of that possibility. Look at the up side of it, too.
3
@Jo Williams
Mnuchin could create a Senior Savings bond for retiring Americans to put their little nest eggs in. CD's paying a decent rate like you mention.
The last decade has seniors savings disintegrate with near-zero rates.
3
The same old tragedy play over (and over) again. The workers make the bread and the politicians throw the circuses. When the fire of a recession/depression burns down the theater we can start all over again. It will never change because we will never change.
3
The elephant in the room is always the defence budget. It does not need to be so high. It is higher than the next seven countries combined. A few hundred billion could be cut and, along with eliminating the mortgage interest deduction for home owners (we don't even have this in socialist Canada) you would be half-way there. Enjoy your tax cut everyone.
11
@Henry's boy
Since Reagan's cuts for income taxes, and increases for pay roll taxes, defense and other discretionary programs have created massive debt, while pay roll taxes created massive surpluses.
Congress needs to fix that.
2
Finally!
Reagan’s dream of “starving the beast” can be realized and America can go back to the good old days of 100 years ago.
Let’s not forget Reagan nearly tripled the debt during his time in office, but I don’t remember hearing Republicans complain that he spent more money than all other presidents before him.
Nor did they complain about GWB doubling the national debt.
Only issue they have is that debt increased about 80% during Obama’s presidency.
The interest on the debt has ballooned, but to paraphrase a co-worker re: tax cuts during the Reagan years...I don’t care if my kids are burdened by having to pay for more interest later, I’m getting more now.
It wouldn’t surprise me to find that she and her kids voted for Trump.
9
@Joe T
Yep. But Reagan did increase greatly the rate of pay roll taxes which created huge surpluses for decades. Surpluses that masked the true size of his and future deficit spending on defense and discretionary programs.
1
For those of who can do math, this is not news. We live in a nation that brings in three trillion, spends four trillion and owes just over 20 trillion. The truth is, there is and never was any possibility of paying off our debts. But for the fact that our creditors have let us slide, this is a bankrupt nation. We push our debts onto future generations and are hoping for the best with no serious intention of changing our behavior. Our currency is tantamount to being worthless and the stupid thing is, compared to other nations, ours is the strong dollar. This won't end well but of course I am old and won't have to live to see how it all ends. So yea me!
8
@BB
Last years of Clinton's administration the budget was nearly balanced. If that had been allowed to continue we would have paid down the national debt by 2014 (without Bushes Wars of course).
6
This is what happens when we give the national checkbook to the GOP. Fiscal management is clearly not a Republican forte. The GOP is very good at ‘pass-the-buck’ to the already wealthy.
16
@DENOTE MORDANT, they are good at throwing toga parties like they do at Yale frsternitiex and Georgetown Prep.
6
This is how Trump runs his business. Borrow large amounts of money, said business fails, declare bankruptcy to avoid paying debt.
OR
Borrow and launder money from the Russians to bail out your failed businesses, engage in Komportment activities, run for president with Russia’s financial backing (eg $21 million funneled through the NRA) in exchange for lifting US sanctions against it, become besties with Putin who interferes in 2016 election to ensure DJT is elected.
15
This will, of course, sink into the usual partisan bickering. With the Republicans currently holding Congress and the White House, they deserve the lion's share of the current criticism. But make no mistake - when the Democrats retake power, even if only Congress, the blame can just as easily shift. And neither party, if one is honest and not just a blind, knee-jerk, partisan is willing to be responsible.
Neither party is actually willing to not just cut spending, but they won't even freeze it. Only in Washington DC, is a reduction in the annual budget growth (say increasing 3% instead of 5%) viewed as a cut! We spend more every year just maintaining a massive bureaucracy - more in salaries, more in bonuses (an absurdity that should be dumped), more on duplicative programs and departments - more, more, more. And since just about every thing has its own little, vocal constituency that will be "devastated", "destroyed", "Grandma off the bridge" or some other hyperbole, member in Congress recoil in horror at being responsible and it just continues to grow. Democrat or Republican, it makes no difference.
Add in the latest penchant for "free" from slavering candidates, whether tuition, student loans, medical care, jobs, even, and there is zero hope that we will rein in the budgetary beast.
2
@George S If you want to balance the budget, you have to look at revenues. If you just look at spending, then nothing gets solved.
Lesson No. 273 in life - when bickering about money, concentrate far more on the revenues than the expenditures.
6
@Mark Allen
Mark, I agree we must look at revenues. But too many people utterly refuse to look at reductions in expenses. Both one-sided approaches are wrong and just make the situation worse.
The biggest problem with looking primarily at revenues, whether on the federal or local levels, is the clear history of politicians consistently viewing increased revenue, even temporary ones, as license to spend on new programs. Thus the expense side always goes up and never responds to decreases in income. Granted, the voters allow and even encourage that, but you and I don’t likely run our personal finances that way and neither should government
@George S claims that "Neither party is actually willing to not just cut spending, but they won't even freeze it."
How quickly George S forgets!
The fact is that the federal budget, adjusted for inflation, fell every year from 2009 to 2013. See
http://www.kenflerlage.com/2016/09/inflation-adjusted-federal-budget.html
It required Google only 0.48 second to uncover this fact. What's your excuse, George?
2
Let's be clear about what is happening and why. This is not a bug; it is a feature. The goal is to make it impossible for the government to meets its obligations to the citizenry, making it function only for the billionaire class. The interest on our deficit will be paid from our contributions to Social Security and related public goods.
We have been poor stewards of democracy, thinking it would chug along as it did for our parents and grandparents. We forgot - or never learned - that democracy needs tending. We ceased to pay close attention and gave in to the luxury of distraction over social issues designed to drive wedges between us. Democracy has been replaced by oligarchy.
Perhaps too late, we discover that democracy is not an iron mountain; it is desert flower. Our democracy was the first to flower in the modern era, and it is the first to succumb to avarice and naked self-interest now.
13
@nora m
Our deficit spending since Reagan has been masked by the trillions of surpluses generated by payroll taxes.
Social Security is the largest creditor of the national debt.
2
Folks, relax. This is just a salvo in the predictable attempt by the overclass to pave the way for paid benefits cuts. Social Security, Medicare, Medicaid and SNAP benefits are obstacles in the river of all fiscal largesse flowing to the rich. And as such, they will stop at nothing to eliminate them. You've been warned.
US sovereign debt is simply the opposite entry of private sector savings and is not a threat to the economy, but rather it allows the economy to grow. That is why debt is only bad when the benefits go to the 90% or so below the current owners of our government and debt for war or high end tax cuts are just what the economy needs. Always.
5
And interest rates are low. Most of the treasury bills are short term (3 year).
If interest rates go up, the deficit will balloon even more.
There is a simple solution to this debt/interest cost problem.
As an observer of the issue for 35 years, Grace Commission included, it seems that this is the only palatable solution.
The Federal Reserve can engage in several more rounds of QE during the next recession, soaking up a good $10 Trillion in US Debt. They bought $4.5 Trillion in the last one. During a National Emergency. Given that the interest bill is about to become a National Emergency, ther is nothing to stop them from doing it again.
Guess who gets the Interest Payments then?
The US Government.
As Nike says, Just Do It!
1
@Rob
It does have an air of inevitability about it, doesn't it? If Japan/aging population is any indication, it may not even be that inflationary.
I think it is a pity that it is being done for tax cuts and not infrastructure/education/etc., but those with a 20 year time horizon until death can be short sighted.
3
@Rob, this is what Japan did and their debt is mostly domestic too. Look what happened to them.
@Rob
What assets would be purchased in a future round of QE?
Housing mortgage portfolios? Those worked out well last time as they generated a profit, even with the toxic junk mixed in.
Maybe the QE could buy up all the student loan debt. Talk about super charging the economy.
Trump only looks at the trade deficit with China. What about our interest that goes there since we are not able to control out government (+ personal) spending? They are thinking longterm. One day when Trump (or someone else in the WH) is coming on too strong they could turn off the spigot. Then what?
2
Wow! And that on top of the fact that the US spends more on its military than all of the rest of the world combined! Time for more folks to read Chris Hedges "America, the Farewell Tour". But don't worry, there'll be lots of guns around homes to settle scores.
2
1. We need money to conduct commerce.
2, As the economy grows we need more money.
3. Money can come to the private sector from 2 places--the federal government or from a favorable trade balance.
4. Money comes from the federal government in 2 ways--spending (fiscal) or from the FED to the banks (monetary).
5, The FED has sent a lot of money to the banks with little effect. The money has sat in the vaults of the banks or been lent to the Rich who use it to speculate. This money has low velocity--it doesn't change hands in domestic commerce frequently.
6. Net federal spending is measured by the federal deficit, i.e. the deficit measures the net flow of money to people, businesses (not banks) and state & local govs. But we need spending with high velocity money.
7. Thus in order to get the new money the private sector needs, the federal deficit must be larger than the trade deficit. We have a large trade deficit. We need a large deficit.
8. If the above is correct, periods of negative deficits, surpluses, which pay down the federal debt should lead to a bad economy. They have. There have been 6 such periods of longer than 3 years in US history, They have ALL ended in a real gut wrenching depression. In fact this accounts for all of our depressions.
9. On the other hand, in 1946 we had the largest debt ratio in our history. The public debt ratio was 47% larger than today. We had deficits for 21 of the next 27 years. We increased the debt 75%.
And we had Great Prosperity.
3
@Len Charlap
Can't wait to read Ray Dalio's freely available new book on debt cycles. What someone who is in the know is FINALLY saying is the biggest challenge is in redistributing opportunity.
https://www.marketplace.org/2018/09/20/world/dalio-debt-cycle
Sure the US economy is doing well by certain measures but for money to flow in the private sector to well educated Americans requires the people with the money to actually take a chance on those educated Americans and then stick around.
2
@Past, Present, Future - I haven't read the book, but I've read a couple of reviews. Dalio is right on the money when he points to a explosion of private debt from about 1996 to 2008 as the cause of the financial crisis of 2008. This what happened before each of the 6 previous financial crisis mentioned above.
But he doesn't ask the question as to WHY private debt exploded. History tells us why:
The federal government has balanced the budget, eliminated deficits for more than three years, and paid down the debt more than 10% in just six periods since 1776, bringing in enough revenue to cover all of its spending during 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, and 1920-30. The debt was paid down 29%. 100%, 59%, 27%, 57%, and 38% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.
In all of these, federal surpluses caused by taxing more than it spent, sucked money OUT of the private sector. For 2008, the trade deficit, except for a brief period in 2003, was larger than the federal deficit and again money was leeched out of the private sector. This time out of the country.
Th definition of insanity is doing the same thing over and over, but expecting different results.
I am very grateful to the Times for this non-partisan article on this important topic. The Social Security reserve will likely to be gone in 2032. Many public pension plans will run out of money. Governments won't be able to do in the future what they have done in the past.
32
@ThirdThots
If the Social Security Trust Fund doesn't run out until 2032 then why do people keep saying Social Security is the source of our $21 trillion debt?
@medianone
Because they're lying and they want everyone to believe them.
Republican policy has poisoned the environment, poisoned our economic future, poisoning race relations at home and relations with our allies world wide.
Why on earth is their agenda?
4
@Robert FL I suspect enough believe there will be no future worth owning no matter what they do so party on now.
Perhaps our schools should start teaching "The decline and fall of the Roman Empire" as a regular part of the school curriculum. The similarity between the Roman Empire and the American Empire are very similar and will probably end about the same way, because of ignorant arrogance and greed.
I for one do not see a good future and I hate to think of what kind of world my grandchildren will be living in by the time they are my age. Our political leaders seem to think that living for today is all that matters.
4
The interest number quoted here is "net interest" which equals Total Interest minus interest paid to SS and other thrust funds. It is a complete fiction of accounting. Interest paid to SS and other funds is simply not available to the Treasury to pay for defense and other government accounts. For the SS Trust Fund, interest is collected monthly and paid to me and others right away - gone!. Go to SS.gov and see the accounts for yourself.
Total interest expense this year will be about $500 billion - about 2.5% of total debt.
https://treasurydirect.gov/govt/reports/ir/ir_expense.htm
In a year or two (not 10 years), the average interest expense will be about 4% +/- which will cost about $900 billion outgo. That is nearly 50% of expected income taxes collected! Subtract Defense and there is nothing left for the rest of government.
As soon as politicians start talking about how to swing the problem, the market will sniff out the real numbers and the game will be over.
5
@LMJr
Imagine what the national debt would look like if those decades of Social Security surpluses had been invested in other financial instruments than U.S. special treasuries.
We would have been running the same huge deficits and staring at the same $21 trillion debt.
1
@medianone
If the social security surpluses had been invested in anything other than non-negotiable treasuries than the combined budget surpluses would have been smaller and the combined budget deficits would have been larger. For reasons beyond my comprehension we have always treated social security surpluses as both money saved for future retirements and money available to spend today. We in effect double count them.
What goes up must come down and it will. The republicans own this disaster in the making as they smile all the way to the bank.
3
A Democrat arguing for fiscal austerity, and Republicans arguing for fiscal largesse. Sam Rayburn and Robert Taft must be turning over in their graves.
4
I have a solution to this issue. I wrote a paper on establishing a "Development Fund" for the United States that would increase federal revenue, yet not raise taxes.
Following the example set by the Norwegian Government Pension Fund Global (valued at $ 1 trillion)l, and the Alaskan Permanent Fund (valued at $63 billion). The mineral wealth on federal land is valued at more than $100 trillion.
I propose that the US pay private companies to extract mineral wealth from federal lands. The Development Fund then would sell these mineral riches on the open market.
The Development Fund would then be able to invest the profits from the sale of these mineral assets in the world economy, in equities, bonds and real estate much like the Norwegian Global Fund and the Alaskan Permanent Fund,
In 2018, every citizen of Alaska received a cash payment of $1,600. For a family of 5, that is an increase of $8,000 to the family budget. What a cool idea.
3
@Rich Caroll
Great idea Rich. Unfortunately that doesn't comport with the good old boy system we current run.
Mineral leases on federal ground are sold at auction to bidders who buy the mineral rights for as little as $25 an acre.
In Texas or North Dakota, those same oil companies pay in the thousands of dollars per acre. Buying federal leases on the ultra cheap allows the original purchaser to bundle and sell into a secondary market, which can be sold again and again until the sale prices reaches true market value.
In the meantime all the inside players have skimmed the cream off that $100 trillion figure you mentioned.
1
@Rich Caroll
"They" received a check, not cash.
And it's ALASKA, which is isolated and with a total estimated 2017 population of around 740,000.
The USA has more than 350,000,000 people. There's no way the entire USA could receive similar payments.
Congratulations. Now we know what our great grandchildren will inherit!
4
@S Mitchell - What about the enormous war debt the greatest generation left to the following generation? As a percentage of the economy that debt was almost 40% LARGER than the debt today. What about that terrible burden?
Well, from 1946 to 1973, the GDP averaged a 3.8% growth and real median household income surged 74%. How did we do that? Did we pay down the debt?
NO! During that 27 year period the debt grew 75%. We invested in America. We grew the economy so that debt became insignificant.
On the other hand, we also had a big war debt after WWI. Then we balanced the budget for 10 years and reduced the debt by 38%, In October of 1929, it was only 16% of the GDP. AND THEN WHAT HAPPENED?
4
What kind of taxes were imposed on the wealthy? What kind of wages did the average employee bring home compared to owner/management salaries and to commodity costs? What kind of trade programs did we have? Which way did military growth go? Were consumer products based on necessity or folly? What kind of austerity programs existed? How much of the ballooning production and economy were related to people finally having cash to buy products finally available to them?
Too many administrations have fallen for “war is good for the economy” and decided if one big one works multiple small ones scattered around the globe should create a boom.
And now, we face a crisis bigger than economy: a fiscally careless billionaire playing fast and loose with the budget in order to enhance his family brands, as well as to line the pockets of also filthy-rich loyalists (purchased loyalty). The mind reels
2
@JSBNoWI - We should copy the policies of post WWII:
O.K. her is (are?) my 2 cents:
1. Return to much more progressive tax rates to encourage the Rich to leave more of their profits in their companies & their companies to pay their workers more, & to discourage the Rich from wild speculation.
2. Strengthen unions by requiring workers to pay for the union benefits they receive & by enforcing rules on coercion by companies against organization. Follow Germany & require union representation on the boards of large companies.
3. Strongly regulate speculation, e.g. require the buyer of a futures contract to take delivery, require banks to get a court order to sell its end of a mortgage contract, outlaw naked credit default swaps.
4. Stop worrying about the debt & invest in America--fix our crumbling infrastructure, build a better power grid, increase support for education at all levels, fund research, etc. If we grow the economy, the debt will fade into insignificance as in 1946 - 1973. On the other hand we can balance the budget. All 6 times we balanced the budget for more than 3 years, we got a major depression.
And we should also:
5. Make the federal gov the employer of last resort with a decent job or paid training for such a job for everyone able to work. There are plenty of things that need to be done. See 5.
http://www.levyinstitute.org/topics/job-guarantee
Why isn't this front page/top-of-the-banner news? This article describes an early warning signal heralding what amounts to the collapse of the U.S. government as we know it in the coming decades, which would be followed by a global financial meltdown the likes of which the modern world has never seen.
Anyone with any common sense knew that Republican economic policies (i.e., massive tax cuts, ignoring debt, government shutdowns, increased spending) were bringing us to this place, and now here we are, inching bit by bit towards the edge of that financial cliff that would amount to the slow death of what we recognize as America.
Every voter needs to read and understand what Republican economic policies are doing, and what they will do. This is essential if we are to ever elect different politicians who have the will and desire to correct this train wreck in the making before it goes off the rails entirely.
Please make this article more prominent. Please share with your friends and family members and communities. Ring the alarm bell in whatever way you can. Our opportunity to course-correct is very time-limited. But we can get it started with the upcoming mid-term election.
16
"Within a decade, more than $900 billion in interest payments will be due annually, easily outpacing spending on myriad other programs. Already the fastest-growing major government expense." Hello GOP: your base is aging out and those of us paying attention have long memories. Your obscene greed and incompetence will not be forgotten. Take note!
22
Yes they will be forgotten. Who remembers the inflationary largesse of the Johnson years, or the skyrocketing deficits of the early Reagan administration?
@Ann
The GOP base might be aging, but unfortunately their kids aren't much better. After all, trump won white millenials (and so did Mitt Romney). They're very much like their parents politically, except maybe on LGBT issues. I expect them to become even more conservative as they get older... But thankfully, they're outnumbered by nonwhites.
Democrats win the youth vote nowadays only because it's the most diverse generation in US history.
Ah, so NOW we get to talk about where that "tax-cut" should have gone.... to pay down the Interest-Due Monster.
Well, it's a little too late.
From what I understand, the US takes in a little more or less than one trillion dollars in taxes and fees, yearly.
The US has been spending outside its means for decades.
The last time I heard of a "surplus" was when Bill Clinton handed one to "W". And we all know what "W" did with it: He trumped up the "Yellowcake Wars" which continue.
The "interest" on our debt?
Now you are beginning to understand what the term "off the books" means. "W" put, pretty much, the whole war "off the books", borrowing maniacally from every country in the world, and especially, China, to keep his "Forever Wars" going.
Yes, Obama continued it.
And so does our Laughable President.
Except Our Laughable President decided to give himself and a few of his choicest friends permanent "tax-cuts", to the tune of TWICE what our National debt's interest is.
The "tax-cuts" given to the, we, Inferiors are not permanent.
They are phased out over the next few years.
Awwww.
So, now all the money in the known Universe is gone into the pockets of the rich (Warren Buffet admits that he GAINED $26 BILLION. trump won't tell you what he got!) and the bill is due.
That bill is not due just ONCE.
It is due forever.
You didn't know?
Well, someone once said, "If you think that education is expensive, then try ignorance."
We're not Number 1 - the interest debt is!
Got it?
39
Lowering taxes while increasing spending is the household equivalent of taking out a mortgage on the same day you quit your job. 98% of economists predicted this before the tax cut was passed, but they went ahead anyway.
Once republicans are removed from power, you can bet they will scream about the deficit again, as the Tea Party rubes take to the streets in their pointy hats to protest how 'democratic spending' is destroying our future.
153
Democratic spending is destroying our future. When entitlements are taken into account, the federal debt is an order of magnitude larger than this article allows.
1
@RP Smith - There is a HUGE difference between the finances of the federal government and your personal finances. "taking out a mortgage on the same day you quit your job" ain't so bad if you have a printing press in your basement.
@Bobo thinks that "Democratic spending is destroying our future" but that Republican speding is AOK!
1
When Bill Clinton left the White House the nation had a SURPLUS of billions of dollars! When George Bush took the reigns he "starved the beast" as he was fond of saying and paid out to his crony rich supporters billions of dollars.
Where were the Republican deficit hawks then? I don't remember hearing their voices screaming from the rooftops. No talk about throwing our children's future down the toilet. No talk about being fiscally irresponsible.
This latest Republican tax cut has benefited the top 1% of the country, while most Americans who paid the lionshare of taxes got a paltry check in the mail of a few hundred dollars.
Trump brags that he is the "King of Debt." That is how he ran his businesses in New York (note the number of bankruptcies under his watchful eye), and that is how he is running the country. He doesn't care. It's not his money.
20
Nearly all of the money going to debt and the military...sounds like the budget for a third-world dictatorship.
37
I love the stock photo used in article. The aircraft sitting on the ground is a Vietnam era McDonnell Douglass F-4 Phantom, retired from active combat use in the mid 1990's. (IMHO, overall still the best jet and most versatile fighter we ever produced.)
Is this a subliminal suggestion that as we continue to spend our way into 3rd world poverty thanks to foolish tax cuts for the wealthiest, combined with outrageous annual increases in out national debt - that its time to hit the aircraft bone yards in the Southwest deserts and reactivate the F-4's?
4
This is absolutely ridiculous. I'd ask how we got here, but I already know. This Administration is not going to do anything about it, in fact they're going to make it worse.
4
And all that yammering about the Democrats dooming our grandkids to an encumbered life, one having to pay off all that money we spend on the poor, lazy immigrants, shiftless medicaid recipients, welfare, and a failing Social Security?
Well. what ever happened to all that lying rhetoric by the Deficit Hawks about how the Dems are needlessly increasing our deficit?
And by the way, the largest owners of our debt? China, Japan, Ireland, Brazil.
8
Why does the screaming about the federal debt never include a statement about who profits from this debt?
7
The US government is the only source of US dollars in the world and you're telling me that it has to *borrow* US dollars from someone in order to spend them? Wow, sounds like a system that only a bunch of bankers could concoct. Oh, wait.
I guess Bernanke's keystrokes, which were fine for funding the QE(x) giveaway to those same banks, won't work in this case? Again, wow.
2
A booming economy, in part fueled by public debt. I wonder how much is fueled by private debt. This will not end well.
7
I taught the gop main interest was a balance budget and social programs back in 2010. Where did that action plan of balance budget go? In the form of tariffs on our allies to make up for a budget short fall. Take from peter to pay paul. In the end the solution will be a control devaluation of the us greenback. History always repeat itself.
SR queens
1
"As Debt Rises, the Government Will Soon Spend More on Interest Than on the Military"
Gee, thanks, Republicans! What a great way to ruin our economic future.
8
Every fiat currency in the history of the world has failed. I repeat, every fiat currency that ever existed has ultimately failed. What is a fiat currency? Simple: it is a currency that is not backed by gold or anything else really tangible. It is literally based on faith. Our current monetary system is one of the largest Ponzi schemes ever perpetrated in history. In a fractional reserve system (which ours is) money is created out of thin air, literally. That is because a bank only has to hold a 'fraction' of its deposits as a reserve (most recently 10% I believe). The rest is loaned out to individuals and business. As a result, our monetary system is really based on debt. In other words, if all of the loans in America were paid today, there would not be enough money in circulation to pay it all. Why? Because of the application of interest. Since loans must be paid back in interest then where does the money for the interest come from? There is none, that's the scheme. As a result, bankruptcy and foreclosure are built inherently into the system. Imagine it as a huge game of musical chairs. When the music stops, someone doesn't have a chair (they go bankrupt). It is an extremely bias system that favors the rich and keeps the poor and middle class on the hamster wheel of paying off their debt with not enough money in the system. The Federal Reserve must be abolished.
3
The 10 year T bill is at 2.96%
The inflation is 2.9%
A wash. Real interest is ZERO.
As always the debt will be paid off on the back of ordinary American by inflation. AKA monetarization.
8
This article is incomplete. It doesn’t say anything about starve the beast, the well-known Republican strategy to dismantle the welfare state that explains why they are only “deficit hawks” when the money benefits regular people. It says nothing about Nancy Pelosi’s desire to implement pay-go to stifle progressive policies in case Bernie becomes president. It says nothing about MMT, which posits that debts don’t matter when you control your currency so long as they generate sufficient economic activity, which tax cuts for the rich fail to do. And it says nothing about both parties being complicit in exploding the military budget.
Stop with the he-said she-said reporting and explain what is really happening behind the scenes.
3
Keynes and FDR never advocated deficit spending, unless you consider buying a house to live in or rent with debt to be deficit spending, buying a car to drive to work with debt to be deficit spending, borrowing to build a factory deficit corporate spending, hiking the gas tax and then borrowing to fix and expand the highway system deficit spending.
The GOP theory of stimulating the economy is slashing payrolls and cutting taxes on those with money so the people without money are forced to sell their property to those with money paying less in taxes. The fewer people with money able to buy much from businesses, the more stuff businesses sell at a loss, leading to firing workers and going bankrupt.
1
In response to Richard Bradley UK2h ago who writes
"So are you saying you are gambling on growth to pay the debt.
Is that not the failed model we have seen crash time and again when growth fails."
NO, NO, NO
Read me post again. Paul Krugman is gambling on growth .
I give to arguments why this will NOT work in a global economy
2
@Woof
Phew. Thanks for the clarification.
Much appreciated.
Both parties now do nothing to control deficits, they just increase them.
At some time, probably sooner rather than later, there will be a US government fiscal crisis that will make the 2008 financial crisis look like a tea party. It won't be pretty.
The nation will survive, but there will be a massive amount of economic damage affecting all Americans.
And since the American people allowed this to happen, perhaps this punishment is justified.
1
The voters punish Democrats when they reduce deficits, or use debt to build productive capital assets that first put working class people to work, and then pay off the debt, like transportation taxes and fees. For example, the gas tax hikes that paid the working class to work building transportation assets which these working class people paid off the debt with gas tax revenue. Or obamacare that hiked taxes to expand health care access and in the long run reduce the deficit while paying health care workers to work.
13
It's the same old story of the 1% against the rest of us. The money that went to them in the recent tax debacle might have been spent on the people's needs like healthcare, affordable education, and our crumbling infastructure. But no, they need huge sums for lobbying and advertising, so they just gave themselves a tax cut. This on top of the really huge tax havens they already enjoy.
As soon as the banks got back on their feet after they caused the recession, they started lobbying against Dodd-Frank legislation that might have reined in their gambling with our money. (Funny how we don't remember that it is our tax money.)
When they control the executive, legislative, and judicial branches of our government, they can pretty much do what they want. That is why we must push back with our vote starting in November if we want to preserve our democracy.
27
Given the distribution of Treasury securities, this means, in essence, that everyone will have to be taxed to give money to rich people. One man's debt is another man's asset.
Since 72% of the spending is on Social Security, Medicare, and Medicaid, it would be logical to raise FICA. The government will also probably find ways to raise taxes on SS and Medicare for retirees with incomes higher than the median.
1
Thank God that Trump gave the 1 %'s a tax break, God forbid that they should have to shoulder some of the cost for running this country.
Our grandchildren, great grandchildren and others will be paying for this for ever.
19
Your story, consumer borrowing, student debt will be the next Great Recession like in 2008. The only questions are when and how bad.
The bizarre thing I learned is that when the corporate welfare tax cut was passed recently, in the whole scheme of things it was rather small ie about 100 billion a year since corporations are almost not paying any taxes anyway, 300 billion, small potatoes compared to ind. income taxes which take in trillions of dollars.
4
Wow, where to begin? “By 2020, we will spend more on interest than we do on kids, including education, food stamps and aid to families”. Here in Cville, parents will be expected to surrender their children to schools for busy work while their parents cater to the whims of the whiny tax dodgers hold up in the ever expanding number Assisted Care Facilities.
2
Interesting that many commenters place all responsibility for excess debt on Republicans, though the article states both parties are equally myopic about deficits when in power. For example, the flip-flopping by Senator Warner and others.
Bottom line: Politicians generally have no ability to assume responsibility for managing the economy in a fiscally responsible fashion. There is really no point in parceling blame between Republicans and Democrats. The Federal government is bloated, having taken on more functions, many of which should not be borne by government at all, than it is able to pay for.
4
@ATF
No, this has been the Republican playbook for years. Cut taxes, increase spending for the military, which has the effect of cutting budgets for education, healthcare, transportation, etc.
"Starve the beast" is the phrase, I believe.
6
Back in the 80’s the pie chart of federal spending showed net interest on the fee debt was 19% of every tax revenue dollar. That’s worse than credit card interest but lower than pay day lenders. We’re headed toward pay day lenders government. Thanks GOP!
5
The American family is acting in a spend-thrift fashion; and that is a practice that never lasts. Sooner or later you keep doing what you're doing and you spend yourself into bankruptcy, or whatever passes for that at a national level. Regardless one thing is clear, once you reach that point you are no longer in control of your life or future are you? It will be dictated by the situation you find yourself in. And you only have yourself to blame.
Deficits? What me worry? We'll just cut social security and medicare benefits and any other entitlement programs we can think of.
So goes the thinking of Ryan and McConnell who knew what they were doing when they passed the huge giveaway to the wealthy known as the tax cut.
Republicans actually love deficits, that is, when they get to run them up by reducing taxes for their donors. Deficits provide the excuse to destroy the social safety net and the justification to block Democratic initiatives when the other party holds the presidency.
11
@Ronald Aaronson
Good point...and this will all be exacerbated by the reduction in immigrants and declining birthrate (the US is at a 30 year low) which will result in less people coming into the work force and paying into social security....I am not looking forward to seeing how this will all play out...also factor in the number of people
Retiring every day (10,000 was one estimate) and living sometime 30 or 40 years after 65.
In a suburb of St. Paul, MN, I recently saw an ad for Burger King paying $18 per hour.....the starting wage....why? They aren't enough workers......Every day I hope someone will start a 3rd party called The Party of Math....which puts all of these problems into basic math formulas so people can really see what's happening.
If people really understood how these policies will eventually financially impact their children and grandchildren, I don't think they would support them....the bigger question is who is really working on these big problems?? It seems no one.
5
That's fine, a Republican is president. When a Democrat is president again, is will be a huge problem. And Barack Obama will be blamed. Always the same script.
7
Is the photo with the article (showing a Republic of Korea F-4 in the foreground) a gentle reminder of the continuing need for military and trade relationships, given our fiscal constraints?
2
It kind of fascinating to see that the US, for decades, has not been able to learn from others.
The Soviet Union's financial crash came in large part because of its military spending.
The US is doing the same but without any real military enemy.
The US military has become an institution that is used simply to move money and unemployed people around in order to keep the tax money flowing instead of using it where it would make sense like infrastructure, education and health care.
Infrastructure, education and health care are a mess and this has killed off large parts of the middle class that still bear most of the tax load of any country.
So the US has nothing to show for long stretches of tax spending and no reserves in the middle classes it can build on.
The Europeans have spent in infrastructure, education, heath services and publicly organized and partially funded retirement plans and find themselves in the same situation that they too spend huge amounts of their budget on interest.
But at least they have a safe middle class and a working infrastructure, retirement systems and an existing health service.
All things that will help them to get over the next recession with less pain than the US.
So why has the US not been able and willing to learn from working examples?
China and Russia are doing it.
Why not the US?
Too proud or too arrogant to learn from others successes?
US government services, unhindered by progress since 1776?
25
@Thomas - Military spending is 15% of the Federal budget.
But Social Security, Medicare, and Medicaid are 72% of the budget. Interest on the debt is another 10%.
@Jonathan,
it is not so much the figures but the way the funds are spent.
15% of the budget for military purposes is a war economy like it was in WWII with Japan or the 3. Reich.
The US runs many wars around the world and one may argue that the US requires a war economy style budget but in real life all of these wars are decisions of the US and most could be ended today..
Even its closest competition, PR China, only spends 1/3 of the amount the US does and China needs to modernize its military from decades of neglect.
The welfare agenda of the US, while being extremely expensive, is completely inefficient.
Compared to Singapore or the EU, getting seriously ill in the USA is a matter of risking bankruptcy.
Retiring in the US usually means to fall way down the income ladder and if you look at the requirement to mortgage houses just to live through retirement in the US, you will see why the system is inadequate.
So whatever money the US spends on these welfare items is not spent well, quite the opposite.
Getting seriously ill in the EU is usually not a reason for losing your house.
Requiring high class surgery here or in the EU does not make you poor.
So you can spend money efficiently any very inefficiently.
The same goes for infrastructure.
Compared to the EU or quite a few places here in Asia, US infrastructure looks like a place somewhere in a 3. World Country.
Just look at public transportation or utilities.
But we pay into social security and pay specific Medicare taxes, so spending for these programs should really be looked at separately from other spending.
4
From 2008-16 when a Democrat was President we heard Republicans calling for a balanced budget amendment to the constitution. We heard that deficits were inter generational theft and the country couldn’t morally afford to do this anymore
What happened to all these good ideas, ever popular in the GOP ranks as recently as 2 years ago?
Reminds me of the Simon and Garfunkel song - The Sound of Silence
6
It's all about politics. Mr. Trump is hoping Americans will enjoy the moment, revel in the low jobless numbers, the booming economy and keep him and his party in office, oblivious to the warning signs any high schooler can read.
With political expediency and fiscal responsibility on widely diverging tracks, this cannot but end badly.
9
Tax cuts for the rich, and what do you know?
Republican hypocrisy has grown as large as our debt.
13
This run up of the debt was intentional. The GOP Tax Scam was used to reward the wealthy who bankroll the party and at the same time strapping any future Administration with a heavy debt burden.
Expect the Republicans to start whining about deficits and debt about 10 seconds after the Democrats regain control of any aspect of government. More importantly, expect many in the media to parrot the Republican line, just like they parroted Paul Ryan's nonsense in his days before becoming Speaker.
I would remind everyone that when George W Bush came to Washington, he inherited a budget surplus and a declining national debt. So called Conservatives cut taxes multiple times and exploded spending even as they fought 2 wars on borrowed money, then they whined about deficits when President Obama inherited a nasty recession from Bush, GOP & Company.
Also expect to hear calls for cuts to Social Security despite the fact that benefits do not come from General Revenue and are funded by the premiums collected as the Social Security Tax from working people over their entire careers. Social Security is a creditor to the Federal Government- not an expense, but expect Republicans and "centrist" Democrats to call for means testing of what is supposed to be an insurance system. Ms Clinton flew that stupid idea in the 2016 campaign- one good reason I did not support her.
The first priority of Democrats should be to rescind the GOP Tax Scam and own up to it. A little truth telling is in order.
100
@David Gregory
GOP will scream that rescinding their tax scam is the Democrats raising taxes.
I dont believe that Mr. Warner's position indicates a change of attitude. He applieda traditional Keynsian approach to the economic needs of the 2008 financial crisis. Those conditions didnt exist in 20017 and didnt warrant the need for stimulus spending via tax cuts.
5
You asked for it, America, and now you've got it! Better start being nice to Cuba because very soon, Cuba could end up OWNING the USA. They've survived more than 50 years of US repression, and soon the US won't be able to afford to repress them anymore. People in the US will start looking toward the type of system that offers more than the failed US capitalist system, and such a system exists only 50 miles off the US coast.
1
The huge interest due on the debt is perhaps the reason why the Fed will keep interest rates relatively low so that we don't implode. DoD spending is a deep black hole of waste so it's hard to believe we could match it just for interest on the debt. DoD is looking to buy a new helicopter the CH-153 Stallion from Lockheed Martin that costs $155 million each. We won't need enemies we are destroying ourselves from within.
9
You mean to tell me that if you raise spending and cut taxes that your budget will be out of balance? Who knew??? Not to worry, though... the GOP has the answer! Cut those pesky entitlements and regulators to fund the interest rates and military...
48
I like the juxtaposition of this article with the following article on Russia's USAReally's bleak news website. The message seems to be that we are doing this to ourselves. No Russian interference necessary.
30
growth does not pay the debt down when there is no revenue paid on profits in the form of taxes. Or is it expected that the newly employed will be paying in taxes while the businesses & old money pay nothing. This another accomplishment the republicans can claim...increase in deficit the highest since 2012. Remember it was down during Democratic president...higher under republican. Something is really wrong in this country.
9
It is a certain guarantee, that should the Democrats take control of the House or Senate, or hopefully both, the Republicans will again mightily complain about our "exploding" debt and will resist any attempt to craft a budget or allow the extension of the debt ceiling. Yes, our government is terribly broken with most of the blame going to the Republicans. When will the populace "wise up" to these flimflam artists who have picked their pockets clean and hope to continue such with regard to Social Security, Medicare and Medicaid?
26
Republicans condemn government borrowing ONLY when the Democrats are in power. Otherwise, the national debt can be ignored. After all, when they are in power, they resurrect the Laffer curve and tell us how economic growth will save us all. Tax cuts for the already prosperous coupled with lower tax rates on capital gains will solve everything:)
11
Opinion
On the Debt Non-Spiral
Secular stagnation means even less reason to worry
Paul Krugman
Opinion Columnist
Sept. 11, 2018
"Another implication, which I don’t think has gotten enough attention, is that there is even less reason than before to obsess over government debt.
The usual scare story about debt warns about a debt spiral: deficits mean higher debt, which means higher interest payments, which means bigger deficits, which means faster growth in debt, and so on until confidence collapses. But this kind of debt spiral can only happen if the interest rate on the debt is higher than the economy’s growth rate.
And this hasn’t been true for a while. "
Full story at
https://www.nytimes.com/2018/09/11/opinion/on-the-debt-non-spiral.html
------
Two observations
1. In a global economy, with nations competing economically , a government must spent money in the most EFFICIENT manner - or some other nation shall its lunch, sooner or later
An analysis of what the US invested in that now requires interest paid on the on the money shows that this is not the case for the US.
2. Debt - interest - fiscal policy - correlation
Country Yield 10 yr Gvmt bond
US 2.59%
Germany 0.49%
Switzerland 0.09%
If the US had the fiscal policy of say Germany, her annual payment on the debt would be 1/5 th
Again, in a global economy, it is not how well you do, but how well you do compared to others.
3
@Woof
So are you saying you are gambling on growth to pay the debt.
Is that not the failed model we have seen crash time and again when growth fails.
Especially when you look at where your debt funded spending is going.
Not infrastructure?
Sounds quite Lehman like.
4
Trump can add the exploding deficit to his list of accomplishment in less than 2yrs. The republicans who railed about the deficit for the 8 Obama yrs are completely responsible for this and future debt and the eventual fall of this economy. The had the choice of paying down the debt and stabilizing Medicare and Social Security. Instead they payoff the wealthy and corporations who have been funding their political careers. Trump is a master of debt and bankruptcy and he does not pay taxes anyway so he is not worried. His supporters and the rest of us should be worried. The economy rose in the first yrs of the Bush debt explosion and then crashed. Trump the Con Man, is even more incompetent and that fall will come much sooner.
49
I fear and have no doubt that this will end badly. Unless we do something about budget deficits now, Social Security will become "Social Insecurity," the Affordable Care Act will become the "Un-Affordable Care Act" and there won't be enough money for defense, and institutions like the FBI and the judiciary.
Make no mistake about it, all sides of the political spectrum have blame for our quandary and the media including the New York Times share in it. When a powerful institution such as the Times advocates for programs such as the ACA, SNAP, Planned Parenthood, the Arts etc., etc., and you know that the country is already running a deficit than I think you are complicit.
We have to come to an agreement soon that we can only spend what we can afford and just as households must, set aside a fraction to pay down what we already owe. Otherwise the USA as we know it will cease to exist and with the rise of dictatorships like China portends badly for the entire world. Peace.
5
I assume this is how Trump world runs?
Based on his extensive business success and financial acumen that has seen him succeed in every field with his upright and decent team of loyal advisers.
You would never hear them having a debt crisis worse than the last American led financial crash based on cuckoo ideas of lending and chicanery.
Luckily the many friendships he has formed around the world and increased global trading partnerships will surely mean everyone will rush to help should the worst happen.
Sadly this article doesn't feature large enough.
9
This will only be made worse if Trump continues his trade war with China. They can't match us tariff for tariff and thus eventually their government will start dumping US bonds. This would destroy our economy!!
18
"While the Republican about-face has been much more striking, Democrats have adjusted their position, too."
While Sen. Lankford has shifted from a position of fiscal responsibility to fiscal foolishness by supporting tax cuts for the rich that create massive deficits that are detrimental to the economy, Sen. Warner has not adjusted his position at all in that he consistently supports fiscally responsible Keynesian economics.
This is not simply a partisan difference. It was Milton Friedman who famously said, "We are all Keynesians now."
8
Sounds like your government has decided to spend $5000 of your taxpayer’s money to pay off its’ credit-card debt over 36 months rather then $1000 to pay it off today.
77
@Lewis Sternberg No, not at all. The Republicans have decided to make the minimum monthly payment on the credit-card debt, while continuing on a growing military spending spree that goes straight onto said charge card. There is not the slightest plan or even discussion about slowing the growth in what is being charged, much less in making more than the minimum payment or starting on paying it even partly down.
Governments and particularly the US government does not operate with the same constraints as a family budget, so the analogy only goes so far. But any way you look at it, the Republicans have every intention of increasing the debt to the benefit of their private and corporate big-money backers. Then to use the eventual crisis to cut social, environmental, and educational spending.
@Lewis Sternberg
What else can be expected we have a self-declared "king of bankruptcy" in charge? He is doing what he does best, blighting every thing he touches.
1
No, they’ve asked for a credit limit increase, stopped paying anything down, and are charging $1,000,000,000,000 a year to the card. No, seriously. $1,000,000,000,000.
I hope everyone reads this article and understands the precarious and perilous situation we are in due to extremely irresponsible tax bill passed by Republicans. The next recession will most likely lead to a great depression and Greek style pronged contraction as govt will cut spending in the middle.of recession. But even more troublesome is the potential of treasury to default on debt that will bring the world economy crashing as so much is hinged on the stability of T bills.
53
It's time to give up on free heathcare and free college. Those are not basic human rights in the USA and they never will be They are fake dreams, given the deficits and debts of the federal govt. and most of the 50 states.
1
Universal health care and free college makes the country healthier and smarter while tax cuts for the wealthy only makes the country poorer.
122
@Matthew And there in a nutshell (pun intended) is the Republican plan. For those with $25 million in assets and 7-figure yearly incomes, the US does have excellent healthcare and education. For those with less, very rapidly they are priced out and indeed healthcare and education and retirement become mirages they will never be able to afford to touch.
Perhaps alternatively it is time to give up on tax cuts for the already rich and economic growth of corporations whose benefits are captured by a few financial services "engineers" and rentiers at the very top. Those are actually not basic rights, and the Laffer curve is not magically going to start working after the next tax cut.
7
@Matthew I assume you are being ironic. There never was free anything. Health care and education is something the people and their reps in government decide to pay for with taxes and redistribution of wealth. When states in the south complain about too much federal meddling, then need assistance after a hurricane or when coal miners get sick or lose their jobs, it shows a basic ignorance of what a country, working together in the best interest of all of us can accomplish. Trickle down economics is actually a rationalization where you give tax breaks to the rich so that they will send profits down the chain to the worker. It has resulted in economic downturns each time.
9
Ah, but we will grow our way out of debt with lower tax rates, so the Republicans say. Seems as though I've heard that before from Reagan and Bush43.
The result was a short-term euphoric high followed by a severe hangover. The Trump tax bill will be no different, probably worse.
120
That's not the bad news. The bad news is that Trump has broken the seal on ignoring debt. Now all future Presidents know it is possible to get away with pretending it doesn't exist.
So the politicans won't ever draw the line, and one day the markets will.
32
can a country file bankruptcy on itself? what chapter would that be? trump is king of bankruptcy maybe he can give tips. No more weekends away from home...the country can’t pay for the jet fuel & McDonalds.
1
@Nostradamus Said So Jet fuel and McDonald's costs are not so bad, it's the bills and fees to the various Trump properties that can't be afforded.
@Peter Peterson, everyone who owns an information almanac knows tax cuts for the rich and unbridled government spending have been the most consistant undertakings of every GOP administration since Reagan offered to slow the flow of money down the food chain to a trickle. Thankfully because of the bugaboos of Islam, and abortion, and gun control, and most especially cutting education funding they still have enough votes to continue their crusade to end America.
2