It's very hard to get a third party established in the US because we have first-past-the-post voting. When an actual majority required (over 50% for the winning candidate) more political parties become viable. In the US, this issue, combined with our largely winner-take-all electoral vote for the executive branch creates a system that can be gamed towards minority rule.
Last time I looked, corporate America was firmly in the camp of the Democrats / woke Left. The Fortune 500 gives to everyone, but look at how DEI and LGBT and ESG have infected corporate boards. Big business has once again decided it likes big government -- what a surprise.
Anyone able to let me know, life is too short to waste on idiots, especially when they are full blown Dunning-Kruger idiots who are too dumb to understand they don't know what they don't know and are just tape recorders repeating the lazy tropes they heard of other also quite dumb ppl
What I really appreciate about Substack, Lee, is that those who comment engage in serious exchanges and avoid the easy snark and disparaging insults so common elsewhere.
I think Mr. Villanueva has conflated and caricatured several different things (DEI, LGBT, ESG) in a way that reduces them all to a common element that he doesn't show a clear understanding of ("woke"), applied to a highly non-homogeneous sector and party ("corporate America"; Democrats). He doesn't seem to consider that the high-profile cases involving corporations may involve responsiveness to market forces, not "big government."
First, there are 500 Fortune 500 companies (I've been told), and widely reported examples of a few making statements that oppose state actions that tendentiously take on what MAGA-oriented statehouses see as "woke" elements of society does not mean that "corporate America" has succumbed to a governmental woke agenda. I live in the middle of the country, and I don't see corporations in my state making dramatic moves towards towards an agendaof "the Left."
DEI training is pretty widespread in corporations (not just big ones). Some of it I find as wrongheaded as the caricatures suggest, and that sort is widely assessed as having had little effect, but some programs focus on helping corporations address biased hiring practices that are costing them talent and profitability, and those seem quite useful. If Mr. Villanueva wants to discuss the former, I'll be there with him. If he wants to lump them all together, I'll write this paragraph.
It's hard to know what he objects to about "LGBT." If he's upset that many businesses no longer discriminate against LGBT employees and job applicants there not much more to say. But if he reflects and finds he really can't defend discrimination against LGBT people, perhaps he'll decide that was just thrown in for rhetorical effect and withdraw it.
As for ESG, I think the right response is to note that the Friedmanesque reduction of valid corporate purpose to increasing shareholder value is only one interpretation of where value lies in a capitalist society. Big Business followed that type of imperative before the Depression and increasingly after Reagan, and no publicly owned business can afford to ignore it entirely, but my question for Mr. Villanueva would be why a turn towards socially conscious corporate behavior that factors broad long-term impacts in decision making outrages him, or represents submission to big government?
It would have taken him 5 seconds to google and see that CEO donations don't just favour republicans over Democratis, they massively favor Republicans over Democrats
These fools really do just see some tweets about 'Woke' corporations and think they are noble ppl fighting big business, not realising they are the tools of big business, being riled up over culture war nonsense to vote for partys who will always put the bosses agenda over that of workers
Hence my referal to Dunning-Kruger and life being too short to waste on stupid ppl and my desire for a block button so I never have to be bored by that persons ignorant attempts at political analysis ever again
Lee, I explicitly said I wasn't talking about donations, that I was talking about ideology. Donations are based on securing lobbying power. That has nothing to do with ideology. As Arby points out below, the recent left-wing swing taken by corporations appears to be driven by the HR and Compliance Depts more than the CEOs. The C-suite appears to be along for the ride, but they can read the writing on the wall, so those who dissent dare not do so publicly. (As a side note: I've often thought that the writing is on the wall for a society that no longer remembers what "the writing on the wall" refers to.)
As for who's not "standing with the workers", what value a does blue-collar UAW auto worker get out of the modern Left's obsessive focus on racial and sexual grievance groups? What value does single Mom working at McDonalds get when her daughter comes home from school convinced that she's a boy? The son of a white, unemployed, Appalachian coal miner is privileged? Really?
Why is race & LGBT grievance group support so highly correlated with education and wealth? It's not accidental; it's distraction. If the wealthy talk about white privilege and standing with oppressed minorities they can avoid acknowledging the obvious advantages of their wealth. Wrapping yourself in the rainbow flag excuses all other sins. But it shouldn't. Freddie Deboer (from the left) has a great post about exactly this on his substack today (https://freddiedeboer.substack.com/p/remember-rich-uncle-pennybags). I don't always agree with Freddie, but he's right about this. Unionization rules help the workers and limit the powerful; DEI trainings at best do nothing and likely do the opposite.
Don't call names when you don't know someone. I went through my libertarian phase and I recovered. As I said to Robert below, I'm a lot more to the left than you likely realize. But I'm old-school left. I'm Catholic-worker-movement left. I care about how the wealthy use economic power to oppress. If you share this commitment (and I suspect you might) I would encourage you to take an honest look at who the wealthy and powerful are oppressing today. Here's a hint: we're starting Black History Month in a few days; June will be Pride Month. It's a little hard to claim that you're oppressed when an entire month dedicated to you is heralded by every major institution of the Western world: corporate, governmental, nonprofit, media, and educational.
If you want to know who the oppressed are, look at what groups don't get months of celebration. Look at what groups are acceptable to denigrate in "polite society". Look at what groups are routinely subjected to the 2-Minutes-of-Hate on Twitter. Those are the oppressed. Those are the "least of these". I stand with them.
You seem to have confused me with someone who has any interest in what you have to say, I assure you I don’t though I do find it funny you wrote all those words that nobody will ever read
so the question is more complicated than that. CEOs actually aren't omnipotent despots, and if one looks at overall corporate culture I think the guy above has a point. There are examples of CEOs/boards imposing their views, but also plenty (more?) counter-examples in recent years of employee base revolting and imposing theirs. Pretty unclear to me how one scores whether big business is pro one camp or the other. The confusion between people who donate (CEOs / senior people) and stated frustrations with republicans (probably mostly driven by rank and file) also permeates the original comment that started this thread.
No, its pretty simple, that fool going off memes and tweets thinks that corporate America is imposing a Woke agenda on the United States and are in the bag for Democrats when the facts are that CEO's donate more to Republicans than Democrats (and by a lot) as do the corporations themselves, yes the educated staff in the business often donate to Democrats but that is not the point he thought he was making (I hesitate to give his ramblings the credit of being called a point)
You're correct, I am lumping the pieces of the Left together in the same way they lump them. The Left views their coalition through the lens of postmodern intersectionality, so "oppression" of one group must be answered by the all "oppressed" groups. The fact that defining what groups are considered "oppressed" or even what groups are considered "groups" is never really mentioned. For example, left-handed people face oppression in their daily living every day. And the most privileged people in America are the attractive, but no one ever wants to talk about that. Instead we obsess about racial categories and bizarre and highly uncommon sexual behaviors. And don't even get me started on how the Left suddenly doesn't care about wealth privilege; I rue the day that Bernie's consultants convinced him to give that up for the 2020 election and adopt the race model (like every other candidate) instead.
There is a great deal of scientific evidence now that oppression-based, DEI trainings are not only ineffective but actually harmful. And not just to the workplace, but to the employees larger feeling of community cohesiveness and trust. It appears you know this, but somehow think there is a third way. I do not. I believe the obsessive focus on race is counterproductive from the beginning. As Justice Roberts said a few years ago: "the way to stop racial discrimination is to stop discriminating on the basis of race." Personally, I've adopted the French belief that even counting and categorizing people by race is problematic since it leads logically to racial group demands.
On the LGBTQQIA2s++ issue (side point -- how that acronym even be taking seriously escapes me, as the first 3 letters are premised on the gender binary and all the rest reject it, but I digress), there have been many high profile examples of people fired, demoted, losing grants, promotions, etc... because they will not wear the rainbow flag. I must conclude that you honestly don't think is a big deal, and that's your right. But I would ask you how you will defend your beliefs should your woke employer declare them to be problematic next. Because if what every Abrahamic religion in the world believes and has taught for thousands of years can be overturned and ruled bigotry in the space of a decade... and you support that... you have no ground to defend your own beliefs from either. So get prepared to embrace pedophilia, because that's next. I know, that sounds so alarmist, but the "scientific" work is already being done: Google "minor attracted person" but not at work. The philosophical work has already been accomplished: if a teenager can consent to slicing off their private parts, surely they can consent to using them. So how would you push back against that? In the words of Thomas More, you've "cut down all the trees in England and the Devil has rounded on you." Or would even that not be a bridge too far for you? And if you don't think it can happen, just ask yourself whether you would have ever believed a decade ago that your HS daughter could be forced to share a gym locker room with penises and be lambasted as a hater and a bigot if she were to object to the penis-havers lurid glances in her direction. That's happening now, but if you notice, you're a bigot.
My view is that the rainbow flag is Vaclev Havel's greengrocer's "Workers of the World Unite" sign. You must put it up or you will be destroyed. And today, that includes wholeheartedly supporting children who want to pharmacologically and surgically modify their bodies, rendering themselves permanently sterile in the process. The bravest people in America today are the few like Billboard Chris who are willing to boldly state the truth. And look at the abuse and actual violence he has endured for doing so. LGBT ideology (not people -- there are LOTS of gay people who don't support the militant LGBT ideology, ask the lesbian TERFs like Bari Weiss) preached tolerance until it gained power; now it's crushing all dissent. That's what your woke corporations support.
How many examples do you need before you are willing to declare they're more an anecdotes and represent a problem?
Mr. Villanueva, On DEI I think you are distorting the impact of what I see as a complex institution. A lot of DEI over the past half-decade has been deeply wrongheaded and counterproductive, drawing on an ideology I find narrowmindedly illiberal. I think the "white fragility" approach is, in fact, burning itself out. Its failure is a product of its rigid and stereotyped thinking, and doesn't erase the fact that there does actually exist racial bias in hiring and promotion practices. I pointed out earlier that there is a different approach to DEI that focuses on addressing that issue for companies that want to add productivity by eliminating barriers, and that the evidence is it can help companies meet their goals whole reducing the role of bias. You say you don't believe this "third way" exists; there's nothing I can do about that.
I would not know where to begin responding to your apocalyptic paragraphs on LGBT issues. I recognize the discourse, naturally, but there's no way to address it. I think the way the Right has seized on what are truly complex, personal, and difficult human issues to create a type of religiously-informed hysteria is far more dangerous and socially distorting than the problematic cases they use to create a demonic portrait of some elements of LGBT culture. For my part, I prefer to try to persuade people on the Left to question some of their shibboleths and not to simplistically defend morally complex and questionable practices just because the Right's attacks on them have reached psychotic levels. I don't think anything I might say to those who share your approach could be heard. But since you seem quite reasonable in other comments you post I guess I'll add that I hope you'll consider reexamining some of the beiefs you've adopted on this issue.
I hope you are successful in your persuasion. I really hope you're right, and I respect that you've been willing to actually talk about it. You call me apocalyptic -- OK. But I notice you didn't address my point about your teenage daughter being forced to use a coed locker room. To use another example, saying "men can't give birth" is verboten in elite-educated society today. If someone 20 years ago had told you either of those things would occur, or that sterilizing children would go from child abuse to a civil right, within a single generation, would not early 2000's Robert have considered them apocalyptic?
Everyone has a tipping point where they realize: "oh my Lord, the liberalism I've been fighting for has turned into an authoritarian caricature of itself." I've gotten there; you clearly haven't. (I'm a lot more progressive than you likely realize -- my comment about Bernie wasn't just tossed out there.) The interesting thing is that once you reach that point, you can see how the train of liberalism was derailed beginning with J.S. Mill and how the postmodernists dynamited the track completely in the 60's. But until you get to the tipping point, all of this looks alarmist and reactionary.
My greatest wish is to live in a tolerant, classically liberal, broadly Judeo-Christian society again. At this point, I see no evidence that any of those, let alone all 3 together, are possible in America. But I continue to hope that I'm wrong.
White males make up less than a third of the population. Labor participation rate has been dropping steadily for years. Business has been screaming about a shortage of labor. Also, the population that is not white heterosexual males is a growing portion of the consumer base.
One way to attract people who are not white heterosexual males to work for you is to stop having a workplace hostile to anybody outside of that small percentage of the population. You can get more of them to work for you if you actually have policies to support some of their unique circumstances.
As far as I can tell, the "woke corporations" are just the ones trying to broaden their base of employees and customers so they can sustain themselves and grow in the future. Its just good business practices for most of them.
"Diversity trainings" that most closely resemble race-based, struggle sessions (ala Mao) don't strike me as "policies to support unique circumstances" at all. Chris Rufo has done yeoman's work documenting these sorts of trainings if you doubt the seriousness of this issue.
I work in a profession that was almost entirely white male in North America and Europe through the 1980s. Engineering is switching rapidly as many more women and minorities are entering the field. We get the occasional training on sexual harassment and diversity because it actually was a significant issue for a couple of decades. Policies on family leave etc. have changed dramatically. Same with working from home - our workplace was doing that, especially for women who just had children, for about 15 years. As a result, they stay with the firm instead of dropping out and are now senior engineers and project managers. The workplace does appear to be improving for the new groups in the workplace.
I have seen no evidence of race-based struggle training sessions in companies I have worked for or work with. My guess is that somebody did one once at a Fortune 100 company and it has been the example dragged around for several years.
Ernst, you're connecting the "diversification of the work force" with "diversity equity and inclusion" as an ideology. These are completely different things.
There are real benefits to culturally and racially homogenous societies; there are also real costs. But that ship sailed with the 1965 Immigration Act. That we're going to go back to 1960's White-America is a pipe dream, held only by the Nazis today (ironically, who share the same race essentialist beliefs as the woke Left but with a different race placed on top.) The white nationalists have about 2% support nationally and no cultural or institutional power though. The woke Left controls essentially every major institution in the Western world (media, ed, corporate boards, NGOs, govt, and increasingly the military.) I'm thrilled that you have not encountered militant wokeness in your employer. Many have not been so lucky. Again, bother to read Chris Rufo; you might learn something.
An ideology that teaches race essentialism and collective racial guilt is wrong. Period. I don't care what race is put on top or what race is made to feel guilty. It was wrong when David Duke did it. It is wrong when Robin Diangelo and Ibram Kendi do it. And the Left who is doing it today is conjuring a terrible demon that they have absolutely no way to control.
None of that has ANYTHING to do with whether the engineering profession (or any other) has brown people in it. That's not what this is about.
If the "Woke Left" actually controlled corporate boards, we wouldn't have CEO compensation 250-350 (awarded vs realized) greater than their typical worker and we would not have a lot of workers struggling to get full-time hours with a wage that puts them above the poverty line if they work just one job. It is labor shortages that are pushing employers to increase wages, not "Wokeness" (e.g. Walmart $12 to $14/hr), If you actually measure by worker and CEO compensation, the 1950s and 1960s S&P 500 was far more "woke" than today. These are corporations that measure things in dollars per "shareholder value", so pay attention to where the dollars instead of the words are.
"But if you want austerity, the correct way to do it is to pass spending cuts in Congress, and iron out a budget deal with Biden through the normal process that we successfully used in the centuries before 2011."
And if you want to avoid these perpetual crises, then offer a reasonable budget to moderates (including this Democrat) who find the extraordinary explosion in federal spending and deficits objectionable. Medicaid should be a matter for the States; the social security eligibility age needs to be pushed out; drunken-sailor-spending like student-loan bailouts needs to be eliminated and excoriated as growth-reducing redistribution to people who made bad but free choices; negative income tax should be used for 70-80% of the population; an income taxes can go up for the top 20-30% without objection here.
The policies and reasons you propose, Max, have some problems, even for what I'd think of as a moderate Democrat (me, though I call myself a vanilla liberal).
1. The recent " extraordinary explosion" of federal spending seems reasonable to me, because in a near-zero interest-rate environment it was affordable, and addressed either war-level emergency needs (Covid cash) or long-term critical needs that would ultimately cost far more to neglect (infrastructure and climate). There may have been waste, but there is *always* going to be waste; it's a feature of human systems, especially political.
2. A very large share of student debt was a product of the shift from lower-cost tuition, with prices kept low by large state-level subsidies for public colleges, to tuition rendered widely unaffordable by the withdrawal of over 50% of public support. College access is a critical national need (for more reasona than can be listed) and we began to pay for it by shifting responsibility from state taxpayers to individuals by making easy money available and over-promising future returns. Their "free choices" were between options we limited by policy, and we offered misinformation on the key choice in order to keep them out of the job market for four years and build human capital as anational need. I agree that it would be fine to make some move to limit bailouts to those who need them, but it's hard to do. (And lots of the ballooning costs of tuition that swelled those loans was also the result of policy choices that incentivized schools to bloat their administrations.)
3. If Medicaid is "a matter for the States" that shifts a tax burden; it doesn't eliminate it. States that don't raise taxes to take on the burden either severely reduce health delivery or force very large costs on those who can least afford them (a huge selective regressive tax), and create conditions for lower productivity and economic growth and future high costs by undermining the health of the workforce and increasing illness. You're going to need a huge chunk of your negative income tax if you want to avoid those outcomes, which will wipe out the federal savings you're looking for.
I agree with Noah on MME, to the extent that I think we should not rely on it (I'm not an economist; I don't know MME is wrong, but my reading hasn't shown me that a layman can tell it's obviously right), but we are seeing that wealthy countries can, in fact, sustain a debt/GDP load higher than we previously thought was healthy, and it may be that the critical issue has more to do with debt-service/GDP levels than economists traditionally thought. The government's mandate is *not* to avoid debt; it is to provide optimal outcomes for the commonwealth. If high but manageable debt fulfills that mission best it's what we should have. We've been hearing the deficit-hawk predictions of imminent disaster since the 1970s (at least I have). While it's wrong to be irresponsible, if responsibility means recognizing that simplistic household-budget approaches to budgets are harmful to the national health then it's irresponsible to maintain that approach.
Because something is cheap -- in this case money -- is not a reason to buy something.
While COVID is a fair turn on of the tap, the balance of these unread omnibus bills is just lard, plain and simple. Huge, Jabba the Hutt payoffs from the Dems to their supporters.
Student debt is a contract with a loan request and a loan made. Pay off your freely made obligations. I put myself through college and my kids.
There is no connection between somebody taking out a college loan and the size of the administration. Student body growth may have driven admins, but not loans.
This is a perfect example of moral hazard - rewarding folks who studied majors with no jobs and penalizing fiscally prudent people.
Unemployment, Medicare, Social Security, and some parts of Medicaid are insurance programs in which the insured is simply getting back the benefit of the bargain.
The Dems screwed this up during the Johnson admin when they commingled these dedicated funds with the general fund and created a fictitious serious of IOUs that can never be repaid.
In some of these things -- Social Security in particular -- the solution is to privatize them and let sophisticated persons manage their own retirement funding.
It's MMT not MME.
You can't have it both ways -- you can't pretend to be a fiduciary of our citizen's funds and then be a drunken sailor with them.
Greed and corruption account for much of the gross overspending in the US. The lack of even rudimentary adherence to the mandated budget process -- regular order in the budget racket -- by the White House, the House, and the Senate is at the core of this shameful and irresponsible policy.
There is nothing wrong with defensive gov't spending in excess of revenues during tough times or wars, but it is just slovenly to think we can just spend with no limit.
Nobody with a brain thinks that's a good idea. Look at the bloody math, FFS.
T30 interest rate, Oct 1981, 15.21% - during a period of then record high inflation, lots of pain when the Prime Rate went to 20.5%
T30 interest rate, Jan 2023, 3.57% - during a period of record inflation, lots of pain coming
T30 interest rate, August 2020, 0.57% - good times, recent good times driven by prosperity, energy independence, and superior policies
This is real and it doesn't matter how one "feels" about it. It's math.
Thanks for the MMT correction, JLM. I don't agree with you on much more.
Calling the components of the IRA "lard," and "Jabba the Hut payoffs," saying spending is "like a drunken sailor," adding "FFS," and so forth adds exciting rhetoric to the discussion, but nothing more.
I think it's great that you put your kids through college--you're not the only one to do that--but I don't look at these issues as tests of personal morality, and I think the "moral hazard" approach is a terrible government philosophy. I don't see the purpose of government as rewarding behavior it considers moral: I see it as managing macro-level social factors to facilitate general goods. If a policy facilitates general good while rewarding some number of people we consider undeserving government should look at ways to minimize the latter, but not at a cost to the former. Focusing on moral hazard is a great way to lose national opportunity or maximize government overhead costs.
On the student debt issue I've already made my argument. We disagree.
Administrative bloat at universities was enabled by a student loan incentive structure that made demand highly inelastic, encouraged excess tuition increases, and discouraged budget discipline over a couple of decades. The result was excess tuition devoted to secondary activity outside the central teaching/research/outreach missions.
Borrowing from the Social Security Trust Fund does not date to the Johnson administration (there was no need for it). It dates to the Reagan Administration. As for shaping policy so that "sophisticated people" can manage their own retirement funds in a privatized system, the government's Constitutional responsibility actually extends to unsophisticated citizens. This is a "moral hazard" approach shifted to a "financial intelligence hazard" basis. The chief beneficiaries would be financial advisors and so-called financial advisors.
I don't really have any way to respond to rhetoric about greed and corruption, slovenly thinking, people without brains, or your concept of "the math." You've made clear how you feel. As for your observations about Treasury note rates, the only point seems to be that you predict lots of pain coming. Noted.
In 1968, the US budget had three components of which one was SS. LBJ did away with this distinction thereby commingling the funds.
What you are referring to in the Reagan Admin was the return to the three budget discipline which did not fix the commingling issue but laid bare the magnitude.
What the most diehard zealots would have us believe is that Social Security has been in effect selling securities to the government itself with those securities being the underpinning of the SS Trust Fund -- the faux notes.
Were that true, there would be no SS crisis looming. We have already crossed the line in which payouts now exceed income for SS.
Said another way, SS payments to seniors are more than SS payroll taxes currently being paid in by the younger folk.
As to allowing citizens to fend for themselves in the retirement arena, the gov't has long since made that determination with the approval of private pension plans, defined contribution plans, simplified pension plans (SEPs), Roth IRAs, regular IRAs and my personal fave deferred compensation.
All of these retirement plans are viable and solvent (one hopes as it is one's money) alternatives to SS. None of them require recreation as they already exist.
Why should the gov't object if I give up all future call on SS and pay some nominal amount -- say 2% rather than 7% -- to fund the dummies?
In using the term "moral hazard" as it relates to the loan forgiveness plan, it is intended to suggest that persons will take on undue risk if their government will bail them out as a special class.
One of the baseline values of our nation is equality which has to do with opportunity and even the twisted notion of equity -- which has to do with outcomes -- both argue that there should be some relation as to how risk turns out if you voluntarily take it.
If you sign a bloody note, pay it. Don't make the 66% of America who did not have the privilege of attending college pay for the 34% who did.
That is not fair using either one's straight sense of equality or twisted sense of equity.
Mr. Minch, I think you've mstaken Johnson's reform in budget reporting for a transfer of funds. Social Security funds were a component within uniform budget accounting during the period (I believe) 1970-90, required by legislation Johnson signed in early 1969, and ended by legislation signed by Reagan. But that did not mean that the Trust Fund monies were commingled or transferred out of Social Security. The were, however, transferred within Social Security during the period 1983-89, following legislation signed by Reagan. There were, indeed, tansfers of funds, but they were not out of the Social Security funds to general funds, but among Social Security funds in order to prevent depletion of funds with low balances. All "borrowed" monies were repaid by 1989.
The Reagan-era reforms put Social Security back into long-term solvency, and for decades it took in more revenue than it disbursed. The excess funds were not kept in cash, they were invested in special issue Treasury bonds, which yield interest income to the funds. In this sense, the Treasury owes the funds the principal on these bonds and, as the funds no longer are taking in more revenue than they are disbursing, and the bonds will gradually need to be liquidated over time to supply the shortfall that bond interest won't cover. This is the origin of the securities you refer to, and it dates from the Reagan reforms.
On your responses to how to treat "smart" retirees and "the dummies" and the term "moral hazard," I'll stick with what I wrote before. We see the role of government policy and morality differently and I don't expect to persuade you
I believe a primary reason for the future lack of full funding is that longevity increased steadily for a couple of decades after the Reagan reforms took place. This is also one reason (among several) why corporate and state pensions became steadily underfunded. People stopping smoking appears to be a key factor in the longevity increase. Hard to predict in mid-1980s. Recently a number of factors appear to be causing a slight reduction in longevity for the first time in US history outside of a major war or the 1918 flu.
Social Security and pension are effectively annuities. Increased longevity can substantially increase the necessary premium payments for a given annual income because it will have to last longer. Changing mortality tables also change the RMD schedules for IRAs. The IRS updates them about once a decade.
"The recent " extraordinary explosion" of federal spending seems reasonable to me, because in a near-zero interest-rate environment it was affordable"
this inability to distinguish between P&L and balance sheet issues is properly scary. To draw an analogy, think about a world where mortgages only exist in variable rate form. how good an idea would it be to borrow to your eyeballs to buy the biggest house possible when rates are low? what happens when rates rise?
Arby, I'm a little puzzled by your analogy to variable rate mortgages. Treasury note yields vary as they are sold at market. But the yield rate of a Treasury security is fixed at sale, like the rate of a fixed-rate mortgage. The borrower's (the government's) service cost doesn't change after the note is sold at market. The proper analogy is to a fixed-rate mortgage, not a variable-rate one.
And, yes, it does indeed make sense to borrow more when fixed-rate debt service is low. Not sure about the eyeballs. Depends how tall you are, I suppose.
A significant percentage of US debt is relatively short Treasuries. Rolling that debt over increases the interest rate paid on that debt. There is relatively short weighted duration of Treasuries (@ 5 years). https://www.brookings.edu/blog/up-front/2022/07/27/projecting-the-structure-of-us-treasury-debt/ You see this show up in total bond funds that typically have a duration of about 6 years.
There was a big push from some people to fund some long-term projects, such as infrastructure, with long-dated debt (30-100 years) given the low interest rates over the past decade to lock in those low interest rates for a very long time. Apparently that went nowhere.
All refinancings of existing debt are a crap shoot on the yield curve.
If you pick right, you may save some interest; but, if you pick wrong, you are penalized with an interest rate penalty.
When Ts hit 15.21%, a lot of smart money bought the T30 and held it to maturity.
When Mexico was failing and Nick Brady stepped in to save the country, Mexican Cetes/Tesobonos priced at north of 60% and every penny was paid back except for a small, gradual currency devaluation penalty which clipped 2-3% from the yield.
C/Ts were not "Brady bonds" but when it was clear the US would not let Mexico default, smart guys realized that meant all debt would be made good.
If you're a government, basically you hope that the economy (and therefore tax revenue) grows faster than interest payments. If not, I guess you just do the best you can?
If you're literally buying a house in the United States, you have three options: pay the higher interest rates, sell the house and use the money to pay off the loans while keeping any extra as profit, or default on the loan and let the mortgage lenders take a loss on the difference between the market price of the house and the amount of money still owed on the mortgage. (In the US, mortgages are "no recourse" loans - the house is the only asset of yours that they can legally claim if you default, even if you owe more than the house is worth.)
My impression is that what MMT says is not that government can spend whatever it wants with no consequences, but rather that, since the government can create all the money it wants, the only meaningful constraint on government spending is inflation.
Imagine government finances as consisting of a money incinerator and a printing press. Any money the government takes in from the economy through taxes and borrowing goes straight into the incinerator, and any money the government spends into the economy comes from the printing press. (There's no difference between this and spending "the same money" that it takes in.) There's no need for revenues and expenditures to balance, except to control the amount of money in the economy. So you design fiscal policy around that, rather around than balanced budgets and cash flows - if someone tries to use MMT to justify extra government spending without taking the effects on inflation into account, they literally don't know what they're talking about.
(Which is kind of the point. A government with the power to print its own currency can never actually go bankrupt by borrowing in that currency, because it can pay off creditors by printing money - but doing too much of that will cause inflation and make that money less valuable, and too much inflation does indeed do all of that bad stuff.)
That works in a largely closed system. However, if you have too much foreign-owned debt so the rest of the world doesn't want to buy it, then inflation can go nuts. That ultimately was the Weimar Republic's problem because their reparations debt was owed to foreign countries. It was greatly exacerbated because the world was still on the gold standard, but it would still be an issue today in a fiat currency world..
Yeah the premium bond route seems like the better choice. You probably need to get started early and plan to syndicate the bond out through some big banks, because the smaller players aren't set up to cope with non-standard bond structures. But there's plenty of short term debt rolling over, and it's easy enough to change a bond that pays out $1060 over three monthly payments as "20, 20, 1020" into one that instead pays "350, 350, 360". (So it's a $10 principal bond, with a 3500% per month interest rate. Which is ridiculous, but this whole crisis is ridiculous.)
Because we have a lot of short term debts rolling over all the time, you can bring down the face value of debt fast, and while this does accelerate our payments a little bit, it shouldn't matter substantively to our overall cashflows. It'd be harder to pull this trick with the longer-term bonds. In theory if you did this forever at some point you'd run out of short term debts to convert, but you'd need _decades_ of inflation before the limit became relevant again.
The big argument for the coin is just that you can threaten to do it, while also offering to abolish both the debt limit and unlimited coin seigniorage in a single bill, to end this kind of brinksmanship forever. (Well, and also: The threat has a bit of that Dark Brandon energy. It's meme-able in a way that I think probably psychs up Dems more than it adds any fuel to the GOP's already-raging bonfire.)
What is the relevance that there are two ppl with kinda bonkers views who believe in the trillion dollar coin proposal? Adolf Hitler also liked nature and dogs. Are they bad? These individuals are neither the originators of the idea nor the most reputable proponents.
There are quite a number of expert constitutional lawyers and I believe even one of the bill authors who have opined the move is legal (some even argue it might be mandatory) and likely would be accepted by the court. Ofc they mostly recognize that being forced to take this measure would itself be harmful (legal uncertainty etc) but it's still a reason to think that the harm will be less than a default.
Not to mention that other constitutional lawyers have made convincing arguments that the executive could just ignore the debt ceiling (the constitutional duty not to default and the congressional budget themselves creating contradictory legal duties).
Both workarounds are undesirable but I don't see what either of them has to do with the crazy ideas about sending troops to the fed.
Are these the same constitutional lawyers who think the executive has unfettered discretion to appropriate $400-600 billion for student-loan forgiveness? We'll see how those arguments do. They are nonsense, even from this believer in fairly broad executive power.
There's a pretty decent argument that a debt ceiling is unconstitutional under the Fourteenth Amendment, which says that the validity of the public debt of the US can never be questioned. It's a fairly mainstream argument, not some nutty outlier theory (which TBF is not necessarily a plus with the current Supreme Court, which seems to have a penchant for nutty outlier theories).
“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
In prior debt ceiling confrontations, this provision has been read literally as to the validity of obligations incurred by the government as noted by the examples.
It has to do with reneging on the validity of debt rather than speaking to payments of either principal or interest.
The debt ceiling issue has nothing to do with the validity of the underlying obligations.
Let me add that the student loan relief is also disgusting and wrong. If the Republicans did it the Dems would be justifiably outraged at the idea of giving money to those who are better off but not those who are worse off.
Yes, you can make the argument that it's unfair to burden people with so much debt to attend college and the government should pay for education. Fine. But it didn't and many ppl decided college was too expensive to attend. It's outrageous that we're now going back and instead of helping the ppl who decided they couldn't afford to go to college were helping those who did. Despite the fact that even with the debt going to college increases your lifetime income by quite alot.
I mean imagine we didn't have social security and people said: it's unfair we don't have government funded retirement so we should reimburse everyone who made payments into their 401ks. People would be outraged. You are literally giving money to the people who are better off (put money away into their retirement accounts) rather than those who didn't. It's the opposite of what the dems are supposed to stand for.
My spouse was supposedly eligible for the Public Service loan forgiveness program a decade ago. Unfortunately, US student loan types and names are very complex and the regulations written for these programs are very complex and unforgiving. therefore, 99% of "eligible" borrowers for forgiveness were not actually eligible at all. In order to "fix" the application, she would have had to start over again beginning a new payment 10 year period with the converted loan to get forgiveness of whatever was left after a total of 20 years instead of 10.. That was clearly not going to be worth the effort. They did a one time fix of that a year ago and the remaining loan (20% of what was eligible a decade ago) was forgiven after going through a fairly complex set of loan conversion and payment documentation steps.
Unfortunately, the US student loan system is so complex and cumbersome that it is nearly impossible to do any sort of targeted forgiveness programs. So it virtually has to be all or nothing unless Congress totally restructures student loans into something simple and understandable, which appears to be anathema to Congress and the bureaucrats.
There are plenty of lawyers who aren't onboard with student debt relief who think the coin thing is legal.
And, though I'd personally benefit, I agree the student-loan forgiveness is pretty clearly illegal. The harder question is whether anyone who has brought suit has standing on the issue (same thing that prevented the courts from stopping Trump's illegal diversion of money for the wall). The student loan servicers would almost certainly have standing but none have brought suit in their own name.
But, if the republican house is willing to take the political heat they would likely have standing as well.
It get messier if the Dems stick a thumb in the House's eye as the debt ceiling is not the only hurdle to funding the government.
It's called appropriations.
It is one thing to say you are going to ignore the debt limit, but the next chapter is to appropriate the funds to pay for things including debt service.
All spending bills must originate in the House. If they sit on it, WTF happens then?
No, this is the perfect example of what politics requires to be effective -- leadership and compromise.
Obama -- who nobody ever trusted thereafter -- at least embraced the cynical compromise of sequestration. Who was his VP?
It seems to me that the majority of comments on this string take an apocalyptic view of the current national debt. It is certainly higher than it has been in the recent past, although we've been here before (after World War II). But despite the fact that I do feel uncomfortable about moving into untested waters--I'm timid by nature--I don't see any analytically solid reason to believe that the current level is seriously problematic.
I think it's wrong to speak about "burdening future generations with our debt." We assume debt in order to accomplish ends that will serve future generations, and those ends include raising GDP, which shrinks the burden of the overall debt. We bear the cost of ongoing debt service, and those continue indefinitely, but we also reap the benefits of the investments that expand GDP, and those too continue indefinitely. I understand dismay that 15% of our annual budget simply to debt service and we never pay off any of the principal (though its value continually declines through inflation), but the question of whether the principal is yielding greater ongoing value seems never to be asked, and I've never seen anyone relate their alarm about the 15% figure to a theoretically argued optimal rate--it's generally simply a "debt is scary/bad" framework, derived from household-debt perspectives.
I'm not persuaded by MMT (that could be because I don't understand it, but it's nice to align with an economist like Noah), but I think the evidence is already clear that the level of debt that it is safe for an economy the size of ours to take on is much higher than past conventional wisdom suggested. One thing I'm sure MMT gets right (and by no means only MMT--all Keynesian-derived economic theory too) is that our national debt is not analogous to household debt, and that people who transfer household debt models to their thinking about our national debt are making a mistake that would be terribly costly to turn into policy. And I don't think that alarmism about "printing vast amounts of money" is justified if the growing size of the economic base provides a basis for monetary policy.
I became politically aware in the early '60s, and jeremiads about the debt began to catch my attention in the mid-1970s, after the oil shocks set in (when the debt/GDP ratio was actually still falling, but people were really scared in a completely unfamiliar economic environment). It really picked up in the '80s when policy changed us into a low-tax nation on the basis of what I have always regarded as magical thinking, and we shifted the burden of funding a growing country from income taxes to debt (without any overt policy change, just responsiveness to a huge 1980s Japanese appetite to park money in a safe investment). This shift, championed by conservatives, set us on a course towards tripling the debt/GDP ratio over the forty years since 1981.
I have been hearing these voices of imminent doom throughout this era, generally from the conservative end of the spectrum that engineered the very shift it deplores; no political cry of wolf has persisted longer. It seems to me that MMT more or less claims that wolves don't exist, and I'm not persuaded--I think we should stay on the lookout and be perpetually nervous. But I wonder how it is that those raising alarms about the size of the debt don't reflect more on how the imminent disaster they have predicted for half a century has never come about, and how much the national economy has grown overall despite their warnings.
I would be perfectly willing to shift back from a low-tax country to a mainstream-high-tax country and reduce the rate of debt growth, so long as the primary tax is a steeply graduated income tax. (Although that turn would require care too, since it involves shifts in incentive structure with plenty of potential unintended negative consequences.) But the reason for the shift should, in my view, rest on models of consequent economic growth, not on a gut aversion to national debt that is not backed up by an empirical rationale.
I would argue it's not the current national debt that's really the problem, its the fact that no elected officials seem to even care that it ever might be. At the end of WWII (and every other war in our history) there was broad agreement that the nation needed o pay off its debt rapidly for both moral and economic reasons. Today, there appears to be no such urgency.
It's not the 100% of GDP debt that worries me; econ growth and mild inflation make that manageable. The fact that we're still running up the credit card at 5%+ of GDP annually despite owing 100%+ of GDP in debt; that worries me.
I think that's fair, Mr. Villanueva. But part of that rate is a one-time (let us pray) pandemic emergency response, and I think we should put that to the side, because the normal short-/long-term benefit calculus didn't apply.
For the huge infrastructure and climate bills passed under Biden, I think the valid concern you point to has to be balanced against the prospective costs of continued inaction. Depreciation on the national infrastructure is an enormous unquantified cost that we have been absorbing and ignoring and the climate bill addresses both ameliorating negative costs and maximizing the economic returns that can be captured by energy transition. If you calculate these as future costs avoided I think it's likely they will more than justify increased debt service costs that an expanded economy will be able to absorb, and if they don't (just to grant the point) whatever cost avoidance is achieved discounts the cost of the debt service--and that doesn't even involve calculating additional growth generated. (There was also a lot of less targeted and less productive funding included in those two big bills, and if the GOP were now saying something like, "Let's revisit the pork and pet project elements of those bills and use this debt ceiling moment as an opportunity to terminate wasteful ones," I'd be all for it.)
I'm not an economist and I can't confirm any of the calculations I've so carelessly characterized here. I'm representing the concept I find convincing in refuting the narrow focus on the debt/GDP ratio (as I understand it). I do think there are elected officials in Congress who pay actual attention to the risks of running past a threshold on debt/GDP, but that exercise is hampered by how fuzzy that threshold is. You can point to Venezuela as a basket case with a ratio of 240%, but Japan's chugging along with Abenomics and its ratio is 260%, and Singapore is still a dynamo with a ratio 30% higher than ours.
I think the rule of thumb should be that the higher we propose to push the ratio with new spending (or tax cuts), the stronger justification is required in terms of quantifiable benefits. (Unfortunately, quantification is hard, and sometimes inadequate. I was hoping the expanded child tax-credit would be made permanent, but my reasons weren't quantifiable on this sort of scale.)
I agree that COVID was an extraneous event for which the regular long-term calculations do not apply. Keynes is ideal to such an event. It's the $1T a year (about 4% of GDP) we were blowing even before (and after) that which worries me.
Nearly all of that is structural entitlements not discretionary spending. Absent either large entitlement cuts or large tax increases, this will not get fixed until it affects our credit rating and exchange rate (which is way too late.) Spending cuts are political death (just look at France today). American taxes have historically fallen in a very narrow range regardless of party (https://thesiburgcompany.com/2021/02/chart-of-federal-tax-receipts-as-a-percent-of-gdp-from-1929-to-2020/). In short, neither potential solution appears viable and both appear politically costly, which means nothing will be done until the whole thing explodes.
We need a Teddy Roosevelt, a Keynes, a Churchill, a Kennedy, a Volcker. Instead we have Marjorie Taylor Greene, Diane Feinstein, and Joe Biden. Call me worried.
First, there is no macroeconomic model I'm aware of, (certainly people have tried) that has any real grasp on the actual situation in the world. The current situation, where one currency dominates globally, makes equilibrium treatments of currencies difficult/impossible. If you are trading in the world keeping many accounts in US dollars (and US TSY securities) makes sense compared with the overhead and risks of using other currencies. The differences in these costs means the benefit of a world financial system anchored in US dollars to the US as a whole is probably much greater than 4% of GDP.
Note that in the US Personal Federal taxes were as low as 38% of Federal tax receipts, but they are now ca. 80%.
I wouldn't worry about the debt level currently. If you were evaluating the US as a private firm that had 330million bound clients and it could charge as needed with good enforcement to raise funds would be worthy of an order of magnitude increase in debt ratios.
But a nation isn't a private firm, John. It has interests that go far beyond the economic. For example, on economic terms, open borders make complete sense. However, in terms of social stability, there must be limits on immigration. On economic grounds, drug legalization is the best policy. On grounds of caring for your fellow man and not causing him to stumble, legal drug markets are a terrible idea. There are lots of things like this. After economics training, I spent years relearning that and unlearning Pareto-optimality as the primary goal of society.
Economists are hammers. They sometimes find nails and drive them in very well, but they often find screws (which banging on won't help), and they occasionally find lions (which are very bad to bang on.) The national debt to me is a "screw problem" in that addressing it requires dealing with fundamental arguments about the proper role of government in society. I am actually OK with either answer (raise taxes or cut spending), but I see no evidence that our leaders are prepared to do either. And the problem is a little like a asteroid hurtling toward Earth; the longer we wait the more difficult it is to correct.
I know a nation isn't a private firm. The point is that a nation like the US has the ability to raise funds unmatched by any private business so there is no mathematical risk of defaulting on our spending obligations. Defaulting would be a political, not a practical, outcome.
You make a lot of statements as fact that are simply your opinion. It appears you don't apply critical thinking to your opinions.
"on economic terms, open borders make complete sense" There are a myriad of situations where this is clearly false. It completely depends on the policies in different countries. If a country provided health care and housing and food to all residents and a neighboring country did not the open border would likely result in massive migration of non-productive workers (e.g. retired) to the former country. Clearly this is economically detrimental to country 1. To support your opinion would require that somehow the increase in economic output in country 2 would more than offset the loss in country 1.
"On economic grounds, drug legalization is the best policy. On grounds of caring for your fellow man and not causing him to stumble, legal drug markets are a terrible idea. "
Once again opinion presented as fact. One need only look at the damage done by keeping many drugs illegal in terms of crime and deaths to counter this. The economics are impossible to know. Would legal drugs result in more people becoming non-productive and a burden on society economically that is greater than the reduced costs of policing and crime resulting from illegal drugs?
Finally we get to your "The national debt to me is a "screw problem" in that addressing it requires dealing with fundamental arguments about the proper role of government in society." Again an opinion presented as fact. What is the specific problem that the debt is causing? Please provide facts to support this opinion. This requires that there is an example of a country, with debts in its own currency that is a fundamental part of the international financial system and with the ability to pay off these debts if desired, that has resulted in a problem. If you don't have such an example then once again you are unable to distinguish between facts and opinions. Milton Friedman considered US debt a hidden tax, but throughout most of history in the US and Western Europe and Britain, this ends up being a negative tax.
I appreciate your citations of data, Mr. Villanueva, and I understand your argument. As I indicated before, I agree that increased debt/GDP is something we need to track closely and consider when dealing with spending, either discretionary or structural.
However, while the debt/GDP ratio is important, the more immediate question related to default is not that ratio but the ratio of debt service to GDP. Much of the borrowing you point to was made at historically low interest rates, and therefore costs relatively less to service than debt accrued before 2009. While we have certainly seen a very rapid expansion in the total debt over the past few years, in part due to structural expenditures, in part discretionary, and in part in one-time Covid emergency expenditures, that doesn't mean the debt service/GDP burden has grown at a comparable rate, and there are no signs I'm aware of that we are any less able to service the debt than was true at the beginning of that period. The danger of default largely concerns that latter factor.
The height of the debt service/GDP ratio was about 5%, which was reached (a sustained) during the 1980s, when we were borrowing massively at very high interest rates. It fell dramatically in the Clinton years (down to around 3.0%) and bottomed out at about 2.5%. It's now at 2.8%, about where it was at the end of the Johnson administration (here's the St.L Fed chart: https://fred.stlouisfed.org/graph/?g=iEiV).
As we're entering a period of somewhat higher interest rates, new borrowing will be more costly, and that's already reflected in rises in the index over the past year. But while the debt/GDP rate is at historic highs, we are now far, far below historic highs in terms if the burden of debt service. We don't want to get back where we were, but we do have critical short-term needs with long-term impact, and, again, the value of the investments we are making has to be calculated in terms both of what they cost us in expenditures and debt service and in future GDP growth they promote.
I wish we lived in a world in which the government actually "invested" our money. The truth is they take money, diminish it by 26% in the collection, and SPEND it.
The US gov't has a negative growth multiplier when it spends money and that is after it reduces the value through its cost of collection.
This is, of course, fiscal policy rather than monetary policy.
The Fed -- the monetary policy guys -- have had the same mission since their inception and yet it is bad fiscal policy that is causing the monetary policy objectives such pain.
If you kneecap the energy business -- fiscal policy -- and light up a nuclear bomb of cost increases, then it is impossible to control inflation (monetary policy).
In the Trump admin, we had a fiscal policy that resulted in the best bloody economy since Geo W Washington. We were energy independent. We were at peace. Inflation was sub 1.5% and interest -- the vig on growth and innovation -- was at an all time low.
Good fiscal policy, good policy makes monetary policy a freakin' breeze.
I attribute a lot of this to Wilbur Smith, Sec Comm, who did a bang up job on eliminating unnecessary regulation wherever he found it.
So, what changed?
Why did inflation explode -- transitory, remember transitory -- and why did it drive interest rates so much higher?
Part of it was the Biden war on energy, part was the reinstatement of terrible regulations, part of it was massive government spending.
The sum total is what we have today -- an impending recession and a fight between fiscal and monetary policy.
I was building a 50-story building in Austin by God Texas in August 1981 when the Prime Rate went to 20.5% and the construction and real estate businesses died. There was plenty of pain. There was zero true economic growth.
Today every indicator signals a bad time and it is all related to bad fiscal policy. What makes it worse is the backdrop of the best US economy since the Revolution.
I don't think the growth multiplier on government spending is negative, or even less than 1; it certainly shouldn't be when there's slack in the economy, as there was during the Great Recession and probably during COVID mitigation measures as well. I don't know what it is now, now that inflation has increased and the labor market is tighter, but there are clearly at least some investments the government can make that will pay off fiscally in the long run (by increasing revenue or reducing long-run costs).
I may well confuse fiscal and monetary policy in writing, Mr. Minch, because I rarely write about this stuff. I think I said what I meant when I used the term "monetary policy" to refer to complaints about "printing money."
Your view of the Trump economy is certainly one endorsed by Mr. Trump. I believe you'll find that most economic indicators were extensions of trends firmly in place before the Trump administration took over. US energy independence was largely the consequence of new technology that developed and was applied before 2017 and independently of Trump's policies. I agree that the low regulation regime of the Trump administration increased energy sector strength. As with much deregulation, the short-term advantages will have to be measured against long-term costs, and I don't know what they will be (I'm not anti-fracking). I think the investments in Biden's IRA will have a much less prominent short-term impact, but will have very large long-term benefits, the opposite of the Trump policies.
Government does involve overhead. I don't know whether your 26% figure is accurate. We can argue indefinitely over "invest" vs. SPEND. I don't see a point in doing that. It's late and we already know you prefer heated rhetoric and I don't. Different styles make life interesting.
There are lots of explanations of why inflation took off. They include Covid spending under both Trump and Biden (and I believe the Biden infrastructure bill probably contributed to it in excess of what was prudent), gyrating tariff policy, radically shifting supply issues, including both Covid-caused disruptions and those coming from the Russian war, and wage/labor dislocations initially caused by Covid and then intensified by poorly understood labor patterns after the initial Covid wave came towards a close. As you know, inflation is currently subsiding and if it does, and if we avoid a recession (50/50, I think), the outcome will be pretty much a wash between alarmism and team transitory.
I'm sorry your building didn't work out. I don't believe our situation now is comparable to 1981 at all.
We're moving on to a new day, and I won't have an opportunity to devote time to bloviating on Substack, much as I love to do it. I promise to read any further replies you post, since I appreciate you pushing me to think hard in response, but I'll let you have the last word.
The march toward energy independence's martial music was deregulation, low cost of capital, infrastructure, drilling, and the business environment.
It did not hurt that Rick Perry, former Tx Gov, was Sec Energy and had been a long standing Gov of Tx whilst it did the same things on a state level.
It is easy to see this by what happened the second Biden took office and reversed many of these policies: cancelled Keystone, ceased auctions, failed to award successful bids, put ANWR off limits, and announced he was unalterably against drilling whilst favoring a form of energy that was unripe and adolescent.
This caused energy CEOs to forego capital investment in even routine capital undertakings and the nation's 13.1MM BBL/day production dropped to below 10MM BBL/day.
The spiraling cost of gas/diesel drove transportation costs ever upward and every product in America baked it into their cost structure and passed it along to consumers.
This was and is bad policy made worse as it was in the face of the best US economy since the Revolution. The stark contrast in policy is unmistaken and telling.
One produced the best economy and low inflation whilst the other drove interest rates and inflation higher immediately.
Inflation -- transitory it turned out not to be -- was 1.4% when Biden took the oath and has more than quadrupled.
The RATE of inflation has moderated infinitesimally, but the core inflation is baked into that cake forever. Go price eggs. Those prices are never coming back down. Ever.
Just to keep it real even the Sec Treas is saying it will be 2024 before we see any real inflation relief. We are 5 weeks into the Saudi/OPEC production cuts. Hang on.
How can you say it's "pointless" - don't the GOP have a point that, well, ever spirally deficits and debts are bad? And that last time they tried the old fashioned way to reduce spending it was vetoed by the President?
If you're in Congress and you genuinely believe that vast levels of money printing are a problem, that now is the time to start reducing deficits (not even debts, just deficits), then what option do you think they should be taking? Do you think Biden would actually ever agree to big spending cuts?
I feel like this is so obvious I'm not sure why I'm writing it but....
If they think that's a big problem then it should be on their national platform, they should have concrete proposals, they should campaign on it, they should win elections based on it, they should pass laws with a veto-proof majority showing they are truly fulfilling the will of the people.
Of course you are right. Newton Gingrich campaigned on something called The Contract for America and nearly balanced the budget.
Do not believe for a second that Clinton had anything to do with it. It was Gingrich and the Congress who restrained not GROWTH, but simply the RATE OF GROWTH.
It would be laughably easy to balance the budget if anybody would just learn to say "NO" to earmarks and increasing budgets for every cabinet department.
The US currently enjoys all time record revenues. If not now, when?
Isn't that what the Tea Party people did? Campaigning on it I mean. Obviously they didn't manage to take control of the government. I'm far from these events but vaguely recall that cutting deficit spending was on their stated if not actual agenda. But they didn't get a Tea Party president and ended up with Trump instead, who had little interest in budgets.
In 2011 Republicans controlled 55% of the House (and didn't control the Senate). You don't get to make "big spending cuts" when the election has just shown that your position isn't popular enough to make sweeping changes.
If your barely won a majority then you temper your goals to make your electoral reality.
That's fundamentally how the American system is designed to work, for better or worse.
If you want big changes you need to have large majorities across multiple veto points.
Actually, all the US needs to make meaningful progress is to reduce the RATE OF GROWTH of existing programs.
In the much ballyhooed and misunderstood Clinton/Gingrich faux balanced budget fable, they only reduced the rate of growth.
The US has record revenue today. All we have to do is to reduce the rate of growth -- harder to do today because of the multi-headed Hydra of inflation.
You cover the subject well at the top two inches of soil, but you miss completely the deep rooted reality.
Obama agreed to a plan called "sequestration" in which future spending would pay for itself. Of course, he didn't adhere to it and the Republicans were justifiably left with the cruel realization that the Dems have no idea of how to manage spending and no intention of doing anything like that. Ever.
The lack of trust on fiscal matters by the Reps of the Dems is deeply rooted in the reality of failed sequestration, massive lobbyist-written, unread spending bills, failure of budget regular order, continuing resolutions, and omnibus bills. It is a fair and well-earned skepticism nigh onto cynical enmity.
The Dems own this conduct and the Reps are doing their elected job to forestall fiscal suicide by whatever means available and necessary.
If the Dems were following the required budget discipline and displayed even a tiny nod toward fiscal responsibility, the Republicans would justifiably be chided, but that is not so, so let's drop the charade.
Further, the Dems in control of Congress have not delivered a budget and appropriations bills - something that is mandated by law and which is called "regular order" ever.
You are crying foul on a system that is already hopelessly broken and suggesting there is moral high ground beneath the cloven hoofs of these poseurs we call Dems.
How do we return to some sense of fiscal order? I am talking Republican Dwight D Eisenhower's 8 balanced budgets and zero deficit type of fiscal order.
We will all collectively have to get in the trenches and engage in hand-to-hand combat as we did once upon a time when we banned pork - earmarks. This, too, is completely out of control proving the Congress cannot be trusted.
I view the Republicans' attempt to use the debt ceiling as a fiscal tool like a family intervening to stop a hopeless addict from doing further damage to himself. It is a desperate act born of the failed earlier acts. The Congress and the Dems need an intervention and a few months in rehab.
The notion that the US is going to actually default is sheer nonsense and is an example of fearmongering used as a pathetic, simplistic lie to trick the masses. You should be ashamed of yourself in the same way that the 51 intel community liars should be for authoring a letter that was blatantly false.
Regardless of what happens, the US is going to pay its bills. Why pretend otherwise?
I applaud the Republicans for renting a pair of balls, but I have no illusions that this will not devolve into petty politics and the White House will lie in much the same way Obama did with sequestration.
We need people in government who can manage finances IAW the law.
Democrats: Not really, but what spending do you want to cut?
Republicans: Um... We'll get back to you on that.
Basically, the Republicans in Congress have made it clear that they prefer low taxes to a balanced budget; they had a majority in both houses of Congress under Trump for a while; if they had wanted to cut spending, they could have, but the only major legislation they passed was a big tax cut that made the deficit bigger.
Keep in mind that Republicans increase debt ceiling when passing tax cuts because it is just a temporary measure before the tax cuts pay for themselves in increased revenue due to the massive increase in growth. (They say with a straight face).
I'm weary of everybody using the debt ceiling issue to point the finger at somebody else. Here's who got us in to this mess.
1) American People
2) Democrats
3) Republicans
We, ALL OF US, routinely spend money we don't have and pass the bill on to our kids and grandkids. We've been doing this for decades. It's not "those people over there", it's all of us. No matter what party is in power, they do deficit spending. If you vote for Republicans, you're voting for deficit spending. If you vote for Democrats, you're voting for deficit spending. If you don't vote, you're agreeing to deficit spending.
I've been a liberal hippy Democrat since the sixties and look like I just came from an orgy at Woodstock. I'm not a MAGA man and won't vote for any of them ever.
But I'm fed up with my fellow Democrats pretending it's the Tea Party and Magaheads that caused this problem. Doing that makes us look just as dishonest as the Magaheads. The world's faith in our finances is already headed for the crapper no matter what the Magaheads do. If the Magaheads were to vanish that would still be the case, because the entire country wants to be irresponsible with our nation's financial reputation.
The federal budget is completely out of control and it's going to get much worse soon. And it's us, all of us, that made that happen. Until we start owning up to what we're doing to our kids, we're screwed.
As soon as the Magaheads get the power they will deficit spend too, just like Trump did. They are not our saviors. But I'll give them credit for making noise, and forcing us to think about this.
agree agree agree, but - if the 1% and corporations were taxed in proportion to the way the rest of us are taxed, would we be having these deficits? Seems like the results of the present system are we of the masses get our government-funded benefits, and the financial lords get their tax loopholes, and everyone is happy. Until we all get to the cliff...
The top 1% own about one third of the nation's wealth. The top 20% own about 85% of the nation's wealth. We in the peasantry are squabbling among ourselves over that last 15%.
But your point is taken. If the government seized all the assets of the top 20%, it would spend it all, and then some more. And we will applaud as they do. Because the real problem is not financial deficits, but...
No doubt. But the deficit went from about $20 trillion when Trump passed his tax cuts to just under 25 trillion between the Tax Cuts and Jobs Act and when Covid arrived. It now is 28 trillion.
That growth suggests to me that the tax cuts played a significant role in increasing our deficit, and we will need to tax those who aren't taxed as well as cut spending.
I am 90% sure the answer is "they couldn't" - it would have been filibustered in the senate, and so the only thing they would have gotten out of it (from their perspective) is a bunch of bad press/red meat to the Republican base showing that the Democrats want NO LIMITS ON DEBT without actually getting the important thing it was worth taking that bad press for.
Actually, they could have. As a spending item, it could have been passed under a "reconciliation" bill. They didn't have the fortitude to expose who they really are.
They "could have" provided they were united, sure. Everything I've read suggested Dems didn't have Manchin on board, and possibly one or two others. You don't need sixty votes for reconciliation, but you do need fifty.
Correct! There is no universe in which Manchin signs onto this, except maybe as some sort of trade for massive coal subsidies or something else that the rest of the caucus would never offer.
Manchin's not stupid: I have zeo doubt he thinks it would be bad for the country to default. But you don't serve multiple terms as a Democrat representing West Virginia without knowing a few things about politics. Manchin knows (if he runs) he's facing a very difficult battle to hold onto his seat next year. Many/most pundits are saying he'll likely lose. We'll see. But Manchin feels voting for an easily demagogue-able measure without bipartisan support isn't in his political interest.
Most peoples' eyes glaze over when they see the words "debt," "deficit" and "fiscal." This is a very very low-salience issue for the median voter.
Yeah, there would have been some bad press but it would be ancient history by November 2024, and the only people who really care were always gonna vote Republican, anyway.
Thank you for a relatively sane tank as opposed to all the media generating fear over the Debt--even the NYT today had a piece which assumed, without a thought, the current Debt was a problem. The Debt is as close to a non-problem as there can be--it’s a historical accounting. Deficits can be a problem, they can drive inflation or squeeze private investment, but no one is talking about that. Everyone intuitively, and wrongly, equates
Sovereign Debt with private debt. They should ask themselves how much debt they could manage if they could set interest rates and print money?
The only sane part of the argument is about increasing interest expense (which, like other government spending, can drive inflation) which affects the deficit--but the ignore the other half of the equation which is that high interest usually accompanies high inflation--which reduces the overall Debt burden. No one is talking about how inflation wiped out $3T of Debt in real dollar last year. i.e. Debt + Budget in real dollars ran a surplus.
Every time I start feeling I’m in crazy land surrounded by a deluded mass of people, I remind myself that accounting isn’t the real economy and, whatever we can do, we can afford.
This must be a slow blogging day. Contra Noah, there have been showdowns over the debt ceiling since at least the 1980s. What's new is treating these showdowns as a looming apocalypse. Back in 1985, James Baker pointed out that the federal government had adequate cashflow to meet all bond payments, and could prioritize other payments to make the most essential payments on time. Bill Clinton, in his showdown, used the "Washington Monument Strategy" to turn the public against congressional Republicans.
Brinksmanship over the debt ceiling is not tantamount to default, and offers little more than an opportunity for grandstanding by Congressmen and Senators. Usually pointless grandstanding.
So why didn't the Democrats just eliminate the debt ceiling (or raise it by a factor of 10 or 100 or 1000) during the first 2 years of the Biden admin, when they had full control of Congress? Who was "holding them hostage" then?
Manchin and Sinema (and perhaps others). Democrats in Red states are wary of unilateral Democratic moves to eliminate or get around the ceiling because debt-hawkism remains a potent weapon in the GOP electoral arsenal. Democrats need GOP partners to depoliticize this, and the GOP has no incentive to depoliticize because it works for its populist wing.
If the ceiling remains because the politics requires it, it could be used constructively as a time for negotiation on pruning tax cuts and spending that both parties recognize as having been either ill-advised or simply unsuccessful, each side giving cover to the other with regard to programs popular with its voters. But that won't happen so long as one party adopts as a basic plank a "spend less (except on defense)" posture, based on a drown-the-government-in-the-bathtub view of the world.
Because it’s a good political issue for Democrats. Republicans threatening to blow everything up while proposing 30% sales taxes, social security cuts, Medicare cuts, etc. hurts them. Democrats didn’t want me I save Republicans from themselves.
You may be right, Scott. That's got high explanatory value, and the press has been presenting the current posturing in that light. If that rationale actually governed the decision not to pursue the issue when it was actually possible to correct it I'd call it utterly irresponsible.
I think Manchin and Synema are working within their own beliefs that bipartisan solutions are preferable as well as what they think their primary and general election voters will support. People in very safe seats on both sides often just play to their extreme base to win in the primaries. That is largely the group dominating the GOP House right now as in 2011-2013.
Why do you say "people" are playing weird political games with the U.S. fiscal system when you mean "House Republicans?" Not Democrats. Not Senate GOP.
Who got us to talk about this? The House Republicans. (I'm a Democrat)
Here's a weird political game with the U.S. fiscal system for you. Deficit spending for decades by BOTH parties as they attempt to buy votes for the next election.
Imagine the MAGA people were all abducted by aliens and vanished from the face of the Earth. Here's what would happen next. We'd keep deficit spending until we crashed the financial system. We're attempting to blame the MAGAs for something we intend to do anyway.
If it weren't for the MAGAs we'd be whistling a happy tune and continuing to spend the nation in to bankruptcy. What's annoying us about the MAGAs in this particular instance is that they're making our crime against our kids more public. We'd prefer to steal from our kids quietly, and hope that they don't notice until after we're dead..
This assumes a whole lot that isn't in evidence, and then supports a fundamentally absurd solution that solves nothing.
I mean, "the global economy might blow up in the future due to excessive government debt, so let's accelarate the process and blow it up now" is certainly a take, but it isn;t a good one.
What's happening now is that House Republicans are forcing us to talk about the budget. I offer you this article as evidence.
I don't like the House Republicans either, but I refuse to be a blind true believer tribal warrior who won't give credit where it is due. The Democrats are not forcing us to talk about deficit spending, they want to keep spending, spending, spending. So they aren't in a position to lecture anyone about fiscal responsibility.
I welcome House Republicans talking about the budget. THEY ARE NOT!!! They are talking about blowing up the global economy unless they get as yet unspoken concessions.
There is a regular order process by which the government raises, appropriates, and spends money. That is the pace where these talks about the budget should happen.
The concept of bankruptcy is actually a bankrupt idea.
As a Business guy, the only issue is Revenue. Social Security receipts are down from 10% GDP to like 6 or 7% GDP. There's trillions untaxed in this country.
Bankruptcy is when investors lose faith in the United States government's ability to manage it's finances. That's going to happen now with this debt ceiling controversy, or it will happen a little farther down the road.
Just sick and tired of ‘business’ leaking their frustration about Republicans but continuing to give them money
If they think this is a danger and the danger is only coming from one place then turn off the taps FFS
It's especially weird when the alternative party isn't even anti-big-business.
It's very hard to get a third party established in the US because we have first-past-the-post voting. When an actual majority required (over 50% for the winning candidate) more political parties become viable. In the US, this issue, combined with our largely winner-take-all electoral vote for the executive branch creates a system that can be gamed towards minority rule.
Last time I looked, corporate America was firmly in the camp of the Democrats / woke Left. The Fortune 500 gives to everyone, but look at how DEI and LGBT and ESG have infected corporate boards. Big business has once again decided it likes big government -- what a surprise.
how do you block idiots on Substack?
Anyone able to let me know, life is too short to waste on idiots, especially when they are full blown Dunning-Kruger idiots who are too dumb to understand they don't know what they don't know and are just tape recorders repeating the lazy tropes they heard of other also quite dumb ppl
What I really appreciate about Substack, Lee, is that those who comment engage in serious exchanges and avoid the easy snark and disparaging insults so common elsewhere.
I think Mr. Villanueva has conflated and caricatured several different things (DEI, LGBT, ESG) in a way that reduces them all to a common element that he doesn't show a clear understanding of ("woke"), applied to a highly non-homogeneous sector and party ("corporate America"; Democrats). He doesn't seem to consider that the high-profile cases involving corporations may involve responsiveness to market forces, not "big government."
First, there are 500 Fortune 500 companies (I've been told), and widely reported examples of a few making statements that oppose state actions that tendentiously take on what MAGA-oriented statehouses see as "woke" elements of society does not mean that "corporate America" has succumbed to a governmental woke agenda. I live in the middle of the country, and I don't see corporations in my state making dramatic moves towards towards an agendaof "the Left."
DEI training is pretty widespread in corporations (not just big ones). Some of it I find as wrongheaded as the caricatures suggest, and that sort is widely assessed as having had little effect, but some programs focus on helping corporations address biased hiring practices that are costing them talent and profitability, and those seem quite useful. If Mr. Villanueva wants to discuss the former, I'll be there with him. If he wants to lump them all together, I'll write this paragraph.
It's hard to know what he objects to about "LGBT." If he's upset that many businesses no longer discriminate against LGBT employees and job applicants there not much more to say. But if he reflects and finds he really can't defend discrimination against LGBT people, perhaps he'll decide that was just thrown in for rhetorical effect and withdraw it.
As for ESG, I think the right response is to note that the Friedmanesque reduction of valid corporate purpose to increasing shareholder value is only one interpretation of where value lies in a capitalist society. Big Business followed that type of imperative before the Depression and increasingly after Reagan, and no publicly owned business can afford to ignore it entirely, but my question for Mr. Villanueva would be why a turn towards socially conscious corporate behavior that factors broad long-term impacts in decision making outrages him, or represents submission to big government?
It would have taken him 5 seconds to google and see that CEO donations don't just favour republicans over Democratis, they massively favor Republicans over Democrats
These fools really do just see some tweets about 'Woke' corporations and think they are noble ppl fighting big business, not realising they are the tools of big business, being riled up over culture war nonsense to vote for partys who will always put the bosses agenda over that of workers
Hence my referal to Dunning-Kruger and life being too short to waste on stupid ppl and my desire for a block button so I never have to be bored by that persons ignorant attempts at political analysis ever again
Lee, I explicitly said I wasn't talking about donations, that I was talking about ideology. Donations are based on securing lobbying power. That has nothing to do with ideology. As Arby points out below, the recent left-wing swing taken by corporations appears to be driven by the HR and Compliance Depts more than the CEOs. The C-suite appears to be along for the ride, but they can read the writing on the wall, so those who dissent dare not do so publicly. (As a side note: I've often thought that the writing is on the wall for a society that no longer remembers what "the writing on the wall" refers to.)
As for who's not "standing with the workers", what value a does blue-collar UAW auto worker get out of the modern Left's obsessive focus on racial and sexual grievance groups? What value does single Mom working at McDonalds get when her daughter comes home from school convinced that she's a boy? The son of a white, unemployed, Appalachian coal miner is privileged? Really?
Why is race & LGBT grievance group support so highly correlated with education and wealth? It's not accidental; it's distraction. If the wealthy talk about white privilege and standing with oppressed minorities they can avoid acknowledging the obvious advantages of their wealth. Wrapping yourself in the rainbow flag excuses all other sins. But it shouldn't. Freddie Deboer (from the left) has a great post about exactly this on his substack today (https://freddiedeboer.substack.com/p/remember-rich-uncle-pennybags). I don't always agree with Freddie, but he's right about this. Unionization rules help the workers and limit the powerful; DEI trainings at best do nothing and likely do the opposite.
Don't call names when you don't know someone. I went through my libertarian phase and I recovered. As I said to Robert below, I'm a lot more to the left than you likely realize. But I'm old-school left. I'm Catholic-worker-movement left. I care about how the wealthy use economic power to oppress. If you share this commitment (and I suspect you might) I would encourage you to take an honest look at who the wealthy and powerful are oppressing today. Here's a hint: we're starting Black History Month in a few days; June will be Pride Month. It's a little hard to claim that you're oppressed when an entire month dedicated to you is heralded by every major institution of the Western world: corporate, governmental, nonprofit, media, and educational.
If you want to know who the oppressed are, look at what groups don't get months of celebration. Look at what groups are acceptable to denigrate in "polite society". Look at what groups are routinely subjected to the 2-Minutes-of-Hate on Twitter. Those are the oppressed. Those are the "least of these". I stand with them.
You seem to have confused me with someone who has any interest in what you have to say, I assure you I don’t though I do find it funny you wrote all those words that nobody will ever read
so the question is more complicated than that. CEOs actually aren't omnipotent despots, and if one looks at overall corporate culture I think the guy above has a point. There are examples of CEOs/boards imposing their views, but also plenty (more?) counter-examples in recent years of employee base revolting and imposing theirs. Pretty unclear to me how one scores whether big business is pro one camp or the other. The confusion between people who donate (CEOs / senior people) and stated frustrations with republicans (probably mostly driven by rank and file) also permeates the original comment that started this thread.
No, its pretty simple, that fool going off memes and tweets thinks that corporate America is imposing a Woke agenda on the United States and are in the bag for Democrats when the facts are that CEO's donate more to Republicans than Democrats (and by a lot) as do the corporations themselves, yes the educated staff in the business often donate to Democrats but that is not the point he thought he was making (I hesitate to give his ramblings the credit of being called a point)
You're correct, I am lumping the pieces of the Left together in the same way they lump them. The Left views their coalition through the lens of postmodern intersectionality, so "oppression" of one group must be answered by the all "oppressed" groups. The fact that defining what groups are considered "oppressed" or even what groups are considered "groups" is never really mentioned. For example, left-handed people face oppression in their daily living every day. And the most privileged people in America are the attractive, but no one ever wants to talk about that. Instead we obsess about racial categories and bizarre and highly uncommon sexual behaviors. And don't even get me started on how the Left suddenly doesn't care about wealth privilege; I rue the day that Bernie's consultants convinced him to give that up for the 2020 election and adopt the race model (like every other candidate) instead.
There is a great deal of scientific evidence now that oppression-based, DEI trainings are not only ineffective but actually harmful. And not just to the workplace, but to the employees larger feeling of community cohesiveness and trust. It appears you know this, but somehow think there is a third way. I do not. I believe the obsessive focus on race is counterproductive from the beginning. As Justice Roberts said a few years ago: "the way to stop racial discrimination is to stop discriminating on the basis of race." Personally, I've adopted the French belief that even counting and categorizing people by race is problematic since it leads logically to racial group demands.
On the LGBTQQIA2s++ issue (side point -- how that acronym even be taking seriously escapes me, as the first 3 letters are premised on the gender binary and all the rest reject it, but I digress), there have been many high profile examples of people fired, demoted, losing grants, promotions, etc... because they will not wear the rainbow flag. I must conclude that you honestly don't think is a big deal, and that's your right. But I would ask you how you will defend your beliefs should your woke employer declare them to be problematic next. Because if what every Abrahamic religion in the world believes and has taught for thousands of years can be overturned and ruled bigotry in the space of a decade... and you support that... you have no ground to defend your own beliefs from either. So get prepared to embrace pedophilia, because that's next. I know, that sounds so alarmist, but the "scientific" work is already being done: Google "minor attracted person" but not at work. The philosophical work has already been accomplished: if a teenager can consent to slicing off their private parts, surely they can consent to using them. So how would you push back against that? In the words of Thomas More, you've "cut down all the trees in England and the Devil has rounded on you." Or would even that not be a bridge too far for you? And if you don't think it can happen, just ask yourself whether you would have ever believed a decade ago that your HS daughter could be forced to share a gym locker room with penises and be lambasted as a hater and a bigot if she were to object to the penis-havers lurid glances in her direction. That's happening now, but if you notice, you're a bigot.
My view is that the rainbow flag is Vaclev Havel's greengrocer's "Workers of the World Unite" sign. You must put it up or you will be destroyed. And today, that includes wholeheartedly supporting children who want to pharmacologically and surgically modify their bodies, rendering themselves permanently sterile in the process. The bravest people in America today are the few like Billboard Chris who are willing to boldly state the truth. And look at the abuse and actual violence he has endured for doing so. LGBT ideology (not people -- there are LOTS of gay people who don't support the militant LGBT ideology, ask the lesbian TERFs like Bari Weiss) preached tolerance until it gained power; now it's crushing all dissent. That's what your woke corporations support.
How many examples do you need before you are willing to declare they're more an anecdotes and represent a problem?
Mr. Villanueva, On DEI I think you are distorting the impact of what I see as a complex institution. A lot of DEI over the past half-decade has been deeply wrongheaded and counterproductive, drawing on an ideology I find narrowmindedly illiberal. I think the "white fragility" approach is, in fact, burning itself out. Its failure is a product of its rigid and stereotyped thinking, and doesn't erase the fact that there does actually exist racial bias in hiring and promotion practices. I pointed out earlier that there is a different approach to DEI that focuses on addressing that issue for companies that want to add productivity by eliminating barriers, and that the evidence is it can help companies meet their goals whole reducing the role of bias. You say you don't believe this "third way" exists; there's nothing I can do about that.
I would not know where to begin responding to your apocalyptic paragraphs on LGBT issues. I recognize the discourse, naturally, but there's no way to address it. I think the way the Right has seized on what are truly complex, personal, and difficult human issues to create a type of religiously-informed hysteria is far more dangerous and socially distorting than the problematic cases they use to create a demonic portrait of some elements of LGBT culture. For my part, I prefer to try to persuade people on the Left to question some of their shibboleths and not to simplistically defend morally complex and questionable practices just because the Right's attacks on them have reached psychotic levels. I don't think anything I might say to those who share your approach could be heard. But since you seem quite reasonable in other comments you post I guess I'll add that I hope you'll consider reexamining some of the beiefs you've adopted on this issue.
I hope you are successful in your persuasion. I really hope you're right, and I respect that you've been willing to actually talk about it. You call me apocalyptic -- OK. But I notice you didn't address my point about your teenage daughter being forced to use a coed locker room. To use another example, saying "men can't give birth" is verboten in elite-educated society today. If someone 20 years ago had told you either of those things would occur, or that sterilizing children would go from child abuse to a civil right, within a single generation, would not early 2000's Robert have considered them apocalyptic?
Everyone has a tipping point where they realize: "oh my Lord, the liberalism I've been fighting for has turned into an authoritarian caricature of itself." I've gotten there; you clearly haven't. (I'm a lot more progressive than you likely realize -- my comment about Bernie wasn't just tossed out there.) The interesting thing is that once you reach that point, you can see how the train of liberalism was derailed beginning with J.S. Mill and how the postmodernists dynamited the track completely in the 60's. But until you get to the tipping point, all of this looks alarmist and reactionary.
My greatest wish is to live in a tolerant, classically liberal, broadly Judeo-Christian society again. At this point, I see no evidence that any of those, let alone all 3 together, are possible in America. But I continue to hope that I'm wrong.
"Hysteria" seems like an odd word choice in this context, given the history of the term.
If you find out, then lmk so I can block you
White males make up less than a third of the population. Labor participation rate has been dropping steadily for years. Business has been screaming about a shortage of labor. Also, the population that is not white heterosexual males is a growing portion of the consumer base.
One way to attract people who are not white heterosexual males to work for you is to stop having a workplace hostile to anybody outside of that small percentage of the population. You can get more of them to work for you if you actually have policies to support some of their unique circumstances.
As far as I can tell, the "woke corporations" are just the ones trying to broaden their base of employees and customers so they can sustain themselves and grow in the future. Its just good business practices for most of them.
"Diversity trainings" that most closely resemble race-based, struggle sessions (ala Mao) don't strike me as "policies to support unique circumstances" at all. Chris Rufo has done yeoman's work documenting these sorts of trainings if you doubt the seriousness of this issue.
I work in a profession that was almost entirely white male in North America and Europe through the 1980s. Engineering is switching rapidly as many more women and minorities are entering the field. We get the occasional training on sexual harassment and diversity because it actually was a significant issue for a couple of decades. Policies on family leave etc. have changed dramatically. Same with working from home - our workplace was doing that, especially for women who just had children, for about 15 years. As a result, they stay with the firm instead of dropping out and are now senior engineers and project managers. The workplace does appear to be improving for the new groups in the workplace.
I have seen no evidence of race-based struggle training sessions in companies I have worked for or work with. My guess is that somebody did one once at a Fortune 100 company and it has been the example dragged around for several years.
Ernst, you're connecting the "diversification of the work force" with "diversity equity and inclusion" as an ideology. These are completely different things.
There are real benefits to culturally and racially homogenous societies; there are also real costs. But that ship sailed with the 1965 Immigration Act. That we're going to go back to 1960's White-America is a pipe dream, held only by the Nazis today (ironically, who share the same race essentialist beliefs as the woke Left but with a different race placed on top.) The white nationalists have about 2% support nationally and no cultural or institutional power though. The woke Left controls essentially every major institution in the Western world (media, ed, corporate boards, NGOs, govt, and increasingly the military.) I'm thrilled that you have not encountered militant wokeness in your employer. Many have not been so lucky. Again, bother to read Chris Rufo; you might learn something.
An ideology that teaches race essentialism and collective racial guilt is wrong. Period. I don't care what race is put on top or what race is made to feel guilty. It was wrong when David Duke did it. It is wrong when Robin Diangelo and Ibram Kendi do it. And the Left who is doing it today is conjuring a terrible demon that they have absolutely no way to control.
None of that has ANYTHING to do with whether the engineering profession (or any other) has brown people in it. That's not what this is about.
If the "Woke Left" actually controlled corporate boards, we wouldn't have CEO compensation 250-350 (awarded vs realized) greater than their typical worker and we would not have a lot of workers struggling to get full-time hours with a wage that puts them above the poverty line if they work just one job. It is labor shortages that are pushing employers to increase wages, not "Wokeness" (e.g. Walmart $12 to $14/hr), If you actually measure by worker and CEO compensation, the 1950s and 1960s S&P 500 was far more "woke" than today. These are corporations that measure things in dollars per "shareholder value", so pay attention to where the dollars instead of the words are.
I agree slightly more with you than you do with yourself.
Bravo and well played.
JLM
www.themusingsofthebigredcar.com
"But if you want austerity, the correct way to do it is to pass spending cuts in Congress, and iron out a budget deal with Biden through the normal process that we successfully used in the centuries before 2011."
And if you want to avoid these perpetual crises, then offer a reasonable budget to moderates (including this Democrat) who find the extraordinary explosion in federal spending and deficits objectionable. Medicaid should be a matter for the States; the social security eligibility age needs to be pushed out; drunken-sailor-spending like student-loan bailouts needs to be eliminated and excoriated as growth-reducing redistribution to people who made bad but free choices; negative income tax should be used for 70-80% of the population; an income taxes can go up for the top 20-30% without objection here.
The policies and reasons you propose, Max, have some problems, even for what I'd think of as a moderate Democrat (me, though I call myself a vanilla liberal).
1. The recent " extraordinary explosion" of federal spending seems reasonable to me, because in a near-zero interest-rate environment it was affordable, and addressed either war-level emergency needs (Covid cash) or long-term critical needs that would ultimately cost far more to neglect (infrastructure and climate). There may have been waste, but there is *always* going to be waste; it's a feature of human systems, especially political.
2. A very large share of student debt was a product of the shift from lower-cost tuition, with prices kept low by large state-level subsidies for public colleges, to tuition rendered widely unaffordable by the withdrawal of over 50% of public support. College access is a critical national need (for more reasona than can be listed) and we began to pay for it by shifting responsibility from state taxpayers to individuals by making easy money available and over-promising future returns. Their "free choices" were between options we limited by policy, and we offered misinformation on the key choice in order to keep them out of the job market for four years and build human capital as anational need. I agree that it would be fine to make some move to limit bailouts to those who need them, but it's hard to do. (And lots of the ballooning costs of tuition that swelled those loans was also the result of policy choices that incentivized schools to bloat their administrations.)
3. If Medicaid is "a matter for the States" that shifts a tax burden; it doesn't eliminate it. States that don't raise taxes to take on the burden either severely reduce health delivery or force very large costs on those who can least afford them (a huge selective regressive tax), and create conditions for lower productivity and economic growth and future high costs by undermining the health of the workforce and increasing illness. You're going to need a huge chunk of your negative income tax if you want to avoid those outcomes, which will wipe out the federal savings you're looking for.
I agree with Noah on MME, to the extent that I think we should not rely on it (I'm not an economist; I don't know MME is wrong, but my reading hasn't shown me that a layman can tell it's obviously right), but we are seeing that wealthy countries can, in fact, sustain a debt/GDP load higher than we previously thought was healthy, and it may be that the critical issue has more to do with debt-service/GDP levels than economists traditionally thought. The government's mandate is *not* to avoid debt; it is to provide optimal outcomes for the commonwealth. If high but manageable debt fulfills that mission best it's what we should have. We've been hearing the deficit-hawk predictions of imminent disaster since the 1970s (at least I have). While it's wrong to be irresponsible, if responsibility means recognizing that simplistic household-budget approaches to budgets are harmful to the national health then it's irresponsible to maintain that approach.
Because something is cheap -- in this case money -- is not a reason to buy something.
While COVID is a fair turn on of the tap, the balance of these unread omnibus bills is just lard, plain and simple. Huge, Jabba the Hutt payoffs from the Dems to their supporters.
Student debt is a contract with a loan request and a loan made. Pay off your freely made obligations. I put myself through college and my kids.
There is no connection between somebody taking out a college loan and the size of the administration. Student body growth may have driven admins, but not loans.
This is a perfect example of moral hazard - rewarding folks who studied majors with no jobs and penalizing fiscally prudent people.
Unemployment, Medicare, Social Security, and some parts of Medicaid are insurance programs in which the insured is simply getting back the benefit of the bargain.
The Dems screwed this up during the Johnson admin when they commingled these dedicated funds with the general fund and created a fictitious serious of IOUs that can never be repaid.
In some of these things -- Social Security in particular -- the solution is to privatize them and let sophisticated persons manage their own retirement funding.
It's MMT not MME.
You can't have it both ways -- you can't pretend to be a fiduciary of our citizen's funds and then be a drunken sailor with them.
Greed and corruption account for much of the gross overspending in the US. The lack of even rudimentary adherence to the mandated budget process -- regular order in the budget racket -- by the White House, the House, and the Senate is at the core of this shameful and irresponsible policy.
There is nothing wrong with defensive gov't spending in excess of revenues during tough times or wars, but it is just slovenly to think we can just spend with no limit.
Nobody with a brain thinks that's a good idea. Look at the bloody math, FFS.
T30 interest rate, Oct 1981, 15.21% - during a period of then record high inflation, lots of pain when the Prime Rate went to 20.5%
T30 interest rate, Jan 2023, 3.57% - during a period of record inflation, lots of pain coming
T30 interest rate, August 2020, 0.57% - good times, recent good times driven by prosperity, energy independence, and superior policies
This is real and it doesn't matter how one "feels" about it. It's math.
JLM
www.themusingsofthebigredcar.com
Thanks for the MMT correction, JLM. I don't agree with you on much more.
Calling the components of the IRA "lard," and "Jabba the Hut payoffs," saying spending is "like a drunken sailor," adding "FFS," and so forth adds exciting rhetoric to the discussion, but nothing more.
I think it's great that you put your kids through college--you're not the only one to do that--but I don't look at these issues as tests of personal morality, and I think the "moral hazard" approach is a terrible government philosophy. I don't see the purpose of government as rewarding behavior it considers moral: I see it as managing macro-level social factors to facilitate general goods. If a policy facilitates general good while rewarding some number of people we consider undeserving government should look at ways to minimize the latter, but not at a cost to the former. Focusing on moral hazard is a great way to lose national opportunity or maximize government overhead costs.
On the student debt issue I've already made my argument. We disagree.
Administrative bloat at universities was enabled by a student loan incentive structure that made demand highly inelastic, encouraged excess tuition increases, and discouraged budget discipline over a couple of decades. The result was excess tuition devoted to secondary activity outside the central teaching/research/outreach missions.
Borrowing from the Social Security Trust Fund does not date to the Johnson administration (there was no need for it). It dates to the Reagan Administration. As for shaping policy so that "sophisticated people" can manage their own retirement funds in a privatized system, the government's Constitutional responsibility actually extends to unsophisticated citizens. This is a "moral hazard" approach shifted to a "financial intelligence hazard" basis. The chief beneficiaries would be financial advisors and so-called financial advisors.
I don't really have any way to respond to rhetoric about greed and corruption, slovenly thinking, people without brains, or your concept of "the math." You've made clear how you feel. As for your observations about Treasury note rates, the only point seems to be that you predict lots of pain coming. Noted.
You are wrong on the social security history.
In 1968, the US budget had three components of which one was SS. LBJ did away with this distinction thereby commingling the funds.
What you are referring to in the Reagan Admin was the return to the three budget discipline which did not fix the commingling issue but laid bare the magnitude.
What the most diehard zealots would have us believe is that Social Security has been in effect selling securities to the government itself with those securities being the underpinning of the SS Trust Fund -- the faux notes.
Were that true, there would be no SS crisis looming. We have already crossed the line in which payouts now exceed income for SS.
Said another way, SS payments to seniors are more than SS payroll taxes currently being paid in by the younger folk.
As to allowing citizens to fend for themselves in the retirement arena, the gov't has long since made that determination with the approval of private pension plans, defined contribution plans, simplified pension plans (SEPs), Roth IRAs, regular IRAs and my personal fave deferred compensation.
All of these retirement plans are viable and solvent (one hopes as it is one's money) alternatives to SS. None of them require recreation as they already exist.
Why should the gov't object if I give up all future call on SS and pay some nominal amount -- say 2% rather than 7% -- to fund the dummies?
In using the term "moral hazard" as it relates to the loan forgiveness plan, it is intended to suggest that persons will take on undue risk if their government will bail them out as a special class.
One of the baseline values of our nation is equality which has to do with opportunity and even the twisted notion of equity -- which has to do with outcomes -- both argue that there should be some relation as to how risk turns out if you voluntarily take it.
If you sign a bloody note, pay it. Don't make the 66% of America who did not have the privilege of attending college pay for the 34% who did.
That is not fair using either one's straight sense of equality or twisted sense of equity.
JLM
www.themusingsofthebigredcar.com
Mr. Minch, I think you've mstaken Johnson's reform in budget reporting for a transfer of funds. Social Security funds were a component within uniform budget accounting during the period (I believe) 1970-90, required by legislation Johnson signed in early 1969, and ended by legislation signed by Reagan. But that did not mean that the Trust Fund monies were commingled or transferred out of Social Security. The were, however, transferred within Social Security during the period 1983-89, following legislation signed by Reagan. There were, indeed, tansfers of funds, but they were not out of the Social Security funds to general funds, but among Social Security funds in order to prevent depletion of funds with low balances. All "borrowed" monies were repaid by 1989.
The Reagan-era reforms put Social Security back into long-term solvency, and for decades it took in more revenue than it disbursed. The excess funds were not kept in cash, they were invested in special issue Treasury bonds, which yield interest income to the funds. In this sense, the Treasury owes the funds the principal on these bonds and, as the funds no longer are taking in more revenue than they are disbursing, and the bonds will gradually need to be liquidated over time to supply the shortfall that bond interest won't cover. This is the origin of the securities you refer to, and it dates from the Reagan reforms.
On your responses to how to treat "smart" retirees and "the dummies" and the term "moral hazard," I'll stick with what I wrote before. We see the role of government policy and morality differently and I don't expect to persuade you
I believe a primary reason for the future lack of full funding is that longevity increased steadily for a couple of decades after the Reagan reforms took place. This is also one reason (among several) why corporate and state pensions became steadily underfunded. People stopping smoking appears to be a key factor in the longevity increase. Hard to predict in mid-1980s. Recently a number of factors appear to be causing a slight reduction in longevity for the first time in US history outside of a major war or the 1918 flu.
Social Security and pension are effectively annuities. Increased longevity can substantially increase the necessary premium payments for a given annual income because it will have to last longer. Changing mortality tables also change the RMD schedules for IRAs. The IRS updates them about once a decade.
"The recent " extraordinary explosion" of federal spending seems reasonable to me, because in a near-zero interest-rate environment it was affordable"
this inability to distinguish between P&L and balance sheet issues is properly scary. To draw an analogy, think about a world where mortgages only exist in variable rate form. how good an idea would it be to borrow to your eyeballs to buy the biggest house possible when rates are low? what happens when rates rise?
Arby, I'm a little puzzled by your analogy to variable rate mortgages. Treasury note yields vary as they are sold at market. But the yield rate of a Treasury security is fixed at sale, like the rate of a fixed-rate mortgage. The borrower's (the government's) service cost doesn't change after the note is sold at market. The proper analogy is to a fixed-rate mortgage, not a variable-rate one.
And, yes, it does indeed make sense to borrow more when fixed-rate debt service is low. Not sure about the eyeballs. Depends how tall you are, I suppose.
A significant percentage of US debt is relatively short Treasuries. Rolling that debt over increases the interest rate paid on that debt. There is relatively short weighted duration of Treasuries (@ 5 years). https://www.brookings.edu/blog/up-front/2022/07/27/projecting-the-structure-of-us-treasury-debt/ You see this show up in total bond funds that typically have a duration of about 6 years.
There was a big push from some people to fund some long-term projects, such as infrastructure, with long-dated debt (30-100 years) given the low interest rates over the past decade to lock in those low interest rates for a very long time. Apparently that went nowhere.
All refinancings of existing debt are a crap shoot on the yield curve.
If you pick right, you may save some interest; but, if you pick wrong, you are penalized with an interest rate penalty.
When Ts hit 15.21%, a lot of smart money bought the T30 and held it to maturity.
When Mexico was failing and Nick Brady stepped in to save the country, Mexican Cetes/Tesobonos priced at north of 60% and every penny was paid back except for a small, gradual currency devaluation penalty which clipped 2-3% from the yield.
C/Ts were not "Brady bonds" but when it was clear the US would not let Mexico default, smart guys realized that meant all debt would be made good.
JLM
www.themusingsofthebigredcar.com
If you're a government, basically you hope that the economy (and therefore tax revenue) grows faster than interest payments. If not, I guess you just do the best you can?
If you're literally buying a house in the United States, you have three options: pay the higher interest rates, sell the house and use the money to pay off the loans while keeping any extra as profit, or default on the loan and let the mortgage lenders take a loss on the difference between the market price of the house and the amount of money still owed on the mortgage. (In the US, mortgages are "no recourse" loans - the house is the only asset of yours that they can legally claim if you default, even if you owe more than the house is worth.)
My impression is that what MMT says is not that government can spend whatever it wants with no consequences, but rather that, since the government can create all the money it wants, the only meaningful constraint on government spending is inflation.
Imagine government finances as consisting of a money incinerator and a printing press. Any money the government takes in from the economy through taxes and borrowing goes straight into the incinerator, and any money the government spends into the economy comes from the printing press. (There's no difference between this and spending "the same money" that it takes in.) There's no need for revenues and expenditures to balance, except to control the amount of money in the economy. So you design fiscal policy around that, rather around than balanced budgets and cash flows - if someone tries to use MMT to justify extra government spending without taking the effects on inflation into account, they literally don't know what they're talking about.
The problem is, of course, that runaway inflation destroys currency value, undermines credit quality, and ultimately drowns the nation.
#WeimarRepublic
JLM
www.themusingsofthebigredcar.com
(Which is kind of the point. A government with the power to print its own currency can never actually go bankrupt by borrowing in that currency, because it can pay off creditors by printing money - but doing too much of that will cause inflation and make that money less valuable, and too much inflation does indeed do all of that bad stuff.)
That works in a largely closed system. However, if you have too much foreign-owned debt so the rest of the world doesn't want to buy it, then inflation can go nuts. That ultimately was the Weimar Republic's problem because their reparations debt was owed to foreign countries. It was greatly exacerbated because the world was still on the gold standard, but it would still be an issue today in a fiat currency world..
Woo Hoo! Max for President on the Sanity Party ticket!
Premium coupon Treasuries, as Matt Levine suggested, are a much tidier escape hatch than the platinum coin.
It's still an amazingly dumb crisis.
Yeah the premium bond route seems like the better choice. You probably need to get started early and plan to syndicate the bond out through some big banks, because the smaller players aren't set up to cope with non-standard bond structures. But there's plenty of short term debt rolling over, and it's easy enough to change a bond that pays out $1060 over three monthly payments as "20, 20, 1020" into one that instead pays "350, 350, 360". (So it's a $10 principal bond, with a 3500% per month interest rate. Which is ridiculous, but this whole crisis is ridiculous.)
Because we have a lot of short term debts rolling over all the time, you can bring down the face value of debt fast, and while this does accelerate our payments a little bit, it shouldn't matter substantively to our overall cashflows. It'd be harder to pull this trick with the longer-term bonds. In theory if you did this forever at some point you'd run out of short term debts to convert, but you'd need _decades_ of inflation before the limit became relevant again.
The big argument for the coin is just that you can threaten to do it, while also offering to abolish both the debt limit and unlimited coin seigniorage in a single bill, to end this kind of brinksmanship forever. (Well, and also: The threat has a bit of that Dark Brandon energy. It's meme-able in a way that I think probably psychs up Dems more than it adds any fuel to the GOP's already-raging bonfire.)
Noah,
A typo I think.
In the para that starts with "But the worst result of 2011" mentions the worst fight "since 2023". I think you mean "since 2011".
If it helps, l also hate people like me who point out typos ...
On the contrary, I quite appreciate it! 🥰
Join the International League of Pedants!
https://www.amazon.com/International-League-Pedants-Accuracy-Lobster/dp/B07YG4TDSQ
There's a lefty who's actually named Tankus?
The writers are getting lazy this season!
Happy Year of the Rabbit to Noah.
What is the relevance that there are two ppl with kinda bonkers views who believe in the trillion dollar coin proposal? Adolf Hitler also liked nature and dogs. Are they bad? These individuals are neither the originators of the idea nor the most reputable proponents.
There are quite a number of expert constitutional lawyers and I believe even one of the bill authors who have opined the move is legal (some even argue it might be mandatory) and likely would be accepted by the court. Ofc they mostly recognize that being forced to take this measure would itself be harmful (legal uncertainty etc) but it's still a reason to think that the harm will be less than a default.
Not to mention that other constitutional lawyers have made convincing arguments that the executive could just ignore the debt ceiling (the constitutional duty not to default and the congressional budget themselves creating contradictory legal duties).
Both workarounds are undesirable but I don't see what either of them has to do with the crazy ideas about sending troops to the fed.
Are these the same constitutional lawyers who think the executive has unfettered discretion to appropriate $400-600 billion for student-loan forgiveness? We'll see how those arguments do. They are nonsense, even from this believer in fairly broad executive power.
There's a pretty decent argument that a debt ceiling is unconstitutional under the Fourteenth Amendment, which says that the validity of the public debt of the US can never be questioned. It's a fairly mainstream argument, not some nutty outlier theory (which TBF is not necessarily a plus with the current Supreme Court, which seems to have a penchant for nutty outlier theories).
“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
In prior debt ceiling confrontations, this provision has been read literally as to the validity of obligations incurred by the government as noted by the examples.
It has to do with reneging on the validity of debt rather than speaking to payments of either principal or interest.
The debt ceiling issue has nothing to do with the validity of the underlying obligations.
JLM
www.themusingsofthebigredcar.com
Let me add that the student loan relief is also disgusting and wrong. If the Republicans did it the Dems would be justifiably outraged at the idea of giving money to those who are better off but not those who are worse off.
Yes, you can make the argument that it's unfair to burden people with so much debt to attend college and the government should pay for education. Fine. But it didn't and many ppl decided college was too expensive to attend. It's outrageous that we're now going back and instead of helping the ppl who decided they couldn't afford to go to college were helping those who did. Despite the fact that even with the debt going to college increases your lifetime income by quite alot.
I mean imagine we didn't have social security and people said: it's unfair we don't have government funded retirement so we should reimburse everyone who made payments into their 401ks. People would be outraged. You are literally giving money to the people who are better off (put money away into their retirement accounts) rather than those who didn't. It's the opposite of what the dems are supposed to stand for.
My spouse was supposedly eligible for the Public Service loan forgiveness program a decade ago. Unfortunately, US student loan types and names are very complex and the regulations written for these programs are very complex and unforgiving. therefore, 99% of "eligible" borrowers for forgiveness were not actually eligible at all. In order to "fix" the application, she would have had to start over again beginning a new payment 10 year period with the converted loan to get forgiveness of whatever was left after a total of 20 years instead of 10.. That was clearly not going to be worth the effort. They did a one time fix of that a year ago and the remaining loan (20% of what was eligible a decade ago) was forgiven after going through a fairly complex set of loan conversion and payment documentation steps.
Unfortunately, the US student loan system is so complex and cumbersome that it is nearly impossible to do any sort of targeted forgiveness programs. So it virtually has to be all or nothing unless Congress totally restructures student loans into something simple and understandable, which appears to be anathema to Congress and the bureaucrats.
There are plenty of lawyers who aren't onboard with student debt relief who think the coin thing is legal.
And, though I'd personally benefit, I agree the student-loan forgiveness is pretty clearly illegal. The harder question is whether anyone who has brought suit has standing on the issue (same thing that prevented the courts from stopping Trump's illegal diversion of money for the wall). The student loan servicers would almost certainly have standing but none have brought suit in their own name.
But, if the republican house is willing to take the political heat they would likely have standing as well.
It get messier if the Dems stick a thumb in the House's eye as the debt ceiling is not the only hurdle to funding the government.
It's called appropriations.
It is one thing to say you are going to ignore the debt limit, but the next chapter is to appropriate the funds to pay for things including debt service.
All spending bills must originate in the House. If they sit on it, WTF happens then?
No, this is the perfect example of what politics requires to be effective -- leadership and compromise.
Obama -- who nobody ever trusted thereafter -- at least embraced the cynical compromise of sequestration. Who was his VP?
This gets worked out, but not without compromise.
JLM
www.themusingsofthebigredcar.com
Balkin's West-Wing-script-style explanation of the Platinum Coin remains an excellent read.
https://balkin.blogspot.com/2011/07/obamas-top-secret-plan-to-solve-debt.html
Except at this point we should add a third coin, with Trump on it.
It seems to me that the majority of comments on this string take an apocalyptic view of the current national debt. It is certainly higher than it has been in the recent past, although we've been here before (after World War II). But despite the fact that I do feel uncomfortable about moving into untested waters--I'm timid by nature--I don't see any analytically solid reason to believe that the current level is seriously problematic.
I think it's wrong to speak about "burdening future generations with our debt." We assume debt in order to accomplish ends that will serve future generations, and those ends include raising GDP, which shrinks the burden of the overall debt. We bear the cost of ongoing debt service, and those continue indefinitely, but we also reap the benefits of the investments that expand GDP, and those too continue indefinitely. I understand dismay that 15% of our annual budget simply to debt service and we never pay off any of the principal (though its value continually declines through inflation), but the question of whether the principal is yielding greater ongoing value seems never to be asked, and I've never seen anyone relate their alarm about the 15% figure to a theoretically argued optimal rate--it's generally simply a "debt is scary/bad" framework, derived from household-debt perspectives.
I'm not persuaded by MMT (that could be because I don't understand it, but it's nice to align with an economist like Noah), but I think the evidence is already clear that the level of debt that it is safe for an economy the size of ours to take on is much higher than past conventional wisdom suggested. One thing I'm sure MMT gets right (and by no means only MMT--all Keynesian-derived economic theory too) is that our national debt is not analogous to household debt, and that people who transfer household debt models to their thinking about our national debt are making a mistake that would be terribly costly to turn into policy. And I don't think that alarmism about "printing vast amounts of money" is justified if the growing size of the economic base provides a basis for monetary policy.
I became politically aware in the early '60s, and jeremiads about the debt began to catch my attention in the mid-1970s, after the oil shocks set in (when the debt/GDP ratio was actually still falling, but people were really scared in a completely unfamiliar economic environment). It really picked up in the '80s when policy changed us into a low-tax nation on the basis of what I have always regarded as magical thinking, and we shifted the burden of funding a growing country from income taxes to debt (without any overt policy change, just responsiveness to a huge 1980s Japanese appetite to park money in a safe investment). This shift, championed by conservatives, set us on a course towards tripling the debt/GDP ratio over the forty years since 1981.
I have been hearing these voices of imminent doom throughout this era, generally from the conservative end of the spectrum that engineered the very shift it deplores; no political cry of wolf has persisted longer. It seems to me that MMT more or less claims that wolves don't exist, and I'm not persuaded--I think we should stay on the lookout and be perpetually nervous. But I wonder how it is that those raising alarms about the size of the debt don't reflect more on how the imminent disaster they have predicted for half a century has never come about, and how much the national economy has grown overall despite their warnings.
I would be perfectly willing to shift back from a low-tax country to a mainstream-high-tax country and reduce the rate of debt growth, so long as the primary tax is a steeply graduated income tax. (Although that turn would require care too, since it involves shifts in incentive structure with plenty of potential unintended negative consequences.) But the reason for the shift should, in my view, rest on models of consequent economic growth, not on a gut aversion to national debt that is not backed up by an empirical rationale.
I would argue it's not the current national debt that's really the problem, its the fact that no elected officials seem to even care that it ever might be. At the end of WWII (and every other war in our history) there was broad agreement that the nation needed o pay off its debt rapidly for both moral and economic reasons. Today, there appears to be no such urgency.
It's not the 100% of GDP debt that worries me; econ growth and mild inflation make that manageable. The fact that we're still running up the credit card at 5%+ of GDP annually despite owing 100%+ of GDP in debt; that worries me.
Historically the estate tax was enacted to pay war debt. We broke our own formula.
JLM
www.themusingsofthebigredcar.com
I think that's fair, Mr. Villanueva. But part of that rate is a one-time (let us pray) pandemic emergency response, and I think we should put that to the side, because the normal short-/long-term benefit calculus didn't apply.
For the huge infrastructure and climate bills passed under Biden, I think the valid concern you point to has to be balanced against the prospective costs of continued inaction. Depreciation on the national infrastructure is an enormous unquantified cost that we have been absorbing and ignoring and the climate bill addresses both ameliorating negative costs and maximizing the economic returns that can be captured by energy transition. If you calculate these as future costs avoided I think it's likely they will more than justify increased debt service costs that an expanded economy will be able to absorb, and if they don't (just to grant the point) whatever cost avoidance is achieved discounts the cost of the debt service--and that doesn't even involve calculating additional growth generated. (There was also a lot of less targeted and less productive funding included in those two big bills, and if the GOP were now saying something like, "Let's revisit the pork and pet project elements of those bills and use this debt ceiling moment as an opportunity to terminate wasteful ones," I'd be all for it.)
I'm not an economist and I can't confirm any of the calculations I've so carelessly characterized here. I'm representing the concept I find convincing in refuting the narrow focus on the debt/GDP ratio (as I understand it). I do think there are elected officials in Congress who pay actual attention to the risks of running past a threshold on debt/GDP, but that exercise is hampered by how fuzzy that threshold is. You can point to Venezuela as a basket case with a ratio of 240%, but Japan's chugging along with Abenomics and its ratio is 260%, and Singapore is still a dynamo with a ratio 30% higher than ours.
I think the rule of thumb should be that the higher we propose to push the ratio with new spending (or tax cuts), the stronger justification is required in terms of quantifiable benefits. (Unfortunately, quantification is hard, and sometimes inadequate. I was hoping the expanded child tax-credit would be made permanent, but my reasons weren't quantifiable on this sort of scale.)
I'm just looking at the total numbers:
https://www.thebalancemoney.com/us-deficit-by-year-3306306
Debt Increase Year over Year
2014 $1,086
2015 $327
2016 $1,423
2017 $671
2018 $1,271
2019 $1,203
2020 $4,226
2021 $1,484
I agree that COVID was an extraneous event for which the regular long-term calculations do not apply. Keynes is ideal to such an event. It's the $1T a year (about 4% of GDP) we were blowing even before (and after) that which worries me.
Nearly all of that is structural entitlements not discretionary spending. Absent either large entitlement cuts or large tax increases, this will not get fixed until it affects our credit rating and exchange rate (which is way too late.) Spending cuts are political death (just look at France today). American taxes have historically fallen in a very narrow range regardless of party (https://thesiburgcompany.com/2021/02/chart-of-federal-tax-receipts-as-a-percent-of-gdp-from-1929-to-2020/). In short, neither potential solution appears viable and both appear politically costly, which means nothing will be done until the whole thing explodes.
We need a Teddy Roosevelt, a Keynes, a Churchill, a Kennedy, a Volcker. Instead we have Marjorie Taylor Greene, Diane Feinstein, and Joe Biden. Call me worried.
First, there is no macroeconomic model I'm aware of, (certainly people have tried) that has any real grasp on the actual situation in the world. The current situation, where one currency dominates globally, makes equilibrium treatments of currencies difficult/impossible. If you are trading in the world keeping many accounts in US dollars (and US TSY securities) makes sense compared with the overhead and risks of using other currencies. The differences in these costs means the benefit of a world financial system anchored in US dollars to the US as a whole is probably much greater than 4% of GDP.
Note the huge difference between the FRED figure you linked to and the FED FRED "Who Pays What in Federal Taxes": https://fredblog.stlouisfed.org/2018/11/who-pays-federal-taxes/?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=fredblog
Note that in the US Personal Federal taxes were as low as 38% of Federal tax receipts, but they are now ca. 80%.
I wouldn't worry about the debt level currently. If you were evaluating the US as a private firm that had 330million bound clients and it could charge as needed with good enforcement to raise funds would be worthy of an order of magnitude increase in debt ratios.
But a nation isn't a private firm, John. It has interests that go far beyond the economic. For example, on economic terms, open borders make complete sense. However, in terms of social stability, there must be limits on immigration. On economic grounds, drug legalization is the best policy. On grounds of caring for your fellow man and not causing him to stumble, legal drug markets are a terrible idea. There are lots of things like this. After economics training, I spent years relearning that and unlearning Pareto-optimality as the primary goal of society.
Economists are hammers. They sometimes find nails and drive them in very well, but they often find screws (which banging on won't help), and they occasionally find lions (which are very bad to bang on.) The national debt to me is a "screw problem" in that addressing it requires dealing with fundamental arguments about the proper role of government in society. I am actually OK with either answer (raise taxes or cut spending), but I see no evidence that our leaders are prepared to do either. And the problem is a little like a asteroid hurtling toward Earth; the longer we wait the more difficult it is to correct.
I know a nation isn't a private firm. The point is that a nation like the US has the ability to raise funds unmatched by any private business so there is no mathematical risk of defaulting on our spending obligations. Defaulting would be a political, not a practical, outcome.
You make a lot of statements as fact that are simply your opinion. It appears you don't apply critical thinking to your opinions.
"on economic terms, open borders make complete sense" There are a myriad of situations where this is clearly false. It completely depends on the policies in different countries. If a country provided health care and housing and food to all residents and a neighboring country did not the open border would likely result in massive migration of non-productive workers (e.g. retired) to the former country. Clearly this is economically detrimental to country 1. To support your opinion would require that somehow the increase in economic output in country 2 would more than offset the loss in country 1.
"On economic grounds, drug legalization is the best policy. On grounds of caring for your fellow man and not causing him to stumble, legal drug markets are a terrible idea. "
Once again opinion presented as fact. One need only look at the damage done by keeping many drugs illegal in terms of crime and deaths to counter this. The economics are impossible to know. Would legal drugs result in more people becoming non-productive and a burden on society economically that is greater than the reduced costs of policing and crime resulting from illegal drugs?
Finally we get to your "The national debt to me is a "screw problem" in that addressing it requires dealing with fundamental arguments about the proper role of government in society." Again an opinion presented as fact. What is the specific problem that the debt is causing? Please provide facts to support this opinion. This requires that there is an example of a country, with debts in its own currency that is a fundamental part of the international financial system and with the ability to pay off these debts if desired, that has resulted in a problem. If you don't have such an example then once again you are unable to distinguish between facts and opinions. Milton Friedman considered US debt a hidden tax, but throughout most of history in the US and Western Europe and Britain, this ends up being a negative tax.
I appreciate your citations of data, Mr. Villanueva, and I understand your argument. As I indicated before, I agree that increased debt/GDP is something we need to track closely and consider when dealing with spending, either discretionary or structural.
However, while the debt/GDP ratio is important, the more immediate question related to default is not that ratio but the ratio of debt service to GDP. Much of the borrowing you point to was made at historically low interest rates, and therefore costs relatively less to service than debt accrued before 2009. While we have certainly seen a very rapid expansion in the total debt over the past few years, in part due to structural expenditures, in part discretionary, and in part in one-time Covid emergency expenditures, that doesn't mean the debt service/GDP burden has grown at a comparable rate, and there are no signs I'm aware of that we are any less able to service the debt than was true at the beginning of that period. The danger of default largely concerns that latter factor.
The height of the debt service/GDP ratio was about 5%, which was reached (a sustained) during the 1980s, when we were borrowing massively at very high interest rates. It fell dramatically in the Clinton years (down to around 3.0%) and bottomed out at about 2.5%. It's now at 2.8%, about where it was at the end of the Johnson administration (here's the St.L Fed chart: https://fred.stlouisfed.org/graph/?g=iEiV).
As we're entering a period of somewhat higher interest rates, new borrowing will be more costly, and that's already reflected in rises in the index over the past year. But while the debt/GDP rate is at historic highs, we are now far, far below historic highs in terms if the burden of debt service. We don't want to get back where we were, but we do have critical short-term needs with long-term impact, and, again, the value of the investments we are making has to be calculated in terms both of what they cost us in expenditures and debt service and in future GDP growth they promote.
You confuse the implications of fiscal policy and monetary policy.
Here is a good explanation of the difference:
https://themusingsofthebigredcar.com/monetary-policy-v-fiscal-policy-what-do-they-even-mean/
I wish we lived in a world in which the government actually "invested" our money. The truth is they take money, diminish it by 26% in the collection, and SPEND it.
The US gov't has a negative growth multiplier when it spends money and that is after it reduces the value through its cost of collection.
This is, of course, fiscal policy rather than monetary policy.
The Fed -- the monetary policy guys -- have had the same mission since their inception and yet it is bad fiscal policy that is causing the monetary policy objectives such pain.
If you kneecap the energy business -- fiscal policy -- and light up a nuclear bomb of cost increases, then it is impossible to control inflation (monetary policy).
In the Trump admin, we had a fiscal policy that resulted in the best bloody economy since Geo W Washington. We were energy independent. We were at peace. Inflation was sub 1.5% and interest -- the vig on growth and innovation -- was at an all time low.
Good fiscal policy, good policy makes monetary policy a freakin' breeze.
I attribute a lot of this to Wilbur Smith, Sec Comm, who did a bang up job on eliminating unnecessary regulation wherever he found it.
So, what changed?
Why did inflation explode -- transitory, remember transitory -- and why did it drive interest rates so much higher?
Part of it was the Biden war on energy, part was the reinstatement of terrible regulations, part of it was massive government spending.
The sum total is what we have today -- an impending recession and a fight between fiscal and monetary policy.
I was building a 50-story building in Austin by God Texas in August 1981 when the Prime Rate went to 20.5% and the construction and real estate businesses died. There was plenty of pain. There was zero true economic growth.
Today every indicator signals a bad time and it is all related to bad fiscal policy. What makes it worse is the backdrop of the best US economy since the Revolution.
What changed?
JLM
www.themusingsofthebigredcar.com
I don't think the growth multiplier on government spending is negative, or even less than 1; it certainly shouldn't be when there's slack in the economy, as there was during the Great Recession and probably during COVID mitigation measures as well. I don't know what it is now, now that inflation has increased and the labor market is tighter, but there are clearly at least some investments the government can make that will pay off fiscally in the long run (by increasing revenue or reducing long-run costs).
I may well confuse fiscal and monetary policy in writing, Mr. Minch, because I rarely write about this stuff. I think I said what I meant when I used the term "monetary policy" to refer to complaints about "printing money."
Your view of the Trump economy is certainly one endorsed by Mr. Trump. I believe you'll find that most economic indicators were extensions of trends firmly in place before the Trump administration took over. US energy independence was largely the consequence of new technology that developed and was applied before 2017 and independently of Trump's policies. I agree that the low regulation regime of the Trump administration increased energy sector strength. As with much deregulation, the short-term advantages will have to be measured against long-term costs, and I don't know what they will be (I'm not anti-fracking). I think the investments in Biden's IRA will have a much less prominent short-term impact, but will have very large long-term benefits, the opposite of the Trump policies.
Government does involve overhead. I don't know whether your 26% figure is accurate. We can argue indefinitely over "invest" vs. SPEND. I don't see a point in doing that. It's late and we already know you prefer heated rhetoric and I don't. Different styles make life interesting.
There are lots of explanations of why inflation took off. They include Covid spending under both Trump and Biden (and I believe the Biden infrastructure bill probably contributed to it in excess of what was prudent), gyrating tariff policy, radically shifting supply issues, including both Covid-caused disruptions and those coming from the Russian war, and wage/labor dislocations initially caused by Covid and then intensified by poorly understood labor patterns after the initial Covid wave came towards a close. As you know, inflation is currently subsiding and if it does, and if we avoid a recession (50/50, I think), the outcome will be pretty much a wash between alarmism and team transitory.
I'm sorry your building didn't work out. I don't believe our situation now is comparable to 1981 at all.
We're moving on to a new day, and I won't have an opportunity to devote time to bloviating on Substack, much as I love to do it. I promise to read any further replies you post, since I appreciate you pushing me to think hard in response, but I'll let you have the last word.
The march toward energy independence's martial music was deregulation, low cost of capital, infrastructure, drilling, and the business environment.
It did not hurt that Rick Perry, former Tx Gov, was Sec Energy and had been a long standing Gov of Tx whilst it did the same things on a state level.
It is easy to see this by what happened the second Biden took office and reversed many of these policies: cancelled Keystone, ceased auctions, failed to award successful bids, put ANWR off limits, and announced he was unalterably against drilling whilst favoring a form of energy that was unripe and adolescent.
This caused energy CEOs to forego capital investment in even routine capital undertakings and the nation's 13.1MM BBL/day production dropped to below 10MM BBL/day.
The spiraling cost of gas/diesel drove transportation costs ever upward and every product in America baked it into their cost structure and passed it along to consumers.
This was and is bad policy made worse as it was in the face of the best US economy since the Revolution. The stark contrast in policy is unmistaken and telling.
One produced the best economy and low inflation whilst the other drove interest rates and inflation higher immediately.
Inflation -- transitory it turned out not to be -- was 1.4% when Biden took the oath and has more than quadrupled.
The RATE of inflation has moderated infinitesimally, but the core inflation is baked into that cake forever. Go price eggs. Those prices are never coming back down. Ever.
Just to keep it real even the Sec Treas is saying it will be 2024 before we see any real inflation relief. We are 5 weeks into the Saudi/OPEC production cuts. Hang on.
JLM
www.themusingsofthebigredcar.com
How can you say it's "pointless" - don't the GOP have a point that, well, ever spirally deficits and debts are bad? And that last time they tried the old fashioned way to reduce spending it was vetoed by the President?
If you're in Congress and you genuinely believe that vast levels of money printing are a problem, that now is the time to start reducing deficits (not even debts, just deficits), then what option do you think they should be taking? Do you think Biden would actually ever agree to big spending cuts?
I feel like this is so obvious I'm not sure why I'm writing it but....
If they think that's a big problem then it should be on their national platform, they should have concrete proposals, they should campaign on it, they should win elections based on it, they should pass laws with a veto-proof majority showing they are truly fulfilling the will of the people.
Of course you are right. Newton Gingrich campaigned on something called The Contract for America and nearly balanced the budget.
Do not believe for a second that Clinton had anything to do with it. It was Gingrich and the Congress who restrained not GROWTH, but simply the RATE OF GROWTH.
It would be laughably easy to balance the budget if anybody would just learn to say "NO" to earmarks and increasing budgets for every cabinet department.
The US currently enjoys all time record revenues. If not now, when?
JLM
www.themusingsofthebigredcar.com
Isn't that what the Tea Party people did? Campaigning on it I mean. Obviously they didn't manage to take control of the government. I'm far from these events but vaguely recall that cutting deficit spending was on their stated if not actual agenda. But they didn't get a Tea Party president and ended up with Trump instead, who had little interest in budgets.
No, they didn't have that.
In 2011 Republicans controlled 55% of the House (and didn't control the Senate). You don't get to make "big spending cuts" when the election has just shown that your position isn't popular enough to make sweeping changes.
If your barely won a majority then you temper your goals to make your electoral reality.
That's fundamentally how the American system is designed to work, for better or worse.
If you want big changes you need to have large majorities across multiple veto points.
Actually, all the US needs to make meaningful progress is to reduce the RATE OF GROWTH of existing programs.
In the much ballyhooed and misunderstood Clinton/Gingrich faux balanced budget fable, they only reduced the rate of growth.
The US has record revenue today. All we have to do is to reduce the rate of growth -- harder to do today because of the multi-headed Hydra of inflation.
JLM
www.themusingsofthebigredcar.com
You cover the subject well at the top two inches of soil, but you miss completely the deep rooted reality.
Obama agreed to a plan called "sequestration" in which future spending would pay for itself. Of course, he didn't adhere to it and the Republicans were justifiably left with the cruel realization that the Dems have no idea of how to manage spending and no intention of doing anything like that. Ever.
The lack of trust on fiscal matters by the Reps of the Dems is deeply rooted in the reality of failed sequestration, massive lobbyist-written, unread spending bills, failure of budget regular order, continuing resolutions, and omnibus bills. It is a fair and well-earned skepticism nigh onto cynical enmity.
The Dems own this conduct and the Reps are doing their elected job to forestall fiscal suicide by whatever means available and necessary.
If the Dems were following the required budget discipline and displayed even a tiny nod toward fiscal responsibility, the Republicans would justifiably be chided, but that is not so, so let's drop the charade.
Further, the Dems in control of Congress have not delivered a budget and appropriations bills - something that is mandated by law and which is called "regular order" ever.
You are crying foul on a system that is already hopelessly broken and suggesting there is moral high ground beneath the cloven hoofs of these poseurs we call Dems.
How do we return to some sense of fiscal order? I am talking Republican Dwight D Eisenhower's 8 balanced budgets and zero deficit type of fiscal order.
We will all collectively have to get in the trenches and engage in hand-to-hand combat as we did once upon a time when we banned pork - earmarks. This, too, is completely out of control proving the Congress cannot be trusted.
I view the Republicans' attempt to use the debt ceiling as a fiscal tool like a family intervening to stop a hopeless addict from doing further damage to himself. It is a desperate act born of the failed earlier acts. The Congress and the Dems need an intervention and a few months in rehab.
The notion that the US is going to actually default is sheer nonsense and is an example of fearmongering used as a pathetic, simplistic lie to trick the masses. You should be ashamed of yourself in the same way that the 51 intel community liars should be for authoring a letter that was blatantly false.
Regardless of what happens, the US is going to pay its bills. Why pretend otherwise?
I applaud the Republicans for renting a pair of balls, but I have no illusions that this will not devolve into petty politics and the White House will lie in much the same way Obama did with sequestration.
We need people in government who can manage finances IAW the law.
Let's get ready to ruuuuuuuuumble.
JLM
www.themusingsofthebigredcar.com
The way I see things:
Republicans: We should balance the budget!
Democrats: Sure. Wanna raise taxes?
Republicans: Hell no! Wanna cut spending?
Democrats: Not really, but what spending do you want to cut?
Republicans: Um... We'll get back to you on that.
Basically, the Republicans in Congress have made it clear that they prefer low taxes to a balanced budget; they had a majority in both houses of Congress under Trump for a while; if they had wanted to cut spending, they could have, but the only major legislation they passed was a big tax cut that made the deficit bigger.
Keep in mind that Republicans increase debt ceiling when passing tax cuts because it is just a temporary measure before the tax cuts pay for themselves in increased revenue due to the massive increase in growth. (They say with a straight face).
I'm weary of everybody using the debt ceiling issue to point the finger at somebody else. Here's who got us in to this mess.
1) American People
2) Democrats
3) Republicans
We, ALL OF US, routinely spend money we don't have and pass the bill on to our kids and grandkids. We've been doing this for decades. It's not "those people over there", it's all of us. No matter what party is in power, they do deficit spending. If you vote for Republicans, you're voting for deficit spending. If you vote for Democrats, you're voting for deficit spending. If you don't vote, you're agreeing to deficit spending.
I've been a liberal hippy Democrat since the sixties and look like I just came from an orgy at Woodstock. I'm not a MAGA man and won't vote for any of them ever.
But I'm fed up with my fellow Democrats pretending it's the Tea Party and Magaheads that caused this problem. Doing that makes us look just as dishonest as the Magaheads. The world's faith in our finances is already headed for the crapper no matter what the Magaheads do. If the Magaheads were to vanish that would still be the case, because the entire country wants to be irresponsible with our nation's financial reputation.
The federal budget is completely out of control and it's going to get much worse soon. And it's us, all of us, that made that happen. Until we start owning up to what we're doing to our kids, we're screwed.
As soon as the Magaheads get the power they will deficit spend too, just like Trump did. They are not our saviors. But I'll give them credit for making noise, and forcing us to think about this.
agree agree agree, but - if the 1% and corporations were taxed in proportion to the way the rest of us are taxed, would we be having these deficits? Seems like the results of the present system are we of the masses get our government-funded benefits, and the financial lords get their tax loopholes, and everyone is happy. Until we all get to the cliff...
If the US gov't seized all the wealth of every millionaire and billionaire, we would still have deficits.
It is a bloody SPENDING problem, Nina.
The US Treasury is enjoying record tax revenue while Congress and the White House are spending more money that ever in the history of the US.
JLM
www.themusingsofthebigredcar.com
The top 1% own about one third of the nation's wealth. The top 20% own about 85% of the nation's wealth. We in the peasantry are squabbling among ourselves over that last 15%.
But your point is taken. If the government seized all the assets of the top 20%, it would spend it all, and then some more. And we will applaud as they do. Because the real problem is not financial deficits, but...
Brain deficits.
We are, of course, discussing a government funded by INCOME taxes, not wealth taxes.
That important point aside, what is really missing is the impact that the wealthy have on the economy in job creation and growth through investment.
Seize their assets, barbecue them at the spit -- who TF creates the jobs?
The "real problem" is a lack of fiscal discipline and rigor by the political class.
We are at an all time high in US revenue. If not now, when?"
Any decent accountant or MBA could work this out in a single day and not miss cocktail hour.
We require the brain power of a single mom with two kids trying to house, clothe, feed, and educate them.
JLM
www.themusingsofthebigredcar.com
I'll settle for a fair income tax, not a tax on assets.
No doubt. But the deficit went from about $20 trillion when Trump passed his tax cuts to just under 25 trillion between the Tax Cuts and Jobs Act and when Covid arrived. It now is 28 trillion.
That growth suggests to me that the tax cuts played a significant role in increasing our deficit, and we will need to tax those who aren't taxed as well as cut spending.
You cannot have it both ways.
The tax cuts resulted in bloody RECORD tax receipts.
One more time: tax rates went down but tax revenue/collections WENT UP!
We are still enjoying record tax revenues.
We have a SPENDING problem.
Conversely, if you raise taxes, revenues will actually go DOWN.
We are marching into a Jimmy Carter recession.
JLM
www.themusingsofthebigredcar.com
The tax cuts resulted in decreased tax receipts. This decrease was less than the increase in GDP. Get your facts straight.
Sounds right to me!
We’d have worse deficits if the 1% were taxed like the rest of us. They pay a larger share of income taxes than the share they earn of income.
Stupid question, but couldn’t the Democrats have repealed the debt ceiling law in the last few years?
Why didn’t they? Just, other priorities? Or it would have been politically unpalatable?
Filibuster.
Good question!
I am 90% sure the answer is "they couldn't" - it would have been filibustered in the senate, and so the only thing they would have gotten out of it (from their perspective) is a bunch of bad press/red meat to the Republican base showing that the Democrats want NO LIMITS ON DEBT without actually getting the important thing it was worth taking that bad press for.
Actually, they could have. As a spending item, it could have been passed under a "reconciliation" bill. They didn't have the fortitude to expose who they really are.
They discussed it and decided against it.
JLM
www.themusingsofthebigredcar.com
Oh please - what they didn’t have is the votes.
They "could have" provided they were united, sure. Everything I've read suggested Dems didn't have Manchin on board, and possibly one or two others. You don't need sixty votes for reconciliation, but you do need fifty.
Correct! There is no universe in which Manchin signs onto this, except maybe as some sort of trade for massive coal subsidies or something else that the rest of the caucus would never offer.
Manchin's not stupid: I have zeo doubt he thinks it would be bad for the country to default. But you don't serve multiple terms as a Democrat representing West Virginia without knowing a few things about politics. Manchin knows (if he runs) he's facing a very difficult battle to hold onto his seat next year. Many/most pundits are saying he'll likely lose. We'll see. But Manchin feels voting for an easily demagogue-able measure without bipartisan support isn't in his political interest.
Most peoples' eyes glaze over when they see the words "debt," "deficit" and "fiscal." This is a very very low-salience issue for the median voter.
Yeah, there would have been some bad press but it would be ancient history by November 2024, and the only people who really care were always gonna vote Republican, anyway.
Oh, I agree! I don't think they have a good excuse - I'm just guessing as to why they didn't try.
Thank you for a relatively sane tank as opposed to all the media generating fear over the Debt--even the NYT today had a piece which assumed, without a thought, the current Debt was a problem. The Debt is as close to a non-problem as there can be--it’s a historical accounting. Deficits can be a problem, they can drive inflation or squeeze private investment, but no one is talking about that. Everyone intuitively, and wrongly, equates
Sovereign Debt with private debt. They should ask themselves how much debt they could manage if they could set interest rates and print money?
The only sane part of the argument is about increasing interest expense (which, like other government spending, can drive inflation) which affects the deficit--but the ignore the other half of the equation which is that high interest usually accompanies high inflation--which reduces the overall Debt burden. No one is talking about how inflation wiped out $3T of Debt in real dollar last year. i.e. Debt + Budget in real dollars ran a surplus.
Every time I start feeling I’m in crazy land surrounded by a deluded mass of people, I remind myself that accounting isn’t the real economy and, whatever we can do, we can afford.
This must be a slow blogging day. Contra Noah, there have been showdowns over the debt ceiling since at least the 1980s. What's new is treating these showdowns as a looming apocalypse. Back in 1985, James Baker pointed out that the federal government had adequate cashflow to meet all bond payments, and could prioritize other payments to make the most essential payments on time. Bill Clinton, in his showdown, used the "Washington Monument Strategy" to turn the public against congressional Republicans.
Brinksmanship over the debt ceiling is not tantamount to default, and offers little more than an opportunity for grandstanding by Congressmen and Senators. Usually pointless grandstanding.
So why didn't the Democrats just eliminate the debt ceiling (or raise it by a factor of 10 or 100 or 1000) during the first 2 years of the Biden admin, when they had full control of Congress? Who was "holding them hostage" then?
Manchin and Sinema (and perhaps others). Democrats in Red states are wary of unilateral Democratic moves to eliminate or get around the ceiling because debt-hawkism remains a potent weapon in the GOP electoral arsenal. Democrats need GOP partners to depoliticize this, and the GOP has no incentive to depoliticize because it works for its populist wing.
If the ceiling remains because the politics requires it, it could be used constructively as a time for negotiation on pruning tax cuts and spending that both parties recognize as having been either ill-advised or simply unsuccessful, each side giving cover to the other with regard to programs popular with its voters. But that won't happen so long as one party adopts as a basic plank a "spend less (except on defense)" posture, based on a drown-the-government-in-the-bathtub view of the world.
Because it’s a good political issue for Democrats. Republicans threatening to blow everything up while proposing 30% sales taxes, social security cuts, Medicare cuts, etc. hurts them. Democrats didn’t want me I save Republicans from themselves.
You may be right, Scott. That's got high explanatory value, and the press has been presenting the current posturing in that light. If that rationale actually governed the decision not to pursue the issue when it was actually possible to correct it I'd call it utterly irresponsible.
I think Manchin and Synema are working within their own beliefs that bipartisan solutions are preferable as well as what they think their primary and general election voters will support. People in very safe seats on both sides often just play to their extreme base to win in the primaries. That is largely the group dominating the GOP House right now as in 2011-2013.
Why do you say "people" are playing weird political games with the U.S. fiscal system when you mean "House Republicans?" Not Democrats. Not Senate GOP.
Sorry, wrong. Everybody made this mess.
Who got us to talk about this? The House Republicans. (I'm a Democrat)
Here's a weird political game with the U.S. fiscal system for you. Deficit spending for decades by BOTH parties as they attempt to buy votes for the next election.
Do you think the same about other types of suicide bombings?
Imagine the MAGA people were all abducted by aliens and vanished from the face of the Earth. Here's what would happen next. We'd keep deficit spending until we crashed the financial system. We're attempting to blame the MAGAs for something we intend to do anyway.
If it weren't for the MAGAs we'd be whistling a happy tune and continuing to spend the nation in to bankruptcy. What's annoying us about the MAGAs in this particular instance is that they're making our crime against our kids more public. We'd prefer to steal from our kids quietly, and hope that they don't notice until after we're dead..
No we’d raise taxes to pay for the spending the public demands.
That's my point.
When?
Immediately.
This assumes a whole lot that isn't in evidence, and then supports a fundamentally absurd solution that solves nothing.
I mean, "the global economy might blow up in the future due to excessive government debt, so let's accelarate the process and blow it up now" is certainly a take, but it isn;t a good one.
What's happening now is that House Republicans are forcing us to talk about the budget. I offer you this article as evidence.
I don't like the House Republicans either, but I refuse to be a blind true believer tribal warrior who won't give credit where it is due. The Democrats are not forcing us to talk about deficit spending, they want to keep spending, spending, spending. So they aren't in a position to lecture anyone about fiscal responsibility.
I welcome House Republicans talking about the budget. THEY ARE NOT!!! They are talking about blowing up the global economy unless they get as yet unspoken concessions.
There is a regular order process by which the government raises, appropriates, and spends money. That is the pace where these talks about the budget should happen.
The history of the shrill call of America going bankrupt I've heard for 60s years.
Chicken littleism.
Tax the untaxed. Simple
The concept of bankruptcy is actually a bankrupt idea.
As a Business guy, the only issue is Revenue. Social Security receipts are down from 10% GDP to like 6 or 7% GDP. There's trillions untaxed in this country.
Bankruptcy is when investors lose faith in the United States government's ability to manage it's finances. That's going to happen now with this debt ceiling controversy, or it will happen a little farther down the road.