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Friday, November 10, 2017
David Morgan — Deficit worries complicate path for Republican tax cuts
The Committee for a Responsible Federal Budget, a nonpartisan budget watchdog in Washington, on Friday called a Senate Republican tax plan a “fatally flawed budget buster,” likening it to Republican legislation in the House of Representatives that the House tax committee has approved....
The Tax Foundation, another nonpartisan group, said the Senate plan would add $1.78 trillion to the deficit over a decade. It estimated that over the same time frame lower taxes would expand the U.S. economy by 3.7 percent, add 925,000 full-time jobs, raise wages by 2.9 percent and generate enough new tax revenue to erase all but $516 billion of the deficit effect.…
how do you explain this and the "neo-liberal conspiracy!" at the same time????????
Easy. The deficit and debt phobes apparently haven't been clued into the plan.
The plan is to reduct taxes on the argument that they pay for themselves, which everyone knows is BS. It will run up the deficit and increase the debt, and that will have the GOP an excuse to argue that welfare programs like SS, Medicare and Medicaid need to be cut back to "reduce the deficit" and "pay the debt." It's not like this is a new plan. It's the playbook.
What if at the same time Trump is successful wrt the external sector and accordingly the "deficit!" collapses?
Then they will pretend that the deficit hasn't collapsed, , just as they pretended the deficit was increasing when it coming coming down quickly in the later Obama years.
Under BO they briefly considered minting some trillion-dollar coins to eliminate the debt. Of course that would make the big lie absolutely transparent, so it couldn't be allowed to happen.
Stop right there! Trump can't convince anyone of anything, probably even himself given all his flipping and flopping around like a beached whale. Half the time he blames the Democrats for not voting for his policies! He controls all branches of government and not only can he barely get any legislation through, he demands Democrats ride to the rescue when his own party deserts him. Let's face it, Trump is a major league incompetent.
Matt: 'Then the "deficit too small!" people are going to look like idiots...'
What if it turns out that the deficit has been too small? Will the people who cry themselves silly any time they hear that the "deficit is too small" apologize and admit that the "deficit is too small" when it turns out that the "deficit is too small"? Nah, probably not. It's not as if working Americans aren't suffering, and their suffering can be alleviated by serious deficit spending.
Maybe, john, but I am not convinced of that yet. We probably won't know other than in hindsight.
Trump is an enigma. For good reason. He is faced with a soft coup d'etat domestically and formidable opposition to his foreign policy., as well as a divided party, which is reflected in GOP paralysis in Congress even though they nominally control the legislature and presidency.
I not only haven't seem anything like what is going on now but also I could not have imagined it in my wildest dreams. It's totally bizarre. So it is understandable (rational) that he is bizarre, too. He needs to be. I think Scott Adams has provided some insight into this from his background in persuasion, on one hand, and systems thinking, on the other hand.
So Trump is necessarily a juggler, and if he weren't a street-savvy New York wheeler- dealer he would already be out.
We'll see.
Whatever, it's definitely the reality show we expected, and then some.
I am actually not as concerned about Trump himself as I am about some of the other crazies, especially the neocons that seem to be gaining traction again. These are the real problem.
Tom, on the whole I agree with you: Trump is surrounded by some amazingly nutty people (although he put most of them there rather than go for intelligent conservatives in the Bacevich and Mearsheimer mould), that his own party is undermining him etc.
None of this, however, explains the incompetence. Even Dubya could get things through. The few things Trump's promised and what he's known for have either collapsed in disarray or backfired because of incompetence. He's been incapable of "repealing and replacing Obama", which like countless other things he promised to do "on day one". The stupid wall is now a fence, and Obummer built hundreds of miles of a real wall! His Muslim ban has been overturned because he couldn't, and still can't, be bothered to do what Obomber did and make it sound like a security issue rather than a rallying cry to bigots. His foreign policy is a mess. His cabinet and advisers are ticking bombs. And on it goes. No wonder his polling numbers are the worst in recorded history, although Trump will claim they're the best in recorded history.
All of the above has little to do with the wacko neocons, who are a danger to all life on planet earth, and can be effectively sidelined or the GOP establishment. Trump brings a lot of this stuff on himself because he's lazy and is infatuated with his self-proclaimed genius.
Again, John, this is intricately related to US politics, "It's complicated."
US politics is so complicated right now since both parties are involved in factional disputes in which each of the two major factions is totally committed to controlling the party. Shared power is impossible, since the agenda are completely incompatible, making compromise impossible.
In neither case it is at all clear which faction will emerge the winner. The contest is the same in both parties, however. The establishment versus the populists. The establishment has the network, power and $, but the populists hold the votes.
No telling now where this is going.
In the meanwhile, the neocons and liberal interventionists are making hay.
It's a mess.
In fact, it is a dangerous mess. The country is so divided, with no prospect for anything changing in the foreseeable future, that the wheels are coming off.
It's also key that no one is control of the narrative. Essentially four silos have developed with the establishments of the GOP and Dems occupying two of them and the alt-right and progressives occupying the other two.
I've been monitoring them and the worldviews are diametrically opposed, although sometime they can agree on who to hate on most. Bizarre.
Trump may have won the presidency, but he was dealt a crappy hand.
Noah Way, I agree with you and Tom Hickey but when you wrote BO at first I wondered why you were talking about bad oder. That was the first time that I realized that Obama's initials fit his presidency.
Matt, I dont get your "US Dollar zombies" comment regarding our deficits.
Even if Trump were to "convince" anyone to change their behavior, and in this case its getting whatever foreign sector actors are keeping their surplus of US dollars either in Treasuries or just cash (not literal dollars but low or no interest bearing accounts at banks) how would that have any affect on the deficit
Just for arguments sake, lets say all foreign holders of low interest US dollar debt decide, because of Trumps brilliant negotiating, to buy something else, like stock in a US company or corporate bond or even goods produced in the US, someone else, an American ostensibly, will now hold that cash/low interest debt. The deficit isn't changing its just changing hands. There is no policy that can make the deficit disappear outside of taxing it away.
And raising interest rates will make it even worse, because now you will have a more attractive risk free return that makes investing in stocks or corporate bonds look less attractive
ie the deficit is a flow (per unit time) and the debt is a stock (integral of deficit delta T)... what you are talking about is correct for the stock of debt but the flow of the deficit might zero...
Unless US domestic entities somehow would then save the same amount per year as the foreigners are saving currently in USDs... but I doubt that..
iow if the Abe people were to take a few $100B and come over here and put it in a big infrasturcture PPP then the external flow would swing that year perhaps to a surplus with Japan...
This is a stock:
http://ticdata.treasury.gov/Publish/mfh.txt
If a part of those $6T USD balances currently held by foreigners were to be spent into the US domestic economy the year that would happpen would see creation of a flow that would reduce the typical negative US external balance perhaps to a zero point and if the US recipients didnt save those balances and instead they went into taxes or GSE mortgage payments..... it would at least substantially make the deficit smaller.... and GDP would go up significantly..
I'm pretty certain Trump understands this based on some statements he has let slip... and he wants to "get even"...
when Trump says, "they have ripped us off..." he is talking about this spread sheet results...
Trump wants to get this munnie back... USD zombie eradication...
He is using personal appeals to the big holders to "make a deal" and do it without use of force...
He has the Sauds on board buying 100s of $B military equipment so we'll get theirs back that way, sounds like he is looking at Abe getting into US infrastructure big league, and not too sure where he is with Xi maybe something will come out of his trip this week.... Ag, materials, energy, etc...
My assumption is if he can pull this off the deficit will collapse not to zero ofc some US will save but it will go down substantially...
So we may not want to be going all around saying "deficit too small!" and then it goes down and we get a domestic BOOM...
We will lose much technical credibility if that happens and deservedly so... at a time when we should be seeking to build as much technical credibility as we can...
"And raising interest rates will make it even worse"
Yes, but look who he picked for Fed, Powell is probably the most (to them) "dovish" ie seemed to be the least inclined to raise rates out of monetarist extremists Warsh or Taylor...
bottom line to Trump will be if he can get the two entry sides of the deficit (fiscal/external) to come down he will be happy with himself...
Would (to us) mean very little domestic USD savings... which is what we are currently doing I assume this would continue to a great extent...
The key is the foreign sector... Ramanan has been on this from the beginning... you cant let the nations establish foreign claims its not good... from this is where the big wars often start...
We should be focusing on education people that imports are real benefits at full employment while exports are real costs, and that the only problem with trade deficits is that they tend to increase unemployment. They tend to increase the fiscal deficit, too, but that is relevant absent inflation, and importing cheap goods controls domestic inflation.
The answer is not getting less real goods but rather taking steps to offset the loss of employment through embedded labor, which is really ersatz immigration as importation of workers.
This is what economists, pundits and politicians should be saying to educate the public at large, and especially voters.
No brainer and not to do it is an indication either of no brains at all, or ideology masking itself as truth based on common sense.
Yes my use of deficits was sloppy while referring to debt, but as we know the stock of debt came about as an accumulation of deficits over the past years.
My larger point, that removing deficits from the foreign sector is not going to really change any of those numbers in and of themselves, stands. Foreign interests holding bonds or US dollar balances does not prevent us from doing anything we want domestically.
When Trump says "they have ripped us off"....... he's lying at worst and fear mongering at best. They received every dollar fair and square. In fact it was mostly American business interests that were served in the negotiation of the trade deals that led to the current financial balances.
" you cant let the nations establish foreign claims its not good... from this is where the big wars often start.."
Blaming foreigners and their dollar balances for our problems with domestic unemployment/under employment is ignorant
Trump is no different form all the other idiots who want us to export our way to prosperity
Excellent article and excellent responses -- especially by Dan Kervick and Tom Hickey ("qualifications").
OK...
Tom: Trump may have won the presidency, but he was dealt a crappy hand.
I think that can be said of every president. You know, because the US has been in decline now for 60 years. Though you got to hand it to Trump the way he's picking up the pace ;)
John: Trump brings a lot of this stuff on himself because he's lazy and is infatuated with his self-proclaimed genius.
John, you're just as lazy as Trump -- you left out "lunatic." ;)
Donald J. Trump @realDonaldTrump Nov 11 Why would Kim Jong-un insult me by calling me "old," when I would NEVER call him "short and fat?" Oh well, I try so hard to be his friend - and maybe someday that will happen!
Tom: So Trump is necessarily a juggler, and if he weren't a street-savvy New York wheeler- dealer he would already be out.
Tom, the only honest dollar (if not the only dollar) the admitted sexual predator -- over 16 women; walking into dressing rooms to watch underage girls undress! -- ever made was as a reality TV clown host. Also, if he had pulled his business scams (Trump U, stiffing family businesses, etc.) here in Montreal, I can assure you that he would have been physically incapacitated decades ago. And definitely no tears.
I don't view Trump as exceptional wrt the US elite but representative. Some one link like him is what like the US, this what you inevitably get. The US started getting ruder, more divided and crazier publicly long before Trump came on the scene as a candidate.
I am neither defending Trump or making excuses for him. But I understand where he is coming from. He says and does publicly what before was kept in the closet. The closet door is now opening on a lot of people. And a lot of American idols are tuning out to have feet of clay.
The Chinese have recognized this for millennia and Confucianism is designed to preclude violating politeness and political correctness, but really it just covers the sewer with perfume and a veneer.
This criticism is one of the meanings of the Tao Te Ching from the standpoint of ethics and political philosophy. But according to the TTC, this is only possible when society is function at a high level of collective consciousness, living naturally accordance with Tao rather than trying to mimic what lesser people think about it.
"Some one link like him is what like the US, this what you inevitably get." should be "Someone like him is what you inevitably get when politeness and political correctness are erased from a culture."
Ok... how do you explain this and the "neo-liberal conspiracy!" at the same time????????
ReplyDeletehow do you explain this and the "neo-liberal conspiracy!" at the same time????????
ReplyDeleteEasy. The deficit and debt phobes apparently haven't been clued into the plan.
The plan is to reduct taxes on the argument that they pay for themselves, which everyone knows is BS. It will run up the deficit and increase the debt, and that will have the GOP an excuse to argue that welfare programs like SS, Medicare and Medicaid need to be cut back to "reduce the deficit" and "pay the debt." It's not like this is a new plan. It's the playbook.
"It will run up the deficit and increase the debt,"
ReplyDeleteWhat if at the same time Trump is successful wrt the external sector and accordingly the "deficit!" collapses?
Then what?
What if the deficit collapses?
ReplyDeleteHahahahaha
Are you allowed to contribute here for comic relief?
What if at the same time Trump is successful wrt the external sector and accordingly the "deficit!" collapses?
ReplyDeleteThen they will pretend that the deficit hasn't collapsed, , just as they pretended the deficit was increasing when it coming coming down quickly in the later Obama years.
This called "sticking with the playbook."
It's worked for them. Why switch?
Under BO they briefly considered minting some trillion-dollar coins to eliminate the debt. Of course that would make the big lie absolutely transparent, so it couldn't be allowed to happen.
ReplyDeleteThe current "deficit!" is foreign USD savings from their trade surpluses...
ReplyDeleteUS not currently saving very much domestically...
US "deficit!" in FY2016 693B.... US external deficit last year was about 700B so its foreigners that are saving USDs and causing the "deficit!"...
Boomers are dissaving and gen next is saving what the boomers are dissaving...
Its all the foreign USD zombies that are saving them...
Trump convinces them to stop that and we probably reduce the "deficit!" to near zero...
Then the "deficit too small!" people are going to look like idiots...
Matt: "Trump convinces them..."
ReplyDeleteStop right there! Trump can't convince anyone of anything, probably even himself given all his flipping and flopping around like a beached whale. Half the time he blames the Democrats for not voting for his policies! He controls all branches of government and not only can he barely get any legislation through, he demands Democrats ride to the rescue when his own party deserts him. Let's face it, Trump is a major league incompetent.
Matt: 'Then the "deficit too small!" people are going to look like idiots...'
What if it turns out that the deficit has been too small? Will the people who cry themselves silly any time they hear that the "deficit is too small" apologize and admit that the "deficit is too small" when it turns out that the "deficit is too small"? Nah, probably not. It's not as if working Americans aren't suffering, and their suffering can be alleviated by serious deficit spending.
Maybe, john, but I am not convinced of that yet. We probably won't know other than in hindsight.
ReplyDeleteTrump is an enigma. For good reason. He is faced with a soft coup d'etat domestically and formidable opposition to his foreign policy., as well as a divided party, which is reflected in GOP paralysis in Congress even though they nominally control the legislature and presidency.
I not only haven't seem anything like what is going on now but also I could not have imagined it in my wildest dreams. It's totally bizarre. So it is understandable (rational) that he is bizarre, too. He needs to be. I think Scott Adams has provided some insight into this from his background in persuasion, on one hand, and systems thinking, on the other hand.
So Trump is necessarily a juggler, and if he weren't a street-savvy New York wheeler- dealer he would already be out.
We'll see.
Whatever, it's definitely the reality show we expected, and then some.
I am actually not as concerned about Trump himself as I am about some of the other crazies, especially the neocons that seem to be gaining traction again. These are the real problem.
Example
ReplyDeleteMystery personnel that prevented Trump / Putin meeting "will be punished" - Putin
Formal meeting, that is, for lack of protocol arrangements.
Tom, on the whole I agree with you: Trump is surrounded by some amazingly nutty people (although he put most of them there rather than go for intelligent conservatives in the Bacevich and Mearsheimer mould), that his own party is undermining him etc.
ReplyDeleteNone of this, however, explains the incompetence. Even Dubya could get things through. The few things Trump's promised and what he's known for have either collapsed in disarray or backfired because of incompetence. He's been incapable of "repealing and replacing Obama", which like countless other things he promised to do "on day one". The stupid wall is now a fence, and Obummer built hundreds of miles of a real wall! His Muslim ban has been overturned because he couldn't, and still can't, be bothered to do what Obomber did and make it sound like a security issue rather than a rallying cry to bigots. His foreign policy is a mess. His cabinet and advisers are ticking bombs. And on it goes. No wonder his polling numbers are the worst in recorded history, although Trump will claim they're the best in recorded history.
All of the above has little to do with the wacko neocons, who are a danger to all life on planet earth, and can be effectively sidelined or the GOP establishment. Trump brings a lot of this stuff on himself because he's lazy and is infatuated with his self-proclaimed genius.
Again, John, this is intricately related to US politics, "It's complicated."
ReplyDeleteUS politics is so complicated right now since both parties are involved in factional disputes in which each of the two major factions is totally committed to controlling the party. Shared power is impossible, since the agenda are completely incompatible, making compromise impossible.
In neither case it is at all clear which faction will emerge the winner. The contest is the same in both parties, however. The establishment versus the populists. The establishment has the network, power and $, but the populists hold the votes.
No telling now where this is going.
In the meanwhile, the neocons and liberal interventionists are making hay.
It's a mess.
In fact, it is a dangerous mess. The country is so divided, with no prospect for anything changing in the foreseeable future, that the wheels are coming off.
It's also key that no one is control of the narrative. Essentially four silos have developed with the establishments of the GOP and Dems occupying two of them and the alt-right and progressives occupying the other two.
I've been monitoring them and the worldviews are diametrically opposed, although sometime they can agree on who to hate on most. Bizarre.
Trump may have won the presidency, but he was dealt a crappy hand.
I should add that we're only inches from violence breaking out of this, and some violence has broken out already — maybe more than is being reported.
ReplyDeleteNoah Way, I agree with you and Tom Hickey but when you wrote BO at first I wondered why you were talking about bad oder. That was the first time that I realized that Obama's initials fit his presidency.
ReplyDeleteWhat Tom says...
ReplyDeleteMatt, I dont get your "US Dollar zombies" comment regarding our deficits.
ReplyDeleteEven if Trump were to "convince" anyone to change their behavior, and in this case its getting whatever foreign sector actors are keeping their surplus of US dollars either in Treasuries or just cash (not literal dollars but low or no interest bearing accounts at banks) how would that have any affect on the deficit
Just for arguments sake, lets say all foreign holders of low interest US dollar debt decide, because of Trumps brilliant negotiating, to buy something else, like stock in a US company or corporate bond or even goods produced in the US, someone else, an American ostensibly, will now hold that cash/low interest debt. The deficit isn't changing its just changing hands. There is no policy that can make the deficit disappear outside of taxing it away.
And raising interest rates will make it even worse, because now you will have a more attractive risk free return that makes investing in stocks or corporate bonds look less attractive
Greg,
ReplyDeletestock/flow consistency...
ie the deficit is a flow (per unit time) and the debt is a stock (integral of deficit delta T)... what you are talking about is correct for the stock of debt but the flow of the deficit might zero...
Unless US domestic entities somehow would then save the same amount per year as the foreigners are saving currently in USDs... but I doubt that..
iow if the Abe people were to take a few $100B and come over here and put it in a big infrasturcture PPP then the external flow would swing that year perhaps to a surplus with Japan...
This is a stock:
http://ticdata.treasury.gov/Publish/mfh.txt
If a part of those $6T USD balances currently held by foreigners were to be spent into the US domestic economy the year that would happpen would see creation of a flow that would reduce the typical negative US external balance perhaps to a zero point and if the US recipients didnt save those balances and instead they went into taxes or GSE mortgage payments..... it would at least substantially make the deficit smaller.... and GDP would go up significantly..
I'm pretty certain Trump understands this based on some statements he has let slip... and he wants to "get even"...
when Trump says, "they have ripped us off..." he is talking about this spread sheet results...
Trump wants to get this munnie back... USD zombie eradication...
He is using personal appeals to the big holders to "make a deal" and do it without use of force...
He has the Sauds on board buying 100s of $B military equipment so we'll get theirs back that way, sounds like he is looking at Abe getting into US infrastructure big league, and not too sure where he is with Xi maybe something will come out of his trip this week.... Ag, materials, energy, etc...
My assumption is if he can pull this off the deficit will collapse not to zero ofc some US will save but it will go down substantially...
So we may not want to be going all around saying "deficit too small!" and then it goes down and we get a domestic BOOM...
We will lose much technical credibility if that happens and deservedly so... at a time when we should be seeking to build as much technical credibility as we can...
You cant to this via slogans...
"And raising interest rates will make it even worse"
ReplyDeleteYes, but look who he picked for Fed, Powell is probably the most (to them) "dovish" ie seemed to be the least inclined to raise rates out of monetarist extremists Warsh or Taylor...
bottom line to Trump will be if he can get the two entry sides of the deficit (fiscal/external) to come down he will be happy with himself...
Would (to us) mean very little domestic USD savings... which is what we are currently doing I assume this would continue to a great extent...
The key is the foreign sector... Ramanan has been on this from the beginning... you cant let the nations establish foreign claims its not good... from this is where the big wars often start...
We should be focusing on education people that imports are real benefits at full employment while exports are real costs, and that the only problem with trade deficits is that they tend to increase unemployment. They tend to increase the fiscal deficit, too, but that is relevant absent inflation, and importing cheap goods controls domestic inflation.
ReplyDeleteThe answer is not getting less real goods but rather taking steps to offset the loss of employment through embedded labor, which is really ersatz immigration as importation of workers.
This is what economists, pundits and politicians should be saying to educate the public at large, and especially voters.
No brainer and not to do it is an indication either of no brains at all, or ideology masking itself as truth based on common sense.
Yes my use of deficits was sloppy while referring to debt, but as we know the stock of debt came about as an accumulation of deficits over the past years.
ReplyDeleteMy larger point, that removing deficits from the foreign sector is not going to really change any of those numbers in and of themselves, stands. Foreign interests holding bonds or US dollar balances does not prevent us from doing anything we want domestically.
When Trump says "they have ripped us off"....... he's lying at worst and fear mongering at best. They received every dollar fair and square. In fact it was mostly American business interests that were served in the negotiation of the trade deals that led to the current financial balances.
" you cant let the nations establish foreign claims its not good... from this is where the big wars often start.."
Blaming foreigners and their dollar balances for our problems with domestic unemployment/under employment is ignorant
Trump is no different form all the other idiots who want us to export our way to prosperity
This comment has been removed by the author.
ReplyDeleteTom, do you recall this article by Joe Firestone in NEP three years ago?
ReplyDelete"Who Needs a Balanced Trade Policy?"
http://neweconomicperspectives.org/2014/01/needs-balanced-trade-policy.html
Excellent article and excellent responses -- especially by Dan Kervick and Tom Hickey ("qualifications").
OK...
Tom: Trump may have won the presidency, but he was dealt a crappy hand.
I think that can be said of every president. You know, because the US has been in decline now for 60 years. Though you got to hand it to Trump the way he's picking up the pace ;)
John: Trump brings a lot of this stuff on himself because he's lazy and is infatuated with his self-proclaimed genius.
John, you're just as lazy as Trump -- you left out "lunatic." ;)
Donald J. Trump @realDonaldTrump Nov 11
Why would Kim Jong-un insult me by calling me "old," when I would NEVER call him "short and fat?" Oh well, I try so hard to be his friend - and maybe someday that will happen!
Tom: So Trump is necessarily a juggler, and if he weren't a street-savvy New York wheeler- dealer he would already be out.
Tom, the only honest dollar (if not the only dollar) the admitted sexual predator -- over 16 women; walking into dressing rooms to watch underage girls undress! -- ever made was as a reality TV clown host. Also, if he had pulled his business scams (Trump U, stiffing family businesses, etc.) here in Montreal, I can assure you that he would have been physically incapacitated decades ago. And definitely no tears.
@ lastgreek
ReplyDeleteI don't view Trump as exceptional wrt the US elite but representative. Some one link like him is what like the US, this what you inevitably get. The US started getting ruder, more divided and crazier publicly long before Trump came on the scene as a candidate.
I am neither defending Trump or making excuses for him. But I understand where he is coming from. He says and does publicly what before was kept in the closet. The closet door is now opening on a lot of people. And a lot of American idols are tuning out to have feet of clay.
The Chinese have recognized this for millennia and Confucianism is designed to preclude violating politeness and political correctness, but really it just covers the sewer with perfume and a veneer.
This criticism is one of the meanings of the Tao Te Ching from the standpoint of ethics and political philosophy. But according to the TTC, this is only possible when society is function at a high level of collective consciousness, living naturally accordance with Tao rather than trying to mimic what lesser people think about it.
"Some one link like him is what like the US, this what you inevitably get." should be "Someone like him is what you inevitably get when politeness and political correctness are erased from a culture."
ReplyDelete