Budget Deficit

Trump Has Fully Embraced the Idea That Deficits Don't Matter

The president likes things big, so that apparently applies to government budgets too.

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There's a newly popular leftist economic concept known as Modern Monetary Theory, which argues that because the government prints its own money it doesn't have to worry about running up deficits or even raising taxes to pay for more government spending. According to this idea, the currency is a public monopoly, so the government has few restrictions on its funding. It can't go bankrupt because it owns the printing presses.

The burgeoning economic justifications for this trendy theory seem rather complex at first glance. But it's one of the simplest ideas in the world. Government can give everything away to everyone—and no one has to pay the price. It's a trendy form of magical thinking wrapped up in some economic mumbo-jumbo.

"Why in the world would grown people actually believe that?" asks William Anderson, an economics professor at Frostburg State University in Maryland. "It's because they believe in government the same way you and I believe in God." It's the ideal theory for those who want far-reaching programs but are frustrated by resistance to higher taxes and concerns about deficits and debt. People believe it because it lets them justify their big-spending agenda.

It was no surprise, then, when U.S. Rep. Alexandria Ocasio-Cortez, the high-profile New York Democrat who is a member of the left-wing "squad," last year embraced the notion. When questioned about how she plans on paying for her laundry-list of new programs, she and other progressives touted a much higher federal tax burden. Conservatives pounced on that proposal, but then Ocasio-Cortez and others argued that MMT "absolutely" needs to be "larger part of our conversation."

Apparently, left-wingers aren't the only ones these days who want to have a chat about "free money" economic theories. At a fund-raiser at his Mar-a-Lago resort last week, President Donald Trump touted his enormous new Pentagon budget (which he inaccurately pinned at $2.5 trillion) and reportedly dismissed concerns about growing deficits and federal debt: "Who the hell cares about the budget? We're going to have a country."

I suppose the president's newfound embrace of progressive economics is understandable. When he was running for president, Trump said he would eliminate the nation's $19-trillion debt in eight years. More than three years into his administration, the U.S. national debt has topped $23 trillion and is racing higher, despite the ongoing economic boom. Annual deficits are up 11.8 percent since last year and have now topped an astonishing $1 trillion.

It's easier to say that they just don't matter, even if the president hasn't come up with a cockamamie economic theory to justify his (and Congress') profligacy. The president likes things big, so that apparently applies to government budgets, too. There is something refreshing—albeit in a disturbing and cynical way—about Republicans who now reject the concept of fiscal responsibility.

The party has claimed to care about government spending over my entire lifetime, and yet has never done anything other than boost the federal budget. Democrats shrug at debt spending because they want to spend more on Medicare-for-all, free college, universal basic income and a list of social programs that rises faster than a barrel of red ink. Republicans shrug because their nationalist agenda of military spending and space forces requires the constant churning of the government printing presses. It's no problem if one believes that such spending actually energizes the economy or, at the very least, doesn't do anything to impede the nation's fiscal health.

Deficits do indeed matter. Traditionally, fiscal conservatives have argued (correctly, I believe) that debt spending crowds out private investment, drives up inflation, reduces personal income, pushes the nation's trust funds toward insolvency, weakens the nation's ability to deal with future crises, and is an act of irresponsibility.

In our current federal situation, debt spending certainly creates all those above-mentioned problems. However, if Modern Monetary Theory takes hold, the government will have even fewer restraints on its spending. Under this theory, "government-issued bonds aren't strictly necessary," Vox explains. The government wouldn't need to issue Treasury bonds, but could "just create the money directly without issuing bonds."

The government's debt spending now is similar to me running up debt for vacations and cars. I'll be OK as long as I make the minimum payments to my creditors. MMT is like giving me a money printing press in my garage. If everyone had one, money would lose its value and we'd get hyperinflation. MMT theorists say spending is no problem as long as inflation is low, but it seems unlikely the government could control inflation after it starts churning out dollars.

We probably won't become Zimbabwe, but a key problem with debt spending revolves around the main reason politicians such as Ocasio-Cortez and Trump want more of it. It leads to never-ending growth in government, which means more bureaucrats micro-managing our lives, less private activity, and a whole lot less freedom.

This column was first published in the Orange County Register.

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  1. Popcorn time when the Trumpistas start commenting. This is gonna be fun!

    1. Are you still eating popcorn? That’s a lot of popcorn. But at least you got to say Trumpistas, so your comment will probably be on SNL tomorrow!

      1. Trummpistas don’t have to comment go to:
        https://www.thebalance.com/us-debt-by-president-by-dollar-and-percent-3306296
        Obama wins hands down as the greatest Debt Creator in American history. Increase the total debt from 1776 to 2017 by more than 74%
        Trump will need at least 8 years to match or exceed that.

    2. And abc in quickly to remind people of his own ignorance.

      1. Tariffs are taxes.

        1. (yawn) He’s STILL the worst President EVER on debt.
          In only three years, he’s already added more new 8-year debt than Obama did AFTER 8 years. And Trump just proposed another (unpaid for) tax cut, to explode his deficits even more.

          Remember, Obama started with one of the worst economies since WWII. Trump started from the longest recovery EVER for an incoming President — handed to jim by Obama.

          The economy? Growing SLOWER than Obama! 2019, just announced was even slower than 2018.

    3. Pretty good overnight action. Trump’s not a real Republican, so he’s not the Republican leader, so the deficit-laden budgets aren’t Trump’s fault; his veto would have been overridden; the Dems control the House where spending begins.

      Funny shit!

      1. Trump is definitely the Republican leader. They are all scared shitless of him.

      2. Trump proposed both the unfunded tax cut AND significantly higher spending. And just proposed another unfunded tax cut! FUCK DEFICITS; I need to buy me some votes.

        And speaking of Dems, Trump is worse that Obama on both GDP growth and new 8-year debt — even though Obama gifted him the longest recovery ever for an incoming President. Is a greater economic failure even possible?

  2. Poor unreason and their support of veto-proof Congressional budget votes during the Trump Administration.

    Clear example of unreason staff being a joke when they ignore this key point.

    Trump should have ceremoniously vetoed the budgets even with the veto being overridden but he does get busy with joke House Impeachments, Propagandists like unreason lying daily, and Iranians putting bounties on his head.

    1. It’s not Trump’s fault that he doesn’t veto spending bills. Nor that he acts like a party leader and gets Senate Republicans on board. He really, really wants to cut spending because he said so that one time on the campaign trail.

      The bragging about the size of his military budget isn’t really bragging. He’s really ashamed at all of this deficit spending. LC tells us so!

      1. So you don’t know what vero proof majorities are? Blaming him solely for the budget is the height of ignorance.

        Yeah he should do more to try to change the tone in washington. However, he hasnt been sent budgets he has a chance of adjusting. They all have been veto proof.

        1. I didn’t blame him solely. The Democrats are as bad or worse.

          Trump is the de facto leader of the Republican party. He has ran plenty of members out of the party because they don’t toe the line. Do you really believe that if he blustered about deficits as much as the wall or some other pet project he wouldn’t be able to get the Senate Republicans on board to at least allow his veto?

          What about the bragging about all of the military spending?

          At a fund-raiser at his Mar-a-Lago resort last week, President Donald Trump touted his enormous new Pentagon budget (which he inaccurately pinned at $2.5 trillion) and reportedly dismissed concerns about growing deficits and federal debt: “Who the hell cares about the budget? We’re going to have a country.”

          That doesn’t sound like someone who is actually serious about deficits.

          1. If he vetoed the budget, and Congress couldn’t agree on another, and the government shutdown, who gets the blame? Hell even Reason was blaming Trump the last time he threatened a government shutdown go get budget concessions. We all worry about deficits but it seems few of us are willing to actually want the type of fight necessary to get the deficit actually lowered. As long as people go all chicken little over a government shutdown, the President has little recourse but to sign budgets, especially when they are passed by a veto proof majority. I just wish the media would report a little better and talk about how the largest portion of the deficit is not defense spending (not even close) but entitlements.

            1. For decades, every time a shutdown has happened, the media have blamed the Republicans, whether they were in Congress or the White House, and apparently the people believe those goddamn media, because they swung the polls. The only way we can win this is to take over the media or at least break down their credibility. Fortunately the latter is already happening, but it hasn’t gotten far enough yet — I think.

              1. For decades, every time a shutdown has happened, the media have blamed the Republicans

                Please spare us any dark media conspiracies. Name one they did not cause. We’ll wait.

                “WE?” Are you no longer a libertarian?

            2. If he vetoed the budget, and Congress couldn’t agree on another, and the government shutdown, who gets the blame?

              LAME and PATHETIC.

              It was Trump who proposed the huge spending increase and failed tax cuts … which is WHY he’s ALREADY to worst President EVER on the debt and deficits. Being worse than Obama is a massive failure, since Obama inherited one of the worst recessions in the past 75 years … and handed Trump the longest recovery ever, for an incoming President.

              Also worse than Obama on GDP growth. (Obama’s final 3 years and Trump’s first three.) A loser EVERYWHERE!

              Trump was ELECTED to pay off the entire debt in 8 years. And even the source posted here by LC1789 says Trump is ALREADY worse than Obama on debt … and just proposed another unpaid tax cut, to explode the debt even worse.

              It was Trump who bribed House Democrats on the 2019 budget agreement … which was rejected by his own party, because of its deficit impact.

              I just wish the media would report a little better and talk about how the largest portion of the deficit is not defense spending (not even close) but entitlements.

              I just wish you could grasp anything about deficits. And … what about unpaid for tax cuts???

              Nearly 3/4 of Trump’s record-setting debt binge came from the tax cuts and spending increases HE proposed. PLUS the unpaid tax cut he just proposed./

          2. Leo I hate to make you look bad…again.

            Trump does not control nor is he the “de facto leader of the Republican Party”.

            The Prime example is that the GOP has the majority in the US Senate. If Trump wanted it to be dismissed immediately, he didn’t get his way. If Trump wanted to have witnesses like Hunter and Joe Biden, he didnt get his way.

            The reality is that most Republican US Senators will toe the GOP line as long as it doesn’t cause them too much grief with their supporters and donors.

            1. *Impeachment of course…

            2. I hate to make you look bad … again.
              Learn what de facto means

          3. Trump is the de facto leader of the Republican party.

            No, he is not. He’s the President of the United States. This is not a European Parliament.

            Trump was elected over the protests of many of the leaders of the GOP.

            He is STILL an ‘outsider’.

            1. Trump is the de facto leader of the Republican party.

              No, he is not. He’s the President of the United States. This is not a European Parliament.

              Learn what de facto means.
              And learn what a Prime Minister is, so you can cut the crap about a Parliament.

          4. Trump is the de facto leader of the Republican party. He has ran plenty of members out of the party because they don’t toe the line. Do you really believe that if he blustered about deficits as much as the wall or some other pet project he wouldn’t be able to get the Senate Republicans on board to at least allow his veto?

            Not if he tried to do them at the same time, including the military spending. He’d have to give up some priorities of his which aren’t ones we share, and probably many that we do share.

        2. JesseAZ
          However, he hasnt been sent budgets he has a chance of adjusting. They all have been veto proof.

          1) OBVIOUSLY, a veto-proof bill CANNOT be sent to the President. It cannot be veto-proof until AFTER Congress votes on it.

          2) Your wrong totally on both veto-proof and Trump’s active creation of the worst debt in US history. House Republicans voted AGAINST the 2019 budget deal, BECAUSE the deal Trump made with Democrats had such a horrific impact on deficits.

          You people seem to invent any denial to defend Trump’s shitty record on the debt and deficits — already worse than Obama — already the worst in US history. And stop denying that Trump himself proposed the large sending increase and failed tax cuts.

          That you are so totally ignorant of the entire process. Laughably wrong on all being veto proof, which seems to be the current shameful lie.

      2. His first year in office he proposed budget cuts. The response from Congress was bipartisan budget increases, instead, passed with a large enough majority that he couldn’t veto them.

        Sure, he should have refused to sign them anyway. I’m a big fan of principled futile gestures. As somebody once said, “I’d rather have my horse shot out from under me, than shoot him myself.”

        But either way the horse is dead.

      3. Cutting spending is not the highest priority right now. Replacing RBG, other judges, regulation, and various bureaucrats is.

        1. Poor unreason and their support of veto-proof Congressional budget votes during the Trump Administration.

          LIAR
          Trump PROPOSED the biggest deficit makers … an unpaid tax cut AND significantly higher spending

          *** ONE MORE TIME, LIAR … HIS OWN PARTY REFUSED HIS 2019 SPENDING DEAL WITH DEMOCRATS!

          AND YOU DEFEND UNFUNDED TAX CUTS … BECAUSE YOU’RE ENTITLED! … TO JAM TAXES AND DEBT DOWN THE THROATS OF YOUR OWN KIDS AND GRANDKIDS … WITH THEM HAVING NO VOTE ON YOUR TEAT SUCKING MOOCH.??

          Clear example of unreason staff being a joke when they ignore this key point.

          I already PROVED you full of shit on that
          https://reason.com/2020/01/29/presidential-candidates-promise-freebies-for-everyone/#comment-8106951
          AND your bat-shit crazy comparison of debt by Presidents
          1) You compared Trump’s 3-year deficits with their 8 years,

          2) You’re own source says you’re FULL OF SHIT … that Trump has ALREADY added more new debt than Obama!!! ….

          3) And *HE* (that would be TRUMP, not Congress) is proposing ANOTHER unpaid tax cut..

          ****THIS TIME I’LL YELL

          YOU’RE FULL OF SHIT AGAIN. THE PRESIENT’S OWN PARTY REJECED THE 2019 BUDGET, BECAUSE OF THE *HUGE* DEBT FROM BRIBING DEMOCRATS.
          a) by repealing Obama’s spending caps, and

          b) suspending the debt ceiling.

          c) You can’t even do the junior high calculation of a 2/3 majority … 284/433 is NOT 2/3. Ask any 12-year-old!!

          ***IT WAS CONGRESIONAL REPUBLICANS DEFENDING THE DEBT FROM TRUMP … WHO WAS ELECTED TO PAY OFF THE ENTIRE DEBT IN 8 YEARS
          INSANE, but voters fell for it …so now he’s FUCKING them. And all of us. And our children. And our children’s children.

          GOP leaders — despite a boost from President Donald Trump — scrambled to round up Republican backing in the hours before the House passed the two-year, $2.7 trillion agreement on a 284-149 vote … Only 65 out of 197 House Republicans ended up voting for the measure, rejecting the pleas from Trump and their own leadership. Democrats noticed.

          DEMOCRATS noticed, but this Trumptard (LC1789) did not?????? … AND NOW LIES ABOUT IT!!! (He saw and replied to the original putdown)

          *** NOW DID YOU HEAR ME???

    2. Calling out LC1789 …. AGAIN

      Poor unreason and their support of veto-proof Congressional budget votes during the Trump Administration.

      LIAR
      Trump PROPOSED the biggest deficit makers … an unpaid tax cut AND significantly higher spending

      *** ONE MORE TIME, LIAR … HIS OWN PARTY REFUSED HIS 2019 SPENDING DEAL WITH DEMOCRATS!

      AND YOU DEFEND UNFUNDED TAX CUTS … BECAUSE YOU’RE ENTITLED! … TO JAM TAXES AND DEBT DOWN THE THROATS OF YOUR OWN KIDS AND GRANDKIDS … WITH THEM HAVING NO VOTE ON YOUR TEAT SUCKING MOOCH.??

      Clear example of unreason staff being a joke when they ignore this key point.

      I already PROVED you full of shit on that
      https://reason.com/2020/01/29/presidential-candidates-promise-freebies-for-everyone/#comment-8106951
      AND your bat-shit crazy comparison of debt by Presidents
      1) You compared Trump’s 3-year deficits with their 8 years,

      2) You’re own source says you’re FULL OF SHIT … that Trump has ALREADY added more new debt than Obama!!! ….

      3) And *HE* (that would be TRUMP, not Congress) is proposing ANOTHER unpaid tax cut..

      ****THIS TIME I’LL YELL

      YOU’RE FULL OF SHIT AGAIN. THE PRESIENT’S OWN PARTY REJECED THE 2019 BUDGET, BECAUSE OF THE *HUGE* DEBT FROM BRIBING DEMOCRATS.
      a) by repealing Obama’s spending caps, and

      b) suspending the debt ceiling.

      c) You can’t even do the junior high calculation of a 2/3 majority … 284/433 is NOT 2/3. Ask any 12-year-old!!

      ***IT WAS CONGRESIONAL REPUBLICANS DEFENDING THE DEBT FROM TRUMP … WHO WAS ELECTED TO PAY OFF THE ENTIRE DEBT IN 8 YEARS
      INSANE, but voters fell for it …so now he’s FUCKING them. And all of us. And our children. And our children’s children.

      GOP leaders — despite a boost from President Donald Trump — scrambled to round up Republican backing in the hours before the House passed the two-year, $2.7 trillion agreement on a 284-149 vote … Only 65 out of 197 House Republicans ended up voting for the measure, rejecting the pleas from Trump and their own leadership. Democrats noticed.

      DEMOCRATS noticed, but this Trumptard (LC1789) did not?????? … AND NOW LIES ABOUT IT!!! (He saw and replied to the original putdown)

      *** NOW DID YOU HEAR ME???

    1. And who could argue with that? Efevevgvgrwvwevt indeed.

      1. Yeah, well, efevevgvgrwvwevt to you, too, Buddy! At least it is more interesting than Tulpa-poop, and more reliably true than Jesse-poop!

        1. You’re still hungry for a big bowl of it.

  3. Aren’t the Dems in control of the House where all spending comes from?

    1. Don’t go getting all technical.
      The House got a law passed making the President submit a “budget” with no authority whatsoever, just so they can claim all the changes they make are his fault.
      I still hope one day the President will submit a budget with no funding for the legislature, and no funding for the departments that are not authorized by the constitution.
      But then I think Trump should submit his ‘state of the union’ on a postcard saying “it’s all good” just so the dems can’t televise their “response”.

      1. The House got a law passed making the President submit a “budget” with no authority whatsoever, just so they can claim all the changes they make are his fault.

        PATHETIC BULLSHIT

        1) NO Presidential budget passes, as is. On what planet do you live?

        2) REPUBLICANS rejected Trump’s budget deal with Democrats, because of MORE massive deficit increase

        Proof: https://reason.com/2020/01/31/trump-has-fully-embraced-the-idea-that-deficits-dont-matter/#comment-8111741

    2. Nah, the House is where all revenue bills have to originate from. Either chamber can originate spending bills.

    3. Greenhut likes to use the word ‘leftist’ but deceives like a leftist.

      He could have managed that in Trump’s first two years when he had the House spending, though slightly increasing from before he took office, remained somewhat steady and in the norm. Then the Democrats took over in 2018 and it crossed the $1 trillion threshold.

      https://www.thebalance.com/us-deficit-by-year-3306306

      How convenient to leave that out.

      1. Ugh. Let’s rework this:

        He could have managed to work in that in Trump’s first two years – when he had the House spending, though slightly increasing from before he took office, – remained somewhat steady and in the norm. Then the Democrats took over in 2018 and it crossed the $1 trillion threshold.

        1. Bat-shit crazy, Rufus!

          Trump BRIBED the Democrats … EVEN higher deficits … HOUSE REPUBLICANS REJECTED TRUMP’S DEAL WITH SATAN … SO IT DID NOT PASS WITH A VETO-PROOF MAJORITY (despite LC1789’s nonstop bullshit)

          YOU LOSE ON ALL FRONTS. AND LIE ABOUT THE FIRST TWO YEARS. BY IGNORING THE UNPAID TAX CUTS.

          Educate yourself here:
          https://reason.com/2020/01/31/trump-has-fully-embraced-the-idea-that-deficits-dont-matter/#comment-8111741

      2. Are you a LIAR or are you HOPLESSLY BRAINWASHED.?

        Trump BRIBED the Democrats … EVEN higher deficits … HOUSE REPUBLICANS REJECTED TRUMP’S DEAL WITH SATAN … SO IT DID NOT PASS WITH A VETO-PROOF MAJORITY (despite LC1789’s nonstop bullshit)

        Educate yourself here:
        https://reason.com/2020/01/31/trump-has-fully-embraced-the-idea-that-deficits-dont-matter/#comment-8111741

    4. Hello? Hello?

      Aren’t the Dems in control of the House where all spending comes from?

      Yes, but …. YOU LOSE

      That’s why Trump bribed them so much — MORE debt — that the 2019 spending deal was …. REJECTED BY HIS OWN PARTY!

      https://reason.com/2020/01/31/trump-has-fully-embraced-the-idea-that-deficits-dont-matter/#comment-8111741

      Anything else?

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    1. Sorry prostitution is illegal in my state, even in your own home.

  5. Er is een nieuw populair linkse economische concept bekend als moderne monetaire theorie, die beweert dat omdat de overheid haar eigen geld print, ze zich geen zorgen hoeft te maken over het oplopen van tekorten of zelfs het verhogen van belastingen om te betalen voor meer overheidsuitgaven. Volgens dit idee is de valuta een.

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  6. I’ve been here a while. As a Reaon commenter emeritus I’ve been noticing a distinct rise in Spam in the comment section.

    I would pose the hypothesis that the people manning the Reason comment page have grown so tired of a.) scammer assholes and b.) GOP Trumpian buttsuckers that they’re letting the place go to shit. Who the fuck wants to clean up all the fucking cum and ooze coming out of whatever shithole that produces the type of people that concoct these scams and/or regurgitates Dear Leader’s bullshit. Ewww.

    1. It’s your fault:
      Editor’s Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

      1. Did that go up during the Woodchipper incident?

        Preet and Katherine Forest can still go fuck themselves.

        1. No, that’s been around for years. It’s just standard boilerplate so Reason can limit its legal liability.

          That’s probably how they were able to tell Preet to go fuck himself.

      2. Abuses? Did they drop the slogan “news, views, and abuse”?

    2. No, dumbass, the comment sections have always been spam targets. It’s a big reason that the comment sections get closed after a certain amount of time, whereas in the old days you could comment on an article years after it was posted.

      The problem is that your brain’s been so calcified by tard cum and meth chasing that you’ve lost whatever recall faculties you might have once possessed.

      1. Calcified tard cum.

        I’m so using that.

  7. Yeah no duh Trump doesn’t care about deficits. He’s a middle of the road Democrat. Which is part of what makes the hysterics about him so obviously stupid.

    1. “He’s a middle of the road Democrat.”

      LOL

      Democrats don’t put kids in cages. Democrats don’t run concentration camps.

      #IMissObama

      1. You forgot the drinking from toilets thing. Very important for people to know about the drinking fountain attached to the toilet.

      2. Obama did it different!

        He politely put them in cages.

      3. Democrats don’t put kids in cages. Democrats don’t run concentration camps.

        Not yet, but they’re pushing hard for socialism.

  8. The last popular movement that cared about deficit spending was the Tea Party and they were reviled by the GOP establishment and everyone to the left of them. Every part of the federal budget has an interest group that will fight tooth and nail for it Being a deficit hawk is exhausting with a constituency that is not as committed over fighting a particular line item as its interest group. This is more a problem with the electorate.

    1. The Tea Party people turned into MAGA-hat people. They are largely the very same people.

      1. And the OWS people turned into BernieBros. So what?

    2. The Tea Party was a very short lived phenomena that quickly got taken over by the ODS people. It did not take too long for concern for the deficit to get taken over by we hate Obama.

      1. Which is why many became MAGA folks. They helped sweep in a Congress that stated they agreed with them. The original TEA party, only have their concerns forgotten. So they chose an outsider who was willing to fight for them. Many didn’t agree with everything he stated but he at least seemed willing to listen to them.

  9. “Democrats shrug at debt spending because they want to spend more on Medicare-for-all, free college, universal basic income and a list of social programs that rises faster than a barrel of red ink. Republicans shrug because their nationalist agenda of military spending and space forces requires the constant churning of the government printing presses. ”

    The cost of these arent even close to equitable. It was amazing how a whole article was written on the debt and current entitlements and baseline budgeting was not mentioned.

    Nobody is serious about the budget deficit when the two big causes are ignored.

    1. The spending on Medicare and Medicaid Services alone in FY19 was more than double what the DoD spent. Yeah, we spend a shit-ton on our military, but that’s mainly because our allies and, let’s be blunt, a good portion of the rest of the world, are sponging off of our capabilities.

  10. Federal spending is one thing I do knock POTUS Trump. He spends like a squad of drunken marines, not just a sailor. This is one area he has yet to keep his word.

    We should not delude ourselves. If we continue on this path, the financial markets will eventually deliver a brutal dose of reality. With lowering bond yields, it is less attractive to buy government debt. When investors and countries move away from federal government bonds, and they will…then what.

    POTUS Trump in my mind continues to make an unforced error about US future bond yields. He keeps saying to lower the rate to negative yield and refinance the national debt. Nice idea in theory, but consider human behavior. I will invest in something that will guarantee me to lose money – true or false. Just think about that and let that sink in. The answer for most is false.

    NB: Yes, I know Congress ultimately disposes, the Executive only proposes. I understand that argument.

    1. It seems better than the alternative, inflation. Where do you run for a no-risk return? I just read that wealthy Swiss residents are sick of negative rates and pulling millions from banks (that charge .70, or something like that, to keep their cash). How are you going to re-bank all of that cash? The Trump administration has a halt on money laundering in NYC real estate/cash/shell corporations. If you pull up Zillow you’ll see 60million penthouses all over. Now, HALF, are sitting empty with hyper-inflation on real estate for everyone else. Perhaps a reason for the hyper-TDS from NYers like Bloomberg. Add the TDS SALT deduction for NY, NJ, IL and California.

      Name the trustworthy developed world banks that don’t have negative rates? Its psychological. Trump could be correct here. Inflation and a debt time bomb is worse than negative rates. Yeah, its another *fee* for the wealthy. If you don’t have millions in cash, you can buy a vault for ordinary expenses.

  11. It’s the spending that matters, not the deficits. More government spending means less investment.

    If they raise taxes but don’t cut spending, that won’t help anything. However, if they use the threat of higher taxes as leverage to cut spending, that could be helpful. A “pay as you go” policy would almost certainly result in less spending. The current uncoupling of spending from taxes makes it so easy to spend more.

    1. Stopping the baseline budgeting growth rates for even 5 years would knock out the deficit. They assume nearly 5% growth in baseline spending, twice the GDP. This is before new spending desires are asked for. Revenues have increased every year, just spending increases faster.

    2. Perhaps but it’s time to curb one and reduce the other.

      Canada is in the same boat and it’s getting uglier with that buffoon remedial ideologue in power.

  12. But I dont understand. He said he alone could fix it, and it would be done greatly, and quickly. How on earth could it be going in the opposite direction?

    Oh is that his signature on those spending bills? How could this be? Spending levels, economic growth, and dow continuing on the same trajectory as under the evil black man?! I just cant believe this.

    Same spending uniparty, different flavor.

    1. Do you have an actual quote?

      1. “It can be done. … It will take place and it will go relatively quickly. … If you have the right people, like, in the agencies and the various people that do the balancing … you can cut the numbers by two pennies and three pennies and balance a budget quickly and have a stronger and better country.”

        Sources:

        Interview with Sean Hannity Feb. 22 and April 4, 2016

        1. Now compare to Democrat statements

          1. Is that the bar? As long as he says he wants to cut debt we should give him a pass when he signs bills that increase deficits, because at least he’s not a Democrat who tells us they’re going to spend money before they do it.

            I certainly don’t agree with the Democrats on this issue. But as far as the two parties go, I don’t really see any difference when it comes to deficit spending other than to which group they prefer to give their handouts to.

            1. Then you haven’t been listening.
              Reality is what it is.
              Wishing it weren’t so and bitching doesn’t accomplish anything.
              Not sure what you’re trying to accomplish. Not sure you even know.
              Might wanna figure that out

        2. I am astounded that you would post something that so deftly illustrates the perfidy of your fellow leftists.

          IF you have the right people, like, in the agencies …

          But the Interagency is filled to the brim with the wrong people. It’s filled with people like you.

          1. You think I’m a leftist?

            HAHAHA

            1. Any non trump apologist is a leftist now. These guys are so stupid. They should really read up on what happened to the brown shirts.

              Sure, it’s all occult rituals and gay sex now, but just you wait, Jesse et all. The night of the long knives spares very few.

  13. Trump is such a piece of shit and his supporters are so fucking blind. For example look at the way Trump abuses the perks of his office and wasting so much money. It’s really insane but people are numb to it because they’re so removed from reality. If you actually cared about govt wasting money you would go ballistic over the way Trump spends millions of public dollars just to play fucking golf. I think it’s somewhere like 100 million now. Imgone the obscenity of that. You run for a public office and you’re so fucking selfish that instead working those four years like a decent human being you treat the job like a whore. You fuck it every which way all while pretending that you’re a good patriotic person. If there was any justice in this world Trump would have a heart attack and shit himself and die in the most embarrassing and debased way and somehow Lindsey Graham would be there when it happened and Lindsey would get Donald’s shit all over his face and then Graham would run out into traffic and get hit by a bus.

    1. Were you pissed off at obama and his nightly parties? Separate planes for vacations (including solo trips for the dog), and his spending? Weird how you’re upset about pennies when talking about dollars.

    2. It’s the golf. That’s what’s causing all these problems. Golf.

      1. Yes. Did you ever see the last president play golf? I mean, yeah, practically every day, but not every minute of the day.

    3. Spoken like a true ignoramus leftist.

      It’s like Obama never existed to these illiberal selective people.

      1. Trump plays almost 3 times more gold than Obama, and he has the government spend all that money at his own businesses. Absolute definition of corruption.

        https://presidentialgolftracker.com/trump-vs-obama-golf-games/

    4. Thanks for the campus coffeehouse version.

  14. We probably won’t become Zimbabwe

    Citation needed.

    1. Vote Grandpa Gulag Sanders or the Fake Indian who lies in and let Queen Illiberal AOC have a go at the purse strings and you will.

    2. Cite or no cite, I’m not fond of that “probably.”

      It reminds me of my daughter’s pitch for her Minecraft roller coaster: “It hardly ever careens off the rails.”

    3. Zimbabwe doesn’t have nukes. Or most of the globally projectable conventional combat power on the planet.

      Plus, every other industrial leader’s currency and budgeting is even more fucked up than ours. Go look at Japan’s debt/GDP ratio some time. Or Brazil’s. Though let’s see if Bolsonaro can do anything.

  15. There’s a newly popular leftist economic concept known as Modern Monetary Theory, which argues that because the government prints its own money it doesn’t have to worry about running up deficits or even raising taxes to pay for more government spending.

    That’s not how MMT works. Its proponents argue that massively high marginal tax rates are needed in concert with the money printing in order to keep inflation from spiraling out of control.

    The irony is that the last 40 years would seem to negate that argument, because we’ve had relatively low tax rates and several years with high deficits, and the inflation rate has remained quite low, certainly lower than it was in the mid-late 70s. Because of that length of time, I suspect as long as the US remains a hegemonic power, deficits really won’t matter, because our economy is the engine that runs the world. If the left ever gets what it wants and the US is no longer the world’s banker and policeman, that’s when shit will hit the fan.

    1. +100000000

      In the 1920’s and early 1930s nobody wanted Deutchmarks. Add in massive reparations obligations in gold and you get hyper inflation like this:
      HYPERINFLATION: Can It Happen Here?

      In the middle of 1914, just before the war, a one pound loaf of bread cost 13 cents. Two years later it was 19 cents. Two years more and it sold for 22 cents. By 1919 it was 26 cents. [Double in value, or a “mere” 12% compound inflation –JM.] Now the fun begins.

      In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35. By the middle of 1922 it was $3.50. At the start of 1923 it rocketed to $700 a loaf. Five months later a loaf went for $1200. By September it was $2 million. A month later it was $670 million (wide spread rioting broke out). The next month it hit $3 billion. By mid month it was $100 billion. Then it all collapsed [as if a roughly 8 billion times rise in cost wasn’t already collapse!

      1. “See?! Even average bakers became trillionaires overnight!”

        — AOC

      2. Hyperinflations – like what happened in the Weimar Republic, never were just about high government debt. There were always other severe, exogenous events. For Germany, it was a classic two-fer. They lost a war and then the allied nations demanded punitive war reparations that resulted in foreign denominated debt.

        It certainly could happen here. Will we lose a war? Hope not, but it could happen. Will we cede monetary sovereignty via a pegged currency or foreign denominated debt? I’d say no – no way. How about a civil war? The current political environment is difficult – the nation is divided, but I don’t see a civil war happening any time soon. How about rampant corruption? Well – I think today’s government corruption isn’t much different than it has been for a 100 years or so – but perhaps I’m wrong. Regime change? This doesn’t just mean Republicans and Democrats taking turns winning the White House or Congress. For me, I would be frightened about “regime change” if Bernie Sanders wins the presidency – and I feel almost the same about Warren. If mistrust in government goes up substantially – I mean very substantially, then that too would raise the odds of hyperinflation. That would likely include a breakdown in the tax system. Lastly, if we experience a collapse in production, then that could trigger hyperinflation. Put me in the growth fairy camp as far as that goes. Productivity growth may not be as robust as it used to be, but we still have a pretty dynamic economy.

    2. “The irony is that the last 40 years would seem to negate that argument, because we’ve had relatively low tax rates…”

      Prior to that we had nominally higher tax rates. But, when you compare actual tax receipts as a percentage of GDP, the differences are not near as stark.

      1. Sure, that’s something to take into account, because no matter where the rates are set, we’ve never gone above 21% in receipts as a percentage of GDP, and the only time we did was when employment/population ratio was at an all-time high with most of the Boomers, all the Gen-Xers, and the first wave of Millennials in the work force at the same time.

        At the same time, the Reagan tax cuts slashed the top rate by 20% in 1981, then lowered it another 11.5% in 1987. There have been some marginal increases during the Clinton and Obama years, but 40% seems to be the Rubicon that no President will cross.

        1. If we taxed the way European countries do, we could get to the 30%-40% of GDP that they achieve, but that will never happen. What most leftists here don’t understand is that in Europe, the middle and lower income groups are taxed much more heavily than they are here; Europe has lower thresholds for high rate brackets and consumption taxes (VAT). They can get away with this because Europeans have been conditioned over millennia to paying substantial taxes. In the U.S., we primarily rely on very high earners for tax revenues. I know that leftists believe that the rich don’t pay any taxes, but the fact is, they pay most of the taxes. We could never have a tax regime like Europe because proposing the middle class tax increases to get us there would be political suicide.

  16. This is what happens when people don’t understand that money is not wealth and wealth is not money.

  17. Can someone point to some evidence that “deficits do indeed matter” beyond an academic argument? Is “crowding out” really an issue, in that companies are not investing because of high interest rates? I used to think the deficit was important, but now wonder if there might be something to MMT. Absent inflation, why should I care?

    1. The problem with MMT is that it’s being pimped by people who would ultimately undermine it by trying to limit US global hegemony. In the earlier years of the nation’s history, deficits were an issue because our economy was dependent on a lot of internal activity to keep it going.

      It’s notable that the one period in the last 70 years that inflation was a problem for us just happened to coincide with a period when the country’s influence in the world was in a trough.

      1. That, and, as my link below concludes: Everyone in the entire economy dies!

    2. Absent inflation, why should I care?

      Because as Red Rocks points out above, it’s not “there will be no inflation.” It’s “when we signs of inflation we will raise taxes.”

    3. If you believe “Math is Racist”, MMT is for you. The following is linked from a left leaning young economist:
      http://noahpinionblog.blogspot.com/2019/03/examining-mmt-model-in-detail.html

  18. When someone brings up MMT I just ask them if that is true, why are we all still paying taxes including the rich? Why can’t we just build more printing presses, ink and paper and run them 24/7 to pay down our debt AND build shiny new things? Sounds Legit.

    1. They like to bring up the taxing issues to remove money from the system hedge against hyperinflation, but productivity still matters.

    2. And why hang onto this quaint notion of printing presses, ink and paper? Just use electronic currency, or — better yet — none at all.

      1. #MakeBarterGreatAgain

      2. The MMT crowd also mostly ignores the fact that banks – the private sector, creates most of the new money in our system. Loans create deposits – and any bank with healthy capital ratios can make loans, and no government “printing” is required. Banks are also not reserve constrained when it comes to making loans -they can make a loan, and, if needed, obtained required reserves if needed (meaning reserves required by Fed regulations).

  19. “Who the hell cares about the budget? We’re going to have a country”

    —-President Trump

    Are you unaware that it’s an election year, and he’s running for president?

    Meanwhile, President Trump is pushing Europe to actually spend their commitments to NATO–so the U.S. doesn’t need to spend so much. Meanwhile, President Trump is negotiating with the Taliban to get us out of Afghanistan, when no one else would. Meanwhile, Trump pushed the sale of military hardware to Saudi Arabia–so they can defend the world’s oil supply without our involvement. Meanwhile, President Trump withdrew our troops out of harm’s way in Syria–so that we wouldn’t become embroiled in a quagmire.

    Meanwhile, President Trump pushed hard to get the senate to pass a bill that would have cut $772 billion from Medicaid–over the objections of Reason staff. Meanwhile, President Trump is just publishing the details of his plan to convert Medicaid into block grants to states and allow the states to restrict Medicaid eligibility by adding work requirements. Can you tell me the last time a president tried to cut entitlement spending?

    Meanwhile, yeah, it’s an election year, and that means politicians spending their way to reelection, and, meanwhile, the alternative to President Trump isn’t a fiscal conservative. Whoever ends up winning the Democrat nomination, it’ll be someone who’s endorsed some version of both the Green New Deal and Medicare for All.

  20. I’m shocked, shocked(!) I say, to discover that a casino / real estate development tycoon is not your textbook fiscal conservative. Shocked. My faith is so badly shaken that I can’t even figure out what tipped me off:

    – the lavish spending in his personal life
    – the multiple bankruptcies in his professional life
    – that politically, he seems less concerned with the cost of a thing, than whether or not it’s a good ‘deal’.

    1. You are so right here. Trump went bankrupt and left a lot of people holding his debt. He will do the same to the nation. He doesn’t worry about spending because it does not affect him. The little people will be ones stuck.

      1. The last time the debt dropped was 1957. Seems there have been quite a few Presidents who left the nation holding debt.

  21. So in other words, yet another way in which Trump is actually just like every other president.

  22. He’ll be a politician yet.

  23. Greenhut shouldn’t be too surprised that federal spending is higher today than when his lifetime began. We live in a credit based economy. If we expect the economy to grow over the long term, then federal debt is probably going to grow too. At the very least, in the aggregate, total private sector debt is going to grow over time (if the economy grows and population increases). Having said that, I do think the federal government spends money on things that would be better turned over to the private sector. The MMT crowd does not have a coherent explanation of how harmful inflation will be avoided if they get to print as much money as they want. The notion that federal debt spending crowds out private investment is popular – but consistent evidence is hard to prove that theory. The loanable funds theory is a myth. At any given time, there are too many variables in the domestic and global economy. Federal spending can negatively impact private investment – and sometimes it has no impact. It certainly does not always drive up inflation. Look at Japan – their federal debt-to-GDP ratio has been much, much higher than ours – and they continue to fight deflation – their economy has mostly been stagnant for 20 years or more. It’s also worth noting that in cases of hyperinflation -such as Zimbabwe, Weimar Germany, etc. – there has always been some other severe, exogenous event – not just high government debt alone, that has resulted in those catastrophic hyperinflations. Those events tended to be things like losing a war, foreign denominated debt, regime change, rampant corruption, or a collapse in production.

  24. I suppose the president’s newfound embrace of progressive economics is understandable

    Where exactly is he “embracing progressive economics”? He is simply being a political realist: he needs to pay off certain groups to get reelected.

  25. You have to and I’ve always said to make money you’ve got to spend money and that’s what we’re doing right now, making money, making tremendous money. I am making the United States more money that it has ever made before, in its entire history combined. Obama was a big, a huge loser. What was the deficit under Obama? It was huge. Now you have democrats and all they do is spend spend spend. I would have vetoed that bill they did last year, what was it called? The TCJA? I’ve always been about cutting waste, cutting fraud, cutting payments to illegal aliens. Do you know how much money we spend on illegal aliens every year? Billions. Billions of dollars. That money should be going to you. Just last year I passed a law that gives money back to the people. It’s a good law. They tell me its a good law. It’s going just terrificly.

  26. If we’re outing deficit heretics here then Greenhut should include Milton Friedman. While he didn’t think deficits were good, he at least understood that not all deficits were created equal and that it was more important to consider the size of the deficit as a percentage of GDP than in absolute terms.

    And in that regard Trump has yet to run a deficit that is larger in terms of GDP percentage than Obama or even Reagan.

    No one in DC gives a shit about the deficit. Everyone uses it as political pablum for the masses. And there is not a single politician in Washington – including that dreamy Reason heartthrob Justin Amash – who would actually vote for the spending cuts necessary to eliminate the deficit.

  27. but then Ocasio-Cortez and others argued that MMT “absolutely” needs to be “larger part of our conversation

    Of course, we were discussing hockey at the time.

  28. Mr. Greenhut read way too much into Trump’s offhand remark. It’s as with all his offhand remarks.

    What I can believe is that Trump doesn’t prioritize a reduction in borrowing at this time to the point where he’d have to bargain away enough to get some of that. He knows Congress wants to spend a ton, and there’s not a lot of vetoing he or any president could do before they’d win that battle.

    But the problem isn’t the regular budget anyway, it’s the Social Security budget, primarily Medicare. Same as in most other countries, except many of them don’t have the equivalent of our Medicare problem because their health care system embodies a strong form of rationing. But that cure is worse than the disease, and they still have a pension problem.

  29. For decades I cared about the national debt and the deficit. I supported Gingrich and the GOP barbarians. I supported the tea party. We could have reformed SS and Medicare back in the ’90s with minimal pain, but demagoguery was the order of the day and nothing was done.

    So now, finally when I’m retired, the only thing I care about is my SS not being touched.

    1. I’m of SS age and personally I would accept a reduction without a moral qualm. However, it is still problematic to tell retires that they should have lived their life differently now that it is too late.

      I tell young people that they have a legitimate issue with SS and Medicare … but few seem to want to do anything about it. It’s their future; they have to take the ball and run with it. Like you I fought that battle for 50 years.

  30. it owns the printing presses.

    No, not since 1913.

    “just create the money directly without issuing bonds.”

    That would be a better idea, but it wouldn’t make deficits unimportant.

  31. Replacing RBG with an originalists is worth a few trillion dollars in extra debt; we get great ROI on that down the road.

    1. Originalists, like you, are MORAL HYPOCRITES ,… and authoritarian thugs.
      Per Thomas Jefferson.

      The Constitution is now
      a) Consent of the DEAD.
      b) Government by might, NOT by right.

      ANSWER HIS QUESTION: By what tight can ANY generation impose ANYTHING on future generations, WITHOUT THEIR CONSENT? Huh?
      Neither debt nor a government.

      You’re an authoritarian THUG … on the statist right … NO DIFFERENT than the statist left …BOTH fighting to impose their own flavor of statism … by government force.

      YOUR tribe a thugs, PROUDLY declares the INSANE notion of imposing DEBT AND TAXES … on future, and … DAMMIT, why SHOULD they have ANY say on that?

      ALL fascists use memorized BULLSHIT, to “justify” their authoritarian diktats. … as willful tools of the political elites.

      Left – Right = Zero

  32. Article Summary:

    The Democratic Party has had an across-the-board belief that deficits don’t matter for generations (numerous citations). Also, Democrat-turned-Republican-populist Donald Trump said “Who cares about the budget!” Conclusion: Both parties are equally unconcerned about deficits!

    1. YOU CAN READ! …. AND THINK!

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  34. Back in the 1990s Sweden reduced its debt by having a law that mandated a surplus and the debt was cut in half. If we can’t be as fiscally responsible as Sweden, we’re pathetic.

    Let’s propose a solution.
    1) A law to balance the budget
    2) Each expenditure has a priority number
    3) If spending exceeds income, those with the lowest priority aren’t funded.

    The debate can now focus on the priorities. Voters can now argue that A, which wasn’t funded is more important than B, which was. They can press their representatives on priorities. Candidates can run on the priorities.

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  36. How can you stop anyone’s fiscal incontinence, anywhere, while for the risk weighted bank capital requirements, the regulators have decreed a 0% risk weight for the sovereign and one of 100% for the citizens? That de facto implies that politicians/bureaucrats now better what to do with credit they’re not personally responsible for than for instance an entrepreneur?
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  39. Trump Has Fully Embraced the Idea That Deficits Don’t Matter

    And so have his libertarian supporters on this site. They love him to pieces and don’t you dare criticize him about anything.

  40. I don’t think Trump believes in modern monetary theory. He flat out said when the shit hits the fan he won’t be president, and he’s probably right. He also thinks that spending like a drunken sailor will not cost him politically with the republican base, and again he’s right. Leftist democrats politicians are some combination of morons who actually believe modern monetary theory (AOC and the like) or rightfully believe that their constituency is economically illiterate enough to believe it. Politicians are a reflection of the stupidity and lack of principals of their electorate. Until the electorate wises up (aka never), nothing will change.

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