FEDERAL DEBT PRIMED TO EXPLODE...

[enhanced_deficit]

From Drudge:

FEDERAL DEBT PRIMED TO EXPLODE...

Trillion-dollar deficits come roaring back...

The GOP tax plan means short-term gains for the economy, but federal debt is primed to explode, CBO analysis says

• The Congressional Budget Office forecast that the new tax law will generate an average of 0.7 percent growth over the decade and create 1.1 million jobs.
• However, larger budget deficits would crowd out private investment in later years, dampening economic growth.
• As a result, the CBO estimated the cumulative deficit over the next decade will be $1.6 trillion larger than previously projected. By 2028, the national debt would total 96 percent of GDP.

Ylan Mui | @ylanmui

Published 5 Hours Ago Updated 1 Hour Ago

CBO: Tax law will add $1.9 trillion to deficit over a decade 3 Hours Ago | 02:15

The Republican overhaul of America's tax code and increased government spending are projected to boost economic growth to 3.3 percent this year but push the national debt to nearly the same size as gross domestic product by 2028, according to government data released Monday.

The Congressional Budget Office forecast that the new tax law will generate an average of 0.7 percent growth over the decade and create 1.1 million jobs. It also predicted the two-year federal spending deal would increase GDP by 0.3 percent this year and 0.6 percent in 2019. However, larger budget deficits would crowd out private investment in later years, dampening economic growth.
As a result, the CBO estimated the cumulative deficit over the next decade will be $1.6 trillion larger than previously projected. By 2028, the national debt would total 96 percent of GDP.
"Such high and rising debt would have serious negative consequences for the budget and for the nation," the CBO report said.





Related

National debt hits $21 trillion

[econ4every1]

From Drudge:

FEDERAL DEBT PRIMED TO EXPLODE...

Wow, that sounds scary. Kind of like a "ticking time bomb"?

Here is a list of similar claims going back to the 1940's of the same sorts of dire predictions. It's been 78 years, do you really think that it's for real this time?

Sept 26, 1940, New York Times: Deficit Financing is Hit by Hanes: ” . . . unless an end is put to deficit financing, to profligate spending and to indifference as to the nature and extent of governmental borrowing, the nation will surely take the road to dictatorship, Robert M. Hanes, president of the American Bankers Association asserted today. He said, “insolvency is the time-bomb which can eventually destroy the American system . . . the Federal debt . . . threatens the solvency of the entire economy.”Feb 11, 1960, New York Times: Mueller Assails Rise in Spending: The enormous cost of various Federal programs is a time bomb, threatening the country’s fiscal future, Secretary of Commerce, Frederick H. Mueller warned here today “. . . the accrued liability is a ticking time bomb. Someday someone will have to pay.”

Oct 4, 1983 Evening Independent – The United States and the developed world face a “ticking time bomb” because of the huge foreign debt involving loans to Third World nations

Oct 26, 1983, David Ibata: “ . . . home-building officials called for a commission to propose ways to trim the $200 billion federal deficit. The deficit is a ‘ticking time bomb‘ that probably will explode in the third quarter of 1984,’ said Fred Napolitano, former president of the National Association of Home Builders.

Feb 21, 1984, James Warren: “‘We now hear from them (the Reagan administration) that deficits don’t cause high-interest rates and inflation,’ AFL-CIO President Lane Kirkland said. ‘If that’s the case, we’ve suddenly discovered the horn of plenty and should stop worrying and keep borrowing and spending. But I don’t believe it. It’s a time bomb ticking away.”

January 12, 1985, Lexington Herald-Leader (KY): The federal deficit is “a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell, a Louisville Republican, said yesterday.

Feb 17, 1985, Los Angeles Times: We labeled the deficit a `ticking time bomb‘ that threatens to permanently undermine the strength and vitality of the American economy.”

Jan 5, 1987, Richmond Times-Dispatch – Richmond, VA: 100TH CONGRESS FACING U.S. DEFICIT ‘TIME BOMB‘
November 28, 1987, The Dallas Morning News: THE TICKING TIME BOMB OF LONG-TERM HEALTH CARE COSTS A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government and our nation’s elderly. The ticking bomb is the growing cost of long-term care.
October 23, 1989, FORTUNE Magazine: A TIME BOMB FOR U.S. TAXPAYERS The government guarantees millions of mortgages, bonds, deposits, and student loans. These liabilities, now twice the national debt, are growing fast.

May 1, 1992, The Pantagraph – Bloomington, Illinois: I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion and growing now at an annual rate of $400 billion per year.
October 28, 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion. Seventy-five percent of this debt is due and payable in the next five years. This is a bomb that’s set to go off and devastate our economy and destroy thousands of jobs.

Dec 3, 1995, Kansas City Star: Deficit is sapping America’s strength. Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.

April 14, 2003: Porter Stansberry, for the Daily Reckoning: The baby boomers are heading into retirement with no savings and no productive companies to support them in old age. Generation debt is a ticking time bomb…with about ten years left on the clock.
October 1, 2004, Bradenton Herald: A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB: Lawmakers approved Bush’s request without cutting federal spending by a penny, thereby fattening the country’s projected record deficit of $422 billion by another $145 billion next year.

May 31, 2005, Providence Journal, Defusing the Medicare time bomb, Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb, set to wreak havoc on the budget and shoot future tax rates sky-high.

April 5, 2006, NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.

Dec 3, 2007, USA Today: US debt: $30,000 per American. WASHINGTON (AP): Like a ticking time bomb, the national debt is an explosion waiting to happen.

September 24, 2010, Email from the Reason Alert: ” . . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”

July 7, 2011, Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode as the cost of health care rises and the nation’s population ages.

If the debt is a "time bomb" that's going to "explode", it surely has the slowest fuse in history. The pundits have been wrong, wrong, wrong, all these years. We should understand federal deficits, even large federal deficits, have not caused inflation or any other negative economic effect, and the debt is not a ticking time bomb? It’s an economic necessity. Let us turn away from faith and start to rely on facts.

The Republican overhaul of America's tax code and increased government spending are projected to boost economic growth to 3.3 percent this year but push the national debt to nearly the same size as gross domestic product by 2028, according to government data released Monday.

There is a problem with this assumption. Future spending=future income. Whatever the debt ends up being will add to future income. Future income will lead to future spending. The only question is, will the real labor and resources exist to meet whatever level of demand that future consumers place on the economy.

The Congressional Budget Office forecast that the new tax law will generate an average of 0.7 percent growth over the decade and create 1.1 million jobs. It also predicted the two-year federal spending deal would increase GDP by 0.3 percent this year and 0.6 percent in 2019. However, larger budget deficits would crowd out private investment in later years, dampening economic growth.
As a result, the CBO estimated the cumulative deficit over the next decade will be $1.6 trillion larger than previously projected. By 2028, the national debt would total 96 percent of GDP.
"Such high and rising debt would have serious negative consequences for the budget and for the nation," the CBO report said.

The CBO is wrong.

[NorthCarolinaLiberty]

[Wow, that sounds scary.

Yeah, it's so scary that the prescription follows immediately after that article you posted:

The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:



Ten Steps To Prosperity:

1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE [/B]— PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

https://mythfighter.com/2018/02/14/w...to-understand/

[NorthCarolinaLiberty]

Econ4every1's solution is freebies for every 1!

[Madison320]

Econ4every1's solution is freebies for every 1!

Looks like roads are about the only thing I have in common with that guy.

[Madison320]

There is a problem with this assumption. Future spending=future income. Whatever the debt ends up being will add to future income. Future income will lead to future spending. The only question is, will the real labor and resources exist to meet whatever level of demand that future consumers place on the economy.

If that was true every county on the planet would be rich. Just let govt spend as much as possible.

The CBO is wrong.

I agree. The CBO is always orders of magnitude wrong on the low side.

10 years ago govt debt held by the public was 5.1T and GDP was 14.6T(actually higher using the new formula). For 2017 debt was 15.4T and GDP was 19.7T. If debt and GDP keep growing at the same rate in 10 years it'll be: Debt 46.5T and GDP 26.6T for a ratio of 175%. If my math is correct.

[econ4every1]

If that was true every county on the planet would be rich. Just let govt spend as much as possible.

That's simply false because all nations of the world are constrained by labor and real resources. This is the mistake that Austrians make when evaluating fiat money systems.

If I asked you if you can jump off a 10 story building...How would you answer?

Of course, you can independent of the consequences. But if the consequences matter then the answer is no (assuming you're not using any technology).

So can government's spend infinitely? Sure, just like you can jump off a building. But if the consequences matter they create a real constraint.

10 years ago govt debt held by the public was 5.1T and GDP was 14.6T(actually higher using the new formula). For 2017 debt was 15.4T and GDP was 19.7T. If debt and GDP keep growing at the same rate in 10 years it'll be: Debt 46.5T and GDP 26.6T for a ratio of 175%. If my math is correct.

Few thoughts, every dollar the government debt increased the private sector debt decreased.

The private sector was allowed to create too much debt (risk) in the run-up to the GFC. When the economy was on the verge of failure, private sector debt was passed onto the government.

Spending=income.

Reduction in debt on the private side=increase in debt on the government side.

Increase in spending on the government side=Increase in savings on the private side.

It's just simple (ok, maybe not that simple) accounting.



What went wrong? The belief that markets are self-regulating. They aren't and the GFC is evidence of that fact.

As far as the level of debt, tell me, how has an increase in debt from $5.1T to $14.6T changed your life? Do you pay more taxes? is everything three times more expensive?Do you receive fewer benefits? What has changed?

[Danke]

That's simply false because all nations of the world are constrained by labor and real resources. This is the mistake that Austrians make when evaluating fiat money systems.

If I asked you if you can jump off a 10 story building...How would you answer?

Of course, you can independent of the consequences. But if the consequences matter then the answer is no (assuming you're not using any technology).

So can government's spend infinitely? Sure, just like you can jump off a building. But if the consequences matter they create a real constraint.



Few thoughts, every dollar the government debt increased the private sector debt decreased.

The private sector was allowed to create too much debt (risk) in the run-up to the GFC. When the economy was on the verge of failure, private sector debt was passed onto the government.

Spending=income.

Reduction in debt on the private side=increase in debt on the government side.

Increase in spending on the government side=Increase in savings on the private side.

It's just simple (ok, maybe not that simple) accounting.



What went wrong? The belief that markets are self-regulating. They aren't and the GFC is evidence of that fact.

As far as the level of debt, tell me, how has an increase in debt from $5.1T to $14.6T changed your life? Do you pay more taxes? is everything three times more expensive?Do you receive fewer benefits? What has changed?

See we are an empire exporting our debt/inflation. It may not be as apparent to many of us. but the rest of the world can see it. Some are definitely benefiting, but many are not. Starvation on a planet of plenty. Women in China chaining there children to posts while they work in hideous conditions to make junk for us, etc. Do you think we could sustain this system without a large and sophisticated military punishing any country trying to break away from it? Just look at Libya as an example. Trying to establish a currency outside of the Fed. for an African currency. Then there was Iraq and now Iran...


We are so productive, but the middle class is shrinking, That productivity should not lead to people working many jobs just to stay a float, whereas, in the past, just one household income earner could support a family.

[Origanalist]

See we are an empire exporting our debt/inflation. It may not be as apparent to many of us. but the rest of the world can see it. Some are definitely benefiting, but many are not. Starvation on a planet of plenty. Women in China chaining there children to posts while they work in hideous conditions to make junk for us, etc. Do you think we could sustain this system without a large and sophisticated military punishing any country trying to break away from it? Just look at Libya as an example. Trying to establish a currency outside of the Fed. for an African currency. Then there was Iraq and now Iran...


We are so productive, but the middle class is shrinking, That productivity should not lead to people working many jobs just to stay a float, whereas, in the past, just one household income earner could support a family.

My old lady needs a better job.

[econ4every1]

See we are an empire exporting our debt/inflation. It may not be as apparent to many of us. but the rest of the world can see it. Some are definitely benefiting, but many are not. Starvation on a planet of plenty. Women in China chaining there children to posts while they work in hideous conditions to make junk for us, etc. Do you think we could sustain this system without a large and sophisticated military punishing any country trying to break away from it? Just look at Libya as an example. Trying to establish a currency outside of the Fed. for an African currency. Then there was Iraq and now Iran...


We are so productive, but the middle class is shrinking, That productivity should not lead to people working many jobs just to stay a float, whereas, in the past, just one household income earner could support a family.

Do you have any idea the cycle of spending that occurs between the US and China? China buys US dollars with money it creates out of thin air to devalue its own dollar and impoverish its own people in order to advance into the age of technology. I agree the costs are born out in human suffering and environmental damage. There are trade-offs, but let's be clear, these conditions are imposed on the Chinese people by their leaders, not by the US government. US consumers are complicit, but not responsible.

So tell me...Do you know where the Chinese government gets 's most of the money it uses to buy US Treasuries?

[Zippyjuan]

Those darned tax and spend liberals ringing up debt right and left! Wait- this was the cut taxes and spend Republicans bringing back the $trillion deficits.

[Madison320]

Those darned tax and spend liberals ringing up debt right and left! Wait- this was the cut taxes and spend Republicans bringing back the $trillion deficits.

Although according to you debt is not a problem.

[Pauls' Revere]

Those darned tax and spend liberals ringing up debt right and left! Wait- this was the cut taxes and spend Republicans bringing back the $trillion deficits.

Government doing what it does best.

[DamianTV]

Those darned tax and spend liberals ringing up debt right and left! Wait- this was the cut taxes and spend Republicans bringing back the $trillion deficits.

How about those darned Federal Reserve Bank supporters and Fiat Currency supporters and those that think Gold and Work are commodities that the elite should just trade around instead of doing real work!

[oyarde]

If I was a mod I would lock this thread .

[econ4every1]

If I was a mod I would lock this thread .

Why?

[Krugminator2]

Why?

MMT treats all spending the same. Spending is part of a functioning economy but it isn't the driver. Cuba can spend as much money as it wants. MMT completely ignores the supply side. Production and innovation drives standards of living. The goal is to maximize productivity. The government is wasteful and unproductive. Government spending doesn't face a market test. Government spending takes productive workers and resources from the private sector and puts them to work inefficiently.

Then there are the practical problems with government spending even if you ignore the productivity argument. Government spending isn't a faucet you can turn on and off. You have to pass legislation and figure out how to spend that money. That is time consuming. Then it isn't like you can just turn spending off once it starts. "Nothing is so permanent as a temporary government program."

[econ4every1]

Krugminator2. Thanks for the comment, I'm definitely interested in having a conversation with you about this. Some of what I'm going to say will be controversial or perhaps seem downright ludicrous. I hope you will ask questions where you think I'm mistaken and continue this as a conversation.

MMT treats all spending the same.

MMT as an economic discipline has NOTHING to say about where to spend, those are political choices. Even if those choices are wrong, MMT is still correct in that, as a discipline it does not prescribe policiy choices it just descibes how the fiat money system has worked since 1971. Understanding the effects of spending and how money are spent are two different things. However, most well-informed MMT'ers will insist that where money is spent matters, but any MMT'er worth their salt should understand that MMT is a description, not a prescription of economics. Thus MMT informs peoples opinions, but those opinions aren't part of MMT.

For example, I can describe to you how solar power works, but if you support solar power policies, that has nothing to do with the description of how solar works. It's your opinion based on your understanding of solar power.

Spending is part of a functioning economy but it isn't the driver.

You are quite right.

If we're going to analogize...how about this one:

Supply is the "driver", demand is the "fuel" and money is the "road".

Without supply, there is nothing else.

Cuba can spend as much money as it wants.

Pointing out that a country can spend as much as it wants teaches us 1 simple lesson. That any nation that has a sovereign free-floating currency can create and spend as much as it wants and this teaches us that spending isn't constrained by taxes. That's it. That's all you should have taken from that statement if you read that somewhere. If you assumed the rest, that was a mistake on your part. Just as if you asked me if I can jump off a 10-story roof and I answered; "yes" and assuming that because I answered yes that I assumed that I could do it without facing the consequences that come when I hit the ground.Sovereign money nations can create all the currency they want, but that isn't the same as saying that they should.

MMT completely ignores the supply side.

Can you cite anyone considered an authority in MMT that has stated that?

Production and inndriven drives standards of living. The goal is to maximize productivity.

Agree 100%, which means the real question is how to achieve it.

The government is wasteful and unproductive.

What does it waste?

If productivity is paramount, then the only way that government spending could be "unproductive" is if the money is used is zero-sum, or the products it purchases is zero-sum.

Now of course productivity has limits, specifically real resources and labor and MMT recognizes that spending is constrained by real resources and labor (productivity) and that overspending will result in inflation (the economic constraint). That should tell you that productivity is pivotal to MMT.

Government spending doesn't face a market test. Government spending takes productive workers and resources from the private sector and puts them to work inefficiently.

That's only true if real resources and labor are unavailable. If there are unemployment and resources available to meet higher levels of demand, then nothing is taken, in fact, the economy in question will experience growth.

The government can overspend and distort prices, this is true, but this is a deeper can of worms I don't want to delve into right now.

Then there are the practical problems with government spending even if you ignore the productivity argument. Government spending isn't a faucet you can turn on and off. You have to pass legislation and figure out how to spend that money. That is time consuming. Then it isn't like you can just turn spending off once it starts. "Nothing is so permanent as a temporary government program."

Most of the money spent each year (about 4/5ths) comes from the private sector. Banks take existing reserves (government money) and expand their balance sheets by creating credit money (banks liability) and depositing the customers promise to pay (asset) and securing it with the banks capital (investor dollars).

The Banking system has been created to be "elastic" so that it can expand or contract based on the demand (or lack of) for goods and services.

Government (Congressional spending) deficits add to banking reserves, government surpluses remove them.

The Fed (which is technically part of the executive branch) can manipulate the number of reserves available in the banking system, however, it cannot create or destroy them.

The demand for money is measured against available reserves and this is how the interest rates (pre-2008) was set. Post 2008 the Banking system is swamped with reserves so the Fed sets the rate directly by paying interest on reserves.

[oyarde]

I think it is time to classify it as something else entirely . Debt describes money that is to be pd back . What we have here is just a huge amount of money that will have interest pd on it . Nothing else .

[enhanced_deficit]

Former Speaker John Boehner: Deficit will be 'No. 1 issue' in six months

• John Boehner warned that the normalization of interest rates would have a whipsaw effect on the deficit.
• The former speaker supported GOP tax cuts and blamed a lack of entitlement reform for the expanding deficit.
• He said failure to balance the budget had to be Paul Ryan's "biggest disappointment."

James Thorne Published 23 Hours Ago

Former Speaker John Boehner: Deficit will be 'number one issue' in six months 20 Hours Ago | 01:51



Former Speaker of the House John Boehner said that the U.S. government deficit would become the No. 1 political issue in about six months.
"As interest rates continue to get to a normal level, it's going to have a huge whipsaw effect on the deficit," Boehner told CNBC's "Squawk on the Street."
Boehner voiced support for the tax cuts but lamented President Donald Trump's decision to maintain spending on entitlements. "I have to believe it's Paul Ryan's biggest disappointment as speaker," he said. "Paul Ryan had a plan to balance the budget over 10 years."

[Zippyjuan]

Former Speaker John Boehner: Deficit will be 'No. 1 issue' in six months

• John Boehner warned that the normalization of interest rates would have a whipsaw effect on the deficit.
• The former speaker supported GOP tax cuts and blamed a lack of entitlement reform for the expanding deficit.
• He said failure to balance the budget had to be Paul Ryan's "biggest disappointment."

James Thorne Published 23 Hours Ago

Former Speaker John Boehner: Deficit will be 'number one issue' in six months 20 Hours Ago | 01:51



Former Speaker of the House John Boehner said that the U.S. government deficit would become the No. 1 political issue in about six months.
"As interest rates continue to get to a normal level, it's going to have a huge whipsaw effect on the deficit," Boehner told CNBC's "Squawk on the Street."
Boehner voiced support for the tax cuts but lamented President Donald Trump's decision to maintain spending on entitlements. "I have to believe it's Paul Ryan's biggest disappointment as speaker," he said. "Paul Ryan had a plan to balance the budget over 10 years."

Paul Ryan's balanced budget called for $5.2 trillion in spending cuts over ten years but also called for $5.7 trillion in tax cuts which would not balance the budget. $2 trillion of the cuts assumed that Obamacare was repealed (counting the spending cuts but not counting the tax cuts towards his "balanced" budget).

https://www.vox.com/cards/paul-ryan-...-do-with-taxes



Rand Paul submitted a balanced budget proposal which assumed that tax revenues were 25% higher after five years.

[econ4every1]

Former Speaker John Boehner: Deficit will be 'No. 1 issue' in six months

• John Boehner warned that the normalization of interest rates would have a whipsaw effect on the deficit.
• The former speaker supported GOP tax cuts and blamed a lack of entitlement reform for the expanding deficit.
• He said failure to balance the budget had to be Paul Ryan's "biggest disappointment."

James Thorne Published 23 Hours Ago

Former Speaker John Boehner: Deficit will be 'number one issue' in six months 20 Hours Ago | 01:51



Former Speaker of the House John Boehner said that the U.S. government deficit would become the No. 1 political issue in about six months.
"As interest rates continue to get to a normal level, it's going to have a huge whipsaw effect on the deficit," Boehner told CNBC's "Squawk on the Street."
Boehner voiced support for the tax cuts but lamented President Donald Trump's decision to maintain spending on entitlements. "I have to believe it's Paul Ryan's biggest disappointment as speaker," he said. "Paul Ryan had a plan to balance the budget over 10 years."

I'm curious, how do you think higher interest rates affect the US economy?

[Zippyjuan]

I'm curious, how do you think higher interest rates affect the US economy?

When the Fed was trying to lower interest rates, folks were complaining that rates were artificially too low and that it would cause inflation (even hyperinflation) and ruin the economy. Now that the Fed has started to very slowly raise interest rates, people complain that higher interest rates will choke off the economy- ruining it again.

[econ4every1]

When the Fed was trying to lower interest rates, folks were complaining that rates were artificially too low and that it would cause inflation (even hyperinflation) and ruin the economy. Now that the Fed has started to very slowly raise interest rates, people complain that higher interest rates will choke off the economy- ruining it again.

Personally, I'm for Zirp as long as people can't use borrowed money (ie. leverage) to gamble with on Wall St.

Having said that, I'm curious to see if any of the naysayers will answer my question.

[Zippyjuan]

Personally, I'm for Zirp as long as people can't use borrowed money (ie. leverage) to gamble with on Wall St.

Having said that, I'm curious to see if any of the naysayers will answer my question.

Rates are pretty much set by the market. The Fed only determines what they charge banks to borrow overnight. They did try to influence longer term rates with QE when they were buying US Treasury bonds and Mortgage Backed Securities. Interest rates are lower when the rate of inflation is lower.

Treasury rates are determined by auction- supply and demand. The Federal Reserve does not participate in those auctions but buys from dealers in the resale market. And those purchases are also auctions- they say how many they wish to buy and the sellers say how many they would be interested in selling and at what price. The Fed pays the lowest price which gets them the total amount of notes they want. All sellers of that round get the same price.

[NorthCarolinaLiberty]

Having said that, I'm curious to see if any of the naysayers will answer my question.

If you're going to ask questions, then it's customary to answer questions.

[enhanced_deficit]

I'm curious, how do you think higher interest rates affect the US economy?

I know very little about interest rate dynamics but from what I read, it can be problematic for various home/biz financing.



Here's the number everyone in the financial markets is obsessing about and why

• The 10-year note's yield is perhaps the most widely tracked rate across the financial universe.
• Its yield is used as a benchmark for other types of debt, including corporate and agency bonds, such as Fannie Mae and Freddie Mac.
• The rate is also a barometer for 30-year fixed mortgage rates, auto loans, student loans and credit card annual percentage rates.

Thomas Franck
Published 12:09 PM ET Fri, 5 Oct 2018

Adam Jeffery | CNBC

Wall Street is abuzz this week amid a surge in the yield for the benchmark 10-year Treasury note, which has repeatedly topped levels not seen since 2011 over the last few days.
These days, when rates rise, stocks fall. That's because rising rates ripple throughout the economy, raising costs for companies that want to issue debt, raising mortgage rates for homeowners and buoying credit card bills for the typical consumer.

US 10-year yield hits highest level since 2011 5:51 PM ET Fri, 5 Oct 2018 | 03:25


The yield rose to as high as 3.24 percent on Friday. Bond traders are also impressed by the pace of the increase. The yield on the 10-year note has climbed about 15 basis points this week alone after trading in an innocuous range around 2.8 percent for much of summer 2018.

https://www.cnbc.com/2018/10/05/why-...ury-rates.html

[Bern]

... Did you see my objections above?

I had not seen your comments previously, but I've looked just now. You didn't answer the question directly. Would you object to the legislation?

In your comments, you provide a lot of conjecture and I think you need to check some of your assumptions. For my part, should the legislation pass, I forsee the development of modernized payment systems based upon competing currencies (both commodities like precious metals as well as foreign specie). It's the absence of a legal tender monopoly which makes the legislation interesting. It gives people freedom and choice and the market forces from that choice become a powerful force constraining malfeasance in central bank monetary policy *and* govco expenditures.

... In the absence of legal tender laws, Gresham's Law no longer holds. If people are free to reject debased currency, and instead demand sound money, sound money will gradually return to use in society. ...

Let me ask you if you value gold more than you value FRN's, when you go shopping, what would spend, FRN's or gold?

Your question presupposes that merchants are offering you a choice. Are you aware of what is happening in Venezuela right now? When the local currency is worth less than toilet paper (or worth less than other options - even illegal ones), merchants with real goods don't want to take it in trade.

So, the real question is (IMO), if you have faith that the FRN could stand shoulder to shoulder against sound money. That is an interesting question in it's own right. If you think it would, why would you object to the legislation? If you think it would not, why would you object to the legislation?

[econ4every1]

Would you object to the legislation?

So I'll ask you. in Simple terms, what do you beleive

I don't think I know enough about what the legislation is trying to accomplish to give a reasoned answer to the question. My instinct is to say yes, I would oppose it, but inevitably I'll be told all of the things that are accomplished via this proposal and how dumb I am for rejecting something so obvious, which I am, as of yet, unaware of. As such, I'd like to withhold my answer until I feel I have a better understanding of what a policy like this would accomplish and if they would be worth the inevitable tradeoffs.

In your comments, you provide a lot of conjecture and I think you need to check some of your assumptions

Could I trouble you for examples?

For my part, should the legislation pass, I forsee the development of modernized payment systems based upon competing currencies (both commodities like precious metals as well as foreign specie). It's the absence of a legal tender monopoly which makes the legislation interesting. It gives people freedom and choice and the market forces from that choice become a powerful force constraining malfeasance in central bank monetary policy *and* govco expenditures.

I would counter by saying there is also a lot of conjecture in that paragraph. However, since money systems are social systems, I'd need to understand more about what kinds of social goals, if any, you think are worthwhile and how money might play a role in achieving those goals (again, if at all).

For instance, are there any "societal problems" in your opinion? For example;

Is the level of unemployment an individual problem, or a societal problem?

Is the level of education achieved by students simply an individual problem or a societal.

Is the state of the environment (including natural disasters) an individual or societal problem?

Is infrastructure (creation and maintenance) an individual or societal problem?

These are just a few examples in an honest effort to understand your point of view (which clearly I do not).

Your question presupposes that merchants are offering you a choice.

Sure, based on human behavior, yes, I presuppose that because when people earn FRN's they will seek, as they do today to spend them quickly because their value over time will decrease. Conversely, people will be less likely to want to part with commodities is their future exchange value increases.

People will hoard gold and spend FRN's

There is nothing that prevents a store from opening RIGHT NOW and accepting only gold in exchange for it's goods. The reason it doesn't happen is because gold is an investment and investments make terrible money.

Case in point, I was in line at the grocery store about 30 years ago. As the woman was making change for me she pulled out an old-timey coin wrapper (you know the old paper wrappers). She cracked it on the till to make change for me in quarters. As soon as I heard the quarters fall into the till, I knew they were silver. I looked at my change and sure enough, three quarters ranging from the 40's to the 60's. I pulled out a $20 FRN and asked if I could "get change" (buy them). Turns out there were 4 rolls in her drawer that day, all of which I bought.

You know where all of those quarters are today? They are all still in my possession.

If a store opened that required me to spend my silver quarters and another store accepted non-silver quarters, which store do you think would earn my business?

Thus, it is my assumption that businesses that accept FRN's will have more business than those who do not.

Are you aware of what is happening in Venezuela right now? When the local currency is worth less than toilet paper (or worth less than other options - even illegal ones), merchants with real goods don't want to take it in trade.

Sure, but I suspect we could start a whole new thread about why their currency is worthless and I'd argue that the causes of what's happened there are not going to happen here.

So, the real question is (IMO), if you have faith that the FRN could stand shoulder to shoulder against sound money. That is an interesting question in it's own right. If you think it would, why would you object to the legislation? If you think it would not, why would you object to the legislation?

Because I think the strength of the nation matters. I think that removing the government's monopoly on currency creation creates the incentive for people to work towards common goals that cannot be achieved via Ron Paul's legislation.

Now I have been honest and frank with you. I'm not "pushing an agenda" and I'm genuinely interested in considering your point-of-view (even if you don't convince me you are right). Furthermore, I want to make it clear (again) that people here in RPF have a lot of problems with the way the banking system works. I also take issue with the way the system works and would advocate change. I know that most here in RPF would throw the whole system overboard, and that's fine, but I think there are problems that, not only can the "free market" not solve but become much worse under a pure free market system.

[oyarde]

The only thing that gives FRN's any value is people still accept them . Looking at 2015 numbers It costs them about a nickel to make a one dollar or two dollar bill, they print about 25 million different notes per day . They claim only ten percent are added to the pool and the rest are replacement for those taken out of circulation . There is less than 6 cents of metal at todays prices in a currently produced US one dollar coin . This is not real money . I unload it as fast as I get it and convert it to guns , land , trees , property tax , lead , copper , silver , ammo , gold , tools , parts , equipment etc or things of real value. If you do not unload it , it will only be worth less later .