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I was willing to put up with the risky, indiscriminate slash and burning of the government if it meant America was going to reduce its deficit. This is a major thing Elon and DOGE campaigned on.
But the Trump budget proposal to Congress, which slashes spending proposes to slash taxes even further and net increase the deficit overall.
That's just beyond the pale for me.
The below is from Tom Woods last Thursday. I think I agree with him:
Some people are unhappy about the new spending bill that just passed.
It envisions $2 trillion deficits as far as the eye can see.
How, in this age of DOGE, people wonder, can this be happening?
Answer: nobody cares about cutting spending. I think Thomas Massie does. But nobody else.
Why would they? The constituency for drastically lower spending, which is what we obviously need, is nonexistent. If you poll even Trump voters and give them a list of possible areas to cut, all they'll agree on is foreign aid, which doesn't come close to solving the main problem.
So it's time to face the situation squarely: no one really wants to see spending cut, especially once they come to terms with what that would really mean.
In a way, this realization is liberating. It puts you at peace. You understand that the problem will never be solved until a fiscal crisis occurs.
Then you can begin to have realistic expectations of politics and politicians.
Maybe you can hold off the civilization destroyers for a while. Even defund them.
You can make sure the Supreme Court isn't dominated by left-wing lunatics.
And if you have the will and the desire, you can change foreign policy.
If these things happened, I'd be perfectly content even if spending were not brought under control. This inner peace comes from recognizing that nobody cares and that it's never going to happen.
And the next step, for even more complete inner peace that lets you sleep like a baby at night: realizing that the government's deficit is the private sector's surplus, which most people find desirable and wouldn't want to cut. That's why we run government deficits for centuries, because the private sector likes accumulating net savings over time.
I think we're still in mistake theory territory with some true believers like Musk who thinks government debt is "our" collective debt, which would somehow be an existential problem soon. But unless things really ramp up dramatically with DOGE with congress's backing, it's currently still thankfully mostly beating up the ideological opponents with the current small cuts.
You're reasoning from an accounting identity, and I won't stand for it.
Yes, in order for the private sector as a whole to be a net creditor, the government must be a net debtor, but that's meaningless. There's no reason we should care about the private sector being a net creditor.
Note that this does not mean that the private sector can't accumulate net positive wealth without government debt. Private wealth did not decline along with net federal debt in the late 1990s, but grew rapidly. Real wealth is physical assets, not entries in a ledger.
It's true that if government doesn't run deficits private investors can't invest in government bonds, but they can buy private bonds or invest in equities. The government borrowing doesn't alleviate private actors of the burden of borrowing so that others may be creditors, but adds to the burden of private borrowers by driving up interest rates and reducing the amount of capital corporations can get by issuing stock.
If there's enough demand for government bonds that government can borrow at rates low enough to invest in infrastructure that will add enough value to pay for itself, that's a reasonable thing to do, but government borrowing does not, in itself, enrich the private sector.
Under no circumstances should the government borrow 6% of GDP at 4% interest at the peak of the business cycle in order to subsidize middle-class consumption.
Well I agree that it's not like a rule of the universe that the private sector must always need or want to be in perpetual surplus, accumulating monetary savings. It just happens to be how people have acted, in the US in the past few centuries at least.
In the US's history, there have been 6 periods where the government went significantly into surplus, with the private sector being significantly in deficit. Those ended in the 6 depressions in the country's history:
And it seems pretty understandable logically, that people like accumulating net savings over time.
In more recent history, the private sector going into financial deficit (some combination of spending down savings and increasing private debt) in the late '90s and mid '00s ended with a massive recession. Your contention that non-financial physical asset wealth was fine didn't seem to stop that resulting recession.
It's not even about the actual financial savings instruments being available, because we have banks with infinitely flexible balance sheets (indeed, the current monetary policy regime is simply paying interest on reserve balances directly, so treasury securities are a pointless vestigial leftover). It's more about the flows of spending: someone's spending is someone else's income.
For a government that uses their own currency and has their own central bank, the base interest rate is a simple policy tool set wherever you want -- it's not subject to market forces.
Totally agreed, as they should drop the interest rate much closer to 0-1% and leave it there. Interest income is just deficit spending in a mostly-pointless, regressive way.
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