**** off donald trump

[JohnRoberts]

It's just nuts and totally devoid of common sense and integrity.

A tax cut to INCREASE the deficit already approaching a trillion dollars a year. The most recent deficit was $666 billion.
This tax cut will add $1.5 trillion of debt over ten years - probably push the deficit over a trillion dollars a year.
The debt is extremely high in historical terms, due to nearly 30 yrs of deficits brought on primarily by the Reagan and GWB tax cuts and both parties refusal to cut spending.
This current tax cut is hitting the gas when you're headed to a brick wall.

It would only be possible to put off the day of reckoning if interest rates could continue to decline (as they have for 30 years) but they are bouncing off zero now.

All late in the cycle of a bull market. Next economic downturn will be from excessive debt, rising interest rates, and it will hit hard.

I am already on record for several years arguing about the US sovereign debt, currently around $20T. ($5T of that held by the fed).

An increase of $1.5T over a decade seems tame compared to the $1T a year increases we've experienced since 2007. Scoring debt increases 10 years out is obviously less certain than the recent past history.

I decline to argue about the future that we can not know with certainty (like will the fed unwind the extraordinary easing without unintended consequences?).  The elephant in the room surrounding budget deficit discussions is GDP growth... The government has a bias toward deficit budgets, so only decent economic growth can mitigate sovereign debt growth...

The average GDP growth since 1947 is 3.2%, we are just now returning to average GDP growth trend after years of below average growth.

I remain optimistic that we can beat 3% growth with current policy trends, I am less confident that we can unwind the $5T of fed owned debt without repercussions, but very slowly would be advised.

JR

 

[JohnRoberts]

If you're referencing what I think you are, it was a bone thrown to Bob Corker to get his support.  Of course, even this is contentious among Republicans.

The really grim part is that all those highly touted middle class tax breaks actually expire--having them go away was the only way to get the projected deficit increase down to 1.5 Trillion while still handing out huge breaks to the ultra-wealthy and to large corporations.

It is academic at this point since senate rules do not allow the proposed strategy.

This will be typical legislative sausage making, so ugly to watch... and lobbyists have already got their hooks in... In principle I am not opposed to a tax break for craft beer breweries, but why not a clean tax bill for a change?

JR

 

[Matador]

An increase of $1.5T over a decade seems tame compared to the $1T a year increases we've experienced since 2007. Scoring debt increases 10 years out is obviously less certain than the recent past history.

Let's back up the scale a bit since 2007:

 

[hodad]

Of course, a huge portion of the worst of Obama's deficits(from his first year in office) is actually on GW Bush--just as the balanced or near-balanced budget of W's first year is to Clinton's credit.  If you factor that in, the R's look even worse.

 

[Tubetec]

Does Donnie 'Dumpty' Trump wander around the oval office langers drunk in his underpants in the middle of the night ?
Cause thats when most of his errant tweets emerge .
Is he chronically sleep deprived at this stage ,any time a negative story is about to break he resorts to pre-emptive diversionary and inflamatory tactics via social media .

Now Flynn has turned states evidence its starting to look like end game.
That moment from taxi driver 'you talking to me' comes to mind ,I can just imagine the emperor with no clothes rehearsing firing himself in front of the mirror .Sure he's a maverick ,and maybe not firmly under the thumb like most politicians or maybe Vlad had a one eyed jack on him from way back ,but a show of cards is game over on all sides in any case .Flynn must be the second best protected man in all the USA at the moment seeing as he could be about to checkmate his former boss .Flynn should have really got out while the going was good ,he's been offered no immunity from prosecution which really translates into him not having enough dirt up his slieve but you never know maybe he's playing its close and has a bunker buster right under Donalds ass .
Keep your heads people ,party political lines never divided the good from the bad .

 

[Script]

Maybe just tell B to stop tweeting in his name  :

 

[AusTex64]

<Even better many large businesses have gamed the tax system to pay less than typical rates, but small businesses do not have that luxury so tax reform will preferentially help small businesses (a good thing IMO). >

I own one of those small businesses, thus have been watching closely. Unfortunately the above statement isn’t true for us, because we are an S corp, commonly known as a pass through business. The profits or loss of the business pass through to my partner and my tax return. So far, we are getting the shaft. The 20% rate only applies to C corps, ie big corporations.

 

[JohnRoberts]

Let's back up the scale a bit since 2007:

Nice chart I figured it was my fault...  :

Here are some charts from government.

I like that the %GDP chart finally reverses direction at the very end, but 2020 hasn't happened yet so probably based on a projection of GDP growth.  Debt at 100% of GDP was generally considered a banana republic but the world still likes dollars and our debt (another economic distortion).

I have been writing about this for years and will try not to repeat myself too much. The next shoe to drop, is what happens to servicing this sovereign debt when interest rates return to anywhere near normal. Debt service expected to increase from 1.3% GDP to 1.95% GDP by 2020.

We are not close to default, but the entitlement spending in the budget that is untouchable, so locked in, added to the increasing debt service costs, will make discretionary spending a smaller and smaller fraction of federal budget...  we need to shrink the beast IMO  (reduce spending), while expanding entitlements are much harder to ever reduce.

JR

 

[JohnRoberts]

<Even better many large businesses have gamed the tax system to pay less than typical rates, but small businesses do not have that luxury so tax reform will preferentially help small businesses (a good thing IMO). >

I own one of those small businesses, thus have been watching closely. Unfortunately the above statement isn’t true for us, because we are an S corp, commonly known as a pass through business. The profits or loss of the business pass through to my partner and my tax return. So far, we are getting the shaft. The 20% rate only applies to C corps, ie big corporations.

The definition of a small business is a little squishy but is generally 500 employees and $7M gross sales. There are small business exceptions with as many as 1500 employees and $35M sales.

I the S corp business structure is already a tax break to escape the corporation tax... Maybe you need to convert to a C corp...  My kit business was a S corp back in the 70s-80s. I don't have any factual information about the new law, but have heard rumors about better equipment expensing.. Carried interest a favorite of wall street investment managers may get changed from capital gains treatment. This won't raise much money in the big picture but will be popular with everybody but wall street, but we haven't seen the actual sausage yet.

JR

 

[AusTex64]

<Maybe you need to convert to a C corp...  >

Been considering this, but there’s no going back once we convert from S corp to C corp. We’re waiting for the dust to settle, then see what the CPA says...

 

[JohnRoberts]

<Maybe you need to convert to a C corp...  >

Been considering this, but there’s no going back once we convert from S corp to C corp. We’re waiting for the dust to settle, then see what the CPA says...

Good luck, C corp will have other overhead costs.

JR

 

[ruffrecords]

What I would like to know is who is all this money owed to?

Cheers

Ian

 

[JohnRoberts]

What I would like to know is who is all this money owed to?

Cheers

Ian

As I mentioned already the fed bought $5T of the debt to manage (distort) interest rates in auctions. So roughly 25% is held by the same government lending it... 

Actually only about $6T is held by other than US citizens or organizations... but in the margin, a trillion here and a trillion there can throw some weight around in bond markets.

We can probably grow our way out of this hole, but we need to get to work on that (only just now tipping 3% GDP growth).

Of course opinions vary and some simple political opinions don't deserve being repeated.  As the Iron Lady famously said, at some point you run out of other people's money.

JR

 

[tands]

Of course opinions vary and some simple political opinions don't deserve being repeated.  As the Iron Lady famously said, at some point you run out of other people's money.

Except you don't.

You assume that the national government is the same as any household or any business or any corporation. It is not.

Households, businesses, corporations, and even state governments are all “financing-constrained”. This means that before they can spend, they must raise the funding through either revenue (income or taxes depending on the entitity), borrowing, or selling assets. SImply put, they must have something in the checking account before writing the check to spend.

A national government is NOT the same as these other entities. A national government CAN and DOES spend without any restriction on raising the funds first.

For these purposes, I’m using a “national government” to mean one that is:

a. sovereign in it’s money (in other words, it is the sole source of determining what is money/legal tender inside it’s territory)

b. let’s it’s money float in exchange rate and doesn’t promise a fixed conversion rate into any other currency or gold

c. borrows money in it’s own currency (when it chooses to borrow) and not a foreign currency.

Who fits this definition? The U.S., Japan, Canada, the U.K., Australia, India, among many (most) others. Who doesn’t fit? Anybody in the Euro Monetary Union (Greece, Spain, Italy, France, Germany, etc). Who else doesn’t fit? Anybody that borrows in foreign currencies (Russia & Argentina in the 1990’s).

What I am explaining is not “an economic theory” – it is basic, fundamental national income accounting and fundamental banking procedures.

The blunt truth is that the U.S. can indeed continue to run deficits. The same people who claim that we are on the verge of collapse (as you claim is obvious) said exactly the same thing about Japan in the mid-1990’s. A decade and a half later Japan is still running “high deficits” and has no problem with either it’s budget or “solvency”.

-

The fundamental economic reality (again, basic math and accounting, not “theory”) is that if the private sector, you and me and private businesses, want to get financially richer, that is if we want to see our bank balances and 401K’s get bigger over time, the government, the public sector, must run a deficit. It is simply impossible for the private sector to net save money AND have the government run a surplus at the same time. (technically, there is one situation where it is possible, but that can ONLY happen if net exports is so large – think 20% or more of GDP – Chinese scale. Such large net exports cannot happen in all countries at once).

more

https://econproph.com/2010/06/20/one-more-time-the-government-is-not-like-a-household-or-a-business/

 

[tands]

The idea that a currency-issuing government is financially constrained is a myth. The funds that government spends do not come from anywhere and taxes collected do not go anywhere. Taxes do not finance anything and government spending is independent of borrowing. The government deficit determines the cumulative stock of financial assets in the private sector. Moreover, when government runs a surplus, purchasing power is destroyed forever. Finally, government expenditures do not crowd out private expenditures.

-

However, for all this capacity, the ability of the United States to spend without financial constraints does not flow from the dollar’s position in international trade itself. The US is simply in the enviable position among fascist states to have exclusive ownership of the world’s reserve currency. There is nothing particularly special about the US dollar and its position in economic relations is mostly a matter of historical fortune. What is not a matter of fortune is that some particular currency had to play this role and a fierce competition between national capital went into the determination of which currency it would be; in particular, two world wars that cost more than 100 million lives.

For all of this, the dollar’s position as world reserve currency is not imposed on other nations by force as many believe. The hardest thing to explain is that the dollar’s position as world reserve currency is not just the result of policy decisions made in Washington, but equally arises from the needs of other national capitals as well. Which is to say, keeping the dollar as reserve currency is not actually a policy at all, but is imposed on Washington as well. Other national capitals need the dollar to function as reserve currency as much as Washington enjoys the benefit.

To be clear on the implications of my argument here: running a fiscal deficit is not an optional policy that the United States can choose to do or not to do. So long as other national capitals produce more than they can reinvest, some fascist state must absorb the resultant excess capital, and this state is the owner of the reserve currency. Over the past 35 years, the United States has tried to balance its budget on numerous occasions and each time it has led to economic crashes. In fact the last three world recessions were caused by attempts to reduce the national deficit of the United States.

more

https://therealmovement.wordpress.com/2015/05/22/mmt-and-the-heresy-of-the-self-financing-fascist-state/

 

[Gene Pink]

more

Four

 

[tands]

https://twitter.com/CyberspaceSeven/status/936965133565296641

 

[dmp]

I am already on record for several years arguing about the US sovereign debt, currently around $20T. ($5T of that held by the fed).

An increase of $1.5T over a decade seems tame compared to the $1T a year increases we've experienced since 2007. Scoring debt increases 10 years out is obviously less certain than the recent past history.

I decline to argue about the future that we can not know with certainty (like will the fed unwind the extraordinary easing without unintended consequences?).  The elephant in the room surrounding budget deficit discussions is GDP growth... The government has a bias toward deficit budgets, so only decent economic growth can mitigate sovereign debt growth...

The average GDP growth since 1947 is 3.2%, we are just now returning to average GDP growth trend after years of below average growth.

I remain optimistic that we can beat 3% growth with current policy trends, I am less confident that we can unwind the $5T of fed owned debt without repercussions, but very slowly would be advised.

JR

GDP is based on demographics (number of people working) and productivity (how effective is work).
Right now, the economy is at or near full employment.
Corporate profits are at a record high and corporations are swimming in cash.
What justification is there that changing the playing field more in favor of corporations will increase economic prosperity?
The real irony is that the Federal Reserve fears an 'over heating' economy and is raising interest rates to subdue cheap capital for business expansion.

The reason the deficit climbed so much from 2008 on was because of a great recession. GDP shrank. Revenue shrank.
When the economy is good, that is the time to make improvements to balance the budget. Putting it more in  the red now just seems insane.

 

[JohnRoberts]

GDP is based on demographics (number of people working) and productivity (how effective is work).

GDP is the total value of everything produced by all the people and companies in the country.

Right now, the economy is at or near full employment.

If we ignore all who dropped out of the workforce (and illegal workers).

There are many unfilled job openings and despite that pay remains stuck in a low growth trend. More economic growth and more new jobs will create upward pressure on pay even for people with jobs.

Corporate profits are at a record high and corporations are swimming in cash.

Yes the liquidity bubble has distorted a number of business decisions. Uncertainty still about healthcare has some businesses hoarding cash, but that is starting to loosen up, as uncertainty is cleared up, but still way too slowly.

What justification is there that changing the playing field more in favor of corporations will increase economic prosperity?

I am repeating myself but economic growth has been stuck below the historical average, until very recently but a few quarters of 3%+ is too short to declare a new trend.

The real irony is that the Federal Reserve fears an 'over heating' economy and is raising interest rates to subdue cheap capital for business expansion.

The irony if any is that the fed has created that overheating with crisis level liquidity and unusually low interest rates almost a decade after the crisis...

Indeed the business tax cuts, and asset repatriation will probably cause a growth bump that the fed will have to respond to, but getting back to normal sooner rather than later is a good thing.  We are still very far from normal and just bumping interest rates may not get the traction it used too, until they sell off their $5T debt balance sheet (at least a few $T of that needs to go to restore near normal market debt pricing).

The reason the deficit climbed so much from 2008 on was because of a great recession. GDP shrank. Revenue shrank.
When the economy is good, that is the time to make improvements to balance the budget. Putting it more in  the red now just seems insane.

We have a chronic competitive disadvantage from business tax rates that favor overseas investment. We need to fix that. Substandard GDP growth, and hyper liquidity is not a strong economy, IMO.

Of course opinions vary...

JR

 

[tands]

https://twitter.com/LeeCamp/status/937779547679936513