Federal Deficit - Help me out here.

[_ajax18]

In the meantime, your hero is doing his best to accelerate a rapid rise of debt. Thank you for having voted to help destroy America. o_O

Having debt doesn't seem to be a partisan issue. Why we need to be in debt is what we argue about. Getting out of debt is a political impossibility and completely out of the question.

It's kind of like marriage. You either go into debt or have your earnings taken forcibly in family court. Either way you will continue working and continue to accrue more debt as long as you live.

[_canpakes]

It's kind of like marriage. You either go into debt or have your earnings taken forcibly in family court. Either way you will continue working and continue to accrue more debt as long as you live.

The way you phrase things, it sounds as if at some point both your experience in marital relationships and the fundamentals of family economics seem to have taken a dreadful turn down a very dark path. o_O

In any event, it's good to see another conservative sacred cow now deemed unimportant and ready to be tossed into the scrap heap, owing to Trump's tendency to worsen what was once previously perceived to be merely 'bad'. First, it was the LPR. Now, we can pretend that the debt is unimportant. But who needs principles when one can instead lap up the twitterized, bitter pablum sloppily drizzled onto their plate by the orange-haired Kardashian of Washington?

[_ajax18]

Now, we can pretend that the debt is unimportant.

First off I salute Kevin for at least being consistent on his position that deficits don't matter. Unfortunately I can't be so optimistic. I think we're going to get hit pretty hard by this debt at some point and I certainly don't believe it doesn't matter. But with the way our political system is set up changing the status quo seems impossible. It would take a radical revolution. Just taxing the rich even at 100% (which is impossible because nobody making over $200k/year would keep working for free out of patriotic duty and brotherly love) would not even put a dent in this astronomical national debt.

[_canpakes]

...nobody making over $200k/year would keep working for free out of patriotic duty and brotherly love...

No worries. The President will just order them to keep working.
: )

[_MeDotOrg]

I’ll apologize up front as I haven’t tried to find out the answer yet on my own, but I’ll ask this to the smarter folks here:

Setting aside the question of whether or not the Fed would or could simply print more dollars to throw at the debt, doesn’t a rising debt still imply that we must devote more dollars to servicing it, therefore it does have a ‘real’ (if not relatively small) impact on the overall budget and total dollars available for other expenditures?

I'm not sure if this is germane, but wasn't Germany's hyperinflation of the 20's caused by simply printing more money to pay down its war debts from the Treaty of Versailles?

[Anonymous]

What would be the optimal scenario for you in regards to federal debt, and how would that impact our standard of living and by extension our republic?

- Doc

The optimal situation for me, personally, might be a bit of hyper-inflation. If the price of things doubled over night:

1- The nominal value of my house would jump from $500k to $1M
2- My salary would double
3- My mortgage payment would stay the same
4- The percentage of my income that goes to paying my mortgage would go down by 50%

On a national scale:

1- The GDP would double
2- The nominal debt would stay about the same
3- the national debt/GDP would go down by 50%

The group that would screwed the hardest in this scenario is the Chinese bondholders--the real value of the U.S. bonds they own would go down by 50%.

Inflation is really just a massive transfer of wealth from savers to borrowers.

Fundamentally, what matters is that the real GDP stay high--that we keep producing useful goods and services. Money is just a key element in the system for deciding how to divvy up the pie. Changing the value of money changes the size of your claim of the pie, but it doesn't change the size of the pie.

All that said, in the real world hyperinflation would be accompanied by a massive recession. That would suck. If my theoretical hourly wage doubled because the price of everything doubles but I can't find a job because of the recession, I'm still screwed.

[_Analytics]

Thanks. Your answer also touches on what would have been my second question, about what might possibly be the greater motivating factor for Trump to be all over the Fed for a rate cut. In other words, a rate cut would slow down the rate of debt increase (and reduce the amount required to service it), keeping the total debt situation looking slightly less hideous. I’d imagine that Trump worries more about that rather than a rate cut being ‘more beneficial’ to general consumers because there are more than a few folks within his hard core base who also freak out about debt ... and Trump will otherwise be perceived as pushing that to record high levels.

I think it’s a straight up political calculation. If the economy starts headed toward recession, his prospects for reelection get bleak. He’s leaning on the Fed to keep the economy from souring before next November. But the more he uses up the limited tools we have to stimulate the economy, the less our ability will be to affect the magnitude or duration of the recession when it hits. I fear our next recession will be long and painful.

I think it's more basic than that. Trump borrows a lot of money, and he owns a lot of real estate. Low interest rates are good for borrowers, and low interest rates help boost the value of real estate.

[_honorentheos]

Your answer also touches on what would have been my second question, about what might possibly be the greater motivating factor for Trump to be all over the Fed for a rate cut.

The historic, simple reason for the Fed to cut rates has been to loosen access to credit so more money moves around in the economy and to raise rates/make the cost of borrowing higher to cool things down to prevent over-inflation. I don't think Trump has complicated thoughts when he vocally claims the Fed is hurting the economy. I think he wants to remove all breaks on the throttle so that the engine burns red hot because it doesn't matter to him if it burns out as a result so long as it remains hot when he needs it to do so. I've said before that Fox News and the like priming their base to then blame Democrats for any economic slowdown or retreat. The current narrative they are sharing is that Democrats WANT a recession because it hurts Trump so the media is trying to convince people things are bad despite things being good. It's clever in that it politicizes any attempt at managing economy rather than treating doing so as the act of a responsible government. One should be cautious letting politicization of the economy become the lens one then uses to consider what needs to be done or what is best including the national debt load. That goes for both sides of the political spectrum.

[_EAllusion]

What would be the optimal scenario for you in regards to federal debt, and how would that impact our standard of living and by extension our republic?

- Doc

The optimal situation for me, personally, might be a bit of hyper-inflation. If the price of things doubled over night:

1- The nominal value of my house would jump from $500k to $1M
2- My salary would double
3- My mortgage payment would stay the same
4- The percentage of my income that goes to paying my mortgage would go down by 50%

On a national scale:

1- The GDP would double
2- The nominal debt would stay about the same
3- the national debt/GDP would go down by 50%

The group that would screwed the hardest in this scenario is the Chinese bondholders--the real value of the U.S. bonds they own would go down by 50%.

Inflation is really just a massive transfer of wealth from savers to borrowers.

Fundamentally, what matters is that the real GDP stay high--that we keep producing useful goods and services. Money is just a key element in the system for deciding how to divvy up the pie. Changing the value of money changes the size of your claim of the pie, but it doesn't change the size of the pie.

All that said, in the real world hyperinflation would be accompanied by a massive recession. That would suck. If my theoretical hourly wage doubled because the price of everything doubles but I can't find a job because of the recession, I'm still screwed.

Stagflation is a thing.

[_EAllusion]

Your answer also touches on what would have been my second question, about what might possibly be the greater motivating factor for Trump to be all over the Fed for a rate cut.

The historic, simple reason for the Fed to cut rates has been to loosen access to credit so more money moves around in the economy and to raise rates/make the cost of borrowing higher to cool things down to prevent over-inflation. I don't think Trump has complicated thoughts when he vocally claims the Fed is hurting the economy. I think he wants to remove all breaks on the throttle so that the engine burns red hot because it doesn't matter to him if it burns out as a result so long as it remains hot when he needs it to do so. I've said before that Fox News and the like priming their base to then blame Democrats for any economic slowdown or retreat. The current narrative they are sharing is that Democrats WANT a recession because it hurts Trump so the media is trying to convince people things are bad despite things being good. It's clever in that it politicizes any attempt at managing economy rather than treating doing so as the act of a responsible government. One should be cautious letting politicization of the economy become the lens one then uses to consider what needs to be done or what is best including the national debt load. That goes for both sides of the political spectrum.

Donald Trump has bled about 2 points in approvals over the past 2 weeks or so. That's probably because mere talk of some indicators of a possible recession while he flailed about hurt him a little. He's as popular as he is because of the perception of the economy. If you look at his job performance approvals on various issues, they are in the toilet aside from the economy, where he is just slightly underwater. The propaganda apparatus can try to blame Democrats all they want. Trump wouldn't escape how politics operates on this one.

If there's a serious recession by next summer, Trump is going down hard. It won't matter who he runs against. His chances are decent aside from this, but that condition is a death sentence for his campaign.

Republicans in general want loose monetary policy when they are in power and tight monetary policy when they are not. The break-neck flip-flopping on this from Obama to Trump goes way deeper than Trump. They know how this works and don't care if this is sound for the nation's economic health.