Trump's Card

[ursus arctos]

Rudy! is very quick on his feet for an old guy

https://twitter.com/christinawilkie/status/1023917049096151041

[The Awesome Berbaslug!!!]

Well the idea is that you don't increase tax to reduce the deficit. In the good times you carry on with the same tax rates and more money flows into the coffers through tax because it's the good times. The question is if the current period really constitutes "the good times". The size of the financial disaster in the previous decade was so massive that it is still being processed.

I agree that the USA should increase taxes, but not too put money towards the deficit. They should do so to redistribute wealth within the real economy by investing in schools and hospitals and that sort of stuff. But that would be communism or something.

Wait, this is entirely dependent on the structure of the tax base. If the budget deficit is a result of setting taxes too low, or in the case of America, not really taxing those with the wealth in any meaningful way, then yes. when the bubble burst in Ireland, our taxbase had been massively distorted away from taxes on income, and wealth, to transaction taxes on property, and boom time levels of activity in the other tax streams, and one of the major challenges facing the govt was to restructure the tax base so that it could support the level of spending.

The other thing is I don't understand linking the budget deficit to inflation. This isn't great in that it a) encourages inflation and b) is deeply procyclical rather than anti cyclical c) seems designed to create a bubble that will explode covering everyone in shite, while massively reducing the govts ability to counter a recession. d) it posits an endless market for your govt debt, which if it doesn't sink you, is going to lead to massively more expensive debt service, because the price of bonds is linked to the risk associated with them, and you're going to be demanding a high rate from a bond that you think isn't a particularly good bet. (The US is a bit of an outlier here, because it is the global hegemon)

Either way I don't get your aversion to the Govt taking money out of the economy in a boom time when the growth rate rises above the long term growth rate. It would have been a big help if the Irish govt had been doing this through the second half of the celtic tiger. The bust would have been smaller, there would have been less repair to do on the tax base when it came to it, and overall misery would have been reduced. Take a look at this graph of denmark's budget surplus/deficit over the last 20 years. Look at how the budget surplus in 2004-8 is larger than the budget deficits from 2008 on added together. When you go into a recession, govt taxes will fall sharply and spending will increase, but if you start with a 5% budget surplus, a drop of 8% only leaves you with a deficit of 3 percent, which is really easy to get out of, Now Denmark is quite extreme in its approach to this, but a) the govt sector makes up 50% of the economy b) no-one would accuse them of a willingness to tax and spend. It's worth noting that the recession barely happened in Denmark as a result of this. This is what you are aiming for. This is what a well managed economy looks like.

If you start out with a budget deficit of 3% which is less than your 4% inflation, and the bust leads to an 8% change, then suddenly you're staring at a budget deficit of 11-12% and a fucking nightmare. It's also worth remembering that the budget deficit that we're talking about here is as a result of repeated tax cuts focused primarily on the top end of the income and wealth distribution.

[anton pulisov]

Either way I don't get your aversion to the Govt taking money out of the economy in a boom time when the growth rate rises above the long term growth rate.

If you have a $100 surplus, you have paid down your national debt by $100. You've also reduced your GDP by $100.

So it has zero effect on your debt to GDP ratio.

[Gerontophile]

Nothing about the Religious Liberty Task Force?

I am beginning to get really angry with this poisonous, oleaginous, mint julep drinking, pockmarked dwarf*.

*I realise I shouldn't say that word, and normally I wouldn't, but fuck him and the chihuahua he rode in on.

[ad hoc]

Well given that this administration has created a policy specifically aimed at stopping Muslims from travelling to the USA, I think he's right to say that the US has become less hospitable to people of faith. That's presumably where this task force will be starting, no? Oh...

[WOM]

If you have a $100 surplus, you have paid down your national debt by $100. You've also reduced your GDP by $100.

So it has zero effect on your debt to GDP ratio.

I continue to be confused as to why you think that's such a relevant measure. Debt as ratio of GDP is a measurement device, but it's not a goal or an end of itself. Debt can be fairly benign, but it's not 'good' by any objective measure. Its continuation doesn't have a positive effect on a country or its economy. As an investment...well, there are much better ones.

But specifically to your point above, in a single year you might have had zero effect, but ongoing you have a continuous one. You don't just reduce your debt for one year, but for each year thereafter....which is good. You pay no interest on that debt, and you're less beholden to your debt holders.

What's more, if, to your point, you're dealing with a country with sane taxation polices, sure...you might be taking money 'out' of the economy. But if it's just piling up in the investment accounts of the very wealthiest, then you really haven't. You've not weakened the economy by kneecapping people trying to buy food or toasters or cars, but taken a point or two out of an investment account. It's just not the same thing.

[anton pulisov]

I continue to be confused as to why you think that's such a relevant measure. Debt as ratio of GDP is a measurement device, but it's not a goal or an end of itself.

It's the most relevant measure of the debt burden. If a bank manager wants to decide if somebody can afford a mortgage or not, the bank manager looks at two things (1) that person's existing debts (2) that person's annual income.

Usually people only look at public debt, but you have to sum public and private together to get the total debt burden of the economy. total debt / GDP.

Clinton ran public account surpluses but all that happened was the shortfall of money being taken out of the economy was made up for by private borrowing (especially in lower income brackets). And that ended well...

You've not weakened the economy by kneecapping people trying to buy food or toasters or cars, but taken a point or two out of an investment account. It's just not the same thing.

In that case you've taken money out of rich people's investment accounts and given it to bondholders. So not much has changed there either.

Better would be to take it out of rich people's investment accounts and use it to fund health care and things like that. Then you are putting money into the real economy.

[Wouter D]

If you have a $100 surplus, you have paid down your national debt by $100. You've also reduced your GDP by $100.

So it has zero effect on your debt to GDP ratio.

That isn't how a ratio works.

[anton pulisov]

That isn't how a ratio works.

yes, I know what you mean. There is little effect on the ratio would have been better wording.

So if debt is $80 and GDP is $100, your debt burden is 80/100*100 = 80%. If you use $1 GDP to pay down $1 debt then your debt burden is 79/99*100 = 79.8% So you've just shrunk your economy by 1% to achieve an 0.2% reduction in the debt burden. The question is if that is worth the effort?

Another approach would be to borrow $1 in new debt and invest it wisely in the real economy so that it creates $1.3 of new GDP. Then your new debt is $81 and your new GDP is $101.3, so your new debt burden is 81/101.3 = 80%. Depending on what interest you pay on the debt, it might be worth it.

There are also macroeconomic multipliers involved. So in the first scenario, you've shrunk the money supply in your economy, which causes a deflationary pressure, which might have a feedback loop that further lowers GDP. In the second scenario, you have caused a small amount of inflation, but as long as it remains small, it doesn't matter. (edit: and, I forgot, if you have your own central bank and your debt is denominated in your own currency, a little bit of inflation will even reduce the burden of your debt).

These are different schools of economic thought. But since economics isn't an exact science, neither can be proven. All I know is that the USA has been running a deficit for nearly a century and people are lining up to buy T-Bills.

[Satchmo Distel]

Nothing about the Religious Liberty Task Force?

I am beginning to get really angry with this poisonous, oleaginous, mint julep drinking, pockmarked dwarf*.

*I realise I shouldn't say that word, and normally I wouldn't, but fuck him and the chihuahua he rode in on.

It sounds suspiciously like "liberty" being defined as the right not to rent hotel rooms to gay couples and the like, in the same way as back in the 60s, liberty was defined as the right to not employ a dark-skinned person, which I suspect Sessions still believes.

Conversely, of course, "liberty" does not extend to the right to use a bathroom that conforms to your gender identity, or the right to be protected from homophobia, etc.

[anton pulisov]

Maybe somebody can point out a country that has run a balanced budget since Bretton Woods was nixed? In other words, the cumulative inflation adjusted current account is not negative when averaged over the entire period since 1971.

Because to run a balanced budget in a world with a fiat monetary system would be a bit silly...

[Ginger Yellow]

Not every country controls its own money supply. Nor do many countries have the sort of situation which guarantees international demand for their debt, and more demand in times of crisis.

[anton pulisov]

Some countries can get away with run bigger deficits than others, clearly.

[The Awesome Berbaslug!!!]

It's a big deal over this side of the atlantic. A lot of the rules around the euro include it. If you go above 120%, you're basically bankrupt. It's an important thing to keep an eye on. It's also an important part of Debt load management, which is the thing you're talking about. The higher this ratio, the higher your debt servicing costs relative to the size of your economy. At one point Ireland's debt servicing costs were about 1% of GDP, they rose to 4%, before falling back to 2%. This table gives a pretty good example of the sort of thing that you were talking about.

ireland has to pay out 4 times as much money in interest every year as it did in 2007. (up from €1.5 bn, to €6 billion having reached €7.5 bn in 2014) In 2013 is was one eighth of our our govt spending, it's fallen to 7.5% now. But it's still gone from around €400 to €1500 per head. This can effectively be seen as the ongoing cost of our Bust. Now this doesn't really apply to the US as they can simply issue more bonds, for which there is a near infinite demand. But at some point this is going to become problematic.

But as you point out, "taking money out of the economy" is often something you want to do, because in a bubble, aside from people bunging a lot of the cash into their investment accounts, you have people engaging in spectacularly ill advised investments, that seem to make sense at the time, but once everything goes tits up, they collapse, causing exciting times for the banking system, and wiping out huge amounts of wealth right across the economy. Perhaps it's as a result of having lived through the last 15 years in Ireland, but quite frankly fuck politicians who inflate bubbles for short term electoral gain.

[anton pulisov]

In the case of the Eurozone you'd have to view the Eurozone economies as one bloc if you want to make a direct comparison to the USA. In that case we can see that the Eurozone, as a whole, has never had a balanced budget. The trend is broadly similar to that of the USA. No surprise, both are fiat currency blocs functioning within the global economy.

Of course, the internal functioning and debt burden redistribution within the Eurozone is a complete shitshow, what with it being a currency union with no political nor fiscal union, but that's another issue.

[ursus arctos]

https://twitter.com/realdonaldtrump/status/1024680095343108097?s=21

https://twitter.com/realdonaldtrump/...343108097?s=21

[Gerontophile]

Snake: Why am I unable to see embedded tweets?

[anton pulisov]

It seems to be a Firefox thing. I have the same problem. Chrome works fine.

[Gerontophile]

I only use Chrome.

[ursus arctos]

I added the link, but you must have some setting enabled.

[Gerontophile]

Pain in the arse. It's the same for Chrome, Firefox and Opera.

[anton pulisov]

It's something to do with private browsing or biscuits or something

[ursus arctos]

"third party cookies", most likely

[Satchmo Distel]

It's something to do with private browsing or biscuits or something

Probably the former, although the two activities could be combined

[The Awesome Berbaslug!!!]

If you refresh chrome, they show up.