"Economists agree that we needed massive deficit spending during the COVID-19 crisis to ward off an economic cataclysm, but federal finances under Trump had become dire even before the pandemic. That happened even though the economy was booming and unemployment was at historically low levels. By the Trump administration’s own description, the pre-pandemic national debt level was already a “crisis” and a “grave threat.”The combination of Trump’s 2017 tax cut and the lack of any serious spending restraint helped both the deficit and the debt soar. So when the once-in-a-lifetime viral disaster slammed our country and we threw more than $3 trillion into COVID-19-related stimulus, there was no longer any margin for error.Our national debt has reached immense levels relative to our economy, nearly as high as it was at the end of World War II. But unlike 75 years ago, the massive financial overhang from Medicare and Social Security will make it dramatically more difficult to dig ourselves out of the debt ditch...Falling deeper into the red is the opposite of what Trump, the self-styled “King of Debt,” said would happen if he became president. In a March 31, 2016, interview with Bob Woodward and Robert Costa of The Washington Post, Trump said he could pay down the national debt, then about $19 trillion, “over a period of eight years” by renegotiating trade deals and spurring economic growth.After he took office, Trump predicted that economic growth created by the 2017 tax cut, combined with the proceeds from the tariffs he imposed on a wide range of goods from numerous countries, would help eliminate the budget deficit and let the U.S. begin to pay down its debt. On July 27, 2018, he told Sean Hannity of Fox News: “We have $21 trillion in debt. When this [the 2017 tax cut] really kicks in, we’ll start paying off that debt like it’s water.”..The tariffs did bring in additional revenue. In fiscal 2019, they netted about $71 billion, up about $36 billion from President Barack Obama’s last year in office. But although $36 billion is a lot of money, it’s less than 1/750th of the national debt. That $36 billion could have covered a bit more than three weeks of interest on the national debt — that is, had Trump not unilaterally decided to send a chunk of the tariff revenue to farmers affected by his trade wars. Businesses that struggled as a result of the tariffs also paid fewer taxes, offsetting some of the increased tariff revenue.Normally, this is where we’d give you Trump’s version of events. But we couldn’t get anyone to give us Trump’s side. Judd Deere, a White House spokesman, referred us to the Office of Management and Budget, which is a branch of the White House...OMB didn’t respond to our requests."
More discussion at ProPublica.
Isn't it interesting how ProPublica is publishing this literally just a few days before Biden's inauguration?
ReplyDeleteDoes anyone think that's a coincidence?
I'm wondering how exactly the debt--which is assets held by the private sector, remember--is going to supposedly cripple the U.S. economy. The article tosses out a lot of big scary numbers, but note that it doesn't give many details about how this will occur, except a possibility that interest rates might rise. And so? Conveniently, it also omits that fact that the cost to service the debt has never been lower.
And how is it a "burden" on our future grandchildren, to whom the debt is owed? Isn't the lack of government spending on things like education, infrastructure, and public health even more of a "burden?" Graduating into a bad economy has effects on income that last for decades. It seems like that's more of a burden than a debt we literally owe to ourselves. There hasn't been a case of a large national debt by itself causing an economy to falter when it is a sovereign currency issuer to my knowledge. I'm so tired of stories like these.
And, as is de rigeur with every deficit scaremonger story, it quotes the notorious Pete Peterson Foundation--the right-wing think thank that's been peddling Armageddon stories about the national for the last 20 years in the name of "cutting back out of control government spending," which invariably means social programs like Medicare and Social Security.
Fortunately, economist Dean Baker did a good job of debunking a lot of this: https://rwer.wordpress.com/2021/01/14/debt-and-deficits-yet-again/
I also pointed out a few flaws in the reasoning: https://hipcrime.substack.com/p/the-fundamental-basics-of-money
Yes, Trump mismanaged the economy, no doubt. But articles like this clearly have an agenda. I used to trust ProPublica. Not anymore.
Noted. I definitely plan to repost and update my old post about Modern Monetary Theory -
Deletehttps://tywkiwdbi.blogspot.com/2019/10/modern-monetary-theory.html
- but will wait until I get my mouse working again (and after we see what the new economic stimulus amounts to).
If the interest rates were fixed, you could make a spreadsheet and calculate how many bonds/debt you'd need to hold, to essentially have your tax returned from the state as interest. My take on understanding National Debt: Debt is the counter-instrument to taxes, where even flat tax redistributes wealth largely from high income to government employment, public debt redistributes wealth from tax payer to debt holder. So what is National Debt then, it's an injustice on the tax payer who doesn't hold bonds.
DeleteCould you maybe point me to the part where this simple idea (of injustice) is "debunked" or at least discussed, in either you post or the other sources.
Trump is a fool, but the slope of that chart is the same under both Presidents until Covid.
ReplyDeleteYup.
DeleteReplying to Anonymous:
ReplyDeleteOh, absolutely it has distributional issues, since the vast majority of treasury securities are owned by the wealthiest Americans. Ever since Reagan we've been borrowing from the rich instead of taxing them. 100% we should raise taxes on the wealthy. Even more of a concern is that low interest rates are driving sky-high real estate prices.
But it's important to understand that we don't need to go to the billionaire plutocrats, hat in hand, to get the money we need to pay for what is desperately needed now, or ever. Nor we do need to borrow from China.
Articles like the one posted always spin scary stories about the national debt, which can then be used by the usual suspects to justify austerity, claiming things like "we're broke;" or "the US is bankrupt" (a category error--nations cannot go bankrupt, only businesses can); or "we can't afford X;" where "X" is anything that will help people outside of the wealthiest 10 percent or multinational corporations. Such scaremongering during a literal national emergency is even more egregious.