Not that I believe the folks at the top at the GOP really cared about it, ever, going back to (at least) Reagan; it was mostly an excuse to cut taxes on the wealth and cut social programs:
The idea that the GOP was ever about "fiscal restraint" is one of the most successful propaganda exercises ever because this hasn't been true since probably the Eisenhower administration.
What's funny is that this era (the 1950s) is often fetishized by people who absolutely oppose the policies that made that possible, including a top marginal tax rate of 91% and a CEO to median worker ratio of 20-25x instead of the 400x+ it is now.
So the Cato Institute finally realized something that hasn't been true for 50+ years. What we're witnessing is the looting of government coffers and transfer of wealth from the poor to the rich on a scale never seen before. And they don't care about the consequences because capital is mobile. They'll simply leave.
If you go back that far, you have to keep in mind major shifts in party alignment. The two parties changed drastically coming out of the civil rights era and by the 80s had effectively flipped.
I can't speak to the Republican politicians if the era, but all the Republican voters I know where legitimately focused on fiscal issues and balancing a budget until Trump showed up. Most of the older Republicans in my family have since left the party and registered independent, the younger Republicans I know are just about Trump though and, similar to Trump, don't really seem to hold any principles that underlie their views on any one topic.
6th Party System Republicans were selectively focused on balancing a budget precisely when Democratic legislative priorities were in question. If you wanted to bust the budget on tax breaks for billionaires or pointless wars, they had excuses all lined up.
OK, but that cuts both ways. Clinton inherited a deficit problem in 1992; he promised a plan to fix it. He produced one - a ten-year plan, with the vast majority of the cuts in years 9 and 10, that is, after Clinton left office, even if he were in office for two terms!
The Republicans took over Congress in 1994, and immediately put an end to that game. Democrats say that the budget was balanced under Clinton, and it was, but it took a Republican Congress to force him to do it. (This also worked pretty well at starving Clinton's priorities, as you say.)
So neither side looks very good. Republicans spend like crazy when in power (though Trump is far worse than the average Republican administration), and get budget-cutting religion when out of the White House. Democrats occasionally talk about the budget, but don't do anything when in power.
The one historical example we have (post Andrew Jackson) of a fiscally responsible administration was a Democratic president hamstrung by a Republican Congress.
> a ten-year plan, with the vast majority of the cuts in years 9 and 10
Technically, Clinton and a Republican congress solved the deficit during his terms (1993-2001), albeit in large part via post-Cold War dividends from BRAC et al.
The longer term plan would have been to solve the US debt, which was obviously larger. And tbh, will only realistically be solved via running persistent inflation.
Honestly, Congress should pass a law requiring presidents to only publicly communicate budget projections up to the end of their term.
" younger Republicans I know are just about Trump though and, similar to Trump, don't really seem to hold any principles that underlie their views on any one topic"
This a big worry. I thought Trump was for old angry people shaking their fist at sky. The ones with dementia. Why are young into him?
I'm sure it varies in different parts of the country. I'm in the southeast, a very Republican region for the last 60ish years. I also have family in Arizona, not as red as here but still popular.
In both areas, the young people I know that are Republicans, and pay any attention to politics, seem to mostly be attracted to his energy and wild promises/claims. They also tend to laugh at the things that I expect many here are concerned by.
+1 In my experience, younger Trump voters in the SE tend to be more politically and economically ignorant.*
Big claim, but as a consequence you're seeing his support tail off substantially in younger voters as the rubber (his campaign claims) meets the road (actual governing, policy, and results). https://www.chip50.org/blog/whose-approval-disapproval-of-tr...
His rhetoric on the campaign trail was attractive to people who didn't think past first order effects ('Yeah! Fewer migrants! They took our jobs!'), but the net effects are becoming evident to those same people, even if they don't understand why.
* I'm explicitly differentiating "Trump voters" from Republicans-who-voted-for-Trump (aka the temporarily endangered mainstream Republicans)
Some of them are redpilled assholes. A lot of them think life is a joke and that his 'trolling' is really funny. Some are the kind of angry young men that make up the front line of any brownshirt movement. Some are just going along with what's popular in their community.
It's a bit less of a worry for me, because Trump is going to die before too many more years go by (like, just of old age; man's not young or healthy).
At that point, there's going to be a huge shakeup in the Republican Party, and the American right wing more generally, because from all indications, he's the only thing holding that coalition together, and they do not have a successor who could do anything like the same.
Trump got to where he is because of Twitter. Hes a product of the social media age. Gen Z respond to him because he understands internet culture, especially the vile parts like how to dominate a conversation by trolling etc - nowadays if you say something controversial, dont put out a PR apology, that hasn't worked since the 90s - instead, double down on it and throw an insult back. I think thats why (some) GenZ respond to him. None of this is a good thing btw.
Here are the changes in the two parties in the last century:
1. FDR made concessions to the working class in the Great Depression to stave off a communist revolution and protect the status quo. Yet this earned the Democratic Party almost unbroken control over Congress until the 1990s;
2. In the wake of desegregation and the civil rights movement, all the slaver-wannabe Southern Democrats (ie the Dixiecrats) left the party and became Republicans. This was an intentional effort by the Republican Party called the Southern Strategy;
3. Despite 60 years of control over Congress and the loyalty of the working class that went back to FDR, Bill Clinton decided "no, we need to be Republican Lite". This was the so-called Third Way neoliberlism. This is the era when we got the 1994 crime bill, welfare "reform" and NAFTA; and
4. After 40+ years of the destruction of real wages, working people were finally seeking a change in the 2010s. White working class people, who were once loyal Democratic voters, went to Donald Trump. I still believe to this day many of these people would've voted for Bernie Sanders had he been the candidate over Hilary "more of the same" Clinton.
But there's no flip here. The Republican Party just got more insane, overt and racist and the same donors that back Republicans successfully turned the Democrats into the controlled opposition party.
The Democratic Party has been the left-wing party since around the turn of the 20th century. Yes, there was a flip, but it was (roughly) under Teddy Roosevelt. Not Franklin Roosevelt.
Ah yes, I remember Strom Thurmond, that great firebrand of the left, and his 1957 filibuster of the Civil Rights Act of 1957. Basically Lenin. /s
To be fair, US political culture (and capitalism in general) contain deep, deep contradictions so it's going to require a whole lot of glue and squinting to say that there is any coherence to any US political party...
The person you're responding to has it correct, though, that there was an important cultural shift around Johnson and Nixon and the Southern Strategy and all that... not that these cultural politics could ever touch the materialist facts of capital.
How long will the petrodollar remain a thing with the current diversification of energy sources proceeding apace internationally?
Listening to Americans talk about energy and vehicles feels like going back in time, they’re stuck in the past and things that worked then and the world is rapidly routing around them. Quite sad to see.
The petrodollar thing always seemed overhyped by people who don't understand economics that well. It was just a term for the dollars received by oil producing countries like Saudi Arabia.
People used dollars rather than yen or pounds because it the US was the largest and a rather free and stable economy. That still mostly applies.
The argument in the linked article:
>Since the 1970s, global oil transactions have been priced and conducted almost exclusively in U.S. dollars. That arrangement has given America an unparalleled advantage, effectively creating an economic blackmail chip.
I think is bunk. A country pricing in Euros would make no difference apart from traders needing to check the dollar euro rate.
> A country pricing in Euros would make no difference apart from traders needing to check the dollar euro rate.
You can't clear nation-scale oil purchases by looking at the exchange rate, which is predicated on there being sufficient liquidity at that price for the transaction you're looking to make.
The petrodollar is both a demand and supply solution, and you're looking at this in micro rather than international macro terms.
The demand explanation is simplest -- the largest producers of a limited-source, universally-required commodity demand that purchases be made in US dollars.
As a result, all countries need access to dollars in order to make those purchases at scale.
Enter the supply side, where dollars both aren't and kinda-are physical. They aren't, in that international transactions are obviously executed with digital balances. They are, in that arbitrary countries can't just "create" dollars as needed: they must get those dollars from someone who has them.
Ultimately... the US Federal Reserve, who is empowered to create new dollars.
Putting all of this together, you have an aggregate demand for dollars of {US federal budget, similar to other countries' monetary demand} plus {international float for transacting dollar-denominated commodities}.
It's that second piece that people are really referring to when they say things like 'the petrodollar allows the US to run deficits that would negatively impact other countries' currencies'.
Because as Doctor Strangelove quipped, it is not only necessary but essential for this system's smooth functioning that the US produces large enough numbers of excess dollars to meet international demand.
The fly in the ointment, so to speak, has been the 00s+, initially War on Terror, now War on Et Al., US weaponization of the dollar against countries doing things it doesn't like.
Hence Russia/China's dream of breaking the petrodollar.
One piece of evidence - around 2020 the US went from being an oil importer to an oil exporter and people hardly noticed.
I also think if Saudi asked to be paid in Euros rather than USD it wouldn't make much difference. People just change currencies into what they need. They are just tokens to facilitate the trade of goods and services like oil for Ferraris in Euro or oil for Boeings in USD. The forex markets are huge.
Ironically, the US being an oil import / exporter is the least important country to this system, given it's the only one able to arbitrarily inflate the US dollar supply.
The forex vs oil scale is valid point, and it'd be curious to compare it across the decades.
Per some preliminary numbers, Brenton Woods being abandoned in 1971 led to market forex volume substantially growing every year.
Oil:forex looks like ~1:150 in 1980, scaling to 1:500 in 2010.
So indeed an increasingly smaller portion of the forex pie.
Abit glib to call it hyped when the US has started multiple wars to protect the petrodollar.
Trying to do business any other way puts targets on whole countries, much less the speaker and their family. Many attempts were made in the middle east and Africa to make that change, and those people and governments were wiped out.
While the argument can be made for it's economic effect and power today vs 20 years ago, I don't think it was overhyped then.
I'm a Brit and we've done business other ways for centuries without issues. At least not issues due to using pounds rather than dollars. Who got wiped out?
Democrats Change In Deficit
----------- --------
Joe Biden -$999B
Barack Obama -$747B
Bill Clinton -$383B
Jimmy Carter +$25.3B
Republicans Change In Deficit
----------- --------
Donald Trump +$2.108T
George W. Bush +$1.541T
George H. W. Bush +$102B
Ronald Reagan +$73.7B
Gerald Ford +$47.5B
Richard Nixon +$9.4B
Dwight Eisenhower -$3.2B
This is how I view it these days as well. I'm fine with running a deficit as long as we're solving real problems at a mix of time horizons. Using public funds to funnel more money to the ultra wealthy is the issue for me as a citizen.
> This is how I view it these days as well. I'm fine with running a deficit as long as we're solving real problems at a mix of time horizons.
There's nothing "these days" about the idea: that's how all debt should be looked at. How much in interest will it cost you, and are the benefits you get worth that cost?
Borrowing money at 2-4% to build water/sewers infrastructure so your population does not die, and thus allows for better economic growth, can pay for the borrowed money easily. Or roads, bridges, rail, schools, scientific research, etc.
If you're borrowing money because you have low revenues due to tax cuts (especially in top tax brackets), then perhaps your ROI won't be as good.
There's nothing wrong with using public funds to solve real problems, but persistent deficit spending is the wrong way to go about it!
Deficit spending causes inflation, and that type of inflation is a hidden, regressive form of taxation. It hits everybody, but the poorest suffer most when all the essentials get more expensive. The government creates new money, but really the value of that money comes out of everybody's income and bank accounts.
If additional government spending is truly necessary, it should be funded through transparent, progressive taxation, so that it only affects those who can afford to pay the tax, and so that the voting public is aware of it.
Unforunately, you're unlikely to win an election on the promise of raising taxes. The hidden tax of inflation, on the other hand, is so perfectly hidden in plain sight that most people don't notice it unless it gets out of hand.
The funny thing is that from a levelized cost of electricity stance, renewables are the cheapest, and cheaper in most cases even after storage is included. It's insane.
Eisenhower who, despite being exhausted by WWII efforts, ran for presidency because he saw that as the only way to prevent a civil war. Nowadays the American Left is Center Right, but back then the American Right was Center Left. Things change, things stay the same.
> Eisenhower who, despite being exhausted by WWII efforts, ran for presidency because he saw that as the only way to prevent a civil war.
Can you share more about this? I'm unfamiliar with a post-World War II civil war risk. Who were the conspirators? Who would be fighting whom?
> Nowadays the American Left is Center Right, but back then the American Right was Center Left. Things change, things stay the same.
I don't think this is the case. Populism has confused some folks about where things stand. There also seems to be this default assumption, kind of like the End of History, that being "left" is associated with moral goodness and so haha the American left is only just center right, ergo not quite good enough yet! I'd challenge that assumption. Frankly, the center is often the best because moving too far to one side or the other is destabilizing. Communism would be awful, as would other authoritarian ideologies like fascism.
The pendulum has been swinging pro-capital since Reagan and has not even stalled yet. This affects both parties. You will not find enlightenment by averaging "heads I win" with "tales you lose."
FDR Democrats: fixed the Great Depression by bailing out the people not the banks (construction of roads, bridges, schools, dams, airports), regulated the banks, legislated protections for unions, electrified rural America, ended elder poverty with Social Security, won WWII, won the peace after WWII. Paid for it by taxing the rich, paid down the debt by taxing pensions.
Clinton Democrats: cut the government to the bone, "DOGE but real," massive tax hike on top workers, massive tax cut on capital, kicked offshoring into gear (NAFTA was voted against by most House and Senate Democrats), teed up the China WTO admission for Bush, and handed him a massive budget surplus with a bow on top ready to be pissed away on not one but two pointless Republican forever-wars. Oh, and bonus Epstein connection.
These are not the same. FDR Democrats would see Clinton Democrats as 100% DINOs, doing everything that Republicans say they want. The DINOs can only be identified as non-Republican due to their fiscal restraint which has not been a Republican quality since Eisenhower. Obama Democrats were better, but chose to bail out the banks not the people, didn't pass single-payer healthcare, and didn't end Bush's forever wars. Biden ended Afghanistan and quietly started enforcing Trump fair trade policies. So the Democratic party has been moving left at a snail's pace after reaching a zenith of "Republicans but less shit," but they are still far, far from FDR. Who was in turn far from actual socialists or communists. Here's hoping that on this next swing of the pendulum we land on FDR again, yeah?
In any case, you cannot average your way to enlightenment. If you want that, you must learn about actual policies and actual history.
I'm a fan of FDR and think he did great things, but he also was doing so at an unprecedented time period, the aftermath of the Great Depression, itself on the heals of a catastrophic World War I, and then of course, World War II. Didn't he have 3 terms? Didn't he threaten to pack the court when he didn't get what he wanted? Didn't the United States turn a blind eye to what Japan was planning because Americans were against being involved in World War II and this was a good way to flip that? There are a lot of other things.
But I think your own argument betrays itself and proves my point.
> but they are still far, far from FDR. Who was in turn far from actual socialists or communists. Here's hoping that on this next swing of the pendulum we land on FDR again, yeah?
When you write this, you're basically arguing my very point - that the center is the best because moving too far to one side or the other is destabilizing. In your own words you've basically boxed in the Democratic Party in the center and you're just arguing FDR was in that center but further to the left. Ok? Yes I agree. If you go center right a bit, or center left a bit, what's the real difference besides the mascot?
But even from the great things that FDR did, just because they worked at one point in time doesn't mean they are forever and always the best idea going forward.
> Here's hoping that on this next swing of the pendulum we land on FDR again, yeah?
Depends on the details. If we stop MAGA, DSA, fix crime, lower taxes, lower spending, streamline the government to be more effective (this could include something like government run healthcare by consolidating agencies), or other various ideas I'm always on board with talking through the pros and cons.
As an aside I always liked Teddy Roosevelt too. Maybe my favorite president aside from the usual suspects like Washington or Lincoln.
-edit-
As another aside I don't think we have to have a pro-capital regime that's also against many of the ideas you might be in favor of. The Nordic countries for example are the most capitalistic countries on the planet according to many measurements.
As a barely related note, FDR was a staunch capitalist. He didn't do what he did because he wanted socialism, quite the contrary. He recognized that the US was right on the edge of a communist revolution, and if he didn't come in and put in concessions, capital would be over.
I genuinely believe that if FDR or an FDR-type did not exist, then communism would be the status-quo of developed nations. The US would turn communist after a bloody civil war. We would ally with the Soviets after. Together, the US, Soviets, and Europe would easily win WWII. At that point, Communism is set as the world order and would continue throughout the 20th century. Many parts of history would turn out "good" - no cold war, no Vietnam war, no Red Scare. Many other parts would turn out bad.
What FDR did was just enough to buy a few decades of peace before the capitalists ransacked the government again. By then, Communism was the ultimate enemy for obvious reasons. The propaganda was far too strong for any kind of revolution, and technology improved enough that people weren't nearly oppressed enough to care about any revolution.
Oh, and we probably would've gotten the civil rights era a couple decades earlier.
Given the history of communism and the results in every state that implemented it, I just do not agree with this assessment at all. For example, you don't need the US to be a capitalistic country for the implementation of the gulag or the Great Leap Forward. Both resulted in at a minimum tens of millions of deaths.
When you say things like "buy a few decades of peace before the capitalists ransacked the government again". What are you even talking about? I'm genuinely perplexed. Capitalism didn't, for example, cause World War I or even World War II - World War II was caused by the rise of Nazism, a nonaggression pact with Communists, and then the attack and partitioning of various countries in Europe by both the Nazis and Communists. In Asia, again, fascist powers attacked capitalist societies such as the United States. How would the US, Soviets, and Europe (who is Europe?) win World War II when from the beginning the Soviets and Nazis were aligned and jointly invaded Poland?
I would certainly grant you that, perhaps the United States would have experienced additional strife or maybe even a civil war had conditions gotten bad enough, but I can't for my life ever think that such a thing was even moderately serious. Even in countries where Communism completely took hold, capitalism found its way back because humans by intrinsic, evolutionary nature, always arrive at the same foundational conclusion which is property rights, cooperation for the greater good without coercion, and abstractions such as code or even money.
> Given the history of communism and the results in every state that implemented it
The #2 economy in the world is run by the Communist Party of China. #1, if you measure in material terms rather than financial terms.
The 1991 talking points are stale. Time passed, and the private owners of the US economy sold our industrial base to the communists in order to stuff their bank accounts. Private ownership provided the means, motive, and opportunity. I am a capitalist despite what it has done to my country, not because of it.
> The #2 economy in the world is run by the Communist Party of China. #1, if you measure in material terms rather than financial terms.
Well if you can even get accurate measurements out. Nobody really knows, for example, whether the population of China has been severely undercounted, or truly how much debt has been amassed, or what the next crises may be, similar to over-building in housing.
You also can't ignore the history of these countries in modern context. China has become more capitalist over time because communism was not working. The comment I was replying to was talking about World War II so of course pointing out the tens (hundreds?) of millions of lives lost due to communism is just participating in the discussion that was put forth here. I'd say the greatest gift China continues to give the United States is hamstringing its economy. They'd easily be #1 right now if not for the CCP.
> Time passed, and the private owners of the US economy sold our industrial base to the communists in order to stuff their bank accounts.
Not just that, but in order to get Americans the cheap baubles they so desire. But that seems less of a criticism of capitalism and more of a government failure.
Right, because Joe Sixpack got a choice between "cheap baubles" and "a job" and chose "cheap baubles"? No, this decision was made by shareholders for shareholders.
It's a government failure all right: a failure of the government to tell the shareholders to stop selling out America.
I'm not resolving policymakers of blame, but ignoring consumer behavior and cultural attitudes leads to incomplete analysis and faulty solutions. You see the same thing with respect to the environment. People still buy plastic bottled water, for example and travel all over the world on vacation while talking about how we need to reduce emissions. We can't reduce emissions without reducing or changing consumption patterns too. Corporations simply sell products that people want - it's up to us as a country to rein them in and that goes for both policy and behavior.
Sorry, I mean Peace as in "we're not beefing with the communists right now".
Part of the reason, maybe the biggest part, that communist nations struggled is because the world's largest world power, which held 50% of the global GDP post WWII, openly opposed them as much as possible. It wasn't just war, it was trading, economic attacks, propaganda. Capitalism seeped back into communist nations because they saw the US was rich, whether that was true or not, and wanted to be more like the US. This was orchestrated intentionally over decades, this was literally the US' #1 goal.
And, to be fair, the US was rich. By circumstance. Post-WWII Europe was destroyed, we held 50% of the world GDP basically by default. Then our richness eroded as communist nations developed extraordinarily quickly, and threatened the US hegemony. Then we imploded our richness from within by throwing away the concessions FDR bought. The average American got poorer and poorer, and the golden age became known as that. Nobody really noticed because technology advanced, so people were poorer, but it was hard to tell. By the 80s people knew. Then we got Reagan, and things only deteriorated further.
That's not to say that communism is good or would have been good. It would have just eliminated a lot of strife in the world and would basically align all developed nations on one singular ideology. Would that ideology then be overthrown? We don't know, but I highly doubt it. People in the US would still be living good lives, except for a very small pool of elite few who got their shit rocked. Everyone else would still enjoy the advances of technology, and they would be content. The USSR would have been much more successful with the US ideologically and economically backing them. It would also be very hard to have a war at that point: over what? All of our post-WWII wars are over communism.
I mean, think about it. The USSR was the second world power, and it was very close! Despite the largest economy and military in the world doing everything in their power to ruin them. Imagine if, instead, those two powers worked together. Imagine where the USSR would be.
Also, the USSR was more progressive than the US. I'm talking gay right, rights for minorities. We would've gotten the civil rights era decades earlier. Gay marriage way, way earlier.
Anyway, I'm not a communist, and I'm happy with how the US turned out for the most part. I just think about how different history would have been if just one president was changed. I do truly think that if FDR was never president, most if not all developed nations would be communist to this day. I think people really do not appreciate just how close the US got to being communist. It was really, really close. We were going down the exact path of every communist nation that followed. There's some sources from the early 20th century, it's interesting to read.
Jeez the horror of societies around the world wanting to be rich. Damn America for wanting to provide material wealth, medicine, and more instead of its citizens living in abject poverty!
> I mean, think about it. The USSR was the second world power, and it was very close! Despite the largest economy and military in the world doing everything in their power to ruin them. Imagine if, instead, those two powers worked together. Imagine where the USSR would be.
This is a very one-sided view. The USSR, by the way who was in league with the Nazis until Hitler betrayed them, also did everything in their power to ruin liberal democracies. Imagine, if instead, the USSR had worked along side the United States instead of opposing it!
The USSR also created things like gulags. Ever been to one? I haven't but I've heard they're not that great. Why did the USSR have to create those? Why does China even to this day have to disappear people? Fall in line with our ideology or die? Sounds a lot like Nazism to me. Meanwhile in the United States you can literally live life as a communist if you so desire. Why is one society more tolerant, wealthy, and happy and the other largely no longer exists? Because around the world people chose to not go to the gulag, to think for themselves, and to make the best use of resources available to them.
I find this USSR revisionist history to be a bit jarring. The USSR didn't even get along that well with China who was a fellow communist state. How can you argue that if everyone was communist we'd all get along when even the communist states (and those they subjected, such as in Eastern Europe) didn't get along?
Teddy Roosevelt. The man who carved the Lincolnite Progressives out of the Republican Party, taking with him the last good Republican president and the last good Republicans. He fumbled 1912, but the man in the arena said all that needs to be said about that in The Man In The Arena.
> you're just arguing FDR was in that center but further to the left
I'm arguing on your terms in the hopes that when you see the output of the "center" function change dramatically with zoom level you will trust it a little less as a source of foundational truth.
Centrism is like listening to only pop music. Many, perhaps even most good ideas can be found there, but the top slots are all bought and paid for and what do other people know anyway. Political ideas, like songs, should stand for themselves and earn their place. We should be glad that our ancestors were bold enough to occasionally push for new ideas or else they would have thrown all good ideas of history onto the refuse pile alongside the bad ones.
> I don't think we have to have a pro-capital regime that's also against many of the ideas you might be in favor of.
Of course. I'm a capitalist, in the words-mean-things sense of the term where "capitalism" means "private ownership of the means of production." Skin-in-the-game capital allocation is special and we shouldn't throw it out with the bathwater. But people who call themselves capitalists generally have politics closer to "Elon's 0.25% taxes are too much and your 25% taxes are too little" than "a laissez faire garden is a garden of weeds," which is where I stand. It's OK to believe that a softmax function is the best way to run an economy (I do!), but it's a fact that this pushes people down and one had better develop some Nobblesse Oblige to compensate or we will not see eye to eye.
People who call themselves centrists generally look for the center between recent presidents, who were all economic-right neoliberals from the perspective of policy accomplishments. Whereas I take the perspective that the neoliberal economics common to both parties is exactly what fucked up this country and needs to be undone.
> But even from the great things that FDR did, just because they worked at one point in time doesn't mean they are forever and always the best idea going forward.
Yeah. The economy has become more productive since the days of the Dust Bowl, so we should be more ambitious with our demands than FDR was.
> I'm arguing on your terms in the hopes that when you see the output of the "center" function change dramatically with zoom level you will trust it a little less as a source of foundational truth.
I'm not following. Can you expand upon this? I'm certainly not arguing that the center is the only source of good ideas - both MAGA and DSA have had great ideas, or at worst identified very real problems that weren't being addressed, but that's different from being run by, say, those organizations completely which would shift us to the far right or far left.
We can debate the zoom level but I'm not really sure what point you're trying to make. Are you saying the center isn't left enough? It's too far to the right? If you wanted to argue that FDR's policies were barely moving the needle on the left and they're still right-leaning, I say call me an ultra-conservative then because while I don't really have too much of an issue in the grand scheme of things about the New Deal policy suite (which has a mix of good and bad effects and assumptions as all policy does) to imply that such policies aren't to the left seems to me to be an arbitrary goal post move. Idk. Moving to the left or the right isn't a given, nor is it a given that such a move is good for any given society. People seem to have confused Progressivism with Progress. It's not a given, just as the End of History wasn't a given either.
> People who call themselves centrists generally look for the center between recent presidents, who were all economic-right neoliberals from the perspective of policy accomplishments. Whereas I take the perspective that the neoliberal economics common to both parties is exactly what fucked up this country and needs to be undone.
Sure, but your prescription seems to be (and correct me if I'm wrong) to throw the baby out with the bathwater - in other words destroy the institutions (either the MAGA or DSA version). Neoliberalism certainly has had a lot of issues but day-to-day life is pretty great for the vast majority of people under those regimes. Free speech, freedom of religion, free markets. Not bad at all.
> The economy has become more productive since the days of the Dust Bowl, so we should be more ambitious with our demands than FDR was.
Sure but your demands from extraction don't come from "the economy" they come from real people. That's where the rubber meets the road in a lot of these schemes and you start to lose contact with reality and what people actually want. For example, I think the economy has become more productive, my demands are the government does XYZ - maybe that doesn't align with your XYZ. Now what? You're just rehashing the current state at that point.
> Sure but your demands from extraction don't come from "the economy" they come from real people.
Elon was bitching about paying 0.25% tax on twitter the other day ($500M/yr on $200B/yr) and here I am paying well north of 25%. I could advocate multiplying his taxes by 100 and still be advocating for comparatively regressive taxation. I don't think you are honestly engaging with how fucked this has gotten.
Please stop saying things like " I don't think you are honestly engaging with how fucked this has gotten.". This is just a dumb waste of time. When someone disagrees with you, it doesn't mean they are not "honestly engaging with...", it just means they disagree with you. Whenever you or someone else writes something like that, it then means you are not honestly engaging with the person you are replying to or the topic at hand. Every accusation is a confession.
I don't disagree with raising taxes on these billionaires or whatever. If for nothing else but personal preservation and because they failed in giving back to society.
This needs three changes to support meaningful discussion and response:
First, all values should be in the same unit; switching from B to T worsens readability here.
Second, it should include the total change as % of GDP as a range across their 4-year term; comparing by actual economic output fractions is better than raw or inflation dollars alone.
Third, the raw dollars should be inflation-adjusted to allow comparison; as presented, no comparison other than sign +/- is meaningful, and especially not of scale of +/-.
Not an American here, but doesn’t Congress pass budgets? Everyone always blames the president but as I look in from the outside, it’s entirely the house and the senate who bungle things.
I've had the same question for a long time and I suspect the answer is something like "the executive is still the one doing the analysis and making the proposals" - presumably Congress doesn't just allocate with complete disregard for what the executive requests. If the executive requests less then it (usually) gets less. But I'd definitely appreciate a more satisfactory answer.
As the quip goes, 'the President proposes and Congress disposes'
In the sense that the President (and the executive branch behind him) almost always have greater unity of purpose (it should! The President technically picked them!) and therefore clarity of vision than Congress.
But Congress (as a largely power-distributed, multi-state-representative body) is ultimately empowered to say yes or no.
As a realpolitik result, Congress (of same or opposition party) generally lets the President lead with a proposal, and then adjusts it to their satisfaction into something that can pass.
Congress would likely be realistically unable to generate a yearly budget, if left to their own devices, due to competing interests and priorities.
Having a starter plan from the President cuts through some of that, even if they strike large sections of it.
Though I would like to see which dates were used to calculate them. And if it was from ”first day to last day of office” it would also be interesting to calculate with a certain ”lag” to account for the fact that effect of some legislation may not show until a bit later.
Democrats Change in Deficit
--------- -----------------
Joe Biden -6.1% GDP
Barack Obama -6.4% GDP
Bill Clinton -5.0% GDP
Jimmy Carter -0.2% GDP
Republicans Change in Deficit
----------- -----------------
Donald Trump +8.6% GDP
George W. Bush +11.0% GDP
George H. W. Bush +1.1% GDP
Ronald Reagan +0.2% GDP
Gerald Ford +2.3% GDP
Richard Nixon +0.7% GDP
Dwight Eisenhower -1.1% GDP
via ChatGPT which among other things verified the original table. I didn't bother with inflation adjustment since it's normalized by GDP.
Good call, normalizing to GDP instead of deficit fixes the flip into/out of surplus problem. Also, now that aggro "cite your sources" guy ran, it's probably worth duplicating the cite here:
Despite being witehouse.gov, I am pleased to see that this is one page that Trump has not yet updated to read "Republicans Rule Democrats Drool" over an editorialized fever dream replacing inconvenient data. Grab it while it lasts, and let's hope that accounting remains boring enough to repel such attention!
(fiscal-year-end figures, not inauguration-to-inauguration)
Democrats
---------------------------------------------------
President Start End Change
---------------------------------------------------
Joe Biden $28.386T $37.375T +$8.989T
Barack Obama $11.876T $20.206T +$8.330T
Bill Clinton $4.351T $5.770T +$1.419T
Jimmy Carter $0.706T $0.995T +$0.288T
Republicans
---------------------------------------------------
President Start End Change
---------------------------------------------------
Donald Trump $20.206T $28.386T +$8.180T
George W. Bush $5.770T $11.876T +$6.106T
George H.W. Bush $2.868T $4.351T +$1.483T
Ronald Reagan $0.995T $2.868T +$1.873T
Gerald Ford $0.484T $0.706T +$0.223T
Richard Nixon $0.366T $0.484T +$0.118T
Dwight Eisenhower $0.266T $0.293T +$0.027T
These are changes between fiscal-year endpoints, not the exact
amount of debt incurred during each president's time in office.Fiscal years do not line up with inauguration dates.
I'm no expert about anything related to this but the obvious fact that the size of the debt as proportion of GDP has consistently increased since Reagan first implemented this scheme suggests it's pretty obvious these GDP gains do not offset increased debt (and that this is causative).
Debt comes from spending, that spending is on stuff, which drives GDP.
So whole concept that we could reduce debt by increasing GDP and tax it, is not how the money actually flows.
This is why in economic downturns, often the best solution is more debt, by more spending. And trying to fix economy by 'austerity' makes things worse.
Of course, also I don't know solution, or what the 'right size' debt should be. Just that it isn't black/white.
It makes sense that spending stimulates GDP in the short term. The consequences of debt are delayed. The argument that people tried to make in the past was that spending can stimulate growth so much that growth ultimately overshadows debt. That was controversial 50 years ago but at this point it doesn't seem like it's working out as expected since debt has been doing nothing except steadily increase relative to GDP. Sometimes it's valid to accept that failed experiments are failures.
This is nonsensical. Debt-to-GDP over the course of an entire term is what matters. Debt was 77% of GDP when Obama took office and >102% when he left. The "change in deficit" is a useless measure.
Democrats Change In Debt/GDP
----------- ------------------
Joe Biden +0.1 pp
Barack Obama +22.2 pp
Bill Clinton -9.4 pp
Jimmy Carter -3.1 pp
Republicans Change In Debt/GDP
----------- ------------------
Donald Trump +18.9 pp
George W. Bush +27.3 pp
George H. W. Bush +12.6 pp
Ronald Reagan +19.8 pp
Gerald Ford +2.3 pp
Richard Nixon -4.7 pp
Dwight Eisenhower -16.1 pp
Former Republican here aka Rino. It’s easily explained; the GOP ceased to exist when they all fell in line with Trump first term. Trump threatened to to form his own party with his massive following and make the GOP the third choice on the ballot. Trumpism is not conservative in any sense; it’s jingoistic nationalism to benefit Trumps interest.
Not to veer too far off-topic but are former-Republican and RINO mutually exclusive? How can one simultaneously be a Republican (in name or otherwise) while calling themself a former Republican?
Either you've stopped voting Republican (in which case you're no longer RINO) or you still are (in which case you're a current Republican)...
From your reply it sounds like you're still voting Republican, just not for the candidates that you classify as "MAGA"? In which case I guess that's a (current) RINO...
Assuming my assumption is correct, I hope you're just recognizing the fact that MAGA didn't get where it is today without massive help from non-MAGA Republicans (in Congress as well as outside), in numerous ways. So you're not going to see the outcome you're waiting for if that's the case.
Exactly. I remember hearing "tax and spend Democrats" as a slur back in the 90s/00s, but seeing the GOP spend without taxing during those years showed what it was really all about...
Before Trump the GOP was fiscally conservative - when the democrats were in power!
That explains a large part of why democrats were able to lower the debt - the republicans in congress wouldn't go along with efforts to raise the debt.
The GOP is basically universally bad at fiscal policy. They spend big, mostly on warmongering and industry. Not developing industry, no no, siphoning government funds to the private sector, where I assume they have many friends.
They increase the deficit because they increase spending and then "cut" taxes. Often they don't effectively "cut" taxes for you and me: the tax burden for many Americans is raised, except for a select few who get tax cuts.
This was happening well before Trump, into Reagan. The only reason this works at all is because they get to say "oh we cut taxes!". But tax burden is very complicated, and nobody is analyzing that for the common voter.
Yes, in the 1970s-1980s the GOP came up with the idea of "starve the beast" [1] which allowed them describe unfunded tax cuts and deficit spending as "fiscally conservative", like a parent taking away a child's allowance.
Complete nonsense in practice, obviously - but political gold! Voters get all the same public services, lower taxes, and to think they're being responsible with money. And if you're a 65-year-old legislator, you'll be dead and buried before the consequences start to bite.
Running up massive debt and deficits is also a way to kill appetite for D priorities that require new spending.
The best way to make sense of the GOP is in it's opposition to wealth redistribution. Primarily downward wealth redistribution. That's their north star.
Upward redistribution is mostly OK though, they consider it just giving rich people their own money back
CATO has been quite good of late at dismantling many of the worst of the Trump GOP's initiatives with real research. They're immigration research is a great resource to rebut the nativist MAGA nonsense.
> From 2018, "Sadly, Fiscal Restraint Is No Longer a Core Principle of the GOP":
While I agree, surely the assumption that the Democrats will be more fiscally responsible isn't true either?
This is more an issue with modern political expectations imo – compounded by challenges of aging demographics.
I can only give my view as a Brit, but I think the same applies here as in the US. Here people expect far more from the government today than at any point in history. Some of these exceptions are reasonable, but many are not.
But either way, despite huge government revenues theres just never enough money to fund all of the social programs voters ideally want. And under this pressure the only option to win elections is to borrow.
I guess to frame it another way – what spending would people want to see the politicians cut? I suspect the only way Western governments will get spending under control is to understand that government can't solve every problem, however nice it might be if they could.
Democrats have a track record that speaks to them being more fiscally responsible than GOP, in spite of the rhetorical narrative.
You can't assume anything about the next crew. Past performance is no guarantee of future results. But if you're predicting fiscal responsibility, past performance favours the Democrats.
The markets generally respond to US concerns by buying more US treasuries. That’s counter-intuitive but reflects the situation that if things hit the fan they feel loaning the US money is still the safest place for their money.
For better or worse there’s unlikely to be a scenario where the US becomes insolvent but it’s not far worse for those outside the US.
May sound very similar but it's more like if everything is going down, the strongest one is going to go down last. It's not really "unlikely to be a scenario where the US becomes insolvent" — it's that if it happens, it happens last. And a lot of that just has to be because the US "owns" the dollar, and the world ended up picking (let's not get into how) the dollar as the reference point for their own currencies; aka everyone's reserve currency.
So no matter how much the US fucks up, they just print more and more dollars and ensure the entire world collectively pays up for their fuck-ups. But if the US doesn't fuck up and does something good, then the benefits of that? Oh, that's a different story. No excessive benefit printing, no sir.
The US world reserve currency status only happens by norm. When RU invaded UA the US cut off RU from most of their access to USD / US-allied banking. At that point, CN and the BRICS countries started working on a decentralized version of a "world reserve currency" which is partially implemented.
Investors know the US is going to lose this status if the current momentum continues and there are some possible alternatives.
Investors won't sit by and tolerate MONEY PRINTER GO BRRRRR if they have ANY alternatives and they have LOTS of incentives to find any.
Why does the US need to prop Japan? Because they are the biggest holder of US treasuries ...and if they need to prop up their own currency, they will need to sell them.
<Insert Pearl Harbor reference...>
> The US will become insolvent by trying to prop up Japan.
No, it won’t. The worst case we are looking at is paying more interest on debt. It’s not great but we aren’t in danger of becoming insolvent because of Japan.
There's a non-zero chance that actually following through on Bessent's statements about support for the largest sovereign buyer of US bonds would push us towards insolvency. You are just stating an opinion that we would stop short of it becoming such a large support program that it would push the US past the tipping point towards inevitable insolvency.
The US sold Euros to do the propping of Japanese bonds without telling the EU. Not only did we spend a lot to save our biggest sovereign buyer, but we undermined our relationship with another. And we didn't buy the Japanese much time.
Worth mentioning that lots of buyers is jumping into Chinese bonds over the past week.
It feels like the BRICS are taking over as of this month.
Obviously we don't measure it in "how many traders", but what the effect their trading has on the instruments they buy.
The US Dollar is slipping from the world's reserve currency status and the US treasury is slipping from the default safe haven for liquid assets. The BRICS countries bonds are becoming more attractive as of this month.
Brazil, India and South Africa all have 5 year bond yields that are higher now than 5 years ago.
Russia is obvious outlier you can’t price well.
If there is any news this month in Chinese bonds it’s a) a crazy upward move that corrected and b) the Chinese authorities have upped the quota on foreign bonds that their asset managers are allowed to buy.
it was a tongue-in-cheek comment, I think. China is doing well and will try to prop up its BRICS partners as long as it benefit China. It doesn't help that current US government is actively attacking those countries' economies.
It's not BRICS as a whole, it's China and a little bit of India.
Brazil is a major risk given political turmoil and generalised corruption; Bolsonaro attempted a coup in a country already plagued in history by coups, his son is going to run for presidency and has a chance to win it.
South Africa's economy is in shambles, their electricity grid can barely function, the country is going backwards socially and economically.
Russia I don't think we even need to talk about.
That leaves China and India, China has capital controls and is notoriously difficult to invest in.
I don't think there's much in common with BRICS as it was in the early 2000s when the acronym surfaced, as of now they are very dissimilar societies and economies.
> I don't think there's much in common with BRICS as it was in the early 2000s when the acronym surfaced
Excepting India, one thing Russia, China, and South Africa all have in common is they're falling into a relationship of economic patronage with China, their erstwhile peer. That may make the term BRICS antiquated in a sense, but now that China has more control over the group it also increases the collective power that China can summon. Whether that power is substantial enough to have become more meaningful than before, I'm not sure. Doesn't seem like the yuan has gained much ground relative to the dollar, euro, or yen.
Bonds go up, bonds go down. This "news" (from a questionable source) needs more context, otherwise it's just noise in isolation.
> The US Dollar is slipping from the world's reserve currency status
As I always like to remind folks, the US dollar is just one of many currencies that banks keep in reserve. There is no status to lose other than being the one held the most. There are also downsides to being the dominant currency - I'm sure you're aware of those, right?
> - and the US treasury is slipping from the default safe haven for liquid assets.
Based on what?
> The BRICS countries bonds are becoming more attractive as of this month.
Are you buying? I'm not buying Chinese bonds. The US stock market is at all-time highs and more people than ever are buying into safe haven American companies.
You should provide more details and context about the cause and effects, why it matters, and what it means. Just saying "people find XYZ more attractive" isn't compelling.
being in an All time high is only better than not being in ATH. With high inflation, it doesn't mean much. It is like Apple every year launching the best iphone ever.
Sure but the OP suggested that since some instrument was at some price point it implied some other thing such as investors not having confidence in a country such as the United States. On the other hand the US stock market is at all-time highs due to investor confidence in American markets and the American economy. If investors were seriously worried about the American government going insolvent there would be a flight to safety - you could maybe argue that American stocks would be the safest entity to fly toward due to their intrinsic value, but you could also argue that if the US government went insolvent a lot of these stocks would tank.
My point is, the OP was just saying stuff without any evidence or even really much personal analysis.
> It is like Apple every year launching the best iPhone ever.
That would depend on why they do it and what theoney is reallocated to. Though yeah I'm sure they'd be wrecked, I don't think they'd dump treasuries I'd the risk of being wrecked was already very high.
>For better or worse there’s unlikely to be a scenario where the US becomes insolvent
How can any organization that issues its own fiat currency become insolvent? Being solvent is simply an issue of adding digits to the borrowers' account in an electronic database.
The only thing that happens (and is happening) is the increase in the supply of currency outpaces the increase in the economic value of goods and services that can be exported, hence the currency loses purchasing power.
The US also used to have the distinction of being the most stable large organization, allowing it to earn a "trust" premium on its currency. But we are voluntarily giving that up.
> How can any organization that issues its own fiat currency become insolvent?
What is the difference between insolvent and still existing but nobody trust / wants your currency? The US can issue currency all it wants, but if nobody wants it that does no good. My boss (I live in the US) could pay me in Euros, Rupees, or any of a number of other currencies - we already have plenty of employees who get their pay in the above currencies. I have to pay my taxes in US dollars, and the local stores all only take dollars, so I want dollars. However if things get bad I'll take some other currency and trade only for dollars as I need them - there is no reason my local grocery store couldn't take a different currency. If they want that currency they will give me a discount for using it.
We know from other countries where this happens, taking other currency is done on the black market. The stores and my pay is officially in the local currency, but everybody finds a way to ensure that they do as much as possible in a different system. (What really happens is far more complex than the above and not something I understand well enough to put into a comment, thus the gross oversimplification that is false because of it)
>The markets generally respond to US concerns by buying more US treasuries. That’s counter-intuitive but reflects the situation that if things hit the fan they feel loaning the US money is still the safest place for their money.
I thought that dynamic broke down with the liberation day tariffs, where both stocks and bonds dropped at the same time?
The financial markets only bought US treasuries under those conditions because they were the least bad option during risky moments. There's no law of physics which says that will always be the same.
Trumpanomics is trying to weaken the dollar to make us more competitive as an exporter (along with tariffs which make imports into the US less competitive with domestic goods) and he is Trump's Congress is blowing away previous deficits, so investors are wise to reevaluate their previous risk mitigation strategies.
The Yen Carry Trade is now fully in reverse and both JP and US are going to see higher interest rates, causing both of their debt service to take up an increasing slice of the budget pie.
Investors are jumping into CN bonds now and are likely to look to the rest of the BRICS nations as the IS looks increasingly unable to manage a responsible budget, an economy that doesn't seem to be growing much, and sovereign bonds which have fewer buyers today than a month ago.
What happens if US becomes insolvent? Is USD going to be inflated? hyperinflated? Will other currencies appreciate or just devalue their own currency by the same percentage to keep up the exports and continue to earn USD for oil?
If the US becomes insolvent, that would severely impact the USD. But other currencies will not try to follow the USD, there would be no point in that. The USD would just lose more status as an anchoring point. The US is also not a major oil exporter, so presumably most oil will trade for other currencies, rather than try to sell for an inflationary currency.
In short, if the US becomes insolvent, the rest of the world will largely ignore what happens in the (at that point) 8th economy in the world, and mostly try to untie their economy from it.
Absolutely no one serious thinks that, but when you feel like you need to diversify you don't have to find a like-for-like replacement. Any port in a storm.
Just consult Google. All a country has to do to find itself on the receiving end of punishing Chinese trade actions is being mildly critical of China in the wrong way, and next thing they know their exporters to China report being held up for months. The EU has taken offense at how China kicks around smaller EU members, Australia has been on the receiving end of it more than once.
If you'd said the EU might be seen as a relatively more stable trading partner, that may be true, the EU does seem to be fairly happy deindustrializing itself. Though it's fueling a rise in the fractured politics there too.
> All a country has to do to find itself on the receiving end of punishing Chinese trade actions is being mildly critical of China in the wrong way, and next thing they know their exporters to China report being held up for months.
If Donald Trump feels personally slighted by a country, he will put massive tariffs on them or threaten to invade them. At least China doesn't have an erratic mad king.
I'll tell you what is going to happen, b/c it is happening as we speak. The U.S. Government is soft-defaulting on the debt by devaluing the currency. (The debasement rate is somewhere in the 7%-8% range)
There will never be a real default, but it is likely that the USD will lose reserve currency status. The U.S. Government has $114+ Trillion in total debt. (Something like $325,000 per person in the US) We are never paying that off. The only way we can do anything about it is to grow the economy and devalue the debt via inflation.
To all the other currencies that are currently used as reserve currencies, other than the US dollar. There has never been a single reserve currency in the world.
It doesn't matter who/what gets it next, what's important is that we're about to take a 60-80% haircut on our standard of living. It's what happened to the British when the lost it with the Pound Sterling, and now it's our turn.
Most people don't remember what hard money is, and why it's important.[1]
* The value of the U.S. dollar against other currencies dropped about 11% in the first half of this year, the biggest decline in more than 50 years, ending a 15-year bull cycle.
* Morgan Stanley Research estimates the U.S. currency could lose another 10% by the end of 2026.
* Despite a recovery of 3.2% in July, the delayed impact of tariffs on growth and unemployment – besides policy uncertainties – are likely to keep negative pressure on the dollar.
* Foreign investors have been adding hedges to their exposure to U.S. assets, which will likely further weaken the dollar.
World reserve currency was solved by Keynes and Joan Robinson in the 1940s.
What you do is have a currency no country controls that acts purely for exchanging one national currency for another. Give it to the united nations or something.
If you take a national currency and make it a world reserve currency then the nation that does do has problems with balance of trade, deficits, and mathematically screws themselves over. This is because you currency becomes overvalued compared to those of over countries, meaning your domestic manufacturing has problems competing, among other things.
We already made the mistake of one national currency becoming the world currency post WW2. I hope its not a mistake the world chooses to repeat.
This is what cryptocurrencies do, but remove the need for an intermediary and codify the rules in software, so it is much harder (near impossible?) for politicians to manipulate the money supply.
It will likely be a cryptocurrency or perhaps a basket of cryptocurrencies. You essentially want a way to store wealth directly on the Internet as it is the fastest and easiest way to reassign ownership of money or collateral. The nice benefit too, then is the U.S. (and no other country as well) is subject to the Triffin Dilemma.
Which was never really a problem before cryptocurrencies. Nor does it any way address the core issue we have with physical currency, taking out loans now, against future wealth generation, which is happening in the crypto space too.
Incorrect. It's always been a problem. Go back and look what has happened to the purchasing power of the dollar throughout the 1900s. If the dollar is losing purchasing power you can hedge that loss by buying Gold, commodities or cryptocurrencies. (Basically anything scarce) Also, there are no loans being taken out against the future wealth generation in crypto. That is entirely a fiat phenomenon. Call your Senator.
Iraq started taking Euros for oil. Shortly after that, they were invaded. Venezuela started selling oil for Yuan. Shortly after that, their president was kidnapped by American troops. Iran is selling oil in Yuan. Shortly after that, American bombs started falling on them.
There is a very strong incentive for oil producing nations to only accept USD.
Do American people ever wonder "are we the baddies"? If this is an accurate description, I think everyone would agree that this is a bully behaviour. And arguably evil and opposite to the "free market" it champions officially.
In fact, is China or Russia involved in similar planet-scale military enforcement?
The US is a very violent place. Founded by war, exists in part to feed the military industrial complex. The vast majority of Americans have no problem with exporting violence around the world if it means “America wins” and not the fear of muslims or socialism or all the other boogeymen.
While the facts are not wrong, they are not compelling as a description of things that were building for years before the currency changes. Iraq/Venezuela were both collecting US ire for decades before the currency attempts. (Not supporting US actions on either - but currency was not a factor in what happened)
This is the truest and most impactful point so far on this thread. Rescinding the Trump I tax cut (IIRC technically the permanent extension of a temporary tax cut) would fix a lot of problems. That and not being belligerent to our creditors gets you pretty close to a complete solution.
Not that simple IMO. If Trump was to rescind his own tax cut, he'd lose a large majority of his base as they feel even more pinched in the pocketbook than they currently are experiencing with the inflation problem.
I don't see a way out of this and I don't think current admin really cares. Loot every last drop they can for next two years to enrich themselves and leave America to burn with no money left for Social Security, bond payments, etc. The crowds with pitchforks won't have anyone to tar and feather as Trump will be too old/dead to face any justice and his rich billionaire family will expat to the billionaire utopia of choice. Along with Musk, Bezo's and Zuck.
Interesting part is the gap between beliefs and prices => if the investors expect a US debt crisis we expect it to show up somewhere in the term premium real yields dollar or inflation expectations ; those signals can remain muted for a long time
The US emits two types of scrapes of paper, one of which (bonds) promises the other (the us dollar) and the "experts" somehow think america can actually go bankrupt. That's hilarious.
So US manufacturing would go up and up by that logic. Not to mention the US can simultaneously restrict the money supply via increased taxes at same time. The US also could just stop issuing bonds entirely and simply create the currency directly rather than the Rube Goldberg that is the bond market
Here are the numbers for the US, as a percentage of GDP:
- Government Debt: 123.0%
- Tax Receipts: 17.2%
- Spending: 23.1%
- Deficit: 5.9%
- Interest on Debt: 4.2%
So yeah, 1/4 of taxes go to paying interest. To allay the debt concern crowd a bit: gdp numbers are real numbers, so inflation of 3% and growth of 1% = 4% nominal, so that deficit number actually means that next years govt debt as percent of gdp won’t be materially higher.
This is the government playbook: create actual inflation of 6% per year, with reported statistic inflation of 3% per year. This means real growth looks like +3% before you need to talk about contractions/recession.
All this means that the sovereign crisis is not near and the government steals your savings at 6% per year.
No one serious is worried about American solvency. The paper says 50% over the next 10 years, but even most economists misunderstand how the monetary system works.
There are so many other issues to worry about at the moment more immediate than solvency.
>> There are so many other issues to worry about at the moment more immediate than solvency.
The U.S. government spends about one-third! (roughly 33% to 39%) of individual income tax revenue strictly to pay the interest on the national debt and that is not even paying off the principal balance itself:
Why is the individual income tax revenue important to compare to interest costs? Total interest cost as a percent of total revenue seems like a more holistic comparison, which is 15%.
The word in the headline “solvency” versus the phrase in the article “debt crisis” is a major difference.
To your point, I don’t think anyone has to be worried about American solvency, but a looming debt crisis doesn’t seem like a stretch of imagination at all.
> but even most economists misunderstand how the monetary system works.
It seems to be more of a subjective topic to me. Otherwise we would all have a perfect plan and never any monetary concerns. Highlighting weak links in the system is I believe a perfectly healthy thing to do. A sanity check would go a long way these days.
"No one serious is worried about American solvency. The paper says 50% over the next 10 years, but even most economists misunderstand how the monetary system works. There are so many other issues to worry about at the moment more immediate than solvency."
And the only point I was trying to make was this: Nobody expects an entire (powerful) system of government to stop being a thing ... until it stops. And other powerful governments have stopped being a thing.
I'm sure there were plenty of pundits in ancient Rome who said things like, "No one serious is worried about Roman solvency". And eventually, they were wrong.
---
Side note: It doesn't matter if unserious people think these things or not. The article's premise is about the ideas of "too much debt" making the bond market a more risky bet.
If people aren't buying bonds this will eventually slow (and stop) cash flow to governments (including the federal government) to the point of it being a crisis, because bonds cover 25% of our Federal government spending.
I am sure this is a nice article, but I'm always surprised when something with a hard paywall makes it this high up on HN. Does everybody but me have a Financial Times subscription?
There is less and less demand for US treasuries, and Trump’s tariff war has only accelerated it.
The GENIUS act gets US a set of entitites that are forced by law to buy US treasuries - stablecoin issuers. It helps the digital dollar be used around the world, and treasuries to still have some demand. That is probably why it is called “genius”. This is the last step before the demand shock.
The US will have to stop borrowing and eventually print money to service its sovereign debt.
And when they do, they could either send it to banks, corporations, fatcats and pork projects — or they can send it to every American equally. The latter would be a UBI that would trickle up into the economy, with people spending it on their actual needs. It would increase most health outcomes, emotional health as well, raise average effective IQ by 13 points. And then they could tax the corporations and robots, and pay down the debt.
As it is, there are literally not enough dollars in existence to pay down that debt. The US will have to print them, or default.
They don’t need to print—they could revalue US gold holdings (artificially held at $42.22/oz). Revaluing this to current market value (over $4k/oz) would instantly generate hundreds of billions on paper, enough to slightly offset debt-to-GDP. Revaluing it even higher would weaken the dollar without any printing. This can be done statutorily even if the statutory price is higher than the market price.
If all hell breaks loose wouldn’t the US just say “screw you we aren’t paying” and utilize the largest military (by far) in the world to keep the goods flowing? Some version of that seems far more likely than UBI does. I’m not saying this would be good (it wouldn’t) and it would be a terrible threat to quality of life and make the US an absolute hellhole, but let’s be real here, if the bread and circuses stop the US citizenry is going to call for blood long before they even remotely consider UBI.
It says a lot about the prevailing mindset of our politicians if they’d rather turn the country into a hellhole and kill a lot of people than just give the plebs $1000 a month and increase their healrh outcomes. The fact that we can spend trillions on bombs and totally avoidable wars, but ask how we can afford insulin and healthcare for our own citizens, is in my opinion a massive political sickness.
“Are we the baddies”? Well, our empire might be. If we are really a democracy, we should try to reform it.
US spending and the sovereign debt we racked up is already unsustainable. You have it backwards. Money IS credit. If we paid it back, we’d have no money. We need to print MORE money, give it to the spenders, and eventually it will trickle to the treasury holders, so we keep our promises. There will be more USD in the world - so what? It is bound to be devalued gradually anyway.
How would it help the average person? Because it lets people have better health outcomes, including mental health, including for kids and elderly, makes everyone have 13 points higher IQ and productivity. Helps them renegotiate with their employer, without minimum wage laws. Helps them be more entrepreneurial and start their own businesses. That $1000 a month can pay for a ton of AI spend for example, and will soon be able to pay for timeshared robots.
The average person will be paid less and less or even be laid off soon. We dint have a mechanism to supplement their income. At least we have medicaid, I guess.
Elon Musk is more extreme than me — he says money won’t even matter in 10 years. Meanwhile the guy is worth $1 trillion on paper. I don’t want to tax him. I want to tax his corporations as they lay off workers.
Sounds like a reheated version of MMT, modern monetary theory. The "just print money" approach exploded in a mushroom cloud of inflation during the COVID years, just as any economist even remotely aligned with the Austrian school of thought could've predicted. And you're still seeing the inflation, it's just partly hidden in and taking place in frothy equity markets.
MMT isn't inevitable. You're describing a path to where Argentina was before Milei. A path to amplifying all the social issues that started in the US with the creation of the welfare state. The alternative would simply be fiscal restraint.
The only real problem or question is if democracy is capable of restraint. The answer is unclear, seems like it may be 'no'.
Mild inflation (in global terms) is fine and actually rebalances money from savers/hoarders to spenders. Look at the Miracle of Worgl. And the inflation is only the result of the money supply being increased, due to the politicians fear of raising taxes on the corporations.
You need to increase taxes on corporations and automation if you want to prevent inflation, otherwise you aren’t removing money from the economy.
Printing money on the one hand can be counterbalanced by taxing the money on the other hand — if you actually burn the money collected by the taxes in a giant hole.
But instead the money from the taxes can be used to pay the treasury holders, and make them whole. This is in fact what the Grace commission found in the 80s under Reagan:
With two thirds of everyone's personal income taxes wasted or not collected, 100 percent of what is collected is absorbed solely by interest on the federal debt and by federal government contributions to transfer payments. In other words, all individual income tax revenues are gone before one nickel is spent on the services that taxpayers expect from their government.https://en.wikipedia.org/wiki/Grace_Commission
Sounds vaguely like the dissolution of the Soviet Union. There too, assets of the State were distributed to the People. Somehow it all ended with oligarchs in the end.
Vague indeed. Why would you compare “shock therapy” privatization (essentially looting) of public resources directly to a handful of oligarchs hands promoted by the Chicago School (founded by Milton Friedman, who also advocated this with Chile’s Pinochet)
with a UBI gradually given directly to the People, and raising taxes on corporations?
The former led to a 1993 constitutional crisis where the parliament wanted to oust Yeltsin (“our man in the white house”) and Yeltsin had troops fire on the parliament and arrest the congress, which represented the people fed up with the wage repression and looting
Yeltsin had a 6% approval rating and we helped him win re-election by meddling in Russian elections. We bragged about in 1996 with movies like “Spinning Boris” and “Yanks to the Rescue” Time Magazine cover.
The latter led to - amazing health, business and productivity outcomes under MINCOME in Canada, and the lowest gini index in America under Alaska’s Permanent Fund
It's just that I think that it ever come to servicing debts by printing money instead of borrowing, "shock therapy" would result. Not from the UBI proposal, but from the world order crumbling. And when chaos comes, there's always a small number of people on top taking advantage. Exactly who gets to run Gas Town may not possible to know in advance, but someone will.
If the United States tried to make various geopolitical moves to sabotage its reserve currency and ultimately become insolvent as a result of a self inflicted debt crisis then I don't see how the current agent orange situation could be topped.
There are so many plumbing issues with the financial system happening at once that people really do not have a clear picture of what is happening in totality.
Start with Japan... Still the largest foreign creditor. However they are facing a situation where the yen carry trade that began after the plaza accords in the 1980s is unwinding. The recent Treasury intervention and the associated expansion of the repo market so they do not sell treasuries directly reveals a hidden structural weakness. This leads to the AI boom because cheap Japanese debt was recycled into larger yields in the U.S. And it's different this time because companies like Microsoft have what is rated as safer debt than the US Treasury itself. The yield on financing part of the AI boom has been much better than yields back home in Japan. So even Japanese institutional investors may start seeing domestic debt as more attractive as the carry trade unwinds and domestic Japanese debt starts paying more. This ties back into the recent treasury intervention and offering a way to unload U.S. debt without impacting the markets directly.
Which brings us to an ongoing structural change that will remove the largest foreign investor in U.S. debt. Which as we all know, is approaching $40 trillion with over $30 trillion of that being held as public debt. Meanwhile, the budget deficit is continuing to rise causing even more issuance of debt. After the 2008 crash, and over the next decade, the U.S. was able to issue debt basically for free and it issued a ton of it. But that debt matures and when it matures, it has to largely be reissued at current rates. There was no free lunch. With the Japanese largely pulling back and at best not selling the debt they have now to defend their currency or to chase domestic yields in Japan, that goes to the UK as the second largest foreign investor. And the UK clearly can't absorb what the US has to issue and refinance. China has been reducing its holdings because as the BRICS bank, etc, replace their need for dollars, they will begin using it in more creative ways.
Some speculation is that the U.S. intervention into the yen carry trade is being challenged by foreign actors, which did not happen during past interventions. Monitoring the daily spread, and if the yen continues climbing over 160 then this will be the first time the U.S. intervention failed to work. To prevent selling existing Treasuries to defend the currency, the Japanese investors will unload it in the repo market.
But this brings us to a new structural problem in response to the insane amount of debt being issued and refinanced and this is called the weighted average maturity. Recently, the U.S. Treasury implied that they are going to begin moving more issuance to shorter term debt because those markets are currently still much more liquid than the longer term markets that had issues revealed by the failure of Silicon Valley Bank. When SVB needed to cover deposits, they found the 20 and 30 year Treasury market was not as liquid as they had hoped. This same fact likely pushed the Treasury to have Japanese investors move towards the repo market instead.
But this brings a new problem, because there is only so much appetite for increasingly taking long term debt and reissuance and moving it towards the front of the weighted average. Currently around 6 years, and the goal is to move it between 2 and 4. Imagine the liquidity impact on moving large amounts of new debt issued and refinanced debt from the 30yr to more short term funding.
Next up, there is a need to have the Federal Reserve unwind its balance sheet even more quickly at the same time all of the above is happening. But it is the Feds balance sheet and forms of QE that have propped up the repo market itself under times of stress. So after Japan, the UK and China all have reasons to continue cutting back, and after the short term funding gets eaten up, the yields will have to rise dramatically to continue attracting investors for even the short term. The immediate response to this will first be to stop issuing the 20 year and reduce the 30 year. They may debate the 50 year but odds are if the 30 has a weak showing that there would be even less appetite for the 50.
But with the unwinding yen carry trade, we have to consider the impact on funding the AI boom going forward. Clearly this has been on the mind of nVidia recently, with the move to create a form of mortgage backed securities for GPU capacity. The largest tech companies have something like $2-3 trillion in shell companies set up specifically for the data center buildouts. The rest of the revenue seems to be going in a circular motion among several large companies. They know as soon as they stop funding the AI buildout, or are forced to by the unwinding of market forces, that the party will end. This is the very reason for the move from nVidia recently. And if mortgage backed securities don't make you feel better about it, they have also compared it to how airlines trade airplanes as assets. Neither is a comparison that they should want to make for historical reasons.
Now in the past, the U.S. allies would see the value in the financial alliance and would ride to the rescue of something like a 50 year bond to lock up these bubbles for a long time. After so many years of tariffs and other forms of coercion, even the recent yen internvention broke norms between the U.S. Treasury and the European Central Bank. Maybe in the past the Saudis, UAE, etc would have jumped in to invest, but clearly those days are over too... With massive implications for the petrodollar. Which itself is another major factor in the reserve currency system and is clearly under strain from the Iran War and other geopolitical factors.
The U.S. response to a debt crisis won't be to default, it will do what it always has done, and try to inflate itself out of the situation. It's just that they can't really take this path either. The more the Federal Reserve becomes the lender of last resort and expands its balance sheet to backstop moving all this to the short term repo market, the end result will be extreme inflation. The yields will begin rising on short term debt faster than we have been seeing on long term debt. Before long, it will be early 1980s style interest rates, and if they don't find a solution, this process will be self repeating... The $40 trillion, with roughly $1.2 trillion in deficits every year, and past reissuance, all into short term funding markets, where the only buyer capable of absorbing it all is the Federal Reserve, there is just no real way out of it.
Even all the structural problems with mortgage backed securities haven't been fixed since 2008. If the AI bubble pops, the energy prices keep increasing, the yen carry trade continues to unwind, any South East Asian conflict with North and South Korea, China/Japan/Taiwan, etc... Or with the Ukraine war ending poorly with Russia moving further into the baltic states...
Maybe hope that a guy who bankrupted several casinos can figure out to do when the largest casino in history runs out of money? I don't know.
EDIT: Sorry for the wall of text. Had a lot to say.
* https://www.cato.org/commentary/sadly-fiscal-restraint-no-lo...
When you've lost the Cato Institute…
More recently in 2025, "The petrodollar, not GOP fiscal restraint, is what sustains our unsustainable debt":
* https://thehill.com/opinion/finance/5465671-republican-fisca...
Not that I believe the folks at the top at the GOP really cared about it, ever, going back to (at least) Reagan; it was mostly an excuse to cut taxes on the wealth and cut social programs:
* https://archive.is/https://www.nytimes.com/2003/09/14/magazi...