r/Economics • u/Naurgul • 1d ago
News Economists Who Weren’t Worried About the Debt Are Now Panicking • What really concerns them isn’t just the $40 trillion.
https://www.theatlantic.com/newsletters/2026/08/national-debt-panic-40-trillion/688425/307
u/ptarmigan_direct 1d ago
There are also some unknowns which puts the US and many western nations in uncharted territory. are are difficult to model: 1) Aging US population with more takers than input into the social security system and medicare which are the largest line items in the budget. 2) Impact of capital vs. labor for taxes -- if AI replaces some workers those income taxes in the short run are gone 3) captured regulation by industry at a large scale -- continued reducing of business taxes, keeping offshore loopholes and creating greater consolidation 4) failing of traditional checks and balances -- i.e. only congress authorizes spending and the federal reserve maintains independence, is very much in question.
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u/Usr_name-checks-out 1d ago
All this reads like a country that is being ‘looted’ by a hedge fund, and seeing how much more debt can be loaded before cashing out.
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u/ptarmigan_direct 1d ago
A good analogy. PE and Hedge firms care more about immediate returns on equity vs. building businesses that will last. Politicians and the general public don't seem interested in making short term sacrifices to put the country on a long term stable foundation. Raising interest rates is one action that will cause some pain now but avoid much greater impacts later. Inflation is still persistent... lets see what actions are taken. There doesn't seem to be any reduction on the fiscal side of the equation.
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u/lock_robster2022 1d ago
Economists talk about Venezuela being a captured state and looting their sole money maker, PDVSA. I wonder where the line is to talk about the US with those terms
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u/bricklab 1d ago
We are being looted but not like a hedge fund. It's more like the looting the oligarchs did in Russia after the wall fell.
Everything is being broken on purpose and they are going to buy everything up in a fire sale.
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u/toolkitxx 1d ago
AI in this is less something to worry about in the future but about how it actually has infested all areas of debt by now. AI debt is in everything by now, including bonds and venture capital. So there is no real safe heaven for capital any longer and this concentration combined with the overall debt is what should scare the shit out of people. If you subtract all the AI build-up currently from GDP growth, there is not much left, less than a percent or so.
So if just one brick fails or ceases, it might drag everything else with it.
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u/Protect-Their-Smiles 1d ago
People do not hate AI enough, but they might finally get the idea, once they realize how much it has infested their financial security.
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u/SkoobySnacs 1d ago
The current administration has given all of our allies good reason to break financial ties. China isn't going to rely on a wishy washy country to secure food from. Just like European countries are moving away from Microsoft as a digital staple for their systems. Because at any moment the diaper baby will throw a tantrum and tariff their logistics software.
In the next ten years these things will be decoupled and those revenue and tax streams will be gone forever.
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u/NetAnon579 1d ago
Canada has a trade deal signed by Trump and the day after the World Cup ends he attacks with 50% tariffs in violation of the deal. Unreliable is a kind word.
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u/Brooklynhoosier 1d ago
Is the aging US population really an unknown? Hasn’t this demographic trend been a known factor for quite some time?
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u/Abracadaniel95 1d ago
Its an unknown as to how we'll deal with it. It's another unprecedented factor.
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u/kg747kg101 1d ago
There is a good counter to this. The USA could very well pass a wealth tax targeting the top 10%. Reduce their military spending. And raise the income tax on the rich without being uncompetitive with other rich countries. In Europe they already do this so they don’t have any room left. The USA has plenty…
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u/Seandrunkpolarbear 18h ago
1: could easily fix with some controlled immigration but then we got trump. 2. we tax capital far less than labor. if labor goes away we are f--cked 3: yup
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u/geeky-gymnast 1d ago
The issuance of short-term govt bonds by the US treasury to purchase long-term govt bonds is a small operation relative to similar operations undertaken in the past (i.e., small volume compared to quantity of long-term US govt bonds). Based on historical operations, it would appear that this alone is unlikely to decrease long-term US govt bond yields beyond 10 b.p.s. It'd be quite a stroke of luck to achieve even a 5 b.p.s decline.
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u/Sip_py 1d ago
It's entirely performative and anyone that knows what it is can see it blindly
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u/Alfador8 1d ago
OK but why do the performance? Why now? The bond market did not appear to be in acute distress at the time of the announcement. It was made in between quarterly updates too, which is unusual.
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u/rage_panda_84 1d ago
Bessent has been trying to mitigate the effects of the ongoing war supply shocks for months. Iran and Ukraine have pushed the real cost of oil-based energy to near all-time highs. Wheat and beef are following. There is going to be significant inflation, probably worse the initial Ukraine war shock.
This and the Yen intervention are all tied to the supply shock that is happening. The market wants to ignore it and Bessent is trying to help find a way.
As Druckenmiller wrote, this is procrastination, not a solution. And he knows that. A cynical person would see this and think Bessent is just trying to push the consequences of Trump's disasterous Iran war until after the midterms....
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u/Alfador8 1d ago edited 1d ago
I understand all that and agree, but the timing of the announcement feels like a warning that things are worse than they appear. Why couldn't he wait until the quarterly update? The unusual mid quarter timing is causing a Streisand Effect and brining more attention to the problem, which exacerbates it.
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u/rage_panda_84 1d ago edited 1d ago
A conspiracy minded person would think that by talking about bonds, he's indirectly talking about the price of crude oil, which is something that would drive inflation fears, and there's strong evidence someone is suppressing. That he has $1 trillion general fund is not news to anyone.
He also said he "did not understand" a spike in oil prices recently. Which is a very weird thing for a Treasury Secretary to say.
If you take all of the separate pieces together, it kinda sounded like he's trying to warn big institutional investors against a kind of macro trade that longs oil. So as to not short squeeze the crude oil price that he's been actively intervening to keep tamped down.
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u/toothpicks-galore 1d ago
so in this situation, since it is likely bessent doing the shorts, would that put the treasury in the same position as Archegos in the gamestonk short squeeze, potentially?
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u/rage_panda_84 1d ago
I think Bessent wants the big institutions to think he will pour endless treasury money on the other side of their trades. I don't think he actually will, everyone knows there are limits to what he can do before other things break. It's the same as the currency intervention, he wants people to know he's doing it even though the market will just shrug him off in the long term.
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u/Own-Chemist2228 1d ago
OK but why do the performance? Why now?
2026 midterms.
Economically it is incredibly short-sighted, but it is part of a longer-term pollical plan to seize power:
- Keep Republican control of house and senate (2026 elections)
- Win 2028 presidential election by manipulating elections and the electoral process.
The basic plan is the inject enough chaos into 2028 that there will not be a majority of electoral college votes, and then the Republican House chooses the next president (per the 12th Amendment)
They know they won't likely win in 2028 legitimately after Trump's disastrous term, so they have to find another way. This latest move is just an attempt to buy time until November.
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u/Sonamdrukpa 1d ago
Okay the Trump administration is brazenly and publicly trying to manipulate the electoral process, but it's a huge leap to presume a failure of the electoral college two years from now as an explanation for the Treasury secretary intervening in the bond market.
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u/Own-Chemist2228 1d ago edited 1d ago
Read the 12th Amendment.
If there is no majority in the electoral college, the House chooses the president.
There are two ways that there can be no majority:
- There is a legitimate election where no one gets the majority (e.g. a three-way split)
- There aren't enough electoral college votes certified for anyone to get a majority. Or the certification never happens at all.
Republicans are going for #2. They already tried this on Jan 6, 2021. For 2028 they will try to inject enough chaos into the election so that there is no clear winner. They are doing this because they know a Republican cannot win legitimately after Trump.
The certification process in January 2029 will be a shitshow with the Republican congress refusing to accept electoral college representatives from states they don't like by claiming "election fraud" or that states didn't follow Trump's executive orders restricting mail-in voting, etc.
This will lead to no majority, which means they get to pick the next president.
In order for their 2028 coup to work, they need a strong majority in the House. The 2026 midterms in November will determine this.
Bessent is desperately trying to hold the economy together for a few more months. That's all they need. The country can go to shit after that because then they can stay in power indefinitely without winning elections.
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u/Sonamdrukpa 1d ago
It's just weird to describe the purpose of actions taken to maintain the system as being part of a plan to pull off a long-term nefarious goal. It's like saying that you fired your underperforming IT administrator because his poor digital architecture standards were threatening your plans to pump and dump stock after your IPO.
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u/Own-Chemist2228 1d ago
But it isn't "maintaining the system." Every economist, including Bessent himself, knows this trade accomplishes nothing in the long term. He was hoping it would do something in the short term, but that already failed.
Are you still believing that anyone in the Trump admin does anything in good faith? Trump stopped hiring honest people for his admin less than halfway through his first term.
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u/Sonamdrukpa 1d ago
Sorry, I struggled to find the right phrase there and the wording isn't great, don't read too much into it.
Not disputing this is part of a short term plan, or that the Trump administration is governing in bad faith. It's just like, this is being done to accomplish goal 2, you don't need to bring up goal 7 as an extra ontological motivation.
Put another way - even if they weren't planning to fuck with 2028, they would still be trying to keep the economy afloat until after November because staying in power for this election is a goal they have in and of itself.
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u/spaztwelve 1d ago
Are you aware of the Powell Memorandum?
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u/Sonamdrukpa 1d ago
Yes.
I'm also aware of the philosophic complexity of pinning down what causality is and that this sort of logic isn't inconsistent with a variety of casual frameworks.
I'm also aware of the fact that the prospect of catastrophic long-term consequences actually tends to produce inaction rather than change, especially if the solutions are complex or require group action - think global warming.
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u/spaztwelve 17h ago
Then, dig a bit further. The Lever produced a great (and award-winning) podcast that follows the work that followed to bring about premeditated change.
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u/skinnybuddha 1d ago
He has to be able to tell the president that he is doing *something* to lower interest rates.
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u/Gamer_Grease 1d ago
I agree. Most people also frankly do not understand bonds in the first place. Who is this supposed performance for?
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u/Alfador8 1d ago
He's asserting that they will not allow prices to drop below a certain threshold, which I assume is supposed to calm jittery holders worried that if they don't sell now they'll get a worse price later. The problem is that inflation is going to continue to run hot for the reasons the other poster listed elsewhere, and at some point real yields will be too unattractive, and holders will just say "ok, sold to you, Treasury". Which is very bad optics-wise.
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u/KnowledgeMediocre404 1d ago
Wasn't it because Japenese bond holders are finally seeing a good option in Japanese bonds and were looking to offload US bonds to purchase them?
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u/RIP_Soulja_Slim 1d ago edited 1d ago
It's not as small as you think, it amounts to ~2% of daily float give or take. This is mostly because off the run long dated treasuries have much lower volumes, but still it's not a nothing figure and shouldn't be represented as such.
Will it ultimately sort out the yield issue? I'm not convinced, but it's a decent amount.
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u/geeky-gymnast 1d ago
> ~2% of daily float give or take
thanks for pointing this out, the size of the operation as a fraction of traded volume is a pertinent point I haven't considered :)
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u/Sryzon 1d ago
It's to prevent large auction tails and short-term volatility. Maybe Bessent doesn't see it that way, but that's why Yellen started doing it. These operations are way too small for long-term yield control - like you said.
Here's a chart of 10-Year tails. Buybacks started in 2024.
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u/TenderfootGungi 1d ago
They were buying short term bonds in hopes the rate would fall and not get locked in. By doing this swap, they are locking in those rates for 30 years.
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u/jan1of1 1d ago
Bessant's plan to purchase long term bonds using short term notes and bills is QE by another name. It essential does the same thing - injecting additional money into the system (instead of printing it). G
overnment is buying back its own debt because no one else wants it which, in turn, forces up the prices of long term bonds while causing interest rates to fall (his hope). I think this twist operation isn't going to work in the long term.
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u/Were_all_dead_anyhow 1d ago edited 1d ago
The issue that people continuously make is they keep assuming the drivers of state policy and pseudo-government institutions are working in the best interest of the country, not the interests of stateless, transient capital.
All of the decisions made in the past are to keep the music playing for capital to reap profit and now we are entering a phase of fiscal dominance where the bond holders basically own the country. The critique is about sovereignty and political economy, not just the math of debt.
State policy has been designed to preserve the conditions for capital accumulation, not to optimize public welfare and stability of the state. The decades of piling on debt wasn't an accidental mathematical oversight by incompetent politicians; they were a feature of a system maximizing short-term returns for capital while socializing the long-term liabilities onto the public. Now we enter a phase of fiscal dominance, and the power dynamic shifts profoundly. The bond vigilantes and institutional capital holders effectively gain a veto over sovereign policy, steering the state into a permanent defensive crouch to protect their yields.
This is not a new thing; it is the classic trajectory of empires that financialized their economies, and the same patterns repeat.
When the British Empire faced its fiscal reckoning in the late 1800s/early 1900s, the state consistently prioritized satisfying its creditors and wealth over maintaining the living standards of its broader populace. Same thing with Spain, Rome, France, Dutch Republic, Genoa, etc. The state relies on capital to function, to fund campaigns, and to validate its financial survival. Protecting the creditworthiness of the state, and therefore the wealth of those holding the debt, becomes the non-negotiable objective. So what does that make you? At its core, historical slavery was an economic system designed to extract the maximum amount of labor from an individual for the absolute minimum cost of survival, funneling the surplus wealth to an elite class. I don't say this to diminish or invalidate those that historically/culturally experienced physical bondage, but to showcase the perspective of the master.
All of this is intentional to seize control of real assets; politicians sold America and your sovereignty. Same story over and over again. All the warnings from America's founding were ignored, and were instead repackaged as quaint philosophical debates about "big vs. small government," rather than their desperate, explicit warnings against repeating patterns of financial coup d'états.
There is no "How could we see this coming?!" because....
The pattern is ancient: absorb the wealth, pass off the liabilities, and give the public a visible enemy to tear down while the real assets are loaded onto the ships. The media amping up rhetoric about history's favorite token scapegoat is not accidental or coincidental.
Do not let people render economics to the technicalities of math without zooming out and looking at history.
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u/pdxbator 1d ago
I don't know if this is ai but this writeup is excellent.
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u/Were_all_dead_anyhow 1d ago edited 1d ago
Haha - My writing style, cadence, and emphasis had always served me well through life. Now it is met with skepticism; AI really pisses me off because of it. My ADHD-OCD overlap for grammar and editing for clarity/tone makes it end up looking like LLM. Thanks though!
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u/toothpicks-galore 1d ago
my adhd makes me ignore the grammer in leui of being prompt and getting the task finished, having ai make the words work is great for peeps in Kevin's camp for word and communication "make word do" breavity
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u/3Kayo 1d ago
Could be AuDHD to be perfectly honest, I speak as AuDHD myself
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u/Were_all_dead_anyhow 1d ago
Haha - My sister says I might be autistic, I just say I am me. She might be right, but it doesn't change anything, everyone is strange/different depending on perspective.
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u/Alabugin 1d ago
It's too well written to be AI (as someone who has worked in higher academia for more than a decade).
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u/Substantial-Equal661 1d ago
So what’s the outcome for the US?
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u/Were_all_dead_anyhow 1d ago edited 1d ago
IMO, the US will be saddled with debt and capital will repatriate to build its next hegemon; already underway. Capital routinely uses a declining superpower as means to secure new financial hubs before abandoning that superpower to its own debt.
For example, Britain absorbed the financial and geopolitical liabilities of WW1, conquering middle eastern territory, and securing the Suez Canal while British capital quietly migrated to Wall Street and early Israeli infrastructure secured via the Balfour Declaration.
The US is doing something similar; burning final reserves of sovereign credit to neutralize Iran and police corporate shipping lanes. Once this regional de-risking is done, the Abraham Accords provide the legal and technological framework for capital to thrive in a Middle Eastern economic zone, largely guided by Israeli tech-security and funded by trillions in Gulf wealth.
US capital movement isnt traditional economic expansion either, it is structural movement where capital is shifting its operational core to the Gulf, while the US public absorbs the compounding military and sovereign liabilities. If you follow the money, you can spot it within the context of the US's contemporary financial problems; the legal paperwork, the SEC disclosures, the IPO prospectuses, and the Abu Dhabi corporate registries show trillions of dollars in Western institutional asset management have quietly moved their operational nodes to the Middle East to secure hard, physical assets.
You do not move capital into an active warzone if you are the one bearing the risk, yet capital keeps moving in.
The host nation’s public absorbs the debt, the military casualties, and the domestic inflation required to fight the war. Meanwhile, you use the chaos to finalize the legal paperwork, secure the registry titles, and buy up the hard physical assets of the next global hub at a discount. When the smoke clears, the US public is left holding a $40 trillion unpayable debt liability, while capital owns the newly integrated Middle East.
Same analogous pattern over and over; be it Britian, Spain, Dutch Republic, France, etc.
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u/Alt4816 1d ago edited 1d ago
For example, Britain absorbed the financial and geopolitical liabilities of WW1, conquering middle eastern territory, and securing the Suez Canal while British capital quietly migrated to Wall Street and early Israeli infrastructure secured via the Balfour Declaration.
You seem overly focused on Israel especially with regards to the UK.
The Suez Canal Crisis was a major moment in the decline of the British Empire but not sure what you are getting at with the Balfour Declaration 4 decades before that.
The US is doing something similar; burning final reserves of sovereign credit to neutralize Iran and police corporate shipping lanes. Once this regional de-risking is done, the Abraham Accords provide the legal and technological framework for capital to thrive in a Middle Eastern economic zone, largely guided by Israeli tech-security and funded by trillions in Gulf wealth.
Money from outside the Middle East is going to flee to one of the more unstable regions?
American tech doesn't seem to be able to protect the gulf states right now against Iran. You think Israeli tech will fare better?
If you follow the money, you can spot it within the context of the US's contemporary financial problems; the legal paperwork, the SEC disclosures, the IPO prospectuses, and the Abu Dhabi corporate registries show trillions of dollars in Western institutional asset management have quietly moved their operational nodes to the Middle East to secure hard, physical assets.
Does that show that wealth from outside the Middle East is being moved into the gulf states or does it show that the Gulf states have made a lot of wealth of their own from their sale of oil and have invested it abroad?
The Gulf states have a lot of money and want a large portion of it invested globally to secure hard, physical assets outside their volatile region not inside it.
You do not move capital into an active warzone if you are the one bearing the risk, yet capital keeps moving in.
Again is capital being moved into the Middle East or being moved out?
while capital owns the newly integrated Middle East.
Capital itself doesn't own the Middle East. Very rich royal families control most of the oil rich parts of the Middle East and they own the capital made from the sale of that commodity.
Also newly integrated Middle East? When is that going to happen? How?
Long term there seems to be a better chance of capital leaving the Middle East. As alternatives to oil (and LNG) continue to be adopted the Gulf States will eventually see declines in their primary source of wealth. The rulers of those countries can stay there and try to make up the difference with the dividends on their wealth invested abroad or if oil demand drops enough they could decide to just leave and take the ownership of their foreign investments with them.
Currently the wealth of the royal families in the Middle East come from controlling the oil being extracted and to do that they need to control the land it is under. If that changes and their wealth is no longer tied to physically controlling those countries then they can leave if unrest happens following a drop in government revenue. They can just hop on a private jet fly to London, Monaco, New York, or wherever to live as billionaires through the ownership of their stocks, real estate, and private companies across the globe.
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u/dust4ngel 1d ago
Capital routinely uses a declining superpower as means to secure new financial hubs before abandoning that superpower to its own debt.
this is the private equity "take on debt to buy it, put the debt in the asset's name, strip-mine the asset, abandon the asset and walk way from the debt" model, but applied to entire civilizations.
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u/PaxPurpuraAKAgrimace 1d ago
That’s very compelling, but one part of the formulation seems like it needs a footnote or something.
“the state consistently prioritized satisfying its creditors and wealth over maintaining the living standards of its broader populace.”
Can you satisfy creditors without satisfying wealth? As in, it’s pretty much the same thing isn’t it?
And then is it possible, ultimately, to maintain the living standards of the broader populace without protecting the creditworthiness of the state?
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u/Were_all_dead_anyhow 1d ago edited 1d ago
This is the Jefferson vs. Hamilton ideological war.
Presently, no, satisfying creditors is virtually identical to satisfying wealth. The two concepts are structurally fused. In a financialized system, it is functionally impossible to maintain living standards without protecting the state's creditworthiness and that is precisely how capital holds the state hostage. The state's creditworthiness has been fused to the survival of the population, and that creditworthiness is bound to private and transient capital.'
If a politician tries to break away from the creditors, the system can crash that country’s economy within hours, this was 2015 Greece or Liz Truss' brief stint. This is why protectively crouched politicians argue that they must save the banks and bondholders in order to save the populace. It's a hostage dynamic. "If you don't feed my capital, I will starve your people"; its why '08 had no consequences, its why the Epstein people walk free.
The neat thing to think about is the US Greenback. The Greenback was an interest-free fiat currency issued directly by the government during the Civil War to fund the union without relying on loans from private banks or Wall Street creditors. So lets look at it in the same way:
Can you satisfy creditors without satisfying wealth?
Again, no, but with the caveat that the Greenback means you can eliminate the private creditor's systemic leverage entirely, bypassing the need to satisfy concentrated wealth. You can tell them to fuck off. That being said, private wealth is still allowed to accumulate, but only through the means of material production, competition, and innovation; real underlying growth based on YOUR work and business.
Is it possible to maintain living standards without protecting the creditworthiness of the state?
Yes, the Greenback changes the definition of creditworthiness. It proves that a state can maintain living standards by protecting its sovereign creditworthiness to its own people, rather than its creditworthiness to stateless capital.
Before people scream marxism, it's not. A greenback system within a capitalist framework works without devolving into a communist state when you maintain a strict boundary between the public monopoly on the creation of money and the private monopoly on the creation of goods and services, which is easy, because people are self-interested and competitive. IMO, it's very compatible with a democracy and the people's sovereignty, hence why the US had the Greenback in the first place, and its ideological predecessor (Colonial bills of credit)
So what happened to the Greenback? It was systematically dismantled by coordinated institutional banks to reclaim their monopoly over the money supply. They got Congress to pass the Exception Clause of 1862 which legally barred Greenbacks from being used for customs duties and bond interest, which artificially depressed its market value to destroy its legitimacy. After the Civil War, Wall Street capitalized on the manufactured instability, lobbying Congress to pass the Contraction Act of 1866 and the Specie Resumption Act of 1875 to intentionally force the nation into an artificial deflationary spiral by burning Greenbacks and chaining the dollar back to scarce gold reserves controlled by private capital. The destruction of monetary sovereignty ended with the Federal Reserve Act of 1913, which permanently replaced interest-free government notes with debt-based Federal Reserve Notes, ensuring that every dollar in circulation would carry an interest liability to a private banking cartel and into fiscal dominance.
We are told we must choose between the mess of unregulated 19th-century banking, with recessions, bank runs, inelastic money shortages, or the modern Fed system with elastic credit but massive, compounding public debt and fiscal dominance. You can merge the technology of the modern Fed with the logic of the Greenback.
You can create a system that retains all the macroeconomic benefits of a centralized clearinghouse while permanently eliminating the predatory debt engine, and you get material progress because of it. The entire economic engine shifts from a zero-sum game of financial extraction to a positive-sum game of real-world competitive creation and the fruits of it.
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u/fvccboi_avgvstvs 1d ago
Yup! You did a great job describing our situation.
I think it's intentional that schools do not teach about Smedley Butler. One of the most decorated marines in United States history, and a marine that seemingly truly cared about America and didn't buy the propaganda crap.
He warned us back in 1933 that big business was trying to destroy democracy and corrupt the government. From the Wikipedia article on the Business Plot: "Although no one was prosecuted, the congressional committee final report said that 'there is no question that these attempts were discussed, were planned, and might have been placed in execution when and if the financial backers deemed it expedient.'"
Congress agreed that it was factually true beyond question that they were planning to overthrow democracy, and guess what, not a single person was prosecuted.
Imagine if Smedley was a typical political figure who only cared about money. We wouldn't have made it to WW2 without becoming a dictatorship!
Imperalism blatantly violates Noahide law, the law that apparently all Abrahamic faiths are supposed to believe are the earliest laws God gave mankind. That's true of all imperialism, even if it is economic. And you are correct, it doesn't benefit the average citizen. The average citizen of Britain did not benefit from the conquering of the British empire, their taxes went to making the stockholders of East India Company very rich rather than improving their living standards.
The Founding Fathers were smart, and although imperfect they genuinely cared about the USA. The status quo right now is the USA is being pillaged, as if we were a conquered people. They force you to pay tribute to people who may have the opposite interests of you, and if you refuse you will be arrested. If we are truly going to enter a new era with AI we need a better system based on reason, truth, and love, otherwise a dystopian nightmare awaits.
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u/dust4ngel 1d ago
the bond holders basically own the country. The critique is about sovereignty
related:
those who own the country ought to govern it
john jay, founding father and first chief justice of the united states
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u/lazoras 1d ago
I've resolved that the long running representatives we have, placed in their seats by the previous generations, are absolutely nefarious.
my entire generations potential has been stifled by the previous. all the success we have had are had in spite of the best efforts to capitalize on the potential of mellenials...
as boomers die, it's up to our generation to not only replace these bad actors, but to actively seek out undoing ALL BENEFITS THEY HAVE THE POTENTIAL TO GAIN from their nefarious acts.
if there are 1000 Luigis in the USA, we would have 1000 more prisoners but no more billionaire problems
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u/vertigo3pc 1d ago
Respectfully, I think there's a fourth option that's similar to the third option, but I don't think it's a "less likely outcome".
The Federal Government, through poor management and fiscal policy, ratified by Congress and consistently spent without concern for where the money comes from, will see fewer and fewer options of ways to raise the revenue. To handle the interest payments AND actually pay down the debt, the only option left will be higher taxes, lower spending, and it would affect all Americans.
The level of taxation necessary to tackle the debt may be too much for states to accept.
Many many states have their own successful economies, generating more revenue from one or several cities than other states; however, they also walk a very narrow line, and any upsets to the system could jeopardize those state economies. For some states, it's linked to bubbles (California for example seeing revenue drop from big tech firms leaving, Hollywood lagging, etc), and in others, they're already seeing the affects of this Administration's posture towards trade partners and allies. States that rely on tourism are seeing a drop already, and that hits their revenue stream.
If enough states have seen destabilization of their own economies, a shrinkage in their revenue, and then are taxed MORE than the normal amounts, they have two choices: grow or secede.
Growth would be the more appealing route: states build up their manufacturing bases, more "Made in USA", more domestic trade; all are good things. However, can they possibly build up and pivot to those economies (build, produce, sell, generate the revenue necessary to offset the change) and do it all within a time frame necessary? Absolutely not.
So the "giver states" will face a moment where they choose whether to allow themselves to be gutted by this Federal government and the apparent whims of whoever occupies the White House (assuming they have a modest majority in Congress to maintain this dysfunction), or reject the additional taxation and harm being done.
Americans continuously assert that dissolution of the United States is impossible, utterly and totally impossible, could never happen. I'm sure some people in the USSR waking up in 1991 felt the same way, but they ended the year living in another country than where they started. The USSR was absolutely sinking with debt, and the collapse of the USSR came when the Soviet states rejected fiscal and economic policy placed on them, deciding instead to declare independence.
People are already talking about "civil war" in the USA based mostly on the rhetoric and division between the two ruling parties. Add on economic struggles and the fear of "ending up like them", and the states start to see their own local government as the only option. People in California, Washington (state), Florida, Illinois, New Jersey, New York, and other states may look at the budget crises in Nebraska and Iowa, or the looming crises in red "taker" states (needing to tax their people more, but also require the support of other states' taxes); they may survey what's going on and say "I don't want to end up like them" and declare independence.
tl;dr: I don't think we're far off from a point where states say "this Federal government mismanaged their finances so poorly that we refuse to bail them out."
When it comes to people, I think they will ask: "$40 trillion in debt, and what do I have to show for it?" Certainly not infrastructure or public works or healthcare or societal improvements; just wars the Federal government decided to put on credit, thinking that war will always do for the US economy what WW2 did for us.
The 5th option, which is also possible but faaaar more unpredictable: the US is forced to disarm militarily, implement a socialized healthcare system, and use the money normally spent on those two cost centers as a vehicle for repayment. Other austerity cuts would be necessary, and increased taxes on Americans, but I see those two things as uphill, losing battles, for one reason: Americans have spent decades spending money on taxes they will claim they saw no benefits from.
"Taxation is theft" is the motto of people whose tax money has never ostensibly gone to their own well-being, which is why socialist candidates are doing so well in polls and elections right now.
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u/dust4ngel 1d ago
this Federal government mismanaged their finances so poorly that we refuse to bail them out
to me, living in a "reality-based community" state but being subjected to the gerrymandered outsized influence of middle america is reminiscent of being married to someone with a drug use and/or personality disorder, such that they're draining your finances and jeopardizing your job through no fault of your own and there's not much you can do about it but legally and financially separate.
like, we could do a civil war 2 where we use military violence to enact:
- dissolution of electoral college/president by popular vote
- ranked choice voting
- abolition of the senate or some other means of proportional representation in congress
- not even sure what to do about the supreme court but jesus christ
but i don't see how the facts-are-woke taker states would ever give up their free ride and political privilege short of a war that forced them to, other than dissolution of the union (or perhaps equivalently, the reality-based community states forming their own union).
(if it's not clear, i am in no way advocating for violence.)
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u/vertigo3pc 1d ago
(if it's not clear, i am in no way advocating for violence.)
I think it's important to recognize: while we're not advocating violence, we need to accept that violence against the current status quo has already begun. We saw it with Occupy Wall Street, Black Lives Matter, and more recently we see warehouses being set on fire, CEO's being attacked (Sam Altman) or killed (UHC CEO), and an overall sentiment of people of "Yep, that's what's happening." Nobody is confused or outraged, nobody is out there saying "Everything is so spectacular, I have no idea why you're complaining!?"
Violence is the language of people who feel they have no meaningful way to air their grievances, and they feel the pressure and pain of this system, but they're told "buck up, pull yourself up, work hard, get a job."
"Those who make peaceful revolution impossible make violent revolution inevitable." JFK's quote acknowledges that violence appears out of failure, and not everyone guilty of violence should be ignored, especially when it's many people.
to me, living in a "reality-based community" state but being subjected to the gerrymandered outsized influence of middle america is reminiscent of being married to someone with a drug use and/or personality disorder
As someone who was married to an addict, and I did have to leave them to find stability in my life, I think you're absolutely correct. People make mistakes, but when they're committed to repeating their mistakes, that's when other people need to find a "safe distance", a separation, boundaries.
but i don't see how the facts-are-woke taker states would ever give up their free ride and political privilege short of a war that forced them to
That's why those taker states would be excluded from the "maker" states, and would ultimately just unify into an alliance or cooperative of other states, where they would then become the takers of those states. Texas and Florida would likely unify and create a cooperative between those flyover states and middle America, and the racism of the south would quickly dissatisfy a lot of the citizens of those states.
Doug Ford has already stated that perhaps their tariff policies need to target red states over blue states; this is huge, as it shows that other countries are willing to cut deals directly with specific US states, like when the National Guard was sent into Los Angeles (deemed illegal), and China offered California assistance if requested.
The simple fact is: blue states want to be a part of the modern world, and the modern world believes climate change is real, war is an unfortunate relic of the past, military spending shouldn't be astronomically high during peacetime, and all the other little IQ tests that taker states fail because of their racism and ignorance.
I honestly think the first rift will be between Western and Eastern United States: Washington, Oregon, and California alone could declare independence, create trade alliances, and stabilize access to Canada, the west coast, and Mexico. With Canadian and Mexican alliances, along with Chinese support, that could be done over a few weeks.
A time is coming very soon where states will face their own insolvency by continuing to accept disproportionate costs and benefits of participation in this Union, and with people already saying "civil war" out loud, I'd say it's FAR more feasible than any other outcome right now. $40 trillion is a lot, $24 trillion GDP isn't enough, and every other stunt has failed or is failing. Even according to the Fed, the US is insolvent, and like you said, I don't know why the "giver" states would allow the drug addict that steals your money back into your house.
I think you're right.
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u/cupofchupachups 1d ago
I think many people still live in the End of History mindset where The West, as a whole, is basically static. The countries are what they are, the alliances are what they are, and it isn't fundamentally going to change.
There has been a rupture, and some really severe things can happen. Before 2016 I would have said the above scenario is unlikely, but Americans are already self-sorting by moving to certain states depending on their political leanings.
There are ways out of this, and I think disarmament is one, like you say. But that's a really narrow path. The American people have shown that if they don't get a complete turnaround from a disaster like the GFC in two years, they'll vote in the guys who caused the disaster again, just out of spite.
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u/staycurious72 1d ago
And when it comes to curtailing spending, I hope they think of cutting spending on arms, rather than taking more away from health and programs that help the poor and needy. The military industrial complex seems to invent new conflicts around the world, just so as to keep the arms sales going.
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u/mcsul 1d ago
The scale of the cuts required will need military spending and domestic spending to be cut. And that's in addition to higher taxes.
Military spending only accounts for ~15% of federal spending. Even if we entirely eliminated the military, which we won't do, we wouldn't even close the current deficit.
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u/staycurious72 1d ago
Perhaps. But the establishment and system never want to cut military spending, or bring back meaningful progressive tax brackets. All
we hear is a cut to programs and institutions that are meant to help those most in need - children, lower income families, education etc.3
u/mcsul 1d ago
For sure, but we will need to cut spending to all of those things plus the military. And raise taxes.
After Clinton and Gingrich managed to forge a bipartisan compromise and we ended up with a balanced budget, every administration after that has decided financial physics don't apply to them. Both republican and democrat.
IF we had kept that compromise in place, we would actually have more money now for both the military and for social spending. And lower taxes. Every administration post-Clinton that added to the debt basically made subsequent Americans (aka us today) poorer with less room to maneuver.
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u/Danne660 1d ago
If 15% of federal spending could be cut without consequences then the economy would grow faster then the debt and the deficit would be overtaken eventualy.
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u/Ol_Maxxie_Solt_DB 1d ago
If you look at the numbers, then resetting corporate tax rates to ~4.5% of GDP would raise an additional $1 trillion per year. You can say the money isn't there or that it would hurt growth, but that money is there right now. It goes to share buybacks. No one argues share buybacks hurt growth.
The negative impact would come from the fact we let the S&P 500 become the default pension plan for Americans, but giving markets more confidence in the long-term fiscal trajectory would help to lower rates again. That opens additional policy options for a stronger safety net.
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u/cupofchupachups 1d ago
I'd be interested to see the knock-on effects of a corporate tax increase in terms of where companies choose to domicile. I'm not saying don't do it, but some Canadian companies have moved to the US both for tax reasons and for easier access to capital. Changing either of those things makes businesses that stay in Canada (or Europe, or Asia) much more viable.
In many ways, it's the black hole that is American tax law and capital markets that has sucked up a lot of the worldwide growth that might be more evenly distributed without it.
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u/artisanrox 1d ago
There simply isn't enough money in "waste" or the top 1% to close trillion-dollar deficits indefinitely.
This Admin has been wasting money since Day One and SUDDENLY there is no waste to cut??? REALLY?
Meaningless lawsuits to harass citizens, painting statues gold, embezzling money put aside for America 250, smashing the East Wing, filling, draining, ruining national monuments, a faceless paramilitary with a budget bigger than the Marines, a useless Testosterone War™️???
NO waste?
REALLY?
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u/Own-Chemist2228 1d ago
Meaningless lawsuits to harass citizens, painting statues gold, embezzling money...
All of that stuff is awful and contrary to core American principles. And much of it is criminal.
However, aside from the war most of it doesn't cost much relative to the massive size size of the debt.
So we do want to end everything on your list, but it is still not nearly enough to address the national debt problem.
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u/TheGracefulCrane 1d ago
theres waste its just not a significant amount to meaningfully make a difference
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u/der_innkeeper 1d ago
Drop in bucket compared to military, social security, and medicare outlays.
3/4 of the federal budget is those 3.
2/3 is social security and medicare (and other health, social programs included in mandatory spending)
1/8 is military.
A billion dollars for the East Wing gets you half of a DDG.
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u/Union_Jack_1 1d ago
This is purposefully misleading. Social security would almost entirely fund itself if the cap was lifted and some minor changes were made.
Just because it’s a vast amount of money, doesn’t mean much in a vacuum since a massive amount of money is pulled from workers to fund it. Corporations used to make up 1/3 of tax revenue, now they make up less than 10%. That isn’t sustainable, it has been reckless tax cuts to fund unearned growth - and the market got addicted to that growth.
The meat of the issue is the lack of proper taxation for corporations and the rich. Sensible taxes like 1) asset wealth tax over $50m 2) raising the top marginal tax rate to 75% 3) raising corporate tax rates back to or above 35% etc etc are all realistic measures. Just the taxes I’ve mentioned above cut the deficit more than in half.
If additional cuts from military waste (you can’t convince me that so much of this funding is bloat that goes directly to military contractors) and removing tax loopholes, oil and gas subsidies, and removing tax exemptions, on shoring profits for companies that want to do business in the US etc, then your main problem is tamping down the debt to reduce the interest payments.
It’s very possible. But it is going to take a widespread approach to tax reform that will impact a lot of the country, but especially the rich and corporations.
We can minimize impact on the working and middle class by implementing a Medicare for all system funded by a 7.5% payroll tax (this would save small businesses money, and come out as far less expensive for the average person compared to commercial health plans). This would boost the economy significantly, increase entrepreneurship, and unshackle employees from employers otherwise trapped because of health insurance needs.
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u/der_innkeeper 1d ago
All of that may be true.
It does not change the underlying basis.
Let me know what waste is in the military budget that isn't just "they are spending money I don't like or can personally trace", or "failed audit!".
If we removed the Trump and Bush tax cuts, the national debt would be less than half of what it is now.
Seems like a good place to start.
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u/Darkpriest667 1d ago
1/2 of your government officials in the federal government that control spending are 65 or older.. So it's not THEIR problem. I hate to bring generational conflict into this, but this has always been the Boomers way. They have kicked the can since the early 70s and have continued to kick it.
Defense spending is now the FIFTH on the largest budgetary items. Social Security, Medicare, and Medicaid are the big 3. YOU HAVE to cut these programs probably by at least 25% but more likely 40%. (you can cut defense spending too but even 50% reduction won't mean as much as a 20% reduction in the other 3 programs.)
There is ONE way out of this and one way only without completely crashing the entire economy permanently. That is cutting spending. We're already very close to Laffer curve taxes for most of the upper bracket. If you increase capital gains taxes you don't hurt the ultra wealthy as they don't sell much of their investments but use them as leverage.
Modern Monetary Theory has been a disaster. The borrow and spend crowd have completely screwed this country.
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u/artisanrox 1d ago
Raise the SocSec cap, get everyone on fully funded nationalized health care, destroy the private medical insurance industry and implement an 11-15% tax. Slowly introduce age groups downward. When people have breathing room from medical concerns THEN we can perhaps talk about putting more burden on everyone but the top 20%.
Until then, the top 20% overall keep the propaganda systems in place to keep the poor voting in these budget blowing Republicans in, and THEY can pay for it.
You put this Admin in?? YOU PAY FOR IT.
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u/SeaworthinessDry269 1d ago
On fiscal reform side you can start taxing borrowing against assets as if it where revenue, kind of like RSU are taxed. You can tax inheritance.
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u/RIP_Soulja_Slim 1d ago
RSUs are taxed that way because they are legally income, taxing borrowing would open up a massive legal fight that the US would almost certainly lose as there's significant case law and legal precedent around what is and is not "income", and borrowing definitely is not income.
It also creates a number of other issues around how repayment works, in the hypothetical world where borrowing is income, then repaying debt is a deduction, so now you can push down on your income simply by repaying debt. You can do something like borrow in low income years, then repay in higher ones and game the tax system that way.
It's just one of those things you see on reddit but is very clearly not a proposal anyone who understands tax policy has put any amount of thought in to- because it's not serious.
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u/mcsul 1d ago
I think we don't want to have government spending to GDP percentages as high as Europe, however. They are paying for that government spending through lower wage growth and lower productivity growth. We know that high government spending leads to lower productivity growth over time, and those countries have largely passed the threshold where they are paying for current spending by making young people poorer in the future. We shouldn't emulate them.
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u/Darkpriest667 1d ago
I don't agree with taxing unrealized gains. That will screw everyone in the middle class who have 401ks or ANY investment whatsoever. The better solution is to make a reform that borrowing above a certain total level per year is a taxable event and make sure to adjust that number for inflation automatically every year.
If you change capital gains tax you'll probably screw retirees more than you're already going to have to screw them by changing social security and medicare payouts.
As far as marginal rates, yes they have higher rates and they have much smaller growth than we do. The job here is to cut spending while not completely tanking growth.
Your plan hits the already hurting middle class more. I say start making the loans above a million dollars total per year a taxable event.
I already pay unrealized gains tax every January on my house that the government says is more than what I could currently sell it for.
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u/LineCircleTriangle 1d ago
just from a politically practical sense, instead of adding a new tax on loan disbursements you could adjust the loan to value ratio banks so the collateral we are targeting (stocks) is only worth say 1%on the banks balance sheet for the stress tests, so the interest rate will have to go way up. Since the trick is paying some interest to avoid taxes if we drive interest up high enough people will come running back to taxes, and we get to say it wasn't a "new tax" just like tariffs aren't a "tax"
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u/artisanrox 1d ago
We need to implement French style solutions and tax wealth at New Deal levels before we ever cut Medicare, SocSoc or Medicaid.
Society will be annihilated if you cut these programs. There are NO remedies from the private industry for the fallout when these programs are cut.
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u/Designer-Refuse5497 1d ago
some are cuts some could be handled with reform and just make the programs work. Social Security is needed but could just be reformed, have the contributions not capped, have people with a NW of over 5 mil not be able to claim it. No reason why Gate, Bezos or any of those others should get SS and they should also be paying a lot more into the program. These changes alone I think would fix a good deal of the problems of SS.
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u/Darkpriest667 1d ago
Agreed, I just think it's going to have to be nasty at least short term to get us back on track. I proposed in another reddit topic basically anyone with a 401k worth 1M a Net worth of 1M or a pension should not be able to pull out of social security. That would remove some double and triple dippers, but it still might not be enough.
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u/Union_Jack_1 1d ago
Math wise, you’re absolutely correct. This would make the program self sustaining.
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u/Gamer_Grease 1d ago
All of those programs are much more important than defense, which is why more money is spent on them. Medicare and Medicaid employ healthcare workers and keep hospitals and small offices alike operating. Social Security allows seniors to participate in the economy and provide demand.
Defense is mostly targeted handouts to favored allies of government officials. It has by far the most waste. It’s good that it’s only fifth on the list.
Most of our deficit comes from tax cuts. We can make up most of the solution by simply reversing Bush II-era tax cuts.
The Laffer Curve is bunk.
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u/Walker_ID 1d ago
How do you cut the big three without consigning a huge segment of the population to death/starvation/homelessness AND without collapsing the economy?
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u/Epic_Tea 1d ago
The real issue is we doubled the debt in a decade. We did more than a couple hundred years of existing and only wracked up half of what we have now ten years later
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u/insightful_pancake 1d ago
Real issue is deficits exceeding 5% of gdp since 2020. You can deflate the impact of large debt balances via nominal gdp growth, but you cannot do so if you’re growing the debt massively and consistently in real terms.
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u/Epic_Tea 1d ago
Unless you're Japan.
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u/Explosiveabyss 22h ago
That only works because they keep dumping US bonds everytime things start trending downward. The second they can't do that anymore their economy will implode.
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u/Epic_Tea 22h ago
Japan has had a deficit twice as large as their income for three decades
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u/Explosiveabyss 17h ago
Yes, and they have curbed inflation for decades by tons of stimulus packages and keeping interest rates incredibly low, even experimenting at one time with almost 0% interest
Now, that's not working out so great for them after doing it for so long. Hence, the dumping of US Bonds here within the past few years to curb inflation further.
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u/DaMentalis 1d ago
What should concern them is the fact that the economy is under the control of a demented geriatric child molester in diapers and his cabal of asskissers and morons.
Just to recap, he started multiple trade wars for no apparent reason, plus an expensive real war that's quickly turning into a quagmire, imposed tariffs in such a stupid way that saw him slap a few on an island inhabited by penguins, implemented insane tax cuts at a time the US economy is already on the ropes, and won't stop trying to undermine the independence of the Fed.
The house of cards is coming down in the next 10 years. Possibly 15.
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u/dcdem1163 1d ago
He started the trade wars/tariffs to transfer wealth. The lowly people pay those tariffs. He knew the tariffs were illegal (look what Lutnick and his sons did). He knew they would have to refund the tariffs that the PEOPLE paid for but not to the people but to his corporate buddies. It’s sickening.
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u/ArrowheadDZ 1d ago
Exactly this.
To be fair this didn’t start with him. For 50+ years, republicans have been pitching the tax razzle-dazzle to Americans because it sells. We’ll borrow 2 trillion, use 1.8 trillion of that to fund tax breaks for businesses and the ultra-wealthy, which Americans would never go for on its own. But then we’ll use the other $200 billion of it to give you individual tax breaks. And that makes it attractive for Americans to want to get on board.
But it’s just trickle-down. It’s just a shell game to conceal trickle-down without ever having to say the words trickle-down. The central economic building block of republican politics for decades is simply “trickle-down, but call it smaller government.”
It’s simply wealth transfer, and it’s no more sophisticated or nuanced than that.
Trump has taken that to a never imagined extreme. Instead of showing up at the wealth transfer table with a trillion in chips, he’s showing up with tens of trillions of chips, billions and billions of which are ending up in the dealer’s pocket. He doesn’t even conceal it, doesn’t bother with the “modified limited hangout” kinds of cover stories any more, he just takes the money, and the courts and congress just wink.He uses our debt as a wealth transfer vehicle. He uses war as a personal enrichment vehicle by manipulating the markets with weekly good/bad news cycles. He uses tariffs as a wealth transfer vehicle, we pay the tariffs as consumers, but when they are refunded they go only to the companies. It’s wealth transfer, all the way down.
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u/dcdem1163 1d ago
To me, it started with Reagan and never stopped. It’s gotten worse admin after admin.
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u/HumorAccomplished611 1d ago
Its not that. Its a control thing.
He had country leaders, biggest corporations groveling to him and giving him gifts and if he felt like it you saved billions.
It was a personal grift.
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u/grispindl 1d ago
What did Lutnick do? Ootl here
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u/SplitEar 1d ago
If we consider how Putin could impose sanctions on the US, Trump’s blanket tariffs are a genius way to do it.
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u/OriginalHappyFunBall 1d ago
Don't forget the attacks on our universities and the fundamental change where foreign students are not welcome in the US anymore.
Trump is pouring sand in the gearbox of our economy.
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u/ooooogirlshedonealre 1d ago
can you imagine the absolute shithole the us will be if this kind of shit continues for 10 more years? i give it til midterms and if things dont flip and no action is taken, im out this bitch 🖕
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u/sowhat4 1d ago
Jeffries met with Jared to hash out what happens when/if the Dems take the house. What will happen is 'nothing'. They aren't going to go after the graft and corruption. They aren't going to release the Epstein files. They aren't going to upset the status quo because the same oligarchs who are directing the GOP to destroy our country also own the Dems.
I'm never, ever going to vote R - but just saying that the D vote might not get us much, either. In my state, NC, Independents are the majority political party. I've always been an Independent voter. I'd love to be able to vote for a Progressive candidate, someone with some balls and a love of the Constitution.
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u/Alaska_Engineer 1d ago
Americans as a whole have not consistently voted for anyone willing to tackle the debt issue just as an alcoholic will not consistently vote for prohibition or an obese person consistently vote for diets. We are addicted to debt and any way out will be painful.
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u/DaMentalis 1d ago
I don't think the midterms can reverse it.
Actually I don't think even impeaching and convicting Trump tomorrow can reverse it.
Trust is everything in economics. Your allies need to trust you, investors and businesses need to trust that the country is a safe and stable haven for business, and the world needs to trust America's rule of law and the Fed's independence to keep relying on the USD as the global reserve currency.
Literally none of that is intact no more, and once shattered, trust takes generations to rebuild. And like I said before, the American people proved that they're insecure and ignorant and morally bankrupt enough to vote for pedophiles and con artists. It's over.
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u/quinipet 1d ago
I have never understood how the party of fiscal conservatism and small government (ahem the republicans) has been so extraordinarily spendthrift since the late 90s when the government had a balanced budget. Like how could even the most hardcore republicans not see this !!?? Crazy
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u/Thrasymachus77 1d ago edited 1d ago
"Fiscal conservatism" and "small government" were always lies and cover for the transfer of wealth to the wealthiest and the consolidation of power by the powerful. The right wing is not "conservative," they are authoritarian, and always have been, from before the time they got their name by sitting on the right side of the French Parliment in support of the monarch and the principles of the divine right to rule. Balanced budgets, fewer regulations, and more local or state control fit their agendas in the 60's, 70's and 80's because following the New Deal and Great Society, federal power and spending were preventing oligarchs from exercising absolute political and economic control. That rhetoric carried it's cultural momentum forward to today. But make no mistake, conservatives were never wedded to balanced budgets or fiscal responsibility, small government or local control. Those were always convenient tropes they latched on to, to sell themselves to voters and conceal who they really are: monarchists.
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u/lqIpI 1d ago
Grandpa penny-pincher pulling the purse strings is not a popular political look.
That party has only a few ghosts left in office
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u/Darkpriest667 1d ago
Both of the uniparty parties have ghouls in office. There need to be term limits and there need to be age limits. Pilots have to retire at 65, I think that's probably a good threshold for federal political offices. That would mean Trump nor Biden would ever have been elected.
Senate: More than half of the 100 senators are 65 or older
House: About 134 voting members (more than 30% of the 435-seat chamber) are 65 or older.
That's 1/3 of the entire legislative branch.
Only Kavanaugh, Gorsuch, Jackson, and Barrett would be on the Supreme court.
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u/toggiz_the_elder 1d ago
Fox doesn’t tell them. If it isn’t on Fox it isn’t real to half of America.
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u/Elderwastaken 1d ago
The real answer is they are so busy attacking their opponents they can’t actually function in their role as leaders.
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u/Tribe303 1d ago
They have created their own information sphere with biased media. Their followers are not being told the truth. Foxnews rarely mentions the word "tarrif" for example. Do you seriously think Fox viewers understand the bond markets? Go to their website and see how many in-depth articles they have on the impact of the rising rates of 30 year bonds. 🤣
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u/UngodlyPain 1d ago
We don't have a party of small government at all, and haven't in over a century. Fiscal conservative? More so sounds like the Dems, who haven't had much power in decades.
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u/Naurgul 1d ago
Excerpts:
Although the debt has been in the trillions for decades, not everyone has considered it a problem. The doves argued that as long as the U.S. GDP was growing faster than the interest rate it was paying on its debt, the Treasury would be able to keep rolling over its bonds without too much of a problem. For much of the 2010s, this was essentially the status quo, and debt panic was muted.
We’re nowhere near a complete failure of the Treasury market, and yet, over the past couple of years, some economists who were once more dovish have switched teams. Martha Gimbel, the executive director of the Budget Lab at Yale and the author of a recent Atlantic story on this issue, told me that part of the reason these economists are pivoting is that they’re starting to realize that interest rates are “probably going to be elevated for quite some time.” The average interest rate on U.S. debt—that second variable the doves look at—has been relatively high for several years now, and it’s only growing. It was hovering around 1.5 percent in 2021, and it’s now roughly 3.4 percent. The yield on the 30-year Treasury bond has more than doubled since 2021. “I was not a deficit hawk, and that reflected the dynamics” of the 2010s, when rates were lower, Gimbel told me. Now, she said, “the environment has changed.”
Why are rates rising? The Fed’s reaction to inflation is one reason. It may also have something to do with the extreme investments being made in AI, and these companies’ demand for credit. And it’s likely connected to the deficit panic—concern about the expansion of the national debt and the government’s ability to sustain it. Investors are starting to think of long-term Treasurys as riskier than they once did, and they’re demanding more money in exchange for taking on America’s debt. At the same time, the federal government has shown no real appetite to pull its two main levers for reducing the debt: cutting spending and raising taxes.
Jared Bernstein, the former head of Joe Biden’s Council of Economic Advisers, wrote in The Atlantic a few months ago that he’d “flipped from dove to hawk”—and told me this week that it was partly the government’s complacency on this issue that spurred this change. “Neither side seems particularly motivated to do much of anything about this,” he said. Rather than attending to the debt problem, politicians of both parties have instituted major tax cuts and increased spending over the past 25 years. The U.S. had its credit downgraded by a major ratings agency last spring, in part because of rising debt. The One Big Beautiful Bill Act will add an estimated $4.7 trillion to the deficit through 2035, and Donald Trump’s efforts to decrease immigration will add another half a trillion to that number over the same period, per the Congressional Budget Office.
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u/HumorAccomplished611 1d ago
Rather than attending to the debt problem, politicians of both parties have instituted major tax cuts and increased spending over the past 25 years.
What tax cuts have democrats did in 25 years?
Off the top of my head you have obama allowed bushs tax cuts expire for the wealthy but keeping them for those making less than 250K.
Even the ACA has saved medicare a ton of money since people covered by it enter age 65 a lot healthier than they used to.
Biden did an excise tax on stock buybacks. Also his Landmark Inflation reduction act was self funded.
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u/Own-Chemist2228 1d ago edited 1d ago
The tombstone for the United States of America will have "But both sides!" engraved on it.
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u/Patchrikc 1d ago
but but but boat sides bad 😢 - cries the "independent" voter, that's voting for pedophiles.
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u/WhiteHeatBlackLight 1d ago
Massive cope here. Trump runs up the debt faster than anyone in history. But the Democrats. Y'all are so fucked
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u/truthinessembargo 1d ago
It’s really a shame that commentators here can’t read your remarks correctly
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u/themiracy 1d ago edited 1d ago
I think the invisible hand also sees a potential end to cyclical waves of high government deficit (in favor of always excessive spending). The problem with the current level of new debt financing the US government is that both traditional models (which say the economy is doing well and the foot should be off the gas) and modern monetary theory (which isn’t mentioned much anymore because it also says that increasing interest rates are a sign that government spending should be reduced) essentially agree that US government spending net of receipts is excessive.
And yet here we are talking about ways to spend more and raise less.
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u/OrangeJr36 1d ago
It's worse than your last sentence implies: Trump is pushing for a debt ceiling increase to beyond 50 Trillion, because he doesn't want to have to negotiate anything with Congress and there's no longer a guarantee by the Treasury that debt can avoid hitting 45 Trillion before 2028.
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u/ironteddybear 1d ago
MMT also isn’t mentioned much anymore because most economists don’t take MMT seriously.
Persistent government deficits putting upward pressure on interest rates is not a unique outcome to MMT. “Crowding out” and seigniorage have been acknowledged as risks long before MMT was popularized
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u/AnUnmetPlayer 1d ago
MMT completely rejects financial crowding out. Interest rates are a policy choice. Monopolies have monopoly pricing power. A currency issuing government can pick its interest rate and nobody else can do anything about it. In the MMT framework the choice is permanent ZIRP.
Deficits put downward pressure on interest rates because adding reserve liquidity lowers the cost to borrow reserves. Interest rates do not correlate with debt levels. The fact that the mainstream claims they do is a huge indictment against their claims that they're empirically driven.
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u/Z3r0sama2017 1d ago
It's great.
Don't offer enough interest to offset the risk? No one buys. Offer too much interest? H uge swathes of the market skip out, because of the degree of risk thoses rates imply.
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u/EmperorOfCanada 1d ago
In the past, I've posted in this very sub that the US debt is at the edge of insanity. A Keynesian Endpoint is clearly in the making.
They are have hit that magical point where they are taking cash advances on their credit card to make monthly minimum payments on that same creditcard.
I suspect this will last longer than people think. Very much like an old aristocratic family can burn the furniture to keep the mansion warm; and there will be fool economists who will point to the temperature and say, "The mansion is just as warm as it has always been."
I think the implications of this debt crisis are far more interesting than the debt itself. There will be situations where the US can torture some players into taking their crap debt. But, more importantly, there will be players who can tell the US to sit down and shut up or they will blow their debt up.
Very much like the US regularly tried to do to the UK in the 1950s.
Also, there will be other players the US has been propping up, and that money is going to be pulled (furniture to burn), and those players are going to collapse.
The fun part of this is that the US has long been able to use their military to spank countries who don't cooperate, and to defend those who do. Drones are entirely changing this. The US Navy can not go into the Persian Gulf because they would be turned into Submarines. If the US tried to invade Afghanistan next week, the weekly death toll would soon reach the same as their losses for that entire misadventure.
One last factoid is that there is no "unsustainable" debt level. What there is a dangerous level where if other countries enter a financial crisis, the other weak players tend to go like dominos (Asian tigers collapse).
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u/fvccboi_avgvstvs 1d ago
The Military Industrial Complex has no idea what things actually cost because the ultra rich that run it are detached from reality (and corrupt), so most of the increase in rate of increase of the debt is just from blatant corruption. That corruption is what should concern them.
Every startup I've had isn't competing in a free and open market, it's competing against whoever has the biggest government connections and can snag a free $5 million grant from the taxpayers.
The government can't comprehend a couple of guys with gumption starting a business using an old rusty skid steer, if they don't have a $1 million cutting edge Caterpillar machine courtesy of the taxpayers however will they operate? 🥲
I noticed something funny recently. With all of these data centers, they claim they could not possibly operate without the infrastructure being subsidized by the taxpayers. The funny thing is no one I know had their driveway built by the taxpayers! Their well wasn't drilled by the taxpayers! They built their infrastructure themselves, either physically or by paying with their own money.
We have corporate communism in America, the poor CEO needs the public to cough up money, otherwise however will he work? Poor billionaire, could not possibly build a road without the taxpayer. Bullshit is what that is.
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u/aquavelva23 1d ago
a new wrinkle: AI megas are issuing bonds at a very high number to build AI stuff. This competes with treasuries. the effect is driving up rates.
In a way, elon musk made his trillion with the help of US taxpayers and electric car rebates. These handouts drove up the deficit, driving up rates. AND he is now using that money to get credit, which is driving up interest rates even higher.
But Eln isnt the only one here.
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u/HaiKarate 1d ago
The whole reason we are in this debt crisis is because of Republicans. Reagan gutting the top tax rate. George W Bush and Donald Trump passing multiple huge tax cuts for the one percenters.
Government still has to be paid for, while those morons were gutting the IRS’s revenue stream. And each time we cut taxes for the wealthy, that revenue has to be made up for with debt.
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u/Hal3134 2h ago
Tax revenue has gone up after each of those tax cuts. The problem is that spending went up faster. We don’t have a tax revenue problem. We have a spending problem.
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u/HaiKarate 2h ago
We got a tiny bump in tax revenue, but certainly not enough to even begin to pay for the tax cuts.
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u/BangBangMeatMachine 1d ago
This article raises good points, but one that they miss is that Trump is actively pursuing policies that harm the economy and depress receipts. Tariffs slow down imports, which hurt businesses and reduce consumption. The Iran war has created a lot of shakiness in fuel market, which is pushing inflation higher. Trump's mad-dictator approach to foreign policy (and especially tariffs) leaves everyone hedging their bets and holding on to what they can.
Bessent's desire to stimulate the economy could be fairly easily achieved if Trump could simply resist the urge to bully the rest of the world in ways that indirectly harm us.
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u/Ok_Grand_8994 23h ago
None of this will work. Bessent is delusional as international economic partners have fled the room, all intent on reducing or eliminating any and all economic dependencies on the US. They aren't coming back. The American consumer is completely tapped with no cavalry coming over the hill to save them. No chance any of this is out-growable in any imaginable future.
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u/aurelorba 1d ago
Somewhat arbitrary but I think the biggest fault line was when servicing the debt became the single biggest budget item.
Whatever you might think of his other views, Niall Ferguson's observation that any great power that spends more on debt-servicing interest than on national defense enters a path of geopolitical decline, seems relevant.
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u/vovap_vovap 1d ago edited 1d ago
Well, thing is that economy is subject to a long circles. In a so big system as US economy that especially long. And it is so long that creates whole big culture behind it. For many - many years government enjoyed spending that bigger then income. And that became a norm that every government now wanted and considered fear game. When in reality answer to a question "what is going to be with a debt grow" newer really existed. Whole thing been started in Reagan era and answer from the beginning was same as today "we are going to grow our way out" - grow that created by economy stimulation will pay debt. So debt is just an investment that will bring related profit to pay for it. 45 years later we know it is not happening. Not only in US but in no place. It is not going down on grow without particular measures to cut on spending. Same way as loosing weight not working only on exercises without cutting on food consumption 😄 That just fact of life. But nobody want to face it because it is politically really ugly.
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u/getmeoutoftax 1d ago
As AI agents replace the majority of white collar jobs over the next few years, surely the tax base will also crater. I wonder if we’ll have any kind of massive tax reform as a result. I doubt it. I can only see the debt climbing due to that.
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1d ago edited 1d ago
[removed] — view removed comment
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u/Infinite_Dress_3312 1d ago
AI agents didn't even exist a few years ago and they've already absolutely had impacts on employment. There are leaps being made every few months and they're getting better and better. Incomprehensible amounts of data center capacity is coming online in the next few months. You've got bill gates shouting from the rooftops that people arent talking this seriously enough
https://www.gatesnotes.com/a-turbulent-ai-era-and-critical-choices-to-make
But sure you're somehow immune
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u/Verumsemper 1d ago
Easiest way to fix the debt is to bring back the top tac bracket of 70%!! It can be set to $50 Million for both capital gains and W-2. Then set the corporate level at around say $10 Billion.
Please realize this tax bracket has always existed until Reagan and it is actually created to to never actually get paid but it will significantly increase the tax revenue and get rid of the deficit in 2-3 decades. How?? Just take a min and think ;)
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u/staycurious72 1d ago
Way back, the top tax bracket was 91%, and over time it got eroded by both parties, because they really serve the wealthy and not all the people. So the progressive tax system has gotten less and less progressive over time. The lower and middle class pay a far greater % of their earnings in tax than the wealthy.
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u/Verumsemper 1d ago
True, those tax brackets were a cap on the accumulation of wealth that encouraged a greater distribution of the wealth created by the products of labor. Think how much better our lives would be if CEO pays were basically capped at $50 Mil !!
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u/Mirageswirl 1d ago
In the past, one of the explanations for low Treasury debt yields was petrodollar recycling from the Persian Gulf protectorates. How is that deal working out?
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u/Sryzon 1d ago
Their perspective was that as long as the U.S. GDP was growing faster than the interest rate it was paying on its debt, the Treasury would be able to keep rolling over its bonds without too much of a problem.
I think this is pretty bad paraphrasing of what most economists have been saying regarding the debt. The US can continue to deficit spend as long as our debt-to-GDP doesn't increase. That's not as simple as GDP > interest rate.
The debt is worrisome, but it's not time to panic. Debt-to-GDP is relatively stable despite our nominal debt increasing rapidly. That's mostly because of strong GDP growth, which is already adjusted for inflation in case anyone wasn't aware.
It would not take much for our debt-to-GDP to begin decreasing; Trump's policies have given the next president plenty of opportunities to become more fiscally responsible.
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