It’s Too Late. Trump Can’t Save Trumponomics. And Neither Can Larry Kudlow.
Back in August, we asked if Trump could save Trumponomics - in spite of its namesake.
At the time, the Washington Post had just reported that the administration was pondering a temporary payroll tax cut in an effort to guard against a deceleration in the economy headed into an election year.
The news presented something of a public relations quandary for Trump, his aides, advisors and allies. Acknowledging that additional tax cuts - especially measures aimed at helping middle-class families -
The Dems are now the party of fiscal responsibility, at least in the Trump era. The Repubs are now the party of borrow and spend, and that tag will outlast Trump.
Any stimulus package is dead in the House unless the spending fits the Dems’ agenda. Those negotiations will be interesting. What does ‘The Art of the Deal’ say about negotiating from what both parties knows is a weak hand?
As soon as a Democrat wins the White House, Republicans and the mainstream media will discover the “importance” of the deficit once again and demand Democrats do something about it. Just like clockwork.
In general, GDP growth this year is not that amazing and headed to a lower range.
See: U.S. GDP growth will slow to 2.1% in 2019 from 3% in 2018. It will be 2% in 2020 and 1.8% in 2021. That’s according to the most recent forecast released at the Federal Open Market Committee meeting on June 19, 2019
That’s maybe not super accurate and it’s old data, but, even if GDP at annual rate is around 2.3, it’s worth keeping that sluggish growth rate in perspective, in terms of at least two things. One, since tax rates are lower, Treasury revenue is lower and as growth slows, revenues will continue to fall well below the trump total bullshit hype zone of 4% GDP growth. The second related issue, is the increasing debt and deficit which like a magnet, sucks money from the magical trump annual budget.
Ok, there is a third dynamic which is more abstract, but, after implementing the Yuge tax cut, the related Yuge Treasury issuance took place, to help goose the deficit, thus, the prior trend of the debt and interest used for financing sort of gets a turbo boost, i.e., as the debt skyrocketed, there was a lag period where interest compounded faster, as less interest was paid — and of course all this was going on while GDP fell. I know, it doesn’t matter, the nazis have won. Anyway, here’s a FRED chart:
https://fred.stlouisfed.org/graph/?g=po3M
The government deficit, is the non-government surplus. Even interest payments are transfers to the private sector. The US is the creator of what is still the World’s reserve currency. Taking advantage is the right thing to do. In fact, it might be the only ‘right’ thing the orange moron has done.
The Federal budget is NOT like a household or local government budget…we are monetarily sovereign…let’s stop denying reality.
Most of the Zimbabwian economic theories related to MMT and their genetically mutated theories that deficits don’t matter are pretty easily disproved. While it is a nice concept to think that America can print money, like Zimbabwe (til the cows come home) and transfer debt to a drooling population of idiot speculators. The outcome over time, is that there are never enough idiots in the equation to make that fantasy work out in a way, where the government gets a free lunch.
At some point the amount of lemmings falling off the cliff slows way down, due to lack of population growth related to reproduction and birth/death rates (lol). In fact, the MMT theory that’s related to a sucker is born every minute can be disproved by genetic theory — see Inheritance of Traits, i.e., as more lemmings fall off the cliff, fewer lemmings are left to mate and thus, as successive lemmings follow the patterns of the parent behavior, the species or specific family becomes extinct — and those that remain, who don’t have the mutated investment gene, will most likely adapt their behavior and take more time to process any logic associated with jumping over the cliff.
Granted the U.S at one point had respect with its reserve currency status, that’s now much more a matter of debate in terms of fiscal responsibility and the inability if Treasury to issue enough fake money to cover the real debt. The private sector is growing slower and saving less and the new Treasury offerings have less future value, thus you’ll need to explain how lower GDP, lower consumption and higher interest payments create fiscal stability.
All I can offer are some clues at FRED, to help open some doors on this topic:
I = investment
S = saving
Where (I — S) = private sector balance, (G — T) = public sector balance & (X — M) = foreign sector balance
Federal government; operating surplus, net, Flow (BOGZ1FU316402101Q)
Federal Surplus or Deficit [-] (FYFSD)
Federal government; Treasury securities; liability, Level (FGTSL)
Federal government; Treasury securities; liability, Flow (BOGZ1FU313161105A)
Real Gross Private Domestic Investment: Fixed Investment (A007RL1Q225SBEA)
FYI, here’s my little chart and if i had time, it would be nice to overlap investment and saving for Zimbabwe, but I’m more focused on impeachment research.
https://fred.stlouisfed.org/graph/?g=poss
I think you are missing out on what economic geniuses (stable?) these guys are. Remember when they predicted 3.2% real growth at the end of July, 3 months ago. Now all administrations have rosy long term forecasts but a mid year review like this is farce. Often wrong Larry.
https://www.whitehouse.gov/wp-content/uploads/2019/07/20msr.pdf
“Real Gross Domestic Product (GDP):
Real GDP growth in 2019 is expected to be 3.2 percent on a fourth quarter-over-fourth quarter (Q4/Q4) basis (as shown in Table 3), before edging down to a sustainable 2.8 percent in the long run.”
From a stimulus perspective the tax cuts enacted were wildly inefficient, and that was entirely predictable. Cuts were given to sectors and economic actors that have a low consumption function. The icing on the cake (sarcasm), is that the cuts also increased income inequality. So you boxed yourself in fiscally to make a social problem much worse. A smart policy adjustment would be to leave total tax collections flat but to adjust them to give greater tax help to the lower income strata of our made great again country.