Trump, Staring At Recession, Tips Payroll Tax Cut, ‘Dramatic’ Measures. Kelton Says ‘Run MUCH Bigger Deficits’

Trump, Staring At Recession, Tips Payroll Tax Cut, ‘Dramatic’ Measures. Kelton Says ‘Run MUCH Bigger Deficits’

Donald Trump is a man who loves superlatives, which is why it's no surprise that when it comes to what his administration plans to do to cushion the US economy from the deleterious effects of the various containment measures aimed at stopping the spread of coronavirus, the president promised something "major". Flanked by nearly a dozen aides and advisors including a terrified-looking Steve Mnuchin, a somber Peter Navarro and a talking mannequin called "Mike", Trump told reporters he's set to an
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10 thoughts on “Trump, Staring At Recession, Tips Payroll Tax Cut, ‘Dramatic’ Measures. Kelton Says ‘Run MUCH Bigger Deficits’

  1. Kelton’s policies would be a complete disaster. You can’t just point to Japan not having imploded completely to signal that MMT will cure everything. So stupid some people can’t see basic logic or understand behavioural psychology and confidence boundaries.

    1. Kelton is great, and you are constructing a straw man. Kelton does not simply “point to Japan”. That is an intellectually dishonest thing to say. I would suggest you actually read what she’s written before you malign it. Would you be willing to debate her in public on the issues? I’m guessing that although you’ll say “yes” here, the real answer is “no”. She’s got a book coming out. You should pre-order one.

      1. Unfortunately your go-to rebuttal when people criticise Kelton and MMT is that they haven’t done their research, and if they did proper research then they would agree. I have spent time studying Kelton’s ideas and I fundamentally disagree.

        Furthermore Kelton does in fact use the argument (many times) that there is little inflation RIGHT NOW with large deficits and debt/GDP. Therefore her expansionary policies wouldn’t ever exceed some confidence boundary in the future, with all theoretical government spending perfectly planned out, so as not to contribute to inflation.

        I do respect that you’ve taken the time to analyse MMT, unlike many pundits and blogs, however.

        Thanks for the book recommendation, I probably will buy.

  2. H-Man, to bail us out of this virus, it is going to require bigly $$$. If that means a larger deficit, so be it, since there are no other options on the table. The “bunker down and deal with it” mentality just doesn’t do the job when you have to look at laying off workers and shuttering the doors. Unless, of course, bankruptcy for all is your favorite flavor.

  3. If this was a military threat, would individuals and businesses be expected to fund there own defense? We wouldn’t even be considering it. Yet here we are, it has taken being under threat for two months before the government considers paying for the defense against the virus. That is beyond incompetence. It is ideology.

    1. Hi all. I think when modeling the economy the rest of the year one would need to include the logistic equation describing the spread of the virus in the US. There are factors to that equation innate to the virus and there are factors to that equation having to do with to what extent individuals reduce their likelihood of spreading the virus further. The speed of the spread of the virus changes the outcome of the pandemic in the US and one part of the outcome of the pandemic in the US is a recession of some magnitude, timing, and duration. I’d hazard to speculate that Trump’s remarks about some dramatic announcement are going to influence the recession through both the virus logistic equation as well a through the economy directly. I don’t know how large an impact the announcement will have on the economy directly; however, the virus itself won’t hear the announcement and now that the virus has a foothold in the US it will continue to spread wherever humans gather in any density. So, unless the announcement will dramatically reduce the opportunity for the virus to spread in the next couple months I expect its short-term effects to be superficial at best. Look at the pandemic in Italy as leading the pandemic in the US by a little bit of time. Would an extra couple hundred dollars in the pocket of each citizen in Italy now make any difference given the rate of spread of the sickness?

  4. I am unclear why a payroll tax cut is the most effective way to help people who lose jobs, hours, tips and gigs. No job: no payroll tax anyway. Fewer hours: eliminating payroll tax will theoretically cushion 7% of the hit to the employee, no more (and does the employer get the other 7%?). Tips or gigs lost: payroll tax is irrelevant.

  5. If USA runs a BIG deficit, who are the lenders (Federal Reserve, US citizens/companies or foreign parties) and how/will they be repaid or is it de facto money printing ( debt probably held forever by Federal Reserve)?

    It all washes out in the foreign exchange rates. If the USA does not want to jeopardize status as world’s premier reserve currency, then the USA needs to openly consider what other countries/currencies are doing in conjunction with our decision to run BIG deficits. The relatively of our actions to other countries/currencies impacts strength of USD.

    There are also serious future implications to be considered AT THE TIME deficit spending occurs. It should not be “spend it now and leave it to future generations to figure out how to repay the debt and deal with the fall out on the USD”. Are we responsible enough to leave a roadmap?

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