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Slight inflation is not going to cut it to balance the federal budget.

by eloff 4y ago

dragonwriter 4y ago
Why would anyone care about balancing the budget? To the extent that debt (or debt-service cost) to GDP matters, balancing the budget is way outside of what is needed to address it. The concerns are, in the short-term, ability to pay debt service out of current revenue, and, in the longer term, assuring the GDP grows faster than debt. Neither of those requires balancing the budget.
- pclmulqdq 4y ago
  I think OP is suggesting that inflation is a product of the introduction of additional dollars to the system, which are mainly added thanks to the government's imbalanced budget (which dwarfs the effects of bank lending on money creation). This is a probably-not-too-wrong but also extremely contentious theory about how the economy works. Most of the people who run the fed and the treasury today subscribe to the idea of modern monetary theory, which does not agree. It's looking more correct now than it has ever looked in the past, though.
- eloff 4y ago
  > The concerns are, in the short-term, ability to pay debt service out of current revenue, and, in the longer term, assuring the GDP grows faster than debt. Neither of those requires balancing the budget. I agree. I don’t mean balancing the budget in an accounting sense. I mean getting spending down to sustainable levels. It just isn’t sustainable right now, and the only two possibilities I see is to either get that under control or to buy government debt with “printed” money, causing inflation which will decrease the real value of the debt. Seeing the flagrant incompetency and immaturity in Congress, I’m betting on the latter.
  - jfengel 4y ago
    Even a competent and mature Congress would find it challenging to dramatically cut the budget. The entitlements programs are crucial to keeping people out of poverty. The next biggest item is the defense budget, and I suppose a "competent and mature Congress" would be able to cut that dramatically, but it's a challenging task. People genuinely believe that our enormous defense budget is required. The rest of the budget is a lot of little things, each one barely more than a rounding error. You could zero out whole departments without moving the needle. People talk about them because of culture warfare, with "teh deficit" as a fig leaf. In the end, the US budget is so big because we want it to be so big. And that's not inherently a bad thing. It is part of an economy doing well enough that people believe the government will repay loans. Eventually we'll outstrip that, but it's not today. The fact that Congress is immature and incompetent... that's kind of a different problem. And one much more important than the deficit. But I don't have any idea how to fix that, because the voters know what they want and deserve to get it, good and hard.

Slight inflation is not going to cut it to balance the federal budget.

by eloff 4y ago

Slight inflation is not going to cut it to balance the federal budget.

Why would anyone care about balancing the budget? To the extent that debt (or debt-service cost) to GDP matters, balancing the budget is way outside of what is needed to address it. The concerns are, in the short-term, ability to pay debt service out of current revenue, and, in the longer term, assuring the GDP grows faster than debt. Neither of those requires balancing the budget.

pclmulqdq 4y ago
I think OP is suggesting that inflation is a product of the introduction of additional dollars to the system, which are mainly added thanks to the government's imbalanced budget (which dwarfs the effects of bank lending on money creation). This is a probably-not-too-wrong but also extremely contentious theory about how the economy works. Most of the people who run the fed and the treasury today subscribe to the idea of modern monetary theory, which does not agree. It's looking more correct now than it has ever looked in the past, though.
eloff 4y ago
> The concerns are, in the short-term, ability to pay debt service out of current revenue, and, in the longer term, assuring the GDP grows faster than debt. Neither of those requires balancing the budget. I agree. I don’t mean balancing the budget in an accounting sense. I mean getting spending down to sustainable levels. It just isn’t sustainable right now, and the only two possibilities I see is to either get that under control or to buy government debt with “printed” money, causing inflation which will decrease the real value of the debt. Seeing the flagrant incompetency and immaturity in Congress, I’m betting on the latter.
- jfengel 4y ago
  Even a competent and mature Congress would find it challenging to dramatically cut the budget. The entitlements programs are crucial to keeping people out of poverty. The next biggest item is the defense budget, and I suppose a "competent and mature Congress" would be able to cut that dramatically, but it's a challenging task. People genuinely believe that our enormous defense budget is required. The rest of the budget is a lot of little things, each one barely more than a rounding error. You could zero out whole departments without moving the needle. People talk about them because of culture warfare, with "teh deficit" as a fig leaf. In the end, the US budget is so big because we want it to be so big. And that's not inherently a bad thing. It is part of an economy doing well enough that people believe the government will repay loans. Eventually we'll outstrip that, but it's not today. The fact that Congress is immature and incompetent... that's kind of a different problem. And one much more important than the deficit. But I don't have any idea how to fix that, because the voters know what they want and deserve to get it, good and hard.