Analysis: Government set to borrow nearly $1 trillion this year, an 84 percent jump from last year

"It was another crazy news week, so it's understandable if you missed a small but important announcement from the Treasury Department: The federal government is on track to borrow nearly $1 trillion this fiscal year — President Donald Trump's first full year in charge of the budget.

That's almost double what the government borrowed in fiscal year 2017.

Here are the exact figures: The U.S. Treasury expects to borrow $955 billion this fiscal year, according to a documents released Wednesday. It's the highest amount of borrowing in six years, and a big jump from the $519 billion the federal government borrowed last year.

Treasury mainly attributed the increase to the "fiscal outlook." The Congressional Budget Office was more blunt. In a report this week, the CBO said tax receipts are going to be lower because of the new tax law..."

http://www.chicagotribune.com/news/nationworld/politics/ct-spending-debt-analysis-20180203-story.html

************

So what? Government deficits equal private savings and every dollar spent by the government goes into the civilian economy.

Deus X wrote:So what? Government deficits equal private savings and every dollar spent by the government goes into the civilian economy.

That is a simplistic formula, all of which is subject to inflation and/or stagflation.

Oh good... then he can brag about cutting the deficit in a couple of years. Our fiscal policies suck. At least the Fed isn't pumping 40 BILLION air dollars a month into the system... so we've got that going for us.

Floridatexan wrote:
That is a simplistic formula, all of which is subject to inflation and/or stagflation.    

The witness is not being responsive, your honor...    

Here, this is less "simplistic", but it boils down to the same thing:

GDP = C + I + G + (X – M)

Where C = consumption, I = investment, G = government spending, X = exports & M = imports

Or stated differently;

GDP = C + S + T

Where C = consumption, S = saving, T = taxes

From there we can conclude:

C + S + T = GDP = C+ I + G + (X – M)

If rearranged we can see that these sectors must net to zero:

(I – S) + (G – T) + (X – M) = 0

Where (I – S) = private sector balance, (G – T) = public sector balance & (X – M) = foreign sector balance.

Take that a step further:

(S – I) = (G – T) + (X – M)

Close the foreign sector out and you get:

(S-I)=(G-T)

https://www.pragcap.com/yes-government-deficits-equal-private-surpluses/

"...all of which is subject to inflation and/or stagflation"--c'mon, FT, you can do better than that.

Deus X wrote:

Floridatexan wrote:
That is a simplistic formula, all of which is subject to inflation and/or stagflation.    

The witness is not being responsive, your honor...    

Here, this is less "simplistic", but it boils down to the same thing:

GDP = C + I + G + (X – M)

Where C = consumption, I = investment, G = government spending, X = exports & M = imports

Or stated differently;

GDP = C + S + T

Where C = consumption, S = saving, T = taxes

From there we can conclude:

C + S + T = GDP = C+ I + G + (X – M)

If rearranged we can see that these sectors must net to zero:

(I – S) + (G – T) + (X – M) = 0

Where (I – S) = private sector balance, (G – T) = public sector balance & (X – M) = foreign sector balance.

Take that a step further:

(S – I) = (G – T) + (X – M)

Close the foreign sector out and you get:

(S-I)=(G-T)

https://www.pragcap.com/yes-government-deficits-equal-private-surpluses/

"...all of which is subject to inflation and/or stagflation"--c'mon, FT, you can do better than that.

You're right...I can. But I don't have time to write you a dissertation.

Floridatexan wrote:
You're right...I can.  But I don't have time to write you a dissertation.  

I don't think time is the limiting factor.

Deus X wrote:

Floridatexan wrote:
You're right...I can.  But I don't have time to write you a dissertation.  

I don't think time is the limiting factor.

Modern Monetary Theory (MMT) Critique

"The following provides a brief critique of a relatively new monetary theory called “Modern Monetary Theory” also known as MMT.

MMT has become an increasingly popular economic theory in some left-wing circles in recent years in part due to its eye opening description of public finances. I am sympathetic to many of the views espoused by MMT and I would argue that they have many useful insights. I’ve written about how MMT is an important theory to understand, but I would also argue that MMT takes a basic Post-Keynesian & Marxian framework and adds a bunch of “modern” understandings that result in inconsistencies. I think they use these inconsistencies to try to form a “new paradigm” for public finances that misconstrues reality. In my opinion, this new paradigm is unnecessary and results in some overreach in the areas describing the monetary system. The following 4 critiques (as well as my own brief comments below) are useful and elaborate on those inconsistencies.

MMT, The Emperor Still Has No Clothes, Thomas Palley
The Monetary and Fiscal Nexus of NeoChartalism, by Marc Lavoie
MMT and the Real World Accounting of 1-1<0, by Brett Feibiger
A Critique of MMT, by Steve Waldman

Here’s a shorter version of what I believe are the primary inconsistencies and problems in MMT. This is a brief rebuttal, but covers the main points of confusion. I’ve tried to focus on points of operational errors where I feel MMT misunderstands operational realities of the monetary system. This hopefully results in an objective analysis as opposed to a politically biased policy focus..."

(points:)

MMT Claim #1: A sovereign currency issuer need not fund itself via taxes or bond sales.

Reality: Any endogenous issuer of money must “fund” itself.



MMT Claim #2: Unemployment is caused by the deficit being too small.

Reality: Unemployment is caused by a lack of private investment.


MMT Claim #3 : “taxes drive money”

Reality: Many things “drive money” and taxes are not likely an important
one


MMT Claim #4: State money sits atop the hierarchy of money in the monetary system.

Reality: Most modern governments have outsourced money creation to
the private banking system placing it in the dominant settlement and
payment role.



Final Critique: MMT is not Empirically Tested


My final and probably most important critique is that MMT is not an empirically tested theory. In fact, it is more a set of beliefs than a set of economic principles. This probably explains why its followers are so militant in their belief. They believe more than they can prove. We see this across several facets of MMT including:

MMT cannot prove that “taxes drive money” and cannot even begin to show what level of taxation would drive demand for money. It is nothing more than a claim that they cannot test.

MMT has no coherent theory of inflation. They claim that they will control inflation through changing of taxes combined with a Job Guarantee, but they cannot show what those levels would be or how they would actually implement such a policy in any coherent manner. Most worrisome is the fact that MMT appears to have no empirically coherent theory for containing high inflation. Despite repeatedly noting that inflation is the true constraint for a sovereign currency issuer they do not have an empirically tested theory for containing inflation. Instead, they claim that the Job Guarantee will anchor prices and claim that reducing deficits will sufficiently contain inflation. These positions are entirely theoretical and have only thin empirical evidence to support them.

The Job Guarantee is a totally untested program in any developed country. MMT cannot show that the JG does what they claim. Instead, it is supported mainly by faith and untested claims.

There is legitimate reason to critique MMT based on its internal operational inconsistencies and the lack of empirical evidence supporting so many of their claims. I find MMT to be a useful theory, but one that we should approach with skepticism.


https://www.pragcap.com/modern-monetary-theory-mmt-critique/

*************

Every time there's a discussion of economics, you throw your MMT argument into the discussion as if it's the magic bullet. Then you denigrate anyone who disagrees. Read the whole article for clarity. I've given you the basics here.

I never cheated on my wife once in our marriage. Without exception, I have found that if you cheat in one area you cheat in all areas. I am not asking to go back to Puritan times, but a more despicable President could not have been found in America. His base stands by him and my neighbor said something about those damn Democrats screwing up the country. He is the one who was a gung ho Trump supporter. Ex Military, government job after the military, and now in retirement he is finally working in the private sector, and my argument about the militarization of America cannot be truer when discussing this neighbor. He is a really good guy, but the work ethic thing.......well he is doing much better in the private sector. Trump in the end simply appealed to racism and anti intellectual backlash which has white older males feeling powerless as diverse young people begin to wield power in this great nation, and so much of the military spending is done in red poor states.....it has become a dangerous addiction of global death to innocents.

Floridatexan wrote:
Every time there's a discussion of economics, you throw your MMT argument into the discussion as if it's the magic bullet.  Then you denigrate anyone who disagrees.  Read the whole article for clarity.  I've given you the basics here.  

After Galileo was forced to recant by the Inquisition, he is reputed to have said "But still it moves" because he knew he was right. That's why I "throw out" my MMT argument whenever you start bleating about the deficit--because I know I'm right.

"What about the deficit" is the argument Republicans always make when Democrats defend social spending. "The debt! The deficit! We can't afford it!", they cry. Since when did you start carrying Republican water, FT?

If, instead of attacking me with idiotic comments like "That is a simplistic formula, all of which is subject to inflation and/or stagflation.", you spent half-a-day educating yourself about MMT,  you might realize that it's nothing more than an accurate description of the mechanics of money creation. There's stuff like the Jobs Guarantee--the JG--that I disagree with, but in general I think it's an accurate description of  how fiat money is created by monetarily sovereign governments.

Regarding your post from the blog Pragmatic Capitalism by Cullen Roche, you should have done your homework a little better. He's also the guy that wrote the sector analysis I posted--the fifth post in this thread--and nowadays he's also a pretty well-known defender of MMT. Your post was something he wrote in 2011, mine--the sector analysis--was also written by him but in 2013. Here's what he has to say about MMT these days:

Barely a day goes by that we don’t hear about how the US government can’t afford to buy this or that. We can’t afford healthcare. We can’t afford Social Security. We can’t afford education. We can’t afford to take care of the environment. It goes on and on. This narrative is based on a political ideology that wants you to think the government is like a household and it’s wrong. Wrong. Wrong. Wrong.

The reality is that the US government isn’t going bankrupt. We aren’t running out of money. We can’t run out of money. We can pay for anything because the US government can go perpetually into debt without defaulting on itself. Yes, the US government’s money can fail in real terms, but that is hardly a concern with record low inflation and no sign of it climbing soon. And MMT does a better job of explaining this real constraint than any mainstream economic school does. Yeah, I disagree with the way they explain some things and I don’t necessarily think those descriptions justify their policy ideas, but you can understand some important elements of MMT without buying into the entire theory. And there’s arguably no more important debate today than understanding the US government’s real budget constraint. So, when compared to the way mainstream economics is (negatively) impacting the policy debate I think it’s safe to say that MMT is important to understand even if you don’t agree with it entirely.

https://www.pragcap.com/why-mmt-is-important/

That's from last October.

You watch, it won't be long before the Republicans start trying to cut social spending and earned benefits like Social Security because the deficit is too high. When you write nonsense about the deficit, you're just making their job easier.

If you want to post about a REAL threat to our well-being, why don't you write about the bank bill the Senate is working on?

Deus X wrote:

Floridatexan wrote:
Every time there's a discussion of economics, you throw your MMT argument into the discussion as if it's the magic bullet.  Then you denigrate anyone who disagrees.  Read the whole article for clarity.  I've given you the basics here.  

After Galileo was forced to recant by the Inquisition, he is reputed to have said "But still it moves" because he knew he was right. That's why I "throw out" my MMT argument whenever you start bleating about the deficit--because I know I'm right.

"What about the deficit" is the argument Republicans always make when Democrats defend social spending. "The debt! The deficit! We can't afford it!", they cry. Since when did you start carrying Republican water, FT?

If, instead of attacking me with idiotic comments like "That is a simplistic formula, all of which is subject to inflation and/or stagflation.", you spent half-a-day educating yourself about MMT,  you might realize that it's nothing more than an accurate description of the mechanics of money creation. There's stuff like the Jobs Guarantee--the JG--that I disagree with, but in general I think it's an accurate description of  how fiat money is created by monetarily sovereign governments.

Regarding your post from the blog Pragmatic Capitalism by Cullen Roche, you should have done your homework a little better. He's also the guy that wrote the sector analysis I posted--the fifth post in this thread--and nowadays he's also a pretty well-known defender of MMT. Your post was something he wrote in 2011, mine--the sector analysis--was also written by him but in 2013. Here's what he has to say about MMT these days:

Barely a day goes by that we don’t hear about how the US government can’t afford to buy this or that. We can’t afford healthcare. We can’t afford Social Security. We can’t afford education. We can’t afford to take care of the environment. It goes on and on. This narrative is based on a political ideology that wants you to think the government is like a household and it’s wrong. Wrong. Wrong. Wrong.

The reality is that the US government isn’t going bankrupt. We aren’t running out of money. We can’t run out of money. We can pay for anything because the US government can go perpetually into debt without defaulting on itself. Yes, the US government’s money can fail in real terms, but that is hardly a concern with record low inflation and no sign of it climbing soon. And MMT does a better job of explaining this real constraint than any mainstream economic school does. Yeah, I disagree with the way they explain some things and I don’t necessarily think those descriptions justify their policy ideas, but you can understand some important elements of MMT without buying into the entire theory. And there’s arguably no more important debate today than understanding the US government’s real budget constraint. So, when compared to the way mainstream economics is (negatively) impacting the policy debate I think it’s safe to say that MMT is important to understand even if you don’t agree with it entirely.

https://www.pragcap.com/why-mmt-is-important/

That's from last October.

You watch, it won't be long before the Republicans start trying to cut social spending and earned benefits like Social Security because the deficit is too high. When you write nonsense about the deficit, you're just making their job easier.

If you want to post about a REAL threat to our well-being, why don't you write about the bank bill the Senate is working on?

I am well aware that the Republican Party and several Democrats (12?), including Sen. Bill Nelson (D-FL), are trying to destroy banking regulation. I wrote to Sen. Nelson and urged him to oppose the current bill. I started out as a banker in HS and could run a bank from top to bottom. That is the reality...the banks wield too much power in Congress. The government doesn't issue money; the banks do...fractional reserve banking is the name of the game.

Just because the author praised aspects of MMT doesn't mean he's completely on board. He only praised certain aspects; he also stated that under the current system, MMT is not practical.

The GOP has passed a budget that robs Peter to pay Paul. Yes, we have a vibrant economy, but Drumpf and the GOP could destroy it in their quest to steal from the public and our grandchildren to enrich themselves and retain power. For example, bleeding from the real economy to fight wars of aggression (guns, not butter...bread, not bombs), Drumpf's trade war, etc., ad nauseum.

Floridatexan wrote:  The government doesn't issue money; the banks do...fractional reserve banking is the name of the game.

"The government doesn't issue money", how can you even say such an idiotic thing? Have you looked at a dollar bill lately...   or even ever? They're signed by the Secretary of the Treasury not Lloyd Blankfein!

Fractional reserve banking has to do with the creation of credit not real money--they teach you that they're creating money in Banking and Finance 101 but the reality is that they create credit--the "money" created is destroyed when the loans are paid off. There are always offsetting accounting entries whenever they do that.

Where do you think the $700 billion came from that Congress authorized the Treasury to spend after the banks drove the economy into the ditch? That the Government had it hid under a mattress somewhere? No! It was real money, created by keystrokes on a computer. There was no offsetting accounting entry. Think about it: You have to pay your taxes with US dollars so the Government has to create the money before you can pay it back to them.

Your nonsense about the deficit is exactly what Republicans want to hear. I'm quite sure they're grateful to have you talking about it. Now they can cut your Social Security. Happy now?

If, instead of arguing with me about MMT, you spent a little time reading about it, you would be vastly wiser.

At this point and with this president nothing and I mean nothing seems to chink the armor of this man, both baffling and concerning for our nation.

IF millions/billions of $ wasn't spent on storm damage and aid to the people or cities affected, you would be crying how he doesn't care. 99% of what I've seen on this site is anti Trump, anti Republican, and anti USA because you all idolized the Clintons and Obama. How about supporting the country and giving the Republicans a chance or will it cost you your welfare and other give-away program money? You all want Trump in prison, but what about Hillary and all of her ILLEGAL crimes and money schemes?

Jake92 wrote:IF millions/billions of $ wasn't spent on storm damage and aid to the people or cities affected, you would be crying how he doesn't care.  99% of what I've seen on this site is anti Trump, anti Republican, and anti USA because you all idolized the Clintons and Obama.  How about supporting the country and giving the Republicans a chance or will it cost you your welfare and other give-away program money?  You all want Trump in prison, but what about Hillary and all of her ILLEGAL crimes and money schemes?  

Oh, boy! This is gonna be fun to watch.

Jake92 wrote:IF millions/billions of $ wasn't spent on storm damage and aid to the people or cities affected, you would be crying how he doesn't care.  99% of what I've seen on this site is anti Trump, anti Republican, and anti USA because you all idolized the Clintons and Obama.  How about supporting the country and giving the Republicans a chance or will it cost you your welfare and other give-away program money?  You all want Trump in prison, but what about Hillary and all of her ILLEGAL crimes and money schemes?  

Are you the honorary Chairman of the Deplorable Society? Personally I want the Office of the Presidency fumigated and cast this bum so far out Americans will never again hear his line of nonsense, you want to buy what he's selling go for it! Americans now see who he is and what he is and they neither like him, believe him or trust him. I could go on but you get the point . . . . he's a bum.

He was a confirmed "bum" when he was elected. What's changed?

PkrBum wrote: He was a confirmed "bum" when he was elected. What's changed?

Why would anyone support such a neophyte to lead our country? Sad!

knothead wrote:

PkrBum wrote: He was a confirmed "bum" when he was elected. What's changed?

Why would anyone support such a neophyte to lead our country? Sad!

They did. Just like useful idiots elected Obama. What's you point? That one in your opinion is worse?

PkrBum wrote:

knothead wrote:

PkrBum wrote: He was a confirmed "bum" when he was elected. What's changed?

Why would anyone support such a neophyte to lead our country? Sad!

They did. Just like useful idiots elected Obama. What's you point? That one in your opinion is worse?

America disagrees . . . . I disagree . . . . the difference between Obama and Trump is like comparing ice cream and shit.

knothead wrote:America disagrees . . . . I disagree . . . . the difference between Obama and Trump is like comparing ice cream and shit.

WOW. Thank you, knot, for telling it like it absolutely is, and I do mean absolutely.

Jake92 wrote:IF millions/billions of $ wasn't spent on storm damage and aid to the people or cities affected, you would be crying how he doesn't care.  99% of what I've seen on this site is anti Trump, anti Republican, and anti USA because you all idolized the Clintons and Obama.  How about supporting the country and giving the Republicans a chance or will it cost you your welfare and other give-away program money?  You all want Trump in prison, but what about Hillary and all of her ILLEGAL crimes and money schemes?  

You can take your "anti-USA" bull caca and put it where the sun don't shine.

knothead wrote:

PkrBum wrote:

knothead wrote:

PkrBum wrote: He was a confirmed "bum" when he was elected. What's changed?

Why would anyone support such a neophyte to lead our country? Sad!

They did. Just like useful idiots elected Obama. What's you point? That one in your opinion is worse?

America disagrees . . . . I disagree . . . . the difference between Obama and Trump is like comparing ice cream and shit.

Confirmation bias. You're just unable to see any other perspective. Very useful.

Responding to PkrBoy's taunts just encourages him. He has no desire--or ability, for that matter--to engage in intelligent dialogue. His only purpose is to annoy and sow discord. If everyone just ignored him, he'd lose interest and go away.

DON'T FEED THE TROLL!

Deus X wrote:Responding to PkrBoy's taunts just encourages him. He has no desire--or ability, for that matter--to engage in intelligent dialogue. His only purpose is to annoy and sow discord. If everyone just ignored him, he'd lose interest and go away.

DON'T FEED THE TROLL!

I'm trying to not be judgmental . . . . I like pkr . . . always have but he has his views I have mine and they collide harshly during this Trump era for sure.