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General Buck Turgidson's avatar

Alex,

You're falling prey to a pervasive fallacy of composition: because something makes sense for one entity, that the same thing will make sense for all entities.

The financial situation of the Federal Government is *not* like a household or business. In fact, it is closer to the opposite.

The simple equation is: Government spending = private sector income.

Reducing Government spending reduces private sector income.

Having the Federal Government balance the budget would be bad, but to run a surplus is even worse: that reduces the overall wealth of the private sector by requiring asset sales to cover the additional tax burden. (Running a federal surplus has directly caused a depression/recession in every instance since the founding of the United States).

BTW, taxes have gone down consistently since the 80's for everyone across the board. It is true that the top 1% have seen their tax rates plummet, but that is not because the other groups are paying more per se. The top are paying more of a percentage of *total* taxes but only because income inequality is increasing. https://www.brookings.edu/blog/up-front/2012/04/13/just-how-progressive-is-the-u-s-tax-code/

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General Buck Turgidson's avatar

No, I mean that "Private sector" = *all* private citizens, businesses, organizations. It's very simple.

You're creating a very complex conspiracy around the basic misunderstanding.

To further blow your mind: China doesn't lend a dime to the US Gov. Not even one cent.

China accumulates $USD via trade and instead of spending those $USD, they hold them. Why do they do that? Because if they turned around and spent all the $USD they earn, their currency would go up in value and make their products more expensive for US consumers. So they hold their $USD in a US Treasury Reserve account. You and I can do this too (go to TreasuryDirect.gov). It's the very safest place to hold your $USD savings (safer than any bank)! Once you have your savings in a Treasury reserve account, wouldn't it make sense to earn some interest while it sits there? Sure! So transfer some of the cash into bonds. Is that lending the US Gov money? No!

Logically, the US Government *can't* borrow $USD. The US Gov *creates* $USD at will - we all know this - people even say it in a derogatory fashion: "the Government prints money". If you are sole creator and source of something, then technically how can you borrow it?

The US Gov does a favor to savers of $USD everywhere: it offers them a risk-free way to earn interest on their savings: US bonds. (Which is completely against the tenets of capitalism by the way! There should be no returns without risk!)

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