U.S. Budget Negotiations

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superrific said:
One thing that pisses me off -- I know I'm not the only one -- is why the billionaires are seeking tax cuts in the first place.

The point of being rich is that you no longer have to trouble yourself with such details. You don't have to make enemies just to save $20M on taxes when your net worth is 200x that. Do they also haggle over whether they got full credit for their discount rewards points at Subway?
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What pisses me off is regular people are told to tighten their belts for the good of the country - which turns out to nobody’s surprise means “for the good of Trump and Elon.”
 
Orwell2025 said:
LMAO…. Please continue to scream at the sky! 3.5 more years!!

For the 3rd time in 90 years the party in power will keep the House in 2026 because the left is falling apart at the seams.

AOC, Jasmine Crockett, Jeffries and Goldman are the face of your party.

Wow… just wow.
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Didn't you type almost the exact same thing under the username you were posting under yesterday? You've now posted under three different usernames in about as many days. You're clearly a troll, but you are a persistent little bugger, I'll give you that. But just a hint, if you're going to post under a 4th username tomorrow, you might want to change your posting style, as its glaringly obvious you're all just the same Trumper troll nutcase.
 
nycfan said:
“…
  • Beneficiaries would pay long-term capital gains tax rates, which are far lower than the tax rates on regular income, if the money goes to qualifying expenses like education or a mortgage.
  • It's less beneficial than a 529 plan, in which withdrawals are tax-free for a variety of educational expenses, and whose contributions might be eligible for state income tax deductions. …”
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Thank you for the information. I guess I like simplicity. Just as I suspected. Having to go thru hoops and figure capital gains on this isn't simplicity in my book. And it just about guarantees getting a tax preparer involved. Which means the benefit to the average or low income family goes down.
 
hedge said:
Most of this was over my head but some of it seemed to make sense (I think?), wondering what the smart people in here think. Anybody ever even heard of this guy?

warwickpowell.substack.com

Moody’s, the Dollar, and the Crisis of the American Social Settlement

Be concerned but not for the reasons you would think
warwickpowell.substack.com warwickpowell.substack.com
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Nope, but I'm extremely familiar with these arguments. This is an enormous amount of words to say very little. Let me point you to the key sentence in the entire thing. It should be in the first paragraph, like all thesis statements, but we live in a world of unstructured disorganized argument so it shows up like 2/3 of the way through:

"What’s in question is not the U.S. government’s ability to issue dollars, but the global willingness to accept them and to hold them. "

Yes, that's always the question. It's been the question for hundreds of years. Every time a country undergoes hyperinflation, it's because the global willingness to accept and hold the currency has collapsed. I mean, I guess this is why he buries the "insight"; if he started with it, it would be entirely unoriginal.

Anyway, in that framing, he does address a number of points that are more or less correct or at least arguable, but again really just a conventional wisdom that most people here already understand, though perhaps don't realize it. For instance:

1. "U.S. Treasury securities are not borrowing in the ordinary sense of the word. They are financial instruments offered to the private sector as a place to park savings, earn interest, and manage portfolios. But if the U.S. cannot become insolvent in its own currency, what does a downgrade really mean?"

First, the downgrade doesn't mean much for reasons I've set out. But if abstract away from CRAs to the idea of a market downgrade, it's a question that answers itself with the framing above. The US government is not likely to go insolvent, in the sense of defaulting on debt. But monetizing the debt is inherently inflationary. Racking up a lot of debt isn't necessarily inflationary (though, as with all leverage, it makes the government more vulnerable to external shocks) but monetizing it definitely is. So what it means is that the market thinks the debt is more likely to be eventually inflated away. Again, this is basic logic.

So when he later asserts that issuing bonds is not actually a constraint, I mean he's right but only trivially. The *bonds* are not constrained, but their value is. If the government can't cover its operating costs with debt, the only other option is with money printing. Those are the stakes, and this guy has labored to make this very straightforward principle look esoteric and obscure.

2. "Let’s restate a simple fact: the U.S. federal government creates the money it spends. Every dollar of spending appropriated by Congress is injected into the economy by marking up the reserve accounts of banks. No taxes or borrowing are needed in advance. There is no gold standard, no fixed exchange rate, and no operational constraint on dollar issuance. The limit is not insolvency, it’s real resource constraints and inflation and I return to these below."

This is basically MMT (modern monetary theory) -- the left/progressive inversion of Keynesianism that never went anywhere and for good reason. The substance of that paragraph isn't specifically MMT, but the only people I've ever seen who choose to emphasize these types of considerations are the MMT folks (their macroeconomics is surprisingly rooted in pedestrian, very-micro details of how exactly the Fed loans money).

3. The general point that the US debt reduction is mostly performative theatrics is probably correct. I mean, it's a counter-factual inquiry, and we don't know what would happen if the government just committed to a full monetization. But we know that the handwringing is fake, because the "deficit hardliners" are anything but.

4. The latter half (or third maybe) of the piece seems to be a haphazard collection of minor points smushed together to form a pastiche of . . . minor points. The idea that the Gulf States don't want our paper anymore, they just want our tech -- I mean, that's not some weird commentary about American debt. It's responsible economic stewardship of ME economies that are ridiculously non-diversified, and concentrated in an increasingly depreciating asset. The "autoimmune crisis" is just a nonsense metaphor for a fiscal spiral into insolvency, which again is well understood.

5. I would say that "think pieces" like this one are a cancer on our political discourse and they have greatly contributed to the economic illiteracy of the American public. People who try to condense like 80 years of history into one conspiracy-flecked paragraph are not doing anyone a service. A message board post like that is one thing (for my part, I usually include more substance that the typical substack piece), but a published contribution to discourse is different. And progressive economic commentators know how to access liberals' hopium in the same way that MAGA influencers know how to exploit the MAGA fever dreams. For instance:

Issuing Treasuries is not about raising funds. Rather, it’s about providing a safe, liquid asset for dollar holders. Operationally, the sale of Treasuries simply swaps one government liability (bank reserves) for another (interest-bearing securities). The issuance is more monetary than fiscal, it is a tool for managing interest rates and liquidity, not funding spending.

Again this sounds like MMT tomfoolery. It's also tinged with just enough "rich people control the world in secret" type of thinking to appeal to liberals. Let's face it: liberals tend very much to study humanities and some social sciences in college. And how do historians make their living? Not by making economics arguments. They rather love to purportedly demonstrate that the economics arguments are masks for deeper financial interests that are hammered out in back rooms in Davos to the constant detriment of the working class.

So this sounds appealing. It gives liberals the degree of intentionality they seek. But it's also deeply misleading. What he's describing is a bank. Banks perform vital economic functions, the most important of which is the intermediary function -- i.e. "swapping" one form of liability for another. And the purpose is not to create a liquid asset; that's the effect. It's the effect of every form of bank loan. Banks take bank reserves and package them into loans. Sometimes loans are even bought and sold between banks. And of course there is tradeable debt issued by many companies.

There is nothing sinister about the Treasury debt issuance. It's not being done to create safe assets. It's just the Treasury department doing what Treasury departments do.
 
I could not give you a %, but there's definitely risk of total economic collapse as the bond market and foreign investors look at an unreliable Dollar and POTUS.

https://www.wsj.com/finance/investing/us-deficit-bond-market-economy-619614b3

We're in the worst place since 2008. Without a sound reason.

If the MAGA/TRUMP goal is a Russia like Oligarchy where only the BB and POTUS are rich and the income gap is a chasm, then mission nearly accomplished.
 
Yes, that's always the question. It's been the question for hundreds of years. Every time a country undergoes hyperinflation, it's because the global willingness to accept and hold the currency has collapsed. I mean, I guess this is why he buries the "insight"; if he started with it, it would be entirely unoriginal.

Why across the board global tariffs are a macroeconomic Idiocracy.
 
BlueSmoke said:
Thank you for the information. I guess I like simplicity. Just as I suspected. Having to go thru hoops and figure capital gains on this isn't simplicity in my book. And it just about guarantees getting a tax preparer involved. Which means the benefit to the average or low income family goes down.
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I do my own taxes. My middle class, mortgage holding with 2 dependent taxes soared 30%+ due directly to the 2017 Tax Fraud Bill. I'm naturally delighted that Katy Perry made it to almost outer space.

It's just math. Americans are allergic to math.
 
She’s just ignoring all the details except the (unpopular) budget cuts that are more than offset by reductions in revenue that on a net basis increase the debt by about $2.7 trillion more over the next 10 years than was already projected if they did nothing at all …
 
So how does the no tax on overtime work? Some of his supporters think it means no Federal Income Tax at all on overtime. I suspect there is going to be widespread gaming the system going on.
 
BlueSmoke said:
So how does the no tax on overtime work? Some of his supporters think it means no Federal Income Tax at all on overtime. I suspect there is going to be widespread gaming the system going on.
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“… The House and Senate bills include some limits on tip exemptions that would make it more difficult for employers to try to manipulate the system — for example, making it harder to shift hourly or salaried workers to tip-based compensation. It would also exclude higher-income earners making more than $160,000, and it would limit the amount of tips that could be deducted from a yearly tax return to $25,000.

“I think the worst-case scenario from a budgetary cost perspective has been averted, at least on that provision, by limiting it to traditionally tipped industries and excluding highly compensated employees,” said Alex Muresianu, a senior policy analyst at the Tax Foundation, a group that advocates for tax policy reforms. “This limits the potential of behavioral change to introduce tipping to more occupations, and that could have really blown the budget.”

… Under the current legislation, the tax breaks would expire in 2028 — which would create political pressure to extend them amid that year's presidential election. The impact on the deficit could go even higher if the exemptions were extended beyond then, which would be likely given the political challenge of raising taxes on workers who had been benefiting from the cuts, said Brett Loper, executive vice president of policy for the Peter G. Peterson Foundation, which advocates for reducing the national debt….”

www.nbcnews.com

What Trump's pledge to cut taxes on tips and overtime means in practice as it moves closer to law

Some workers will see a significant increase in after-tax income if the policy becomes law, but the wider impact on the economy would be relatively limited, economists said.
www.nbcnews.com www.nbcnews.com
 
Whatever tax cuts for the non-wealthy actually come through with this bill will almost certainly be more than outweighed by price increases on many products thanks to Trump's trade wars. Add in rising healthcare costs and reduced benefits - for example, next year's healthcare plan for NC state employees, including teachers, will have substantial increases in monthly payments with reduced overall benefits such as more expensive prices for many health services, including prescription drugs - and whatever dubious benefits workers get from a small tax cut will be wiped out very quickly.
 
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