Why is This Commentary BS?
“With a little more than a month until Inauguration Day, one of the most fascinating parts of the new administration isn’t being led by President-elect Donald Trump.
The Department of Government Efficiency, or DOGE, has arguably garnered more attention than Trump’s plans for tax cuts, tariffs, and immigration.
Co-heads Elon Musk and Vivek Ramaswamy have targeted $2 trillion in budget cuts by July 4, 2026, but concrete details on how it plans to get there remain a bit of a mystery.
To get a better sense of what DOGE might ultimately do, we mapped out all the areas Musk and Ramaswamy have hinted at making cuts. What is clear is there’s no shortage of ideas on where the government is wasting money, according to the duo.
However, tweeting that you’ll “delete” an entire agency is one thing. Executing that plan is another thing entirely.
That’s not to say there’s no value in the endeavor. A Pimco economist highlighted DOGE as one of the key ways Trump can reduce the risk from America’s soaring debt.
This gets to a wider point: DOGE’s goal of cutting government spending comes at a crucial time for the global economy.
Government debt across the globe has spiraled out of control and the current trajectory represents “the most serious threat to macroeconomic and financial stability,” according to a senior economist at the Bank for International Settlements.”
Can someone please explain to me how America’s current debt is a problem?
The US debt is denominated in dollars. The dollar is the US sovereign currency and is the world’s reserve currency. The US creates and destroys dollars every day with the click of computer keys.
Furthermore, the debt isn’t what matters, it’s the debt/GDP ratio that matters. Japan’s debt/GDP is far higher and they don’t have hyperinflation.
All this hyperventilating about US debt is just bog ordinary GOP propaganda to justify cutting government and taxes for the wealthy and corporations.
Please stop, I’m bored.
For the reasons that you mention, total quantity of government debt in the semi-autarkic US has little effect on inflation. On the other hand, the rate of increase can, depending on economic conditions. If the total governmental and private demand for labor and resources starts to run up against supply, then inflation will ensue (contra Friedman, government is a minor contributor toward total money creation, except in countries with large external indebtedness). If inflation starts to be a problem, then taxation is one way to reduce demand.
Note that taxation of the rich is somewhat less effective than level taxation, but it is preferable because of other societal benefits.
rick:
“autarkic” = economic independence or self-sufficiency. Did we need tax breaks . . . those heavily skewed to the upper income rackets. Did the 2017 tax break pay for itself? All smoke and mirrors by president charlatan. I could probably tolerate trump if it was not for this BS and the people who voted for him because they are afraid of a woman in office and her skin color.
The amount of debt doesn’t matter as long as it is kept out of the hands of someone that will spend it. However currently the increase in debt is being spent.
Dollars are created by lending and dollars are destroyed by repaying and/or defaulting on the loan. If you want to call that mouse clicks then you can but it not elucidating.
Yes, debt/gpd is a better metric than absolute debt. When interest rates are higher than gdp growth your debt will increase faster than gdp, leading to a spiral. The US already does not have enough tax receipts to cover interest and entitlements so debt will continue to increase unless we can increase tax receipts faster than debt growth. This is unlikely to happen given current trajectories.
Cutting taxes will NOT improve the situation and is a major reason why we have this problem. See Figure 3 in the following: https://www.americanprogress.org/article/tax-cuts-are-primarily-responsible-for-the-increasing-debt-ratio/
The Japanese have a savings rate of around 28%. They also produce more than they consume (net exporter). They have a positive NIIP (Net International Investment Position). The US savings rate is around 4%. We are a net importer. We have a negative NIIP. It is difficult to compare the two situations.
Watch Lacey Hunt regarding the impact of high debt on countries. https://www.youtube.com/watch?v=hk9S_o4LW94
This isn’t the best video on the subject but it is what I could find at the moment.
@Pre,
“Dollars are created by lending . . .” If you want to call the dollars created by the treasury “lending” then you can but it is not elucidating. The Treasury literally creates the dollars that it “lends” with keyboard clicks.
I’ve been reading about the US debt spiral and prophecies of hyperinflation for decades. Hasn’t happened. “Debt” increases but debt owed to whom by whom? Is debt a problem, and for whom?
Look, money is just a polite fiction. The dollar means exactly what people think it means.
It is the Federal Reserve that creates money, not the Treasury.
Relatively recent research, https://www.aeaweb.org/articles?id=10.1257/jep.26.3.69, indicates that debt/gdp above 90% for over five years is the threshold for creating conditions where recovery is difficult if not impossible.
Yes the dollar is a construct. But it plays an important role in sending information throughout the economy on supply and demand of goods and services. Too much or too little money impedes the flow of information.
I recommend that you read this. https://a.co/d/3Jz1hmX
@Pre,
“Relatively recent research, https://www.aeaweb.org/articles?id=10.1257/jep.26.3.69, indicates that debt/gdp above 90% for over five years is the threshold for creating conditions where recovery is difficult if not impossible.
And yet Japan has been well over 90% for over five years. And the Japanese Yen is not the world’s reserve currency. Japan seems to be fine. So much for your “relatively recent research.”
Outstanding Joel!! You get it.
All government spending is income to the recipient; including the “waste”. The private sector will have to make up the shortfall with increased spending. I don’t see that happening with the current income and wealth distribution highly skewed to the wealthy. More tax cuts for the wealthy will only result in greater wealth for the wealthy. The rich will only invest in increasing production if they can sell the output. Again, highly unlikely with the current income inequality.
I can’t wait to see the congressman who goes home to tell their constituents “I voted to put you out of a job or cut your income” in the name of government efficiency.
Well Mark:
If the gov. quit giving tax breaks to a minority of the population much of the debt goes away. In particular those in the upper 10% in income of the population.
The 2017 tax break really paid off too. Now tweedily dim and tweedily dumb what us to pay for it.