We’ve seen this story before and know how it ends.
Can Anyone Sink the Tax Bill?
The Wall Street Journal says These GOP Lawmakers Could Sink Trump’s ‘Big Beautiful’ Tax Bill
Republicans pushed President Trump’s “big, beautiful” tax and spending package closer to the finish line with votes earlier this month approving a budget framework. But as lawmakers return to work this week, hard intraparty fights remain in writing and ironing out the multitrillion-dollar package.
Most GOP lawmakers are on board with the broader plan to extend expiring pieces of the 2017 tax law, introduce new tax breaks such as “no tax on tips,” boost border spending and cut other government outlays. Speaker Mike Johnson (R., La.) wants to get the bill finished by Memorial Day. Still, fights are smoldering over the details, and several small groups of lawmakers have painted certain issues as nonnegotiable.
Deficit hard-liners
A group of so-called budget hawks have hinged their support of the president’s reconciliation bill on the idea that the tax cuts must be paired with significant spending cuts. These Republicans are willing to allow some deficit increases because they assume that economic growth will cover some of the costs. But they’ve indicated that—even though they’ve moved the process along so far—they aren’t automatic yes votes.
While government funding and federal spending battles often center around the pushback of members of the ultraconservative House Freedom Caucus like Reps. Chip Roy (R., Texas) and Andrew Clyde (R., Ga.), others are raising concerns as well. Rank-and-file Republicans like Reps. David Schweikert (R., Ariz.) and Lloyd Smucker (R., Pa.), a Budget Committee member, are among those also warning about a bill that would expand deficits too much.
It’s a tough balance to strike. The House’s budget calls for at least $1.5 trillion in spending cuts over a decade, with a goal of at least $2 trillion. The budget hawks say they’re going to insist that the final bill hits those targets. Cuts that deep could clash with the desires of others in the party who would be comfortable with smaller reductions. So far, Johnson has privately told GOP holdouts that he plans to stick to the House budget instructions that require a minimum of $1.5 trillion.
Medicaid Defenders
One area likely to be targeted in the pursuit of steep spending cuts is Medicaid, a health insurance program that covers more than 70 million people who are low-income and is a big part of state budgets and the healthcare economy. There is a bloc of Republicans warning that deep reductions in coverage will hurt constituents and make GOP efforts to keep the House majority more difficult in 2026.
Such members include Reps. David Valadao (R., Calif.) and Rob Bresnahan (R., Pa.), who are both in battleground district seats. And in the Senate, Sens. Susan Collins (R., Maine), Lisa Murkowski (R., Alaska) and Josh Hawley (R., Mo.) have opposed deep cuts.
“The reality is Medicaid plays a huge role in my district,” said Valadao, whose constituency has among the highest levels of Medicaid recipients in the nation. Biden won the district by 13 points in 2020, while Trump won it by 5 points in 2024. Making sure that Medicaid “is sustainable and it is around to protect the most vulnerable is something that is first and foremost in my thought process” heading into a vote, he said.
SALT Caucus
A group of Republican lawmakers are vowing that their support for the Trump tax bill depends on raising the cap on state and local tax deductions, which was limited to $10,000 in 2017 as part of Trump’s tax law.
Most of these lawmakers hail from states that have higher costs of living and property taxes, like New York, New Jersey and California. Reps. Nick LaLota, Mike Lawler and Andrew Garbarino of New York, and New Jersey’s Jeff Van Drew and Tom Kean Jr. are among those pushing strongly to address the issue, with some threatening to withhold their support from the GOP package if the cap isn’t raised.
Some Republicans are suggesting the cap could be raised to $30,000 or more, but higher caps reduce revenue that could be used elsewhere.
Inflation Reduction Act protectors
Republicans whose states and districts received billions in funding that went towards clean energy projects through the Biden administration’s Inflation Reduction Act are also warning party leaders against clawing back this funding and limiting tax credits that provide incentives. Such a clawback could be used to help offset the cost of other tax cuts, and Trump has repeatedly vowed to repeal the law.
Recently, Murkowski and Sens. Thom Tillis (R., N.C.), John Curtis (R., Utah), and Jerry Moran (R., Kan.) sent a letter to Senate Majority Leader John Thune (R., S.D.) detailing the fallout if the buzzsaw comes for the Inflation Reduction Act-related investments.
“While we support fiscal responsibility and prudent efforts to streamline the tax code, we caution against the full-scale repeal of current credits, which could lead to significant disruptions for the American people and weaken our position as a global energy leader,” they wrote.
These senators joined nearly two dozen House Republicans who have argued in favor of preserving some of the Biden-era green energy tax credits. Those members include Garbarino as well as centrists like Reps. Don Bacon (R., Neb.), Jen Kiggans (R., Va.) and Mariannette Miller-Meeks (R., Iowa).
The Winners
- Medicaid Defenders
- SALT Caucus
- Inflation Reduction Act protectors
- The Industrial-Military Complex
The more the alleged deficit hard liners try to hold out, the uglier this is likely to get because Trump and Speaker Mike Johnson will buy as many Democrats as necessary to get this over the hump.
Democrats more than Republicans want SALT restored. Both are hypocrites.
SALT primarily benefits the wealthy who itemize deductions. Democrats who favor higher taxes on the wealthy should be against this but won’t be.
Republicans who across the board should want a simpler tax code want to restore this deduction and add more.
The Hard Liners
Some of the alleged hard liners will make up fantasy numbers about how much growth the bill bring.
Other deficit hard liners will meekly stand aside, agree to more of that in return for more military spending, or eventually cave with threat of being primaried.
I expect there will be a few to the bitter end who will prove to be what they say they are, perhaps just one.
How Compromise Works
Congressional compromise is always more of this and more of that.
It’s never less of anything.
Budget Deficit Will Balloon
The budget deficit is guaranteed to balloon.
Trump will cheer. The cult will cheer. If you are a hypocrite in either party you will cheer.
Expect a lot of cheering with the hypocrite deficit hawks at the Wall Street Journal and in Congress leading the way.
This is going to be big, and very ugly.
No funding for Ukraine saves how many billions?
No US AID saves 30 billion
Definitely other programs saves more billions.
No other green funding and other additional Inflation Reduction Act saves more billions.
The deficit won’t explode like it did under Biden s last year.
I would like to see a pay as you go budget. Say the military / fema etc have a base budget. Need more money for a war. Or disaster well that total gets added into everyones tax bill the next year. With a note stating where the cost was accrued
10 for fema in nc
30 for ukraine
Etc
Then worry about paying the debt. .
“There is a bloc of Republicans warning that deep reductions in coverage will hurt constituents and make GOP efforts to keep the House majority more difficult in 2026.”
Touching the third rail can be fatal to a political career. Rome didn’t even have rails back then. Human nature brings the decline and fall of all empires.
No matter how much they take, it will never be enough.
I want work requirements for Medicaid. There are over 7 million males of working age not in the workforce. I don’t know how many females. It will get some of them back to work. They also need to cut food stamps and stop allowing soda and junk food to be purchased with them. You shouldn’t be able to deduct property taxes on federal taxes.
Trump’s big beautiful tax bill: You can put lipstick on a pig but it is still a pig.
Mish, the US has a lot bigger problems brewing than the typical “center-left center-right hypocrisy”. Democrats don’t have an ax to grind for Trump anymore. They have shifted blame to the voters: That’s a strategic move.
“Unrealized Capital Gains Tax“, and European-inspired “Wealth Tax“, and “Luxurious Living Tax” (a 2.5L car, a 3-bedroom condo), will be enacted by a Democrat congress hostage to the voters of the AOC-Bernie Group, Inc.
Wait until every major metropolitan area hosts a few million new
slavesunskilled migrant workers brought by theslave-tradersNGOs, with voting rights upon arrival.——————————–
Anyone who lived in Greece in 1981 like myself (lower-middle class family), and saw the previously affluent middle and upper-middle class eliminated by Harvard Marxist Papandreou (because their constant whining had kneecapped the center-right), would ring the alarm. The rhetoric was exactly the same, phrase by phrase. It just hadn’t reach America yet – you have no immune system against it, you don’t know this road. In Europe it’s considered politically primitive because they got over it. But you Americans are too sure of yourselves and the “status quo”. If the current Democrats win the next one, the change will be complete, not just another Pelosi-Schumer-Rhinos theater. You have enough money to run away, but not enough to stay, that’s all I’m telling you.
I’m pretty sure there are no longer many, if any, “center-left” demoncrats
remaining in this country..
The party now consists mainly of what is known as “Marxists/Communists”.
“Democrats who favor higher taxes on the wealthy should be against this but won’t be.”
Well, why is that a surprise to anyone???? They are a RIGHT-wing party that is sold by the corporate media as a “left-wing” party solely to prevent the emergence of an actual left-wing party.
New 1st Fractal Decay Nadir Target: 13-19 June 2025. The Chinese(appropriate with tariffs) water torture steady drip drip on the new admin’s forehead with daily deteriorating economic news with slowly and painfully take its toll. No reasonable person is enjoying this.
Removing the SALT cap will benefit me immensely. My property taxes in Florida far exceed the 10K limit.
Think of what the state and local tax burden must be like in more upscale communities in California, especially for recent home buyers.
I will tell you as a recent (2yr) home buyer/owner in upscale wine country CA zip. $900 prop tax on $850K(now 1.2M) home easy $5K/M rental. I’m always entertained at the number of out of state (rich) neighbors from red states that own homes here and payin taxes in blue state leftist liberal California! They keep residence in a red state so they don’t pay income tax but live here. Our streets are swept, parks are over funded and great government services around. Thank you red states!
And yet, it used to be the norm. Back in the ’80s and ’90s, interest costs were consuming over 1/3 of tax revenues just like they are today, making it imperative to balance the budget. Balanced budgets were advocated by Democrats and Republicans alike, including President Clinton.
The U.S. has shifted so far left on fiscal discipline that no one even remembers that the expectation used to be a balanced budget. The debate was about size of government rather than size of deficit.
Today we’re so far gone that “tax-and-spend” within a balanced budget not only isn’t a left-wing approach, it isn’t even on the spectrum. Today we have the “Borrow-and-Spend Republicans” vs. “Print-and-Spend Democrats”.
No wonder we have a debt crisis.
Until the budget deficit is eliminated and a large portion of the debt paid down, any remaining tax cuts from 2017 should be allowed to expired. Mortgage interest deductions and capital gains exclusions gained upon selling a house should be removed. And taxes should be raised.
Also eliminate the stepped up basis on inherited assets. The so called “Angel of Death” tax break.
Let them eat grass.
Compromise: You get everything you want, I get everything I want. Debt can be printed away and laid upon some future generation until such time that it cannot and I hope neither of us are there. Sincerely, U.S. Congress.
We’re a country of moral hazard, used to all groups throwing their weight around to have all risk backstopped and all profit protected.
point of order–the democrats’ biggest-voice advocacy cohort, suburban white women (and their spouses/families), are right there at the money trough for the SALT deductions, anything that keeps their 401ks intact and surely will have no problem having social security go untaxed as they roll over their IRAS to Roths and eventually never pay tax on any of their gains. Don’t sell them as the big defender of the poor, they are right there slopping around in their own version of government largesse with their check-valve on wealth.
My friend likes to call much of America the gentrified monied class. None of what has occurred since the GFC can occur without running the debt up by nearly 30 trillion in the 16 years since. No one has the financial or political will to fix one damn thing unless everyone suddenly is willing to give back the last 4 years of insane bubblish gains.
As Mish says, “got gold?”
It’s like intentionally baking in stagflation because of unwillingess to do the right thing.
I have yet to see any rational and logical justification as to why people who earn tips as all or part of their compensation should be allowed to exclude this income part from being taxed.
This is a very slippery economic slope that will lead to many classes of workers looking for opportunities to gain such protection for themselves by converting as much of their income to tips as possible.
Exempting tip income: an attempt to buy the votes of people further down the income ladder.
“Suggested tip” percentages have been rising at some restaurants and the haircut shop that I patronize.
At least Shedeur Sanders got drafted in the fifth round so Trump can now devote himself to tweeting about the necessity of raising the debt ceiling by 5 trillion dollars.
I agree that the proof will be next year’s borrowing amount going up or down. I will take the over.
Only tariffs, a smaller gov, higher payroll taxes collection from higher wages and lower rates can cut our gov.debt. The rest is bs.
and the ports are empty https://www.seattletimes.com/business/tariff-tit-for-tat-has-seattle-waiting-for-the-ships-to-come-in/
Let’s say a major crisis hits, could the national debt possibly reach 200 % of GDP already in Trump’s presidency?
Spot-on analysis.
Re-reading the referenced 2017 article about reducing spending by $3.6 trillion was interesting. Lots of promises and no action. Everything is always about reducing budgets over ten years and nothing of consequences happens. Cuts are loaded to the last years of any bill and forgotten.
Complicating todays talks from the 2017 article are the facts that both trump and bidens additions to debt and trumps additions to liquidity during covid have been added to the problem.
DOGE is turning out to be largely a political hack job with little to show for its gold spray painted chainsaw dance by Musk who continues to get subsidies for his vehicle sales. Must be nice to be on the inside while trump hacks the supply chain to pieces for his competitors. Even with the juice from Washington, Musks company is taking it on the chin as global sales fall.
Where are the cuts coming from in an economy that has had its supply chain threatened by tariff chaos?
Why is the corporate tax rate lower than my rate?
Why are there $4.5 trillion of additional tax cuts for corporations?
Defense is known to be extraordinarily wasteful, yet trump wants to add $150 to $200 billion to that sinkhole. The defense budget is tied to GDP so it is an easy way to prop up a failing economy.
GDP is about to shrink and federal, state and local tax revenues are going to fall.
Sigh!
The corporate tax rate has to be competitive with the corporate tax rate in other countries. If the US has a corporate rate is as high as it was prior to 2017, corporations will report their income through their headquarters and affiliates in other countries. That’s why Apple was an “Irish” company. It’s better for the Treasury to get 20% of something than 39% of nothing.
Corporate taxes of any amount just get rolled into the prices that the corporations charge to their buyers.
Corporate taxes are just a sleight-of-hand way to tax PEOPLE more.
Taxes are too high because we spend too much.
Doesn’t matter. We have to go back to the system where corporations pay $1 of tax for every $2 that people pay. Instead of the people paying $7 of taxes for every $1 from the corporations, which is where we are now.
Of course, it also helps if anti-trust laws are brought back from dead and are actually enforced once again.
And the above message is sponsored by the CEO Roundtable, the Chamber of Commerce, the Cato & Manhattan Institutes and every supply side organization that has advocated for the failed trickle-down economics of Hayek, Laffer, et al.
Any government cannot spend ONE TRILLION DOLLARS on Department of Defense and survive. This is YEARLY. This is crazy. Also, you can’t have all these illegals in the country getting Medicaid and bringing in their families that are getting Medicaid too. Also, I have no problem with SALT tax break of 20-30 grand. You have to give a break to the Middle Class. Sorry Mish, the Middle Class is 80-200,000 IMHO. With inflation, the income for Middle Class has increased. These are the people that keep the cogs rolling. Tax rates on rich should be increased to 50% minimum-minimum! Possibly up to 60-70%.
This shit show is going to blow up. The question is when?
OK, so what exactly do you expect to happen and how will it transpire?
The problem with SALT is that it rewards high-cost states for being high cost. It subsidizes residents of cost-inflated states while penalizing those in lower-cost states
The Federal government shouldn’t be rewarding states for having high state and local taxes.
A larger standard deduction would make more sense than any kind of SALT nonsense.
80k is poverty, not middle class, in most places. I would say middle class is at least double so more like 169k-400k.
57% of Federal Discretionary spending is the military. Musk et al should be camped at the Pentagon slashing away. Sadly, they’re gutting things that don’t move the needle.
https://www.facebook.com/photo.php?fbid=1169603333050643&id=114517875225866&set=a.115969958413991
Having trouble understanding the controversy over SALT. Yes, blue states plunder more. But for FED gov to claim that income which went directly to another government tax is some how income to be taxed by the feds is putting a tax on a tax.
By that logic, sales taxes should also be deductible.
They used to be.
They were made non-deductible (also credit card interest) because the beneficiaries would be the poor and lower middle class folks. And Reaganites didn’t like that.
Yes, they should be. A sales TAX by definition isn’t income. Assuming we were running an honest system.
Sales tax used to be deductible and the Federal income tax used to top out at over 90%.
You’ve got it backwards Bill.
Income is income, and everyone should be equally obligated to pay the proper Federal and state taxes on that income.
The SALT deduction amounts to giving residents of high-tax states a lower Federal tax rate, a free handout just because they live in a high-tax state.
Cancelling that arguably unconstitutional subsidy is not a double taxation. (The constitutional issue is that the Federal Gov’t should treat residents of all states equally in terms of taxation, not favor residents in one state over another.)
So more deficits while pissing off all the countries that would finance the deficits? All while USDX has already lost 8% since inauguration? Good luck with that!
You have no idea who finances the U.S. deficits. It’s not the rest of the world. The vast majority of Treasury bonds are owned by U.S. entities, and they are quite capable of buying all the other Bonds in existence as well.
If China, Japan, Luxembourg, and so on don’t roll over their bonds and the Fed buys them instead, isn’t this inflationary for the USA?
I didn’t say the Federal Reserve would buy them. But if they did, that would only be inflationary if the economy were already tight.
Also note that it’s going to be massively deflationary as the Federal Government figures out how to do what it takes to cut spending and raises taxes to rein in the out of control deficit.
The Federal Government raised military spending by 17.6% even as DOGE was doing its thing and fell flat on its face, and that’s without a war in Iran. If we do Netanyahu’s bidding again, the sky is the limit on military spending.
While I agree that there could possibly be massive deflation as the tariffs and supply chain destruction turns the USA into a dystopia, it seems like the deflation would be short lived due to QE in the US, and some countries are already doing QE programs, South Korea for example.
P.S. The Chinese are not holding so many Treasuries because they’re dumb and have no other options. The reality is that no one trusts the Chinese Renminbi, not even the Chinese people. If China doesn’t roll over the Treasuries they have in their foreign exchange reserve, that will have serious adverse impacts on their currency and economy.
China has already been massively reducing its US Treasury holdings.
2013 $1.316 trillion (peak)
2014 $1.263 trillion
2015 $1.249 trillion
2016 $1.115 trillion
2017 $1.150 trillion
2018 $1.140 trillion
2019 $1.070 trillion
2020 $1.060 trillion
2021 $1.060 trillion
2022 $980 billion
2023 $780 billion
2024 $759 billion
With the USA habitually seizing assets of nations it doesn’t want to get along with and cutting out trade with China, and with the USA increasingly being considered less trustworthy globally, it makes sense for China to diversify more into JGBs, Bunds, gold, etc.
wrong
I have commented on this numerous times
China masks holdings in SOE in European markets
The republican party and the Wealthiest 10% of conservative American are directly responsible for 70%, $26T, of the Total US Federal Government debt, $37T, created over just the last 17 years. $10T bailout of US financial system 2007 – 2009, $8T 2017 Trump Tax Cut and $10T, bailout of US economy required to restart US economy after Trump deliberate mishandling of Covid-19, pandemic caused US to have worst response to covid-19 on the planet, requiring economy to be shut down and then restarted with $10T bailout to prevent economy from sinking into a decades long depression. This $26T unnecessary, increase in Fed debt could have absolutely been avoided and was caused directly and soley by arrogant republican policy…..Republicans and the wealthiest 20% should pay for this with higher taxes which will reduce budget deficits and fed debt down to healthy and sustainable levels over the next 10 years, whatever levels of tax rate increases achieves that over the next 10 years, with the rest of the American tax base also having their rates increase at some small rate that is not significant relative to their income levels, given that they have not been the main drivers of the super rapid increase in the Federal debt over the past 17 years, but should support the patriotic effort to get deficits and debt down to healthy and sustainable levels over the next 10 years because together we are the “UNITED” states of America……….not the Separate and Independent States of America…….AMEN!!!!!!!!!!!!!!!
To call any of these people deficit hawks is a joke. Extending the debt tax cuts should be means tested – only for incomes under, say, $300k. Military spending should be radically cut.
Get the Federal government out of Medicaid. Let states determine if they want to implement it. SALT impacts state and local governments with high tax rates. I am in no way considered wealthy, but my taxes went down when SALT was passed. Get rid of tax credits for alternative energy projects. Let the cost savings pay for themselves.
The SALT cap of $10K hits a number of blue states quite hard. This is known and continues to be repeated and repeated. What is less talked about is states that have low or no income tax. These states can’t rely just on sales taxes. No, many have sky high property taxes. Think Texas and Florida. Property tax is on the radar of the Florida governor and he has demanded that the legislature act in 2026. Texas has a massive property tax burden. The point: it’s a nice talking point to characterize the SALT cap as a blue state issue. There are plenty of red staters impacted as well!
Why should any state or local tax be subsidized by being deductible on your federal return? People should be pressuring their state and local governments to restrain spending, not expect the federal government to mitigate the cost. And I say that as a hard-hit blue stater.
That’s easy to answer. So that not every dollar of income get’s taxed twice. It also works in reverse: many states have partial off-sets to allow a reduction in your state AGI to account for your federal tax liability. That some states have very high state and local income taxes is a real issue when looking the implications for your federal tax liability. So I am sympathetic to your comment. Setting it at zero would be politically impossible but that would solve your subsidy issue. I actually think $30K is too high and $10k too low for a cap. I think it should be raised to $15k and then indexed to cpi.
Income is not getting “taxed twice”. You are paying the Federal rate and the state rate ONCE on the same income.
As of the 2023 data, Florida ranked 28th in property tax rate at 0.79%, down from 2022’s 0.82%. There are 21 states that have an effective rate of 1% or higher, with 3 states over 2%.
https://taxfoundation.org/data/all/state/property-taxes-by-state-county/
Sky-high property taxes are not a function of an excessive tax rate burden and is not what Florida relies on. The bulk of revenue is from sales taxes and tourists also contribute quite a bit to the economy.
Those who pay big property tax bills here paid inflated dollars for their properties and presumably can afford it. Anyone homesteaded here is protected by the SOH (Save Our Homes) Act, which has been around since 1995 and limits the ad valorem portion of the tax bill to an increase of 3% or the CPI, whichever is less. In the 13+ years I have owned my home it has tripled in market value, but taxes have only gone up a little over 37%.
Governor DeSantis thinks property tax is an issue for Florida residents and is looking for a one time rebate this year and has also publically directed the state legislature to take action next year. Your data is quite informative but DeSantis thinks prop tax is an issue. You may have it good but when you sell your home, the new owners will pay a far higher prop tax. And given that Florida is 100% dependent on net migration for population increase (there are more deaths than births in Florida), property tax is a bigger issue than it appears. This explains why DeSantis is so focused on it.
“You may have it good but when you sell your home, the new owners will pay a far higher prop tax.”
Yes, but it will be because they paid a far higher price that presumably they can afford and the taxes are still roughly the same percentage of the higher cost.
The issue is housing costs, especially in a state that has a large, relatively low-paying service industry. Eliminating property taxes may very well do absolutely nothing to help this and even make it worse as having no property tax would support higher home prices. Escrow of property taxes is part of a mortgage and most people tend to think in terms of how much they can afford to pay each month.
I’m not a fan of government and generally regard lower taxes as a plus, but in this case given how local funding is done I have reservations about this working out well in the long run, especially since he seems to think we can soak tourists even more to make up for it. Everyone has a breaking point. Of course, if DeSantis gets his way he will be long gone if it blows up down the road.
Nope, it’s because Florida has the equivalent of Prop 13 in California. Most of the people are homesteaded and therefore paying WAY under market rates in the same manner Californians are.
When you sell is when the house gets marketed to market, it’s not because of sales price (most times the tax price is WAY under the sales price).
Reps. Nick LaLota, Mike Lawler, Andrew Garbarino, Jeff Van Drew and Tom Kean Jr.are scumbags
Don’t forget Nicole Malliotakis, They are all cowards who won’t stand up to Trump so they don’t face his mean tweets. Their statements supporting Medicaid are word salads that would make Kamala blush. They want to protect Medicaid for all eligible recipients but want to redefine who is eligible. Except for migrants every citizen on Medicaid is eligible.
It seems to me that a national debt can be pretty much infinite and the nation will get by with money printing as long as the deficit hews to inflation. So, maybe 2% deficits forever. However, just sticking to that 2% appears to be pretty hard. I think Japan does something like this.
Where should we continue to get the money to pay the interest on the debt?
Apparently by borrowing!
The government pay $1 trillion interest on the debt. That payment goes into the bank accounts of the holders of the debt. The banks, now flush with an extra $1 trillion sitting in accounts, wants to earn interest on that money. So they use the money to buy government debt. That’s where the money comes from.
There’s an economic error so great that it boggles the mind. It’s stock vs. flow.
“Banks lend by simultaneously creating a loan asset and a deposit liability on their balance sheet. That is why it is called credit “creation”–credit is created literally out of thin air (or with the stroke of a keyboard).”
That’s why banks should be nationalized. You can monetize and then sterilize a lot of Treasuries by imposing reserve ratios (which the bankers and pseudo economists maintained were a tax [sic]). No, banks aren’t intermediaries, not credit transmitters, but credit creators.
https://files.stlouisfed.org/files/htdocs/publications/review/2023/06/02/fiscal-dominance-and-the-return-of-zero-interest-bank-reserve-requirements.pdf
It is a fact that all bank-held savings are lost to both consumption and investment until their owners so decide.
The first rule of reserves and reserve ratios should be to require that all money creating institutions have the same legal reserve requirements, both as to types of assets eligible for reserves, as well as the level of reserve ratios. Monetary policy should limit all reserves to balances in the Federal Reserve banks (IBDDs), and have uniform reserve ratios, for all deposits, in all banks, irrespective of size.
Cutting the deficit to 2% of GDP would be a Herculean task for our government. It would be deemed heartless. There would be weeping and wailing and gnashing of teeth. Rending of garments, even.
Especially if it was done with tax increases!
2% deficit? How’s that?
Here are some “rough” numbers.
US govt spending $7 trillion, revenue $5 T, deficit $2 T
The deficit is 40% of revenue or 30% of spending.
GDP is $30T. The deficit is almost 7% of GDP.
Some people struggle with math.
The fiscal deficit expressed as a percentage of GDP, calculated by dividing the fiscal deficit (2 T) by the GDP ( 29 T) and multiplying by 100.
What are you talking about? You are making no sense. If you run your personal finances like that statement, then you are probably broke.
I’m NOT THE GOVERNMENT ! They can print money. The rules AREN’T the same and I’m amazed that these national debt discussions can go on for decades with no one questioning why the whole thing makes no sense.
They can ‘print’ money equal to 2% of the economy and that strongly tends to bid up prices by………………………2% !!!! Money is a commodity, ultimately. This how Japan gets by.
The mainstream economic thinking is that a deficit is allowed provided it keeps pace with GDP growth, hence a constant debt/GDP ratio.
This only works if the debt/GDP ratio is reduced during normal economic times, so that there’s headroom for extra spending during recessions.
This Keynesian approach looks good on paper but fails in reality – not so different in that respect from Communism and many other economic Utopian fantasies.
tighten the beltway and put the financial porky pigs on austerity
More Americans are financing groceries with buy now, pay later loans — and more are paying those bills late, survey sayshttps://www.cnbc.com/2025/04/26/americans-groceries-buy-now-pay-later-loans.html?
Just call it the “Wimpy Economy”.
BNPL is just another form of credit card. There has always been a too high percentage of people who live beyond their means, who have had kids that they cannot afford to feed or raise, who buy cars using a lease, etc. that can only survive with government/charity help.
What can be done about this?