US Goods Exports and Trade Policy Uncertainty

At a minimum, trade policy uncertainty has risen. Whether that has resulted in the stagnation in exports is an open question.


Figure 1: Log ratio goods exports to GDP, both in Ch.2012$ (blue, left scale), and US trade policy categorical index (red, right scale). NBER defined recession dates shaded gray. Source: BEA 2018Q3 advance, policyuncertainty.com, NBER, and author’s calculations.

Update, 11/2, 7AM Pacific: The dollar obviously is of importance — confirmed by slowdown in exports in 2014.

I compare static fit 2009Q2-2018Q3 using standard regressors (Fed real dollar index, rest-of-world GDP from WEO, interpolated, all three variables in logs), time trend against same augmented with (level) of trade policy uncertainty. I get the following:

Measured uncertainty certainly seems to be associated with the downturn (it’s statistically signficant at the 4% msl) even after accounting for the dollar’s value (t-stat near 5).

71 thoughts on “US Goods Exports and Trade Policy Uncertainty

  1. pgl

    Real exports have been flat for 4 years. I know, I know – time to blame Obama!

    Actually what changed in 2014? The dollar appreciated for one. Of course Trumpian policies like fiscal stimulus and trade wars would tend to make the dollar even stronger. Of course his economic “advisers” like Kudlow say a strong dollar is a good thing. Ahem!

    Reply
    1. pgl

      foreign IMPORT policy as you put it is a direct reaction to that STOOOOPID Trump trade war. Of course both feed uncertainty. Disengtangling these interrelated features is probably really difficult but we await your paper that solves the statistical issues in the next edition of JASA!

      Reply
      1. CoRev

        Ahem, only one issue, Trump trade wars? Making the dollar even stronger must have no influence? Or (ahem again) a lowered value for your local currency, with or without a changed dollar, of course has absolutely no influence on your US imports. Sometimes you just amaze me with your need to blame and ridicule.

        Reply
        1. pgl

          Lord – can you even read? I already mentioned the stronger dollar. It was YOU that brought up the issue of “import policy”.

          C’mon CoRev – can you be more idiotic? Oh wait – we know you can.

          Reply
          1. CoRev

            Pgl, yup, you sarcastically mentioned the increased value of the dollar: “Real exports have been flat for 4 years. I know, I know – time to blame Obama!

            Actually what changed in 2014? The dollar appreciated for one….” But you then went on to blame Trump: “Of course Trumpian policies like fiscal stimulus and trade wars would tend to make the dollar even stronger. …”, while ignoring the inverse of devaluations of importing nations currencies. You seem to misunderstand the importance of those same policies of importing countries.

            This Trump hating world in which you live just can’t admit the ease at which his policies have improved the US economy compared to those of Obama. Living in that world you can never admit that employment and wages are up in real and nominal terms, nor that positive records are being set and reset.

            C’mon pgl – can you be more idiotic? Oh wait – we know you can.

          2. 2slugbaits

            CoRev while ignoring the inverse of devaluations of importing nations currencies.

            Like a lot of conservatives who get their economic news from Fox Noise, you seem to be living in a time warp. China’s currency devaluation was a legitimate issue at one time, but not in recent years. You’re stuck in the Bush 43 era. Try to keep up with current economic news.

          3. pgl

            “Pgl, yup, you sarcastically mentioned the increased value of the dollar”

            Sarcastically??????? I guess CoRev got kicked out of the sand box so he has to go looking elsewhere to start pointless fights. BTW – the rest of his comment was even more worthless. As usual.

          4. pgl

            “you can never admit that employment and wages are up in real and nominal terms, nor that positive records are being set and reset.”

            Oh Lord – CoRev does not get that record nominal wages is not the same thing as record real wages. I guess he thinks the price level in 2018 equals what it was in 1988. Like I said – the rest of his comment was his usual high standards of utter stupidity.

          5. CoRev

            2slugs, China? I never mentioned China, but devaluations of importing countries’ currencies. Please try to use your economics training instead of your conservative/Trump hating emotions.

            Pgl, sometimes you just amaze me with your need to blame and ridicule.

  2. pgl

    BEA notes real net exports of goods and services = negative $578 billion in 2014. For 2018, this deficit will likely about around $900 billion. As your graph notes – real exports have not grown much over the past 4 years where as we are importing a lot more. OK higher income leads to more imports but in Trump’s insane view of international trade we are losing big time. Of course he has no idea what winning means.

    Reply
  3. joseph

    CEA Chair Hassett, echoing Trump, says trade war with China is mostly hurting them not us. He explains that American consumers can easily buy substitutes for all the generic Chinese manufactured goods from alternative sellers like Malaysia.”

    So Trump and his idiot syncophant Hassett think that buying less from China and buying more from Malaysia (at higher prices?) will reduce the the U.S. trade deficit. A confederacy of dunces.

    How’s Hassett’s DOW 36,000 working out? Oops, going backwards.

    Reply
    1. pgl

      Does Hassett think that China can only buy products from the US? If he does – then he is dumber than the Usual Suspects here.

      Reply
    2. Benlu

      Guess the September 2018 import and export data come in handy.
      “The foreign-trade deficit in goods and services increased 1.3% from the prior month to $54 billion in September, the Commerce Department said Friday. A surge in products purchased from abroad helped widen the gap, with the value of imported goods ballooning to $218 billion, the highest level on record. Meantime, imports from China picked up, pushing the trade gap to $40.2 billion, another record high.”

      https://www.wsj.com/articles/u-s-trade-deficit-widened-in-september-1541162084

      Reply
      1. pgl

        “A surge in products purchased from abroad helped widen the gap, with the value of imported goods ballooning to $218 billion, the highest level on record.”

        Is ‘highest level on record’ the highest EVER or just how CoRev defines record – highest in the last few years? I would ask if this was highest in inflation adjusted terms but then CoRev would accuse me of getting political!

        Reply
      2. pgl

        Nominal value of imports hit record levels. Now one might ask about the inflation adjusted value which raises the issue of what has happened to the price-level. But which price level? The overall GDP deflator may be increasing but not the price deflator for imports has declined quite considerably:

        https://fred.stlouisfed.org/series/A255RD3Q086SBEA

        Yep – we are able to buy foreign goods for a lot less than their prices in 2012. And real imports have risen by even more than the increase in nominal imports!

        Reply
      1. Moses Herzog

        I can’t help it, these “type” comments from Menzie always make me laugh and give me 5-10 minutes of hangover joy, as I know this is about as “vicious” as Menzie ever gets. Does this mean I’m “sadistic”?? I don’t know, I suppose there’s a streak in there somewhere. Is it “sadistic” to enjoy seeing people get a “subtle dig” when it’s an accurate and well deserved dig?? Many people thought David Letterman was “cruel”. I never saw it if he was.

        Reply
    1. pgl

      Maybe a reverse correlation. Let’s walk you through it. Strong dollar leads to weak exports which means trade deficit rises as imports keeps rising. The know nothing President with know nothings as economic advisers panics and starts a trade war which does nothing to address the underlying problem but leads to more uncertainty. There! Of course CoRev would accuse me of talking about only one factor. Snicker!

      Reply
  4. pgl

    CoRev claimed real wages have hit record levels but as usual he is incapable of providing any single shred of evidence. So permit me:

    http://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/

    “After adjusting for inflation, however, today’s average hourly wage has just about the same purchasing power it did in 1978, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then. In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.”

    Of course their excellent chart shows that the current nominal wage was only $22.65. Yes the chart makes this very clear but we know CoRev cannot even follow simple charts. But I’m sure he has some magic formula to proves $22.65 is greater than $23.68.

    Reply
    1. CoRev

      Pgl, I see you are incapable of reading and UNDERSTANDING what you read. You said: “CoRev claimed real wages have hit record levels …” But, what I actually said was: “Living in that world you can never admit that employment and wages are up in real and nominal terms, nor that positive records are being set and reset.” Conflating two phrases does not make a truthful quote,

      BTW, why cite a months old article when new data is available? Perhaps it proves the validity of my preamble “This Trump hating world in which you live just can’t admit the ease at which his policies have improved the US economy compared to those of Obama.” to the potion you misunderstood.

      Reply
      1. pgl

        I see – the record high for the last couple of years! LOL!

        BTW – if you have a more recent discussion please provide. And make sure it covers data back to 1973 so we can see what your definition of “record” realy looks like!

        I think we need a CoRev to English dictionary to understood your babbling!

        Reply
        1. CoRev

          Pgl, why would I argue about your erroneous interpretation of plain English? I take it you disbelieve wages are up, and records have been set by Trump’s policies.

          Or even more likely you can not discuss these issues as it contradicts your constant complaints of Trump’s policies.

          Reply
  5. pgl

    “2slugbaits
    November 3, 2018 at 8:36 am
    CoRev while ignoring the inverse of devaluations of importing nations currencies.

    Like a lot of conservatives who get their economic news from Fox Noise, you seem to be living in a time warp. China’s currency devaluation was a legitimate issue at one time, but not in recent years.”

    You are right that China has not been engaged in currency manipulation for many years. But was that what CoRev was saying here? After all – no international economist uses terms like “the inverse of devaluations”. WTF does this even mean. OK if I state the exchange rate as $/yuan and someone else states it as its inverse as in yuan/$, neither one of us has said anything about manipulation.

    You could talk about Euros/$ and I might prefer $/Euros but we would both agree that we have freely floating exchange rates here.

    Alas – CoRev has this habit of writing words that he does not even understand.

    Reply
  6. 2slugbaits

    CoRev I never mentioned China, but devaluations of importing countries’ currencies.

    Oh, I see. My mistake. Then would you mind telling us exactly what you meant by the (rather inelegant) phrase “inverse of devaluations of importing nations currencies”? Like pgl, your phrasing sounded to me like word salad. If you weren’t referring to China’s past history of currency manipulation, then to what exactly were you referring?

    Reply
    1. pgl

      If CoRev meant the EU region – I guess someone should tell this goof ball that the Euro and the US$ are freely floating. Oh wait – maybe he meant the Fiji Islands.

      Reply
  7. CoRev

    Pgl, let me repeat what I think is the cause of your (and others) anger: “This Trump hating world in which you live just can’t admit the ease at which his policies have improved the US economy compared to those of Obama. ”

    The ease at which the economy was improved points directly at Dem policies as the culprit for delaying this improved economy.

    Reply
    1. pgl

      I think we have a new record for number of gibberish words with absolutely no point. Wanna do this Sonny Purdue style – as in cotton pickin! At least we know what Sonny meant by those words.

      Reply
    2. pgl

      Every bit of your latest gibberish here falls under the category of WORD SALAD. Now I think more people should be eating healthy salads there is the issue of eating veggies that contain E. Coli (Escherichia coli). It is very clear your word salad is E.Coil on steroids. Seriously CoRev – why do you continue to embarrass your mom with this intellectual garbage on an economist blog? I’m sure there are other blogs run by right wing dorks that would cheer on your incessant intellectual garbage!

      Reply
    3. 2slugbaits

      CoRev Let me refresh your failing senior citizen memory. Ever since 2009 you insisted that fiscal stimulus would not and could not stimulate economic growth. And I consistently argued that fiscal stimulus could always boost GDP. Now that Trump is in the White House you have quietly changed your tune and now fiscal stimulus is pretty good after all. The problem is that fiscal stimulus is a very bad policy when the economy is already at full employment. Fiscal stimulus is not an unconditional tool. It should only be used when the economy is in recession and the interest rate is at the ZLB. But Trump has decided to temporarily juice the full employment economy at the cost of longer run future growth. It’s basically another version of LBJ’s guns and butter policy. And it will probably unwind just as badly. It’s a horrible policy.

      Now please read a standard macro textbook so I won’t have to continue correcting you. And try reading some of the analyses of Trump’s tax cuts. Almost all of them predicted a temporary bump in GDP in 2018 and then a dropping off in 2019 followed by flat or negative growth thereafter as the stimulus unwinds and the bills start coming due.

      Reply
      1. CoRev

        2slugs, again your memory is wrong. My concern was that Obama’s fiscal stimulus would not work. Let me also refresh your memory in that you agreed that his stimulus was too small. What we see is that we could have had a much improved economy with better policy.

        What you do forget is my pre-2008 position that Bush’s policies were reducing the annual deficit. Selective memories can deceive.

        Reply
        1. 2slugbaits

          CoRev you agreed that his stimulus was too small.

          And you thought it should have been even smaller!!! Your economics is simply incoherent.

          my pre-2008 position that Bush’s policies were reducing the annual deficit.

          Really? You think Bush was doing a fine job with respect to managing the deficit while the economy was near the peak of the business cycle? Care to comment on this post:
          http://econbrowser.com/archives/2009/09/the_cyclically

          Reply
          1. CoRev

            2 slugs, why ignore the operative portion of my comment: “My concern was that Obama’s fiscal stimulus would not work. ” coupled with my prior: “This Trump hating world in which you live just can’t admit the ease at which his policies have improved the US economy compared to those of Obama. ” My analysis of Obama’s and Democrat’s versus Trumps’ and Republican economic policies was and is currently proving to be correct.

            It actually appears to be painful for Democrats to discuss the current economic policy results.

            As for Bush, the answer is yes. His term was book ended with recessions, and yet he was months away from a balanced budget had the economy had not tanked.

            While helping edit the book “Presinomics” there was little to no clarification of which Presidential policies actually caused the affects measured. Amazingly, the comparison of Obama/Democratic policies with the Bush/Trump/Republican policy results have given a much clearer picture of those policy differences and results.

            It is those policy differences which appear painful to Democrats.

          2. 2slugbaits

            CoRev he was months away from a balanced budget had the economy had not tanked.

            So in your view macroeconomic policy should seek to obtain a near balanced budget when the economy is at the top of the business cycle??? My goodness, that’s a novel theory. And here I always thought the budget should be balanced over the budget cycle rather than just at the peak. In any event, the best that Bush did was an on budget deficit of 2.4% in FY2007. That seems like a long way from a balanced budget. BTW, in FY2015 the on budget deficit (2.6%) was very close to the FY2007 deficit. And that was a bad thing.

            You still seem to be having problems understanding basic macro. There’s no secret as to why the economy is running strong right now. It’s because we’re running huge deficits while the economy is at full employment. Fiscal stimulus works. That’s why some of us were arguing for a much larger stimulus in 2009 while you were arguing for a much smaller stimulus. But you should never run large deficits when the economy is at full employment. Like I said, this is LBJ’s Guns & Butter Part Deux. Like a lot of conservatives who never read an econ book, you seem to believe that government should cut taxes when the economy is booming and cut spending when the economy is in recession.

            It’s a pretty dense book and it might be beyond your skillset, but I recommend that you read the new book “Crashed” by the economic historian Adam Tooze. It should correct a lot of your thinking.

        2. noneconomist

          Selective memories? You’re talking about the same George Bush who believed that budget surpluses were proof the government was poorly run? Who believed paying down debt too quickly could be fiscally harmful? Whose VP said the tax cut would be a reward for their constituents because Reagan had proved “deficits don’t matter”? That George Bush? The guy who entered office with a $156 Billion FY surplus and who proceeded to turn that into a $157 Billion deficit to be followed by larger ones still?
          The same guy who wanted to “save” Social Security by endorsing a plan that would have borrowed an additional $4-$5 Trillion over a 10-15 year period to make the transition into more privatized accounts? The plan that was torpedoed by more than a few his fellow Republicans?
          The guy who entered office with a national debt of $5.7 Trillion and who presided over increases with Republican congresses that upped the debt to over 10 Trillion by 2008?
          Well, thanks for the memories. I’d almost forgotten what economic wizards he and his fellow Republicans were.

          Reply
          1. CoRev

            Noneconomist, yup! That’s the one. Your examples actually confirm how Democrats prefer to talk around the edges of policy versus the affects. For instance, Social Security excess collections usually add to both national debt and the annual deficit while impending collections deficits will also add to them. Thus showing how MANDATORY budget costs are two edged deficit swords. It is Democratic policy that adds to the MANDATORY budget, as your example of “saving” Social Security shows, but it is compounded by the Obama/Democratic PPACA and extensive expansions of Medicare policies which have increased the national debt and annual deficits.

          2. noneconomist

            Bush blew the surplus and piled up another few trillions of debt because of “excess” SS collections and Medicare expansion (ok, he did claim credit for an unfounded drug plan) ? All while presiding over two tax cuts while funding two war fronts in the Middle East which had no negligible effects on deficits or the debt?
            Whew! Situation normal. Your economics illiteracy score remains perfect.
            Oh. That debt explosion , c. 2001-2007, when Republicans controlled Congress was Obama’s fault. You’re on fire! Keep ‘em coming!

          3. CoRev

            Noneconomist, you’re talking around the edges again. Bush had two recessions and an attack on the homeland during his term. St. Clinton or St, Obama? Your biggest mistake was to ignore the effects of mandatory budgets, but that is to be expected for a Democrat.

          4. 2slugbaits

            CoRev Your examples actually confirm how Democrats prefer to talk around the edges of policy versus the affects. For instance, Social Security excess collections usually add to both national debt and the annual deficit while impending collections deficits will also add to them.

            No. FICA revenues in excess of FICA expenses add to the PUBLIC DEBT, but *not* the DEBT HELD BY THE PUBLIC. FICA revenues do not add to the annual deficit…they subtract from the deficit. Please learn basic government accounting.

            Your biggest mistake was to ignore the effects of mandatory budgets, but that is to be expected for a Democrat.

            What about the mandatory budget cuts under the sequester rules? Those led to fiscal contraction at just the wrong time. And it shows up in the weak growth in 2015, which was a kind of mini-recession.

            Bush had two recessions and an attack on the homeland during his term. St. Clinton or St, Obama?

            Obama had to counter a planned attack on the economy led by Mitch McConnell, who made no secret of his intent to sabotage the economy in order to elect Republicans. Or how about that traitorous Tea Party movement that bragged about taking the debt limit extension as hostage (“a hostage worth killing”)? And Obama had to deal with the multiple EZ crises, or did you forget about those?

  8. pgl

    Fellows – get a clue about CoRev. He has to have the last word even if it is nothing more than stupid word salad. Take his latest for example:

    “CoRev
    November 5, 2018 at 4:38 am
    Noneconomist, yup! That’s the one. Your examples actually confirm how Democrats prefer to talk around the edges of policy versus the affects. For instance, Social Security excess collections usually add to both national debt and the annual deficit while impending collections deficits will also add to them. Thus showing how MANDATORY budget costs are two edged deficit swords. It is Democratic policy that adds to the MANDATORY budget, as your example of “saving” Social Security shows, but it is compounded by the Obama/Democratic PPACA and extensive expansions of Medicare policies which have increased the national debt and annual deficits.”

    What a bunch of incoherent BS. Excess Social Security collections add to the national debt? Seriously? Most people define the change in the debt as the difference between spending and tax collections. But CoRev’s magic decoder ring says it is just the opposite. Yes CoRev has rewritten preK arithmetic laced with a lot of big sounding words he does not understand. And so it goes on and on and on again. Never a real point but he continues anyway.

    Reply
    1. 2slugbaits

      pgl FICA taxes in excess of FICA expenses do add to the public debt because the Trustees hold bonds. And conservatives tend to cite the public debt rather than the debt held by the public. In most cases it’s really the debt held by the public that we’re interested in. CoRev’s problem is that he knows just enough to get confused once he gets beyond the Fox Noise talking points. And it shows because his posts degenerate into sheer gibberish. If only he would bother to read a macro textbook.

      Reply
      1. 2slugbaits

        pgl I should have been clearer. If the on budget side is running a deficit that is greater than the off budget surplus, then the excess FICA revenues increase the intragovernmental side of the PUBLIC DEBT, but reduce the DEBT HELD BY THE PUBLIC. In the special case when the on budge deficit is less than the excess FICA revenues then the PUBLIC DEBT itself can actually increase, which is counter-intuitive. So this actually happened when Clinton ran on budget surpluses.

        Reply
      2. pgl

        Yes – there are two accounting of the deficit here. My only point was that CoRev got the sign wrong. This moron really thinks having tax revenues in excess of spending leads to higher debt. Even two year sold realize that the debt falls when taxes exceed spending. But not our CoRev!

        Reply
      3. CoRev

        Pgl, as 2slugs says: ” FICA taxes in excess of FICA expenses do add to the public debt because the Trustees hold bonds. “, and what 2slugs ignores is those bonds are used on both the obligations and payments side of the on going operations, e.g.”When the rest of the budget is in deficit, a Social Security cash surplus allows the government to borrow less from the public to finance the deficit. (The “public” encompasses all lenders other than federal trust funds, including U.S. individuals and institutions, the Federal Reserve System, and foreign investors.) The Treasury always uses whatever cash is on hand — whether from Social Security contributions or other earmarked or non-earmarked sources — to meet its current obligations before engaging in additional borrowing from the public.https://www.cbpp.org/research/social-security/policy-basics-understanding-the-social-security-trust-funds

        Because of this NORMAL use of available cash U.S. Treasury SPENDS those FICA collections on an ongoing basis. Since cash collections are both cyclical and erratic ongoing operations will almost always be in deficit, those funds are most often spent. For 2-3 decades there have been excess FICA, but if not already in the next year or so, those collections are in deficit requiring that SSA draw on those special SS treasuries, and when that happens since we are in a budget deficit U.S. Treasury will need to borrow to refund those bonds increasing the debt held by the public. Which is what the Republicans have been saying was going to happen for years.

        Reply
        1. 2slugbaits

          CoRev since we are in a budget deficit U.S. Treasury will need to borrow to refund those bonds increasing the debt held by the public. Which is what the Republicans have been saying was going to happen

          I don’t know of anyone who said that paying down those SS bonds wouldn’t have to come from general revenues, so I’m not sure what point you’re trying to make.

          Bush 43’s best year in terms of the budget deficit was FY2007. The unified budget deficit was 1.1% of GDP; however, the on-budget deficit was 2.4% of GDP. It was the 1.3% FICA surplus that lowered the unified budget deficit. Now it is true that in FY2006 and FY2007 the unified primary budget (i.e., excluding interest) was in a very small surplus, although the on-budget primary budget was still negative. And this was at the peak of the business cycle when primary surpluses should be large. Compare that with the Clinton budgets, which saw primary budget surpluses every year from 1995 through 2001, and in most of those years the unified primary budget surplus was more than 2% of GDP. And the on-budget primary surpluses were positive as well. The Trump tax cuts are making the problem of the primary deficit much worse. Those tax cuts are also putting upward pressure on interest rates. The long run effect will be less investment (which we’re seeing in the data), higher interest rates (which we’re seeing in the data), and higher future taxes (which is something that myopic voters don’t yet see). Of course, if you’re a geezer then you probably don’t care about the long run effects of Trump’s policies because the future won’t include you. I suspect that’s one reason why so many older males voted for Trump.

          Reply
          1. CoRev

            2slugs, we’ve had this conversation many times, but calculating the US Annual deficit is so simple even folks like pgl and noneconmist can perform them. If total revenues exceed total expenditures then we are in surplus, and when total revenues in are less than total expenditures then we are in deficit. It’s not complex only simple addition and subtraction even they can perform.

            On/off budget, primary budget budget (anything) do not apply only revenues and expenditures effect this FLOW VARIABLE, which is continuously calculated on a daily basis. These daily calculations impact the amount needed to be borrowed to maintain the operating cash balance, and is reported in the DAILY TREASURY STATEMENT. https://www.fms.treas.gov/fmsweb/viewDTSFiles?dir=w&fname=18110500.txt

            The mathematics to calculate these totals is very simple. While the operating procedures surrounding the US Treasury steps needed to maintain the operating cash balance are much less so. Only three things truly affect these US Treasury operating steps, 1) Revenue, 2) Expenditures and 3) Debt Ceiling. Categorizing and accounting for these steps against the three things results in terms like Public Debt and Debt held by the Public, etc. and tracking these steps against the annual Federal Budget results in terms like on/off budget, primary budget, etc.

            Next time you see someone using these terms understand that they are either obfuscating a simple concept, the ongoing Deficit, and or they are trying to compare this very simply calculated flow variable against the three other constraints listed above.

          2. 2slugbaits

            CoRev Yes, we all understand cash flow management. That’s not the issue I’m raising. I’m talking about the effect of Trump’s tax and spend policies on future taxes and future debt financing. The off-budget surpluses come from the FICA tax and offsets some of the on-budget deficit. But as the off-budget surplus evaporates over the next few years, that will put more pressure on the on-budget side. So there will either have to be higher on-budget taxes or more Treasury borrowing or less on-budget spending (i.e., less military, VA and Homeland Security spending). And not just a little bit less…it will have to be a lot less. Higher taxes and less spending will invite a strong negative fiscal shock. Not good. Increased Treasury borrowing will result in some combination of higher interest rates or a stronger dollar. Again, not good. And cuts to the rate at which SS Trustee bonds are redeemed in order to fund SS payments (i.e., the Sen. McConnell plan) would be a bond default, which probably wouldn’t go over too well in the bond markets. All of this is to say that there are very good reasons why you need to look at the path of on-budget deficits and not just the unified budget deficit. The current path of the primary on-budget deficit is explosive. For the life of me I do not understand why so many conservatives cheered Reinhart & Rogoff when the global economy was in deep recession and interest rates were at the ZLB, but somehow seem quite relaxed about yawning deficits when the economy is at full employment and likely operating above potential GDP. It’s just insane.

          3. CoRev

            2slugs, “I don’t know of anyone who said that paying down those SS bonds wouldn’t have to come from general revenues, …” You seem to forget the many, many comments over at AB claiming that it doesn’t happen and moreover isn’t happening today on those rare occasions when FICA is in deficit in some very short periods. Now that we are reaching a structural FICA deficit it will happen very often.

          4. CoRev

            2slugs, “Yes, we all understand cash flow management.”, but you then go on talk about unified, on/off budget etc, which actually is not cash flow but budget bucketing and accounting.

            You have repeated what I started with in defining the problem as the mandatory/entitlements programs which are locked into the the budget. Redefining those terms does not add value, but appears like an attempt to obfuscate from the actual problem these programs are causing and republicans earlier made clear was a looming problem. Let me repeat my earlier comment explaining how the US Treasury defines cash flow: ” The Treasury always uses whatever cash is on hand — whether from Social Security contributions or other earmarked or non-earmarked sources — to meet its current obligations before engaging in additional borrowing from the public. ” https://www.cbpp.org/research/social-security/policy-basics-understanding-the-social-security-trust-funds
            Notice there is no separation of types of revenue nor expenditures, just plain simple cash flow.

            Let me rephrase your comment to make my point: All of this is to say that there are very good reasons why you need to look at the path of annual deficits and not just the unified budget deficit. The current path of the of the mandatory/entitlements spending is leading to an explosive increase in the annual-budget deficit.. For the life of me I do not understand why so many liberals prefer to ignore this well documented and understood problem. The other looming issue is the growing interest rate needed in our borrowing, another mandatory expense. In the 2019 budgeti t already approaches ~1/3 of the current deficit.

            The longer democrats ignore these obvious problems and use them as political clubs to scare voters to stay in office the worse the problem will become. Instead of admitting the problem exists, democrats prefer to buy even more votes by adding more or expanding existing mandatory programs.

          5. 2slugbaits

            CoRev You seem to forget the many, many comments over at AB claiming that it doesn’t happen

            I don’t know of anyone here or over at AB who denied that paying SS benefits would have to come from general revenues after the FICA surplus revenues no longer covered SS expenses. It think it’s more likely that you may have misunderstood some of the arguments. Now it is the case that Bush 43 was alarmed at the prospect of having to raise general revenue taxes in order to pay down those Trustee bonds, but that’s because Bush wanted to establish a FICA surplus in perpetuity in order to permanently offset income tax cuts. Maybe that’s what you’re referring to.

          6. 2slugbaits

            CoRev There are different kinds of mandatory entitlement spending categories, and each one has a different history and a different future. There’s no such thing as a single MedicareSocialSecurityMedicaid program. Right now FICA revenues more than cover FICA expenses. In fact, FICA taxes are reducing the debt held by the public. At some point that will no longer be true and general revenue will have to make up the shortfall. But that is because we all have to pay back money we borrowed, and the general revenue has been borrowing from the SS Trustees for decades. Eventually the SS Trustee bonds come due. Are you suggesting that the government default on those bond payments in order to avoid a cost to the general revenue??? Now eventually those bonds might be exhausted and SS payments will have to be cut, but under current law general revenues are not allowed to cover SS shortfalls to promised benefits. That doesn’t mean people won’t get SS benefits, it just means they might not get all of the planned benefit increases. Future generations might choose to change the law in order to allow general revenue funds to supplement SS benefits, but that’s a decision best left to future generations and not those who will have been long dead and forgotten. As to Medicare, some parts of Medicare are covered by a Medicare tax. It might be the case that in a few years we need to raise that tax. Fine. Is that a problem?

            The other looming issue is the growing interest rate needed in our borrowing, another mandatory expense. In the 2019 budgeti t already approaches ~1/3 of the current deficit.
            The longer democrats ignore these obvious problems and use them as political clubs to scare voters to stay in office the worse the problem will become.

            Have you been living in a cave? How many times do pgl and Menzie and I have to pound our fist on the table to try and get you to understand the connection between Trump’s full employment deficits and higher interest payments? Trump is the one who told us that he loves debt. He told us that he was the “King of Debt.” Dick Cheney told us that deficits don’t matter. If you’re worried about the rising interest costs, then please tell us why you supported Trump’s tax cuts and bigger military budgets. And why would you support his spending tens of billions on a “big, beautiful wall” that will keep out taxpaying workers? This is just cognitive dissonance. You’re also engaging in something that Trump does a lot. It’s called “projection” and it means accusing others of what you’re guilty of doing.

            Instead of admitting the problem exists, democrats prefer to buy even more votes by adding more or expanding existing mandatory programs.

            You mean like that unfunded Medicare Part D component that Bush and the GOP pushed through Congress? You know, the one where they had to twist arms and keep the vote open until it passed over the objection of Democrats who wanted it fully funded? Or are you referring to your uninformed bellowing about how Obama was going to cut hundreds of billions in Medicare? If you were so worried about expanding entitlement programs, then why were you so apoplectic about what you (mis)understood to be a huge cut in Medicare? And if you’re worried about the deficit, then why aren’t you blaming Trump for trying to buy votes with tax cuts for the rich and increased military spending? Or the cost of building “the wall”? Or the expense of Trump’s weekly golf getaways? Which mandatory entitlement programs do you think should be cut? Let me guess…all of them except those programs that benefit you. Am I right?

          7. baffling

            and 2slugs delivers another beatdown on corev. but my guess is that little critter will still come back asking for more, still delirious from his beating.

        2. noneconomist

          Wait. Are you saying when the government borrows from whatever sources, it must repay those funds with interest? That’s shocking news!
          But potential good news. The King of Debt once suggested lowering the national debt by at less tjan face value. There’s stillhope for more conservative economic wizardry .

          Reply
    2. noneconomist

      Personally, I could use a CoRev history lesson here. Which presidents insisted on tax cuts while attempting to recover from an attack on the homeland, combined with sending, oh, 140,000 American troops to war fronts far from home? While, at the same time, presiding over government revenues that fell considerably from 2001 to 2005 because of the tax cuts? And while sobbing profusely over rising deficits and increasing debt that would imperil their children’s futures?
      (Sufficient revenues are normally required to equip our troops–especially those 7000 miles or so from home–unless it becomes necessary to borrow because uh, Social Security and Medicare have combined to eat up money that should be going to fund overseas adventures and the fall in revenues had nothing whatsoever to do with tax cuts.)
      BTW, I could also use CoRev instruction on simple debt history. On 9/30/2001, the outstanding debt (according to Bureau of the Public Debt) was $5.807 Trillion. On 9/30/2007, the debt stood at $9.007 Trillion, a 55+% increase. That’s either a lot of debt piled up by Social Security and Medicare or more economic wizardry from Bush and the Republican controlled congresses. Or, likely, it was Obama’s fault.
      In any event, I look forward to better understanding history and to correcting my very selective memory.

      Reply
      1. pgl

        CoRev must have both failed history and economics for sure. But of late he is showing he has not passed preK arithmetic. Taxes exceeding spending less to higher debt???????????????????/

        Reply
        1. noneconomist

          If only CoRev and Art Laffer had been around in 1789. They could have advised Alexander Hamilton–a nationalist conservative if ever there was one–on how to more effectively raise revenue.
          Hamilton, as I recall, faced a national debt about 15X more then revenues. He, of course, instituted a significant protective tariff AND sought to RAISE excise taxes, including those on farmers who distilled their corn into more profitable whisky. More revenue for the treasury, in Hamilton’s view, would help reduce the debt. What WAS he thinking?
          Well now we know. Had he insisted on cutting taxes, the farmers would have raised more corn and sold more whisky, thus alleviating the debt through smart thinking.
          Same for the original Republican president, Abe Lincoln. He and the Republican controlled congress amped up spending with tax increases (and new plans to raise revenues) simply to fight a war, borrowing and spending more in a brief period than had been spent since 1789. If only he’d followed the Jefferson Davis plan–Cut taxes (or don’t collect from states that didn’t want to pay)–just think where we’d be today.

          Reply
      2. CoRev

        Noneconomist, please read 2slugs and my explanations of the US ongoing expenditures and debt issuance procedures. It might explain, if you are capable of understanding the terms and their nuances your comment: “…I could also use CoRev instruction on simple debt history. On 9/30/2001, the outstanding debt (according to Bureau of the Public Debt) was $5.807 Trillion. On 9/30/2007, the debt stood at $9.007 Trillion, a 55+% increase. That’s either a lot of debt piled up by Social Security and Medicare or more economic wizardry from Bush and the Republican controlled congresses. ”

        This is more gibberish: “(Sufficient revenues are normally required to equip our troops–especially those 7000 miles or so from home–unless it becomes necessary to borrow because uh, Social Security and Medicare have combined to eat up money that should be going to fund overseas adventures and the fall in revenues had nothing whatsoever to do with tax cuts.)”

        BTW, mosrt oftebn I am talking about the annual budget deficits, and this chart indicates how Bush did. https://www.usgovernmentspending.com/usgs_line.php?title=Federal%20Deficit&units=b&size=m&legend=&year=1998_2018&sname=US&bar=1&stack=1&col=c&source=a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a&spending0=-69.27_-125.61_-236.24_-128.23_157.75_377.59_412.73_318.35_248.18_160.71_458.55_1412.69_1294.37_1299.59_1086.95_679.54_484.60_438.49_584.65_665.37_779.00 Please notes Bushes years 2001 thru 2008. Recessions occurred in the 1st and last years, but his deficits were reduced from the high of 2004 until 2007 where without the great recession hewas on track to eeduce the annual budget deficit to zero.

        Reply
        1. noneconomist

          Thanks for explaining how Social Security was responsible for increasing the national debt by 55% under Republican control. Good to know War expenditures and decreases in revenue had nothing to do with it. I’m flattered when the king of gibberish mentions my contributions.
          BTW, without the Great Depression, Hoover would also have reduced deficits as well as putting multiple chickens in every pot and a car in every garage.

          Reply
        2. pgl

          This is from the same person that told us more Social Security tax collections ADDS increases the deficit? I should thank Alan Greenspan for not having you on his 1983 Social Security reform committee!

          Reply
          1. noneconomist

            SS reform. Yes, that time when conservative icon (but soon to be RINO) Ronald Reagan was tricked by wily Speaker Tip O’Neil into signing a compromise agreement to strengthen the system. Or, was it liberal big spender President O’Neil who rammed through the agreement? The one that today has been the main cause of deficits, according to CoRev, (not to mention the primary debt driver) since 1936.
            Darn. My selective memory is punishing me again.

  9. CoRev

    Baffled and 2slugs, you are proving my two main points. 1) You won’t discuss or credit the Trump policy positives for the economy and only point out the fringe negatives. Or minimize them: ” Future generations might choose to change the law in order to allow general revenue funds to supplement SS benefits, but that’s a decision best left to future generations and not those who will have been long dead and forgotten. future Generations? WE are already drawing down the Bonds held in the Trust Fund and it expected to be exhausted by 2034. Not future generations, and the situation is even worse for Medicare.
    2) The Mandatory Budget payments problems have been recognized for a long time, but you Democrats prefer to ignore and or expand the problems, by proposing an expansion of Obamacare with Medicare for all.

    The SS example is represented by 2slugs misunderstanding of reality: “Right now FICA revenues more than cover FICA expenses. ” Reality is: “The Social Security program’s costs are expected to exceed its income this year, marking the first time that has happened since 1982 and forcing the U.S. government to dip into the retirement system’s trust fund to pay benefits to participants. The program’s trustees said the shortfall trend could worsen in the decades to come. …
    This year, the program’s cost will outstrip total income by $2 billion and non-interest income by $85 billion, the report said.” This is from the 2018 Actuarial Status of the Social Security Trust Funds and from this article: https://www.cbsnews.com/news/social-security-says-costs-will-exceed-income-this-year/

    The report also forecasts that Medicare’s giant trust fund for inpatient care won’t be able to cover projected medical bills starting in 2026, three years earlier than previously expected. ”

    Baffled, can you explain where 2slugs did his beat down in light of those two above points i’ve been making?

    Reply
    1. baffling

      “Baffled, can you explain where 2slugs did his beat down in light of those two above points i’ve been making?”
      as i said, you would respond in delirium due to the beatdown. i don’t think you even read 2slugs comment, and if so, you certainly did not understand what he said.

      “WE are already drawing down the Bonds held in the Trust Fund and it expected to be exhausted by 2034. Not future generations, and the situation is even worse for Medicare.”
      those are reserves. it does not mean we have exhausted funds for social security-which is what you are implying. it simply means, with no change to current tax or benefits, the system will only be able to pay out about 75% of that promised. which is why it is best left to future generations to determine the solution. corev, you will be 6 feet under in 2034 when this happens. now if you want to cut back on your ss distributions today to help future generations, have at it. but why should future generations let you determine what changes they need to invoke? are you game to have your social security check reduced starting today corev? or are you simply advocating for a belt tightening, but only for OTHER peoples belt?

      Reply
      1. CoRev

        Baffled again I see. 2034 – 2018 = 16 years, until what you call the “reserves” is gone. In those 16 years, without changes, 100% of those $~3T SS reserves will end up as debt held by the public, What you failed to also notice is that Medicare is in even worse shape and will run out by 2026.

        This is the most callous statement I have seen re SS recipients: ” it simply means, with no change to current tax or benefits, the system will only be able to pay out about 75% of that promised.” You apparently will not rely on SS, but there are many millions of your fellow citizens who can barely get by on what they receive, and you think a 25% cut is quite OK for the future generations to solve in 16 years.

        BTW. where’s that beat down description?

        Reply
    2. noneconomist

      CoRev: If, as you note above, next year’s SS costs will exceed income by $85 Billion, that still leaves a $900 Billion deficit that’s non-SS related. And, you did say, that SS, Medicare, and Medicaid are the main debt culprits.
      You never explained how OASDI was primarily responsible for Republicans piling an additional 55% onto the national debt between 2001 and 2007. Or how the Bush plan–the one that would have BORROWED another $4-$5 Trillion—-would have saved the system. But then, I never expected you would. Or could.

      Reply
  10. baffling

    “This is the most callous statement I have seen re SS recipients:”
    not sure what you mean by callous. it is simply a statement of fact. do i want to make a 25% cut? no. which is why i allude to the idea that some changes can be made. they simply should not be made by YOU, who will be dead and gone at that point in time. don’t inflict your solution on others, let them choose. unless you want to contribute to the solution today, and start taking a deduction in your current social security benefit? i did notice, as the slippery critter that you are, you have avoided that aspect. you want to have a say in the solution, put some skin in the game corev. otherwise shut up and stay in your lane.
    “and you think a 25% cut is quite OK for the future generations to solve in 16 years.”
    no. but my guess is you believe the solution is to invoke the 25% cut on those future generations today, and not give a reduction to anybody currently on the ss payroll.

    “BTW. where’s that beat down description?”
    i think it would behoove you to read 2slugs response once again. you still seem a bit groggy by the beating he inflicted on you. poor little critter got hit so hard he can’t even remember the beating!

    Reply
    1. CoRev

      Baffled, the problem with callous statement is the originator never realized they were being callous, insensitive, heartless and unfeeling until it is pointed out to them. Saying it’s just a statement of fact doesn’t help the cruelty of the statement.

      What you suggest is waiting until a later generation fixes the existing and long known problem. Waiting even another 16 years is cruel, but that what callous uncaring people who need to make political points do.

      Trying to blame others for your own comments and obvious unconcern for others is another ploy to hide your own callousness. It is a similar ploy to hide your failure to understand 2slugs’ comment as indicated by the failure to ID any “beat down”.

      BTW, I do not intend to res[pond to this inane comment string.

      Reply
      1. baffling

        callous would be somebody who is extracting too much from social security today, helping to cause a shortfall in the future for social security. even more callous would be if that individual demanded that future recipients of social security take reduced benefits, while smugly keeping his own benefits without any reduction. even more callously, that individual demands those future recipients act on his advice, when such a fool will be long dead before the problem actually arises. that would be callous and smug, corev. i have a concern for those reduced benefits in the future-i am part of the generation you are shortchanging . if you are unwilling to take a pay cut today to help, it is you who has no concern and displays an unknowing amount of callousness. and as i said, reread the beatdown 2slugs gave you-you may actually learn something corev.

        Reply

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