Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared at Project Syndicate.
After a period when little attention was paid to the long-run prognosis for government debt, its sustainability is again front-and-center, in the United States as in many other countries. The reason is not the concocted debt ceiling crisis, which was resolved at the end of May, two days before a looming default. A likely reason is, rather, the big increase in interest rates over the last year.
So long as interest rates, both nominal and real, were historically low — even close to zero in 2021 — it seemed fine for the government to borrow. In particular, real interest rates, that is, nominal interest rates minus expected inflation, were negative. But now that interest payments on the national debt have risen (with more to come), the situation doesn’t look so benign.
Real interest payments will continue to rise in 2023-24. A little-noticed benefit of higher inflation in 2021-22, in the US and around the world, was that, by raising nominal GDP, it actually worked to improve Debt/GDP ratios. Only the real component of higher nominal interest rates hurts the debt dynamics. Currently, inflation is apparently coming back down, which will have the little-noticed cost of raising real interest payments on the national debt in coming years.
- How bad has US fiscal policy been?
In general, the macroeconomics of sound fiscal policy calls for the pursuit of two principles. First, in the short run, it should be countercyclical: expanding spending (or cutting tax rates) to stimulate the economy in response to recession, and restricting spending (or raising taxes) in response to booms. Secondly, in the long run, borrowing should be sustainable, that is, on a trend where accumulated debt rises more slowly than the size of the economy, so that the debt/GDP ratio declines.
Chile is an example of a country that achieved both objectives, counter-cyclicality and sustainability, after it reformed its fiscal institutions in 2000. Meanwhile, Greece is an example of a country that moved in the wrong direction, after joining the euro in 2001, showing pro-cyclical fiscal policy and unsustainable debt.
American fiscal policy has generally been counter-cyclical. To be sure, it could have been better. The Bush Administration in 2008 and the Obama Administration in 2009 appropriately expanded in response to the Great Recession, but not enough to return the economy to full health rapidly. It took until May 2018 for unemployment to fall below 4 %. (Why was the stimulus cut short? The Democrats lost their congressional majority in 2010. Republicans vote for fiscal stimulus when and only when they occupy the White House.)
Again, it was appropriate for the Trump Administration in 2020 and the Biden Administration in 2021 to expand in response to the Coronavirus recession. This time they overdid it: unemployment came back down very rapidly, already below 4% by December 2021, but excessive expansion helped push up the inflation rate sharply in 2021 and 2022. Nevertheless, US fiscal policy at least moved in the right direction in response to the last two recessions, and relatively promptly.
It is on the criterion of sustainability that US fiscal policy gets a low score. It is easy to lose sight of the long run picture amidst the short-run fluctuations. US debt as a share of the economy peaked at the end of World War II. Debt in the hands of public reached 106% of GDP in 1946. It then came steadily down, until the Reagan tax cuts of 1981-83, which led to record deficits. Debt/GDP has been on an upward trend since then, until in 2020 it almost attained the record high set in 1946. Only during the intervals 1996-2000 and 2021-23 has the upward trend been temporarily reversed.
- Trouble ahead
The long-term prognosis from here on out is for an ever-rising debt/GDP ratio. The aging of the population, as has long been foreseen, is driving up mandatory spending (“entitlements”). A report from the Congressional Budget Office in February projected that Social Security spending will rise from 4.8 % of GDP in 2022 to 6.0% in 2033 and that Medicare spending will rise from 2.8 % of GDP to 4.1 %. The report has the debt/GDP ratio breaking its 1946 record within 10 years:
“Federal debt held by the public is projected to rise from 98 percent of GDP in 2023 to 118 percent in 2033—an average increase of 2 percentage points per year. Over that period, the growth of interest costs and mandatory spending outpaces the growth of revenues and the economy, driving up debt. Those factors persist beyond 2033, pushing federal debt higher still, to 195 percent of GDP in 2053.”
On May 30, Larry Summers, in a speech at the Peterson Institute of International Economics, convincingly laid out a set of reasons to expect the US debt trajectory to be even worse than the CBO’s projection. (The difference mostly results from a constraint on CBO: it must assume that future spending and tax provisions will remain the same as currently legislated.)
- What do the ultra-conservatives propose?
One might naively think that the so-called ultra-conservatives, who until recently had been refusing to raise the debt ceiling, would have some ideas about how to eliminate the budget deficit and put the debt back on a sustainable path. Isn’t this what fiscal conservatism is all about? (One can’t take seriously fiscal goals that are even more ambitious, such as candidate Donald Trump’s preposterous 2016 claim that he would be able to eliminate the national debt altogether over eight years.)
The American fiscal conservative is today a mythical beast. Or, at least, one can’t find them in the Republican party. One might argue that Bill Clinton ran a conservative fiscal policy. And a few independents have single-mindedly kept the faith all along.
The ultra-conservatives, now and in the past, say that they want to balance the budget by cutting federal spending, while sparing entitlement spending — social security, Medicare, and some other health spending. In February, the ultra-ultra conservative (ne-plus-ultra) Congresswoman Marjorie Taylor Greene, yelled “liar” in the middle of President Biden’s State of the Union speech. She was outraged at the insinuation that any Republican congressperson was proposing to cut social security or Medicare. In response, as the loud heckling spread, Biden had the presence of mind to depart from his script and welcome the apparent unanimity being expressed in the chamber that social security and Medicare were off the table.
The ultra-conservatives seem not to realize that entitlement spending adds up to roughly half of all government spending and is rising steadily. More precisely, such mandatory spending totaled 49 % in 2022, or 63 % if farm price supports and other mandatory income support programs are included. In addition, they want to increase, rather than cut, military spending. And let’s assume that the government will continue to pay the interest bill on the debt. But interest on the debt plus military spending add up to another fifth of all government spending: 20% % in 2022 and likely to rise in the future. This does not include those benefits for veterans that are not classified as either entitlements or military spending.
And, needless to say, the ultra-conservatives want to keep tax rates low. These provisos together imply that what remains would have to bear the entire brunt of the cuts. This non-defense discretionary spending is $0.9 trillion in 2023, which is 16 % of total government spending (or 3.6% of GDP) If one adds in all mandatory income support (14 % of spending), then the sum is 30% of spending.
They can’t really mean to balance the budget by zeroing out all non-defense discretionary spending. For one thing, it would mean eliminating air traffic control, law enforcement, immigration control, the national parks, the weather service, and much more. For another thing, do the math. The federal budget deficit is $1.4 trillion in 2023 [= 5.3% of GDP]. Total government spending is $6.2 trillion [= 23.7 % of GDP], and forecast to rise rapidly. Of that spending, only $0.9 trillion is non-defense discretionary [= 3.6% of GDP]. Even in the hypothetical state where non-defense discretionary spending were eliminated entirely, it still would not be enough to bring the budget deficit down to zero: $0.9 trillion versus $1.4 trillion. That is simple arithmetic.
A sincere plan to put the debt back on a sustainable path would need (i) to slow the growth of entitlements a little, particularly Social Security; (ii) to raise some taxes (which could be done while yet improving the efficiency and equity of the tax system); and (iii) to give the Internal Revenue Service all the funding it needs to answer the phones and collect the taxes already legislated. That approach would be more fiscally conservative than threatening to default on the debt unless IRS funding is cut.
This post written by Jeffrey Frankel.
Interesting that Frankel doesn’t touch defense spending. either cutting or slowing its growth. But he’s all for reducing the incomes of the elderly.
Need I remind people that DOD has yet to pass an audit, so no one really knows how the money is being spent or what DOD’s assets really are. But the are ample indications that of waste and corruption going back decades: “Corrupt from Top to Bottom”
In “The Pentagon Wars,” James G. Burton, a retired Air Force colonel who scrutinized the buying of weapons from his post inside the Pentagon, argues that moral and ethical corruption, incompetence and overweening ambition characterized the process.”
“His scathing memoir says the Pentagon’s spending of the public’s money is a dirty business, one that too often has nothing to do with national defense, one in which secrecy and deception are valuable currencies. “Sadly, I have seen program managers lie to high-level review boards, generals lie to civilians, civilians lie to generals, and both lie to Congress and the American public,” Mr. Burton writes. “Seldom is anyone held accountable. On the contrary, many are rewarded for their behavior.” https://www.nytimes.com/1993/10/03/books/corrupt-from-top-to-bottom.html
Even the NY Times has noticed how bad the procurement and maintenance are in DOD, despite almost a $Trillion being lavished on the department. https://www.nytimes.com/2023/06/19/world/europe/ukraine-weapons-howitzers-contracts.html
Any serious commentary on debt sustainability must come to grips with bloated DOD spending, mismanagement, and waste. Frankel’s commentary misses the mark.
“Frankel doesn’t touch defense spending”
That’s a lie.
The rest of your rant is beyond repugnant. Of course little Jonny boy is all upset that people call him on his lies so he has to go all emotional attacking the motives of our hosts? Something one would expect from a Trump todie or Putin’s pet poodle.
I can’t address every aspect in every post. The subject of “Seeking US debt sustainability” was to follow the logic of the ultra-conservatives on its own terms. As for my last sentence, I was leaving a statement of what I personally think we should do for other occasions, past and future.
I have long held the view that military spending is unnecessarily wasteful and excessive. Prime areas to cut are those weapons systems that the Pentagon doesn’t even want, but are continued because of jobs and profits in congressional districts. Ditto for some bases. And we are engaged in a huge (> $1 trillion) program to modernize our land-based missiles that does not take into account that, so long as we have MAD deterrence, we don’t need more missiles. (In fact it could exacerbate strategic instability.) We may need more funding to support Ukraine’s self-defense, but there are other big places to cut. — JF
Professor Frankel,
You are frequent, generous contributor here. It is unfortunate that your generosity exposes you to the “Johnny treatment”. We don’t really know why he behaves as he does, but it is quite common for Johnny to claim that others believe or have said things that they clearly do not believe and have not said.
So thank you for your calm, informative response to Johnny,but don’t be disappointed if it does no good.
AGREED
Why is such solid care to his fellow man and empathy to others, met with so much insanity??? It’s so hard to intake, and not to internalize. Thanks Prof Frankel for caring about others. and making it clear you CARE, when many other economists grapple with communicating their care for society.
Thank you for your contributions. Yes if you take the conservatives at their word and want to balance our national budget exclusively via discretionary spending cuts, where GOP will accept it, the simple math says it cannot be done. That is also why the final GOP house proposals for a budget were such a joke. They refused to give specifics and finally came up with a budget that was not even going to get close to their sated goals. But they just claimed it did and the Fox “news” minions will be thinking it is so.
“Need I remind people that DOD has yet to pass an audit, so no one really knows how the money is being spent or what DOD’s assets really are. ”
This is not only a lie but it is beyond pointless. BEA reports how much we spent on defense spending on a quarterly basis. And Congress can get from the Pentagon what they spend funds on. They do it all the time.
Now maybe one can make the case that we spend too much on defense spending. I argued that routinely. But an audit does not cut defense spending. It takes political action – and not the usual stupid whining from one’s potty that little Jonny boy specializes at. BTW – could you ask your mommy to change your diaber?
https://www.amazon.com/Pentagon-Wars-Reformers-Challenge-Guard/dp/1612516009
The Pentagon Wars: Reformers Challenge the Old Guard Paperback – February 15, 2014
Wait – Jonny boy is citing something written a decade ago? Something written before Trump’s massive military build up? I just hope Mr. Burton is working on an update as this citation from little Jonny boy is really outdated.
From Jonny boy’s last link:
Problems are inevitable in an arms-acquisition frenzy the size of Ukraine’s. Since Russia invaded last year, Western allies have sent Ukraine tens of billions of dollars worth of weapons. As of last week, the United States alone had committed about $40 billion worth of military aid (and more in financial and humanitarian assistance), and European allies have also contributed tens of billions. In addition, Ukraine has spent billions of dollars of its own on the private arms market.
Many of the transfers from Western allies have involved modern weapons such as U.S. air defense systems that have proved highly effective against Russian drones and missiles. But in other cases, allies have provided stockpiled equipment that, at best, needed extensive overhauls.
Now if all equipment been in perfect conditions, then more of Putin’s war criminals would have been killed. Which would be bad news for JohnH as his master Putin would have cut off little Jonny pet poodle’s dog food. Maybe living in the Kremlin is what little Jonny boy over and over again forgets to READ his own links beyond the headline.
Ole Bark, bark, AFAIK since leaving DoD, the entire department has NOT passe an audit. Title 10 seems to make it impossible to do a department-wide audit. couple that with so many black/highly classified programs within the agencies and services, even taking an audit is impossible. Portions of the Congressional DoD budget starts highly classified and lumps several of these programs under one line item. How could anyone audit this level and kind of black line items.
For JohnH so what if the DoD is not fully audited and for what purpose?
Little CoRev seems to be arguing with little CoRev – like the retarded dog chasing his own tail. Oh wait – CoRev is that retarded dog. m
My apologies. The Pentagon Wars: Reformers Challenge the Old Guard was published in 1993 not 2014. So Jonny boy is referencing a 30 year old book. Which explains how they made this movie in 1998
https://www.youtube.com/watch?v=ir0FAa8P2MU
You love to bash the US as you heap praise on Putin’s Russia. But wait, the Kremlin war budget for 2023 is $82 billion and with Russian GDP falling to only $1.6 billion in 2023, it seems that Russia’s defense budget exceeds 5% of GDP:
https://tradingeconomics.com/russia/gdp
Now get out your little audit papers and tell us how this compares to the US.
More on the wonderful state of Russia’s economy:
https://www.msn.com/en-us/money/markets/russia-s-economy-will-shrink-again-this-year-as-putin-s-war-on-ukraine-worsens-inflation-and-labor-shortages-ratings-agency-says/ar-AA1cNTqd?ocid=msedgdhp&pc=U531&cvid=d6f3ebeb91d840f9b17fde5b692ea916&ei=12
Russia’s economy is set to contract by 0.8% this year, as inflation remains a key burden, according to a Scope Ratings report seen by Reuters on Tuesday. The European credit rating agency estimates a 6% average inflation rate for 2023, brought on by a record exodus of workers from the country that has led to a labor shortage not seen since 1998. “Underlying price pressures are exacerbated by labor shortages, resulting from the mobilization of working-age men for the war in Ukraine and accelerated emigration which reached a high of around 1.3m people in 2022,” the report said.
Gee – Putin needs his pet poodle JohnH to spin this. Well the reduction in the labor force likely means reported unemployment is low!
JohnH,
“ no one really knows how the money is being spent or what DOD’s assets really are. But the are ample indications that of waste and corruption”
Do you even read what you write?
How can one simultaneously not know, and have ample evidence?
As Macroduck keeps saying “Jonny knows things”. Jonny lives in his own fantasy world so yea Jonny knows a lot about his alternative universe.
Apparently, pgl and Ducky DON’T know things that are public knowledge…if only they bothered to read the news!
“The Defense Department has failed its fifth-ever audit, unable to account for more than half of its assets, but the effort is being viewed as a “teachable moment,” according to its chief financial officer.
After 1,600 auditors combed through DOD’s $3.5 trillion in assets and $3.7 trillion in liabilities, officials found that the department couldn’t account for about 61 percent of its assets, Pentagon Comptroller Mike McCord told reporters on Tuesday.” https://thehill.com/policy/defense/3740921-defense-department-fails-another-audit-but-makes-progress/
Public knowledge? Excuse me but your stupid rants may be publicly available on the internet but they detract from knowledge.
After 1,600 auditors combed through DOD’s $3.5 trillion in assets and $3.7 trillion in liabilities, officials found that the department couldn’t account for about 61 percent of its assets, Pentagon Comptroller Mike McCord told reporters on Tuesday. McCord said the department has made progress toward a “clean” audit in the past year, but later added “we failed to get an ‘A.’”
Not getting an A is failure? Pretty funny from a clown whose highest grade in basket weaving was C minus.
just curious, in whose interest is public knowledge of the pentagon’s resources and assets? putin? china?
Excellent article. But please leave Larry Summers out of this. He is one of those most at fault for the slow recovery of the 90s. He is a self-serving, double dealing con artist for the rich.
“He is one of those most at fault for the slow recovery of the 90s.”
Yea but please read Dr. Frankel’s 6th paragraph which covers this. The discussion from Summers on this particular issue is a worthy read.
the pentagon at more than 50% discretionary spending in real dollars higher than the reagan build up, should be cut in half.
we do not need 2000 plus f-35’s so unreliable they cannot get through an operational test scenario and so late it needs massive upgades in radar and integration back bone to say the least a new engine that don’t run to hot trying to fly a mission. note 800 in us and a few ‘allies’ all not up to any job.
f-35 is one of many new stuff that should get the ghw bush treatment, that is only build them after proven they work!
the other way to sustainable debt is grow the economy!
seems neither the ‘ultra-conservatives’ nor their opposites are not talking about that.
“the pentagon at more than 50% discretionary spending in real dollars higher than the reagan build up, should be cut in half.”
When little CoRev thought we could easily cut discretionary spending, I let this troll know much of this “discretionary” spending was defense spending. I suspect CoRev did not realize that as he went off on another stupid tangent.
Ole Bark, bark, please take a course in Federal budgeting. Budgets are not payments, we were talking about paying the daily bills from available revenue. Budget and paymentsa are related, but 2 different steps in the operations cycle.
Please get a clue!
Living in the clueless liberal’s head is an amazement.
Seriously CoRev – I trust you know how utterly worthless this rant is. Learn to make a real point sometime. Damn!
“Budget and paymentsa are related, but 2 different steps in the operations cycle. Please get a clue!”
I have a clue why your ex-wife divorced you. She had to make most of the family income because she married a moron. But because CoRev wrote the rent check, he took credit for everything.
But poor little CoRev – since the ex dumped him, he has had to live the government dole!
Bwa, ha, ha! Living in this psychotic head is an amazement.
Ole Bark, bark, i see you are projecting again: “But poor little CoRev – since the ex dumped him, he has had to live the government dole!” I suspect you are referring only to your own experience. Your delusions are getting even more infantile.
The delusional liberal mind is an amazement.
Asked why he didn’t simply return the bankers boxes full of documents after the National Archives and Justice Department moved to subpoena him, Trump said, “Because I had boxes, I wanted to go through the boxes and get all of my personal things out. I don’t want to hand that over to NARA yet. And I was very busy, as you’ve sort of seen.”
After all – we would not want FBI agents checking out Melania’s underwear.
The ultra-conservatives, now and in the past, say that they want to balance the budget by cutting federal spending, while sparing entitlement spending — social security, Medicare, and some other health spending.
Well a lot of progressives would not want to change the benefits from the 1983 Reagan-Greenspan Social Security reforms either. A lot of progressives would be loath to have less Federal commitments to health care.
The differences is that the MAGA crowd is under the delusion that we do not need to pay for this spending while progressives are proposing new sources of tax revenues.
Now we might consider considerable reductions in defense spending but this mental retards in the MAGA movement want more defense spending paid for by tax cuts for the rich. Given that this Administration is not about to cut defense spending, we need more tax revenues. It is that simple.
I can’t address every aspect in every post. The subject of “Seeking US debt sustainability” was to follow the logic of the ultra-conservatives on its own terms. As for my last sentence, I was leaving a statement of what I personally think we should do for other occasions, past and future.
I have long held the view that military spending is unnecessarily wasteful and excessive. Prime areas to cut are those weapons systems that the Pentagon doesn’t even want, but are continued because of jobs and profits in congressional districts. Ditto for some bases. And we are engaged in a huge (> $1 trillion) program to modernize our land-based missiles that does not take into account that, so long as we have MAD deterrence, we don’t need more missiles. (In fact it could exacerbate strategic instability.) We may need more funding to support Ukraine’s self-defense, but there are other big places to cut. — JF
I agree. — JF
“real interest rates, that is, nominal interest rates minus expected inflation, were negative. But now that interest payments on the national debt have risen (with more to come), the situation doesn’t look so benign.”
The first sentence is the right metric. But then the graphs with respect to the 2nd sentence uses nominal interest rate expenses when the correct analysis would focus on real interest rate expenses.
Part of the ‘sincere plan’ should rework foreign policy so national defence spending could be reduced and US foreign policy stops blowing back on the US national economy. The implosion of the Soviet Union in the early 1990s should have resulted in a significant peace dividend; it did not. Backstopping the Israeli colonization of the West Bank and support for Israel’s regional monopoly on nuclear weapons has turned out to be rather expensive. The USA has re-opened Cold War-like hostilities on not one but two fronts and both appear to be acting as a drag on the US economy with more blowback to come.
Various experts over the years have argued that there is significant link between fiscal strength and military strength.
Then there is the ever so popular cheap energy entitlement which I believe Frankel hinted at in the closing paragraph. US federal excise taxes on gasoline and diesel fuel have not budged in roughly 30 years.
The Biden administration in recognition of the popular will hopes to advance the ‘transition’ to a lower climate emissions future through tax credits and subsidies with no regard to health outcomes of lifestyles centred around automobiles regardless of the motor type or energy source. Health outcomes also have implications for economic and national security outcomes. The title of the Inflation Reduction Act is a cruel hoax and hints at the difficulty of US voters to engage in meaningful policy discussions.
All this is very disturbing for smaller rich western democracies, who, I would argue, have a vested interest in a strong, powerful United States of America with a common sense of purpose.
“Part of the ‘sincere plan’ should rework foreign policy so national defence spending could be reduced and US foreign policy stops blowing back on the US national economy.” Note Dr. Frankel agrees. So do I.
‘The implosion of the Soviet Union in the early 1990s should have resulted in a significant peace dividend; it did not.’
Do us a favor – plot real defense spending for the 1990’s. We did have a peace dividend until Bush43 blew it up.
https://fred.stlouisfed.org/series/FDEFX
Federal Government: National Defense Consumption Expenditures and Gross Investment
Note that nominal spending fell from 1991 to 2000. In real terms – it fell even more. Yes – we did have a temporary peace dividend. Note also that defense spending fell under Obama.
Now Bush43 and Trump decided to blow the peace dividend all paid for by tax cuts for the rich.
Dr. Franke; did write:
But interest on the debt plus military spending add up to another fifth of all government spending: 20% % in 2022 and likely to rise in the future. This does not include those benefits for veterans that are not classified as either entitlements or military spending.
But here we JohnH claiming Dr. Frankel skipped defenses spending. Yes little Jonny boy has to start off with a stupid lie as he goes onto to falsely claim Dr. Frankel does not care about the elderly. Seriously – why this blog tolerates this little disgusting liar is beyond me,
We will never really learn. Even economists like Frankel feel the need, for no real reason, to blame the recent supply side inflation on fiscal policy and the covid/stimulus legislation.
We finally have fiscal policy that works and people are determined to make sure we fail in the future.
thanks for the commentary. however, it is unreasonable to think that the conservatives will thoughtfully work through what is viable and reasonable spending to cut-they had a chance to negotiate with Biden recently and chose not to. there is nothing thoughtful on their view of the budget. my guess is, most of the people who should have read this article failed to even get through the first line of the commentary. as we have seen over and over on this blog, logic does not really play a role in the modern conservative school of thought. it is all about sound bites and attention getting. too many of our government officials are caught up in the social media rat race…
Jeffrey Sachs: “ America’s Wars and the US Debt Crisis
To surmount the debt crisis, America needs to stop feeding the Military-Industrial Complex, the most powerful lobby in Washington.”
https://www.commondreams.org/opinion/military-spending-debt-crisis
“The single biggest answer is the U.S. government’s addiction to war and military spending. According to the Watson Institute at Brown University, the cost of U.S. wars from fiscal year 2001 to fiscal year 2022 amounted to a whopping $8 trillion, more than half of the extra $15 trillion in debt.”
Something more up to date than a book written in 1993! But you might have noticed that Dr. Frankel has replied to your pathetic first comment noting he is from less defense spending. Now if you were a real man – you would apologize to him. But yea – we are not holding our breath.
‘Since 2000, the MIC led the U.S. into disastrous wars of choice in Afghanistan, Iraq, Syria, Libya, and now Ukraine.’
Wait a second – does Frankel forget about 9/11 which led to us going after OBL in Afghanistan? We stayed too long for now but if Frankel thinks we should have just forgave 9/11 – he is out to lunch/
And if Frankel thinks we made Putin invade Ukraine – he is even dumber than JohnH.
Yes we have spent way too much on defense since 2001 but Frankel pollutes his point with conflating Ukraine and the initial invasion of Afghanistan with the stupid 2003 decision to invade Iraq.
“Frankel pollutes his point”
Sachs polluted his point. My bad Dr. Frankel.
Beyond stupid: pgl argues that DOD audits don’t cut “defense spending.” But they can reveal areas of fraud, waste, malfeasance, and abuse, which when addressed can reduce defense spending.
Beyond stupid is what you do – all the time.
David O’Rear
June 20, 2023 at 11:12 am
Nailed your garbage perfectly.
pgl should love this: “Senator Warren, Representative Kim Reintroduce Department of Defense Ethics and Anti-Corruption Act
Legislation to Limit Contractor Influence and Constrain Foreign Influence on Retired Senior Military Officers.”
https://www.warren.senate.gov/newsroom/press-releases/senator-warren-representative-kim-reintroduce-department-of-defense-ethics-and-anti-corruption-act
But pgl thinks this won’t save money!
Oh my – the Jonny treatment as Macroduck calls it. Dude – I’ve been calling for less defense spending even before you learned to go potty. Oh wait – you still wear diapers. Never mind.
“Senator Warren, Representative Kim Reintroduce Department of Defense Ethics and Anti-Corruption Act
Legislation to Limit Contractor Influence and Constrain Foreign Influence on Retired Senior Military Officers”
Ahem. I have always supported measures like this. Dr. Frankel – after enduring the dishonest attacks from Jonny boy – calmly noted he supports proposals like this.
So what does little Jonny boy do now? He dishonestly claims I do not think this proposal might reduce spending.
Now come on Jonny boy – do something useful in your disgusting dishonest little life by accomplishing two basic tasks:
(1) Provide YOUR estimate of the savings this will produce (this should be a laugh riot); and
(2) Come up with the names of Senators who have stood in the way of this proposal so the adults in the room can write their offices and demand they do better.
Oh wait – little Jonny boy does not know how to do either task. No – little Jonny boy knows how to do only one thing – lie about what others have said. Now that is a waste.
perhaps the audits can reduce fraud, waste, etc, which can reduce defense spending. but that is NOT why you want to reduce defense spending, john. you do not want to make the DOD more efficient and effective. you want to eliminate the DOD. lets be transparent in our desires, john. you want a neutered us military. not going to get it.
“john. you want a neutered us military.”
Neutered? Is that what happened to Jonny boy’s little brain?
I’d be interested in reading other pieces where Dr. Frankel was not limited by space constraints in addressing the budgetary and deficit issues raised by enormous, poorly controlled defense spending.
Are you now calling Dr. Frankel a liar? Yes – you are the lowest scum God ever created. Do us all a favor – go pollute John Cochrane’s blog with your insulting worthless trash.
Funny! pgl and Ducky often make all sorts of claims about what they and others stand for and previously wrote…and then they come up empty when asked for proof!
I suspect that Dr. Frankel, if he has in fact criticized enormous defense spending and discussed the problematic budgetary and deficit issues it raises, it would be easy to document.
First you lie about what Frankel said. Now you’re “interested” in what he has to say? Baloney.
The Jonny treatment! Exactly. Me thinks Jonny boy pulls this garbage because he thinks it makes him look smarter than the rest of us. Which is a neat trick since Jonny boy is truly the dumbest troll God ever created.
You might read the piece he wrote here first.
BTW, Re: your breathless pandering of China’s auto market: the top three best selling brands in China in 2022 were VW, Toyota, and Honda.
Speaking of booming economies, There were more vehicles sold in New York (population 19 million) in 2022 than in that new world economic powerhouse Russia (population 146 million). Apparently, everybody’s not waiting in line for a new Lada.
It was ltr that tried to tell us that China has the most car exports. China makes a lot of cars but it consumes more than it produces which is why it imports $50 billion cars per year but exports a mere $8 billion. Yea ltr has become almost as fact challenged as Jonny boy.
‘There were more vehicles sold in New York’
Yep – there are too many cars in NYC. And we have a very good public transportation system.
Noneconomist rivals 1960s Detroit auto executives for obtuseness about the disruptive impact of foreign competition, then Japanese.
“The future of electric cars is Chinese – and we should all be concerned…Ford warns that the company’s main competition in the global electric car market isn’t coming from traditional rivals such as General Motors in the US, or Toyota in Japan, but Chinese carmakers instead. China is going to be the “powerhouse” in electric vehicles, he predicted.”
https://www.msn.com/en-us/news/world/the-future-of-electric-cars-is-chinese-and-we-should-all-be-concerned/ar-AA1cM2b8
Of course, Amory Lovins at the Rocky Mountain Institute was predicting this 20 years ago. Personally I’ve never owned an American made vehicle (lousy quality), so I could care less if the remaining US auto manufacturers all go belly up. But my guess is that the corrupt political elite will protect them more vigorously than any endangered species. (So much for ‘free’ trade!)
And to rub salt in the wound of failed US sanctions on Russia, the Chinese have replaced Western auto brands. “On the streets of Moscow and in cities and towns across Russia…maybe a third of the cars are now Chinese, i.e., both imported vehicles and vehicles manufactured in Russia in factories either owned or receiving massive technical assistance from China.”
https://gilbertdoctorow.com/2023/06/20/is-china-helping-russia-in-the-war-a-new-consideration/
And people like Noneconomist, with his head in the sand, have no idea what’s happening.
Top three auto sales brands in China 2022: VW, Toyota, Honda. Your head? Clearly up your a___. But what’s new?
Speaking of salt in wounds, that mighty Russian economy you so lovingly pimp, saw car sales DROP about 60% in 2022. Yeah, JH, lots of new vehicles running around streets and highways all over Russia. In your dreams.
BTW, in 2022 there were over 2.1 million new vehicles sold in the combined Paciific states of California, Oregon, and Washington, combined population about 57 million. That’s more than 3X the number sold in Mother Russia, population 146 million.
You really should seek out another spot to place your severely battered head.
If Noneconomist bothered to keep informed, he would easily understand the Chinese EV threat to the US auto market: “Ford Gets $9.2 Billion to Help US Catch Up With China’s EV Dominance
https://www.bloomberg.com/graphics/2023-ford-ev-battery-plant-funding-biden-green-technology/?srnd=premium
And just as I predicted, the US government steps in to protect its beleaguered, pathetic auto industry. Where are the free market fundamentalists when you need them? After decades of decrying the perils of protectionism, these economists have suddenly done a quiet, dramatic about face and now embrace protectionism!
John, implied in your comment is a tacit approval of the ccp long term support of the EV field in china. so why are you so critical of the usa supporting the EV industry, but you have no problem if the ccp does the same thing in china? why the double standard?
probably the same reason you cannot bring yourself to criticize the murderous actions of putin in Ukraine.
John, why do you hate America so much?
Not supporting Chinese EV industry, only pointing out the reality of how dynamic it is and how pathetic the US industry is, apart from Tesla. EVs are a disruptive force that the traditional internal combustion producers have trouble dealing with, because they have neither the technology nor the motivation to develop, since it destroys their cash cow. What I’m critical of is taxpayer support of an industry that has shown itself to be sclerotic old dog ever since Toyota, Honda and Nissan easily stole a huge chunk of their market share decades ago.
In addition the Chinese EVs will supposedly be more climate friendly, something Detroit has dragged its feet on.
Chinese consumers may not be paying attention Re: the dynamic Chinese EV industry
Top selling brands in China 2022: VW, Toyota, Honda.
One would think that dynamism would be readily apparent in auto sales IN China.
We know where your head has been. It’s definitely affected your sight and your hearing.
Savvy consumer and Russian cheerleading pimp that you are, I’m betting you can’t wait to get in a new Skoda because you really liked the 1992 Toyota Corolla, which advanced Russian auto technology has finally caught up to.
Government aid in an auto industry. Wow! You no doubt are stupid enough to believe that no other country’s government has ever aided its manufacturers.
Your poor head. Lodged where it is and unable to free itself.
It’s always amusing to hear progressives tie themselves in knots over the “difficult” problems of the debt while constraining themselves to the Republican framing of the problem. Why, imagine, the so-called richest country in the world doesn’t have enough money to pay for stuff!
If we simply went back to the tax rates of 2000, before GW Bush, it would reduce deficits by $400 billion a year. Most people might even say that alone would be enough to forestall problems, just undoing the Bush and Trump tax cuts.
But we could do much better. The U.S. has nearly the lowest tax rate as a percentage of GDP in the entire OECD. The median tax rate is 34.1% of GDP and the U.S. is at 26.6%. Just moving toward the median would provide $1.7 trillion in revenue and poof, all the debt problems are gone forever. And that doesn’t even come close to the 40 to 45% of many European countries.
There’s plenty of money but even progressives limit them to Republican framing and anything more is out of the realm of possibility .
The point was to demonstrate that the GOP framing is absurdly impossible.
Nobody would ever claim that if we can cut defense and increase taxes, it would still not be possible to solve the problems of deficit/debt.
Putin’s war crimes have once again ended up in the death of his own soldiers:
https://www.msn.com/en-us/news/world/vladimir-putin-s-army-ravaged-by-suspected-cholera-outbreak-after-destroying-ukraine-dam/ar-AA1cOoMT?ocid=msedgdhp&pc=U531&cvid=7671bebca2be4dd19ddf4a49c1bab826&ei=8
According to the Daily Star, “several” Russian soldiers reportedly died after contracting cholera while nearly one hundred more were forced to be removed from the frontlines. “Entire units from the Kherson direction located along the North Crimean Canal [lost] their combat capability and are taken to the rear for treatment,” a Ukrainian military movement reported on Monday. “Several Russian soldiers died.” The military group also said that the suspected cholera outbreak among Putin’s troops was “likely” due to the Russian soldiers drinking water “from open sources” because “there are difficulties with the delivery of bottled or simply purified water to the occupiers” as a result of ongoing flooding.
And yet JohnH defends Putin on this. I guess being the Kremlin pet poodle has its own rewards.
Here’s a picture to go with Professor Frankel’s text:
https://fred.stlouisfed.org/graph/?g=16je8
I’ve included term premium along with real and nominal ten-year yields. Term premium is once again negative, so that we are getting a bargain relative to the expected cost of funding and expected inflation.
Here is a picture of term premium across three maturiies:
https://fred.stlouisfed.org/graph/?g=16jgx
Note that term premium is inverted. Relative to expected funding costs and expected inflation, the greater bargain is to be had by borrowing at longer maturities. If you go to page 23 of the “Treasury Presentation to TBAC” pdf, you’ll see that the weighted average maturity of outstanding Treasury debt is at an historic high, so Treasury is making good use of the current bargain at the long end. Look here for the pdf:
https://home.treasury.gov/policy-issues/financing-the-government/quarterly-refunding/most-recent-quarterly-refunding-documents
That pdf and the other materials available on that page contain lots of information about how the federal government spends its money and how it borrows.
Thanks. I was wondering why one would use the 3-month Tbill rate as opposed to the 10-year government bond rate. And I have always said we should be using real interest rates.
Dr Frankel, would your fiscal conservative plan actually balance the budget: ” (i) to slow the growth of entitlements a little, particularly Social Security; (ii) to raise some taxes (which could be done while yet improving the efficiency and equity of the tax system); and (iii) to give the Internal Revenue Service all the funding it needs to answer the phones and collect the taxes already legislated. That approach would be more fiscally conservative than threatening to default on the debt unless IRS funding is cut.”?
Balancing the budget is the core of the conservative position.
Do you have any budget savings numbers for these 3 categories of change?
“Balancing the budget is the core of the conservative position.”
Just like curing limbago, the croop, and weakness of the loins, while reinvigorate the limbs is the goal of most traveling show elixirs. There are enough rubes in most towns that GOP budget math always wins a few votes.
McQuack, did you have a point? Do you actually believe that the current level of Federal budget imbalance to revenue can continue indefinitely
This liberal mind is an amazement.
“McQuack, did you have a point?”
That’s the key question we should direct to you every time you pollute this blog with your pointless garbage.
there is no requirement to balance the budget. it is not a necessity. some may desire that outcome, but it has not been a conservative requirement for decades. reagan started the movement away from a balanced budget, and no republican since has made it a priority. it is only a conservative priority when democrats are in office.
We do not have to annually balance the budget in nominal terms. Now we could have the present value of non-interest government surpluses be at least as high as the government debt. That is how conservative economists such as Thomas Sargent, Milton Friedman, and Robert Barro framed this 40 years ago.
But poor little CoRev only pretends to be a conservative as he does not have the intelligence to read what these scholars wrote.
Ole Bark, bark, 40m years ago there were “non-interest government surpluses ” today those surpluses are all but gone. We did in fact convert those “non-interest government surpluses” to the General Fund and spent them, while converting them to “present value” special Treasury instruments.
Are you that clueless about Federal spending?
The clueless liberal mind is an amazement.
More hilarity from the fool. As a core budget balancer, he’s also a big supporter of the guy who proudly referred to himself as the “King of Debt,” and who—pre pandemic—oversaw a 47% increase in FY deficits (2018, 2019).
Guessing he was a big Reagan supporter because Reagan was surely gonna show everybody how a conservative could easily balance the budget. More hilarity still.
Reagan, Bush43, Trump – all the kings of massive debt! MAGA!
“Balancing the budget is the core of the conservative position.”
It is? This is like Chris Christie telling us he is losing weight by eating a dozen doughnuts for breakfast each day.
Hey little CoRev – try READING what Dr. Frankel wrote. Duh!
When talking about DoD spending you need to decompose into the major subcategories. For FY2022 DoD’s budget (per OMB tables) can be broken out as follows:
Military Personal: 22.4%
Operations & Maintenance: 40.2%
Procurement: 19.3%
Research, Development, Test & Evaluation: 15.0%
Military Construction: 1.7%
Family Housing: 0.2%
Other: 1.2%
The Procurement category includes what DoD calls “major end items”, such as aircraft, tanks, ships, howitzers, etc. It does not include replenishment procurements of spare and repair parts, which are funded through Operations & Maintenance dollars that feed into a working capital fund. The point is that the lion’s share of DoD’s budget goes towards “readiness” via Operations & Maintenance and Military Personnel (i.e., military pay). If you want to cut DoD’s budget in any significant way, then you’ll also have to accept some reduced level of readiness and a smaller force. But a smaller force means a greater reliance on a capital intensive (i.e., more expensive systems) military. Those are just a hard truths.
And JohnH tells us no one audits the DoD budget. It seems you get the accounting quite well.
We spend twice as much on Operations & Maintenance than we do on Procurement, which makes sense since we are talking about durable goods with fairly long economic useful lives. Think about how much you have spent on car repairs and gasoline as opposed to the cost of the new car.
Ole Bark, bark, well DUHHH!?!? Reducing procurement adds to life cycles of existing stock and then to O&M. BTW, cutting O&M reduces readiness. Your grasp of the obvious is an amazement.
The logical gaps of this liberal mind is an amazement.