Republicans Are Upset About The National Debt Again

Bottom line is these jokers that run our world give zero shits about debt or deficits.

 

If you start somewhere it should be by looking at the biggest ticket items. You don't try to balance your household budget starting with looking for loose change in the couch. Your time is more effectively spent cutting up your wife's credit card. All that "waste" you might find in terms of employment is like a fraction of a percent of total spending. There are also a lot of laws/regulations in place making it hard to fire federal workers so the cost of dumping them isn't cheap either. To you and I millions of dollars spent on employing unproductive workers seems like a lot of money but on the scale of federal spending it's really pennies.

 

How about cut up your own credit card

 

Highly recommend reading this book to best understand the federal workforce. Fairly quick read

https://www.goodreads.com/en/book/show/46266188-the-fifth-risk

 

Already tried that first to avoid the argument with the wife.

 

My new tax bill:
Make sure the middle class tax cut is extended, not phased out.
Small corporations, say with gross sales of $3 million or less, 21% tax rate on gross profits.
Corporations with gross sales of $3 - $50 million, 24% tax rate.
Corporations with $50 million and more, 28% tax rate.
FYI I'm not planning on running for president in 2024..

 

It's being propped up now by interest rates that are near zero percent. I don't see Republicans complaining about this. Democrats either. BTW, unless we drastically reduce expenses across the board, including defense spending, and also raise taxes across the board, perhaps by a significant amount, the dollar will probably collapse in the future and no one in power is going to do anything about it and might not until it crashes. What I just wrote may be very cynical but I think it's a realistic observation. Also, do you want our economy to lose more and more jobs? This will happen if a major, comprehensive stimulus bill isn't passed. It's happening now with the stimulus bill that just passed. The stimulus bills are band aids to keep things from getting worse and there may be more stimulus bills after this one. If you think our economy is going to go back to pre covid levels in the next few months, good luck with that.

 

Your math is flat wrong. I've been telling you that I can prove that YOU do not have a linear preference for money. It is easy to demonstrate. Whether you realize it or not, this the math you are doing:

EV(x) = p1(x1) + p2(x2) where p is the probability & x is the outcome. for virtually all casino bets, this is negative. You then conclude that taking these bets can't be supported by math. Which means of course we cannot justify these decision as rational with your math. We also cannot explain (with this math) why people buy insurance.

the correct math (&, again I can use you to demonstrate this behaviorally) is:

EU(x) = p1(U(x1)) + p2(U(x2)) U(.) is a person's utility function. that's what they are maximizing. In general a lot of people are risk loving over small stakes & U is convex & find a 49% of winning ($100) and a 51% of losing $100 to provide positive utility so it is rational for them to gamble, those same people tend to be risk averse over large stakes & so buy insurance which is also a NEG EV decision. In that case, & in general people's U functions are concave. That's why I like my first Sonic slinger more than the second. It's why giving Warren Buffet $10,000 affects him differently than if you gave a college kid $10,000

bottom line, people don't have linear preferences for $. interestingly though, they do have linear preferences for p

 

I totally agree with your corporate tax proposal. As to individual rates, my preference would be to let them all reverse, but I could see argument for only reversing the top couple of brackets.

 

Yes people get worked up by federal workers, excluding military but over the last 40 years their numbers have declined. Most spending is entitlements and payments to third parties. Where manpower is needed much of it is outsourced. People just don’t understand how federal spending works, and worse they choose to remain willfully ignorant. Entitlements plus military plus interest is something like 80% of federal spending, give or take.

 

Gambling, eh? I played gin rummy quite a bit back in the day and learned to minimize my losses. If the cards aren't going your way do your best to minimize losses. Have as few points in your hand when your opponent knocks or gins. I play online for fun now and a whole lot of people don't minimize losses and only win against someone who knows how to play when they get great cards.

 

Great post. Just to add a couple points on MMT, first is supposes there is a gap between fiscal spending and potential productivity that is being underutilized. The idea is to manage closer to full productivity and that will give you benefit without jacking up inflation. So if you assume unemployment is 7% and 5% of those are actively seeking work then you could employ those 5% using deficit dollars without increasing inflation. There is no demand for those people since they can't find a job so it won't pressure up labor rates. So your constraints are really full employment and anything else you do that puts the government in competition for resources and drives up market prices for those resources. On the interest we pay on debt, there is no reason we have to do that. We offer public debt mainly because the markets like risk-free debt instruments but we could do away with that altogether. Most of our debt is with the fed, so we owe it to ourselves. I think Japan has about $2T and China has a little over $1T and those are our biggest external creditors. So to the extent that interest payments start impacting fiscal decisions in a negative way, it's not like we are actually experiencing a credit crunch or something. The key external factor would be the float, or demand for the dollar. Devaluation due to significant deficits over time could be harmful or maybe helpful in international trade. We lose purchasing power, but gain demand for our products...so net net not sure which is better. If it pushed other countries off using the dollar as the reserve currency then I think that would be a scary day.

One important point you made was that MMT would push responsibility for managing the economy out of the fed and into the political sphere and that would likely be disasterous because of the political emphasis over economics of the decisions they make. One of the early advocates of MMT was talking about some programs that fit into the MMT sphere and mentioned a universal jobs guarantee bill and the green new deal. The jobs bill makes sense because you are putting people to work who otherwise aren't in demand and therefore it shouldn't be inflationary under MMT theory. But if you get into programs like the green new deal, which would compete for engineers and other skilled labor, it could very well be inflationary to those specific markets. So you have a political mandate to address climate change competing with economic constraints to avoid inflation and the political mandates will likely win most of the time. Also most of the politicians are too dumb (i.e. they still believe in the Laffer curve and redistribution as a growth engine) to effectively make these economic decisions. Even the fed struggles with it and they are geniuses by comparison, though the fed lacks some tools that might be more effective.

 

Did you apply for SSI or did you apply for your wife?

 

I don’t think that the last 15 years is a good sample for data. We had an unprecedented event in the housing bubble that caused a significant drop in housing values. We bought our home in 2004. Between then and the crash my house had appreciated by 40%. At the bottom of the crash my home had depreciated 40% from the high with a valuation of about $90K less than we paid. It has since appreciated by about 50% from that low over about 11 years. Net, my home is now worth about 27% over purchase price.

The last 15 years included a crash and a massive rebound in asset prices. One could easily think, and most likely easily prove that the rebound was inflation and fueled by QE and QEII and subsequent low interest rates.

Another data point is that in early 2010 I bought two condominiums. It was an apartment complex that was converting to condos at the time of the crash. Paid $32K each for them cash. You couldnt even get a loan on them then. I rented them for just under$1,000/month in August of 2010. Today they are both worth about a little under $200k and I rent them for $1,550, and $1,600 per month. One of the best investments I ever made, all made possible by the government printing money all these years. It was definitely inflation driven by monetary supply, but you can’t really see it in composite inflation statistics.

 

People obviously don't have linear utility functions. Again, this is a very easy real world observation.

Insurance is a negative EV purchase, but most people will buy it since they don't have the luxury of large numbers of repeated trials and need to keep a roof over their head.

With casino games you can try to ham fist in a theoretical utility function to match observed behaviors, but it will vary enormously from individual to individual (and even from moment to moment -- drinking, e.g., will make most people less risk averse, that's why they give you free booze at casinos). But even then, you're making the same mistake of trying to quantify the utility derived from money as the only relevant motivator, which it obviously isn't. People gamble for all sorts of reasons that have nothing at all to do with their expected winnings -- from excitement, entertainment, socialization to addiction and self-hate.

 

630k in taxes on 3M sales? No thanks.

 

Real estate prices are included in the CPI via rent (and owner's equivalent rent).

The prices of other assets like stocks should also impact inflation by increasing demand. If the money in your brokerage account doubles, maybe you go out and buy a boat you wouldn't have otherwise considered. Higher demand in nominal dollars for the same real output = inflation.

Yet that's not happening. That suggests other deflationary forces are at work.