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Monday, February 13, 2017

Attention! Deficit disorder

As much as I hate Trump, you've never seen me complain about the Wall. In truth, I tend to think it's a good idea -- potentially. In the future. Not now.

I'm not obsessed with ending immigration; I just happen to believe in the Keynesian idea of healing a damaged economy through large public works projects. As Keynes himself said:
If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again…there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.
The principle is simple: When times are bad, government should be the employer of last resort -- and should employ everyone who needs a job, thereby putting spending money in the pockets of consumers. If the government must engage in massive deficit spending at such times, so be it.

The debt must be repaid when times are better. That's the part which everyone forgets.

Is Donald Trump a Keynesian? He would never use that term. Neither did Ronald Reagan, who practiced "military Keynesianism." The problem is that Der Donald, like Bush I and Dubya, is actually an anti-Keynesian: Now is not the time to run up a large deficit, because we are not in a downturn. This ain't 2008, and it sure as hell ain't 1932. Now is the time to pay back our debts.

Nevertheless, Trump has formulated plans which involve massive red ink. The hypocrisy is infuriating. Republicans screech about the evils of deficit spending only when a Democrat is in office.

Remember those GOP-funded ads in which the little girl tells the hole-diggers to please stop digging? Remember how the Tea Partiers screamed about Obama's infrastructure plan -- which was actually much smaller than Republican propaganda led everyone to believe?

Now Donald Trump wants to spend a trillion bucks on infrastructure -- and he wants to lower taxes at the same time, a combo that could prove disastrous. Everyone knows that Trump will run up a deficit unlike any we've seen before.

Nevertheless, the Republicans are fine with his infrastructure plans. They aren't going to run that "please stop digging" commercial as long as DJT is in the White House.

When Dubya blew through the Clinton surplus and ran us into the red again, Dick Cheney said: "Reagan proved that deficits don't matter. Obama proved that deficits do matter to convservatives, but only when Team Blue is in charge. Trump proves that red-staters love red ink.

So where's the money going to come from? Foreigners don't want to buy our treasuries any more.
In the age of Trump, America’s biggest foreign creditors are suddenly having second thoughts about financing the U.S. government.

In Japan, the largest holder of Treasuries, investors culled their stakes in December by the most in almost four years, the Ministry of Finance’s most recent figures show. What’s striking is the selling has persisted at a time when going abroad has rarely been so attractive. And it’s not just the Japanese. Across the world, foreigners are pulling back from U.S. debt like never before.

From Tokyo to Beijing and London, the consensus is clear: few overseas investors want to step into the $13.9 trillion U.S. Treasury market right now. Whether it’s the prospect of bigger deficits and more inflation under President Donald Trump or higher interest rates from the Federal Reserve, the world’s safest debt market seems less of a sure thing -- particularly after the upswing in yields since November.
As Kevin Drum notes, the Great Sell-Off started last summer, so we can't fairly blame Trump -- at least not wholly.

A continuing smear campaign has convinced young people that Bill Clinton was the Worst President Ever, even though he presided over great times and he managed to put the government in the black. If we had followed his prescription, and if we had stayed out of the Iraq war, the entire US debt would have been repaid ten years ago.
If his own wife followed his prescription during her campaign she would be in WH now.
I keep wishing we could taunt der Donald into building highspeed rails across the country by telling him he wouldn't be able to do it.
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