I more or less agree with your point. But it’s hardly fair to make a comment in a thread about a specific topic then get upset if people discuss it in the context of that topic.
That’s true in this case, but we have to look at the long term. Even now, the US pays about $1 trillion per year just on interest on the debt. That is a huge chunk of the budget going towards something completely unproductive. As the debt increases, the share of interest payments will go higher unless interest rates are reduced but that will only kick the can down the road if the budget is not fixed to stimulate more productive activity.
As we continue down this road, there will come a time when there is little to no confidence that the US can pay back its debt and the US would be unable to sell its debt unless they significantly increase interest rates to entice investors. When that time comes, the US will have to print an even greater amount of money just to keep up with payments because so much of the budget is going towards unproductive activity that does not generate meaningful additional revenue. With confidence reducing in the US’s ability to pay back debts, that also means reduced confidence in the US dollar itself, making it worth less.
You’re right that the amount of US dollars issued is not enough to cause inflation on its own, but in this case it is a symptom of the problem of bad allocation.
How do you account for growth in the real economy, then? Spain invaded and obliterated the cultures of a whole continent in part because they didn’t have enough silver to match their accounting books.
I get that we have a problem with venture capital and defense contractors having access to the federal money spigot, but putting an arbitrary cap on the monetary supply will just impose a new set of problems.
You haven’t said anything empirically you’ve just stated your case as fact ( just as I have but at least I’m not pretending to have presented it hard cold logic instead )
Anyway, the problem is being able to make the money. Your right at some point having to much money is good and sometimes having too much money is bad if your trying to manually control the economy . But doing that at all can be bad. It gives a few an immense power over the many. It’s best to limit it entirely rather then leave anyone’s thumbs on the scale.
Youre entirely right that it will have adverse consequences at times, but that’s kinda the point. You make a healthy economy by having healthy economic trade.
Federal government deficit spending works because interest is often higher than return on federal bonds, so it’s literally cheaper for the government to go into debt and pay over a long period than to pay cash.
Local government can’t do that, but they do have other tools. The one I deal with the most often is Public Improvement Districts where we’ll cut a deal to waive municipal property tax or the city’s sales tax for like 20 years on a big development in return for the developers building the public infrastructure required to support that development, then transferring it to the City. For really big projects, we may even redirect the tax to the developer, which we actually kinda prefer when that 20-year clock times out and you don’t have business owners and residents suddenly getting new taxes they aren’t used to and freaking ALL the way out.
It’s a deal for the developer because they need that infrastructure anyway, and the only “extra” cost to them is oversizing stuff like wastewater lines beyond what they need, and it’s a deal for the city because those road, water, sidewalk, and wastewater extensions they install with the project end up serving more than just that development.
Federal government deficit spending works because the state holds the monopoly on violence and if you don’t pay taxes denominated in the state’s currency you go to jail, so everyone needs such currency.
That a related, but separate issue. That’s how taxes work at all, whether the government is doing deficit spending, the budget is in balance, or there is a budget surplus.
That’s how taxation works, but it doesn’t solve government finance by itself.
The US government has always paid interest on the debt. It’s never missed a payment. That makes it a very stable investment, and until recently it was considered the most stable, predictable investment that could be made.
That also means the US could have stupidly-low interest on its debts. And because the investment is so safe, it also creates a bottom for interest rates. No other investment is safer, so any time the fed rate goes up, all other loan rates go up as well - otherwise investors would just put their money in the US instead of on a home or business loan.
That and other factors result in inflation generally being higher than the interest on loans made to the US, which results in a situation where paying cash up front is actually more expensive than getting a loan and paying with future tax revenue, because future tax revenue grows with inflation that outpaces the interest on the loan.
While the government can technically print money, it then has to tax people more to prevent inflation, so this “money doesn’t matter” “let’s build a utopia out of hopes and dreams” stuff is nonsense. I cannot take seriously claims that a party cares about people or causes if that party cannot be bothered to consider the actual logistics of solving problems. That’s just tribalism.
The government should absolutely drive economic activity by spending money to solve problems, and it does have a small advantage since very low inflation is desirable, but for the most part that money must come from carefully spent taxes – not taxes thrown blindly at corporations or pocketed by corrupt politicians.
I think you’ve read a lot into that person’s comment that wasn’t actually in the comment. What they said wasn’t that the government should spend with abandon; they said it shouldn’t be arbitrarily limited. And insisting on zero deficit spending at all times is indeed arbitrary.
If, for instance, they issue bonds in order to pay for better public education, that has a significant positive effect on the growth of the local economy a few years in the future, which they can reasonably expect to result in increased tax revenue at that time, and indeed a larger increase than what they’re spending in the present. Borrowing money to spend in this way isn’t fiscally irresponsible; quite the opposite. It pays for itself over a slightly longer time horizon and improves the city.
There are often similar effects with programs to support low-income residents, because support to these residents has a higher “velocity” than aid for higher-income residents. Infrastructure spending is also frequently justifiable.
Conversely, giving tax cuts to AI datacenters doesn’t become responsible stewardship if you offset the cost by increasing payroll taxes.
Budgeting for a government is really complicated, and oversimplifying that, whether it’s by saying “we need zero deficit!” or by saying “we have infinite money!” is gonna lead to bad decisions. But “we have infinite money” being false doesn’t make “we need zero deficit” true. Both are oversimplifications, and the right has been using the latter as a propaganda bludgeon for at least 40 years now.
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Local government isn’t a currency issuer though. Sure a city can issue bonds but that’s real debt, just like household debt.
Currency issuing governments, well yeah that’s another story.
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I more or less agree with your point. But it’s hardly fair to make a comment in a thread about a specific topic then get upset if people discuss it in the context of that topic.
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Runaway inflation is also harmful to welfare in the long run.
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That’s true in this case, but we have to look at the long term. Even now, the US pays about $1 trillion per year just on interest on the debt. That is a huge chunk of the budget going towards something completely unproductive. As the debt increases, the share of interest payments will go higher unless interest rates are reduced but that will only kick the can down the road if the budget is not fixed to stimulate more productive activity.
As we continue down this road, there will come a time when there is little to no confidence that the US can pay back its debt and the US would be unable to sell its debt unless they significantly increase interest rates to entice investors. When that time comes, the US will have to print an even greater amount of money just to keep up with payments because so much of the budget is going towards unproductive activity that does not generate meaningful additional revenue. With confidence reducing in the US’s ability to pay back debts, that also means reduced confidence in the US dollar itself, making it worth less.
You’re right that the amount of US dollars issued is not enough to cause inflation on its own, but in this case it is a symptom of the problem of bad allocation.
The public sector should be constrainted by funding and that funding should be remediated via taxes.
Money isn’t supposed to be infinate. The system as is requires uncapped spending.
How do you account for growth in the real economy, then? Spain invaded and obliterated the cultures of a whole continent in part because they didn’t have enough silver to match their accounting books.
I get that we have a problem with venture capital and defense contractors having access to the federal money spigot, but putting an arbitrary cap on the monetary supply will just impose a new set of problems.
Unlike gold and silver our token based monetary system allows you to split money into increasingly small units.
So as the economy improves the currency would deflate. That’s becomes an entire separate discussion.
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Just make more money! Who would have thought of that? Your educated opinion is quite impressive.
p.s. the US government doesn’t issue their own currency, that’s the Fed.
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The ability to create infinate money IS the problem. Also I said “The system as is” there is no contradiction in my statement.
It shouldn’t be that way.
I did argue from knowledge I know exactly that idea your stating. It’s a artifact of our current debt = new money system.
Also why are you so aggressive? Are you ok???
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You haven’t said anything empirically you’ve just stated your case as fact ( just as I have but at least I’m not pretending to have presented it hard cold logic instead )
Anyway, the problem is being able to make the money. Your right at some point having to much money is good and sometimes having too much money is bad if your trying to manually control the economy . But doing that at all can be bad. It gives a few an immense power over the many. It’s best to limit it entirely rather then leave anyone’s thumbs on the scale.
Youre entirely right that it will have adverse consequences at times, but that’s kinda the point. You make a healthy economy by having healthy economic trade.
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Federal government deficit spending works because interest is often higher than return on federal bonds, so it’s literally cheaper for the government to go into debt and pay over a long period than to pay cash.
Local government can’t do that, but they do have other tools. The one I deal with the most often is Public Improvement Districts where we’ll cut a deal to waive municipal property tax or the city’s sales tax for like 20 years on a big development in return for the developers building the public infrastructure required to support that development, then transferring it to the City. For really big projects, we may even redirect the tax to the developer, which we actually kinda prefer when that 20-year clock times out and you don’t have business owners and residents suddenly getting new taxes they aren’t used to and freaking ALL the way out.
It’s a deal for the developer because they need that infrastructure anyway, and the only “extra” cost to them is oversizing stuff like wastewater lines beyond what they need, and it’s a deal for the city because those road, water, sidewalk, and wastewater extensions they install with the project end up serving more than just that development.
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That a related, but separate issue. That’s how taxes work at all, whether the government is doing deficit spending, the budget is in balance, or there is a budget surplus.
deleted by creator
That’s how taxation works, but it doesn’t solve government finance by itself.
The US government has always paid interest on the debt. It’s never missed a payment. That makes it a very stable investment, and until recently it was considered the most stable, predictable investment that could be made.
That also means the US could have stupidly-low interest on its debts. And because the investment is so safe, it also creates a bottom for interest rates. No other investment is safer, so any time the fed rate goes up, all other loan rates go up as well - otherwise investors would just put their money in the US instead of on a home or business loan.
That and other factors result in inflation generally being higher than the interest on loans made to the US, which results in a situation where paying cash up front is actually more expensive than getting a loan and paying with future tax revenue, because future tax revenue grows with inflation that outpaces the interest on the loan.
deleted by creator
While the government can technically print money, it then has to tax people more to prevent inflation, so this “money doesn’t matter” “let’s build a utopia out of hopes and dreams” stuff is nonsense. I cannot take seriously claims that a party cares about people or causes if that party cannot be bothered to consider the actual logistics of solving problems. That’s just tribalism.
The government should absolutely drive economic activity by spending money to solve problems, and it does have a small advantage since very low inflation is desirable, but for the most part that money must come from carefully spent taxes – not taxes thrown blindly at corporations or pocketed by corrupt politicians.
I think you’ve read a lot into that person’s comment that wasn’t actually in the comment. What they said wasn’t that the government should spend with abandon; they said it shouldn’t be arbitrarily limited. And insisting on zero deficit spending at all times is indeed arbitrary.
If, for instance, they issue bonds in order to pay for better public education, that has a significant positive effect on the growth of the local economy a few years in the future, which they can reasonably expect to result in increased tax revenue at that time, and indeed a larger increase than what they’re spending in the present. Borrowing money to spend in this way isn’t fiscally irresponsible; quite the opposite. It pays for itself over a slightly longer time horizon and improves the city.
There are often similar effects with programs to support low-income residents, because support to these residents has a higher “velocity” than aid for higher-income residents. Infrastructure spending is also frequently justifiable.
Conversely, giving tax cuts to AI datacenters doesn’t become responsible stewardship if you offset the cost by increasing payroll taxes.
Budgeting for a government is really complicated, and oversimplifying that, whether it’s by saying “we need zero deficit!” or by saying “we have infinite money!” is gonna lead to bad decisions. But “we have infinite money” being false doesn’t make “we need zero deficit” true. Both are oversimplifications, and the right has been using the latter as a propaganda bludgeon for at least 40 years now.
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This seems to be an MMT critique rather than a leftist one.
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