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Trump adviser eyes entitlement cuts to plug U.S. budget gaps
If you're not rich already and depending on entitlement programs you're about to get even less rich with less to depend upon. Raise your hand if you didn't see this coming. I particularly liked this quote "“We have to be tougher on spending,” White House economic adviser Larry Kudlow said in remarks to the Economic Club of New York, adding that government spending was the reason for the wider budget deficits, not the Republican-led tax cuts activated this year."
@MFO Members: Now lets be fair and balanced. About 60 million social security recipients will receive a 2.8% increase in 2019, and only a $1.50 a month in Medicare premiums. Regards, Ted
"government spending was the reason for the wider budget deficits, not the Republican-led tax cuts activated this year."
Yeah ... spend enough to cause a fiscal crisis, and you can then cut entitlements to remedy the problem. It's like making the patient sicker on purpose just before you justify reasons for killing them.
We have a spending problem in the country, and it's not just entitlements, as the GOP wants us to believe. And yes, TAX CUTS are to be considered 'spending' in this discussion, contrary to what Kudlow, Ryan, or others want us to believe.
And yes, TAX CUTS are to be considered 'spending' in this discussion, contrary to what Kudlow, Ryan, or others want us to believe.
Totally, Ryan has been eying to reduce the entitlement programs for a long time. Larry Kudow, a frequent contributor to CNBC who is more wrong than right on his financial calls.
"Yeah ... spend enough to cause a fiscal crisis, and you can then cut entitlements to remedy the problem. It's like making the patient sicker on purpose just before you justify reasons for killing them." No shit.
Isn't it nice to see such agreement when it comes to large deficits for now?
Kudlow: "We’re going to run deficits of about 4 to 5 percent of GDP for the next year or two, OK. I’d rather they were lower but it’s not a catastrophe."
Krugman: "I’m not saying that we shouldn’t worry about debt at all, because there may be future contingencies when real interest rates rise and debt becomes an issue. But debt is way, way down on the list of things to worry about - absolutely trivial compared with, say, crumbling infrastructure, which should be fixed without worrying about paying as you go."
They may disagree on what to spend all that borrowed money on (yes, cutting taxes is spending), but they seem to agree that it's okay to borrow a trillion here (5% of $19.4T), a trillion there, so long as they can spend it where they want.
I guess that's inflation for you: "A billion here, a billion there, and pretty soon you're talking about real money." (attributed to Dirksen)
Wait just a minute please, if you will, aren't the tariffs a form of a consumption based tax? I'm thinking that Trump is in a since switching from an income based tax (although it is still in place but at a lesser rate) to a form of a consumption based tax through tariffs or some form of both. Hopefully, social security and medicare will remain as they are for those already receiving them but new folks entering these entitlements might at a lesser benefit.
"aren't the tariffs a form of a consumption based tax?"
@Old_Skeet- Sure reads that way to me. Which has had me wondering- what is the actual real intent of Trump's moves? Is he primarily trying to impose a new consumption tax on a long-term basis, or is he just trying to apply leverage to China on a short-term basis?
If he accomplishes much in the way of forcing manufacturing back to the US, then US consumers will still be paying a lot more, because there's no way that they can match the lower Chinese or Asian manufacturing costs. That will also pretty well exclude those US manufacturers from the larger world market, again because of those higher manufacturing costs.
Either way it would seem that US consumers will be paying more, which is effectively the same thing as a decrease in their take-home pay.
Whatever is really going on here, Trump himself may or may not fully understand, but you had better believe that the hard-core right-wing economists that are feeding him this stuff sure as hell understand.
General question: If my observation that "US consumers will be paying more, which is effectively the same thing as a decrease in their take-home pay" is correct, won't that eventually have the effect of reducing national consumption / purchasing / business income?
Since an increase in prices will effectively reduce the disposable income of consumers, it would seem that this would be so.
Also, wouldn't the increase in prices be tantamount to an increase in inflation? If that's true, wouldn't this eventually also have an effect on interest rates, as the Fed moves to adjust for that inflation?
It seems to me that this whole scenario might have long-term consequences that we haven't really considered. Whether Mr. Trump actually considers and understands the possibilities, I'll leave to your judgement.
Edit/Add: @msf- Am I off-base on this? Would appreciate your perspective.
Comments
Regards,
Ted
Yeah ... spend enough to cause a fiscal crisis, and you can then cut entitlements to remedy the problem. It's like making the patient sicker on purpose just before you justify reasons for killing them.
We have a spending problem in the country, and it's not just entitlements, as the GOP wants us to believe. And yes, TAX CUTS are to be considered 'spending' in this discussion, contrary to what Kudlow, Ryan, or others want us to believe.
This administration and its protectionism trade will hurt the economy of this country.
https://msn.com/en-us/money/markets/trump-says-tariffs-will-save-american-factories-history-shows-otherwise/ar-BBNtvAD
Kudlow: "We’re going to run deficits of about 4 to 5 percent of GDP for the next year or two, OK. I’d rather they were lower but it’s not a catastrophe."
Krugman: "I’m not saying that we shouldn’t worry about debt at all, because there may be future contingencies when real interest rates rise and debt becomes an issue. But debt is way, way down on the list of things to worry about - absolutely trivial compared with, say, crumbling infrastructure, which should be fixed without worrying about paying as you go."
They may disagree on what to spend all that borrowed money on (yes, cutting taxes is spending), but they seem to agree that it's okay to borrow a trillion here (5% of $19.4T), a trillion there, so long as they can spend it where they want.
I guess that's inflation for you: "A billion here, a billion there, and pretty soon you're talking about real money." (attributed to Dirksen)
@Old_Skeet- Sure reads that way to me. Which has had me wondering- what is the actual real intent of Trump's moves? Is he primarily trying to impose a new consumption tax on a long-term basis, or is he just trying to apply leverage to China on a short-term basis?
If he accomplishes much in the way of forcing manufacturing back to the US, then US consumers will still be paying a lot more, because there's no way that they can match the lower Chinese or Asian manufacturing costs. That will also pretty well exclude those US manufacturers from the larger world market, again because of those higher manufacturing costs.
Either way it would seem that US consumers will be paying more, which is effectively the same thing as a decrease in their take-home pay.
Whatever is really going on here, Trump himself may or may not fully understand, but you had better believe that the hard-core right-wing economists that are feeding him this stuff sure as hell understand.
Since an increase in prices will effectively reduce the disposable income of consumers, it would seem that this would be so.
Also, wouldn't the increase in prices be tantamount to an increase in inflation? If that's true, wouldn't this eventually also have an effect on interest rates, as the Fed moves to adjust for that inflation?
It seems to me that this whole scenario might have long-term consequences that we haven't really considered. Whether Mr. Trump actually considers and understands the possibilities, I'll leave to your judgement.
Edit/Add: @msf- Am I off-base on this? Would appreciate your perspective.