JimofPennsylvan
Platinum Member
- Jun 6, 2007
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President-Elect Donald Trump could have a great term of Presidency over the next four years if he just dramatically lowers his expectations about what he can accomplish; he has to lower his expectations because he doesn't and won't have the votes in Congress to do otherwise! Many commentators have pointed to the crux of the problem which is that Republicans will have a slim majority in the House. Richard Rubin wrote an article in yesterday's Wall Street Journal that was more specific on the problem he referenced that this present Republican Speaker of the House and the last three Republican Speaker's Kevin McCarthy, Paul Ryan and John Boehner all had to use a huge number of Democrat members in their chamber to fund the government because the budget hawks in the Republican conference in the House would not vote for the budget bills to fund the government because they demand politically unviable cuts in government spending and won't go for dramatic increases in deficit spending! These Republican budget hawks in the House from last week's budget votes seem to number thirty-eight (the number of Republican votes that shot down the budget bill that would have suspended the national debt ceiling for two years). The dilemma for President Trump is that he wants to extend the 2017 tax cuts and in addition be dramatically transformative in cutting taxes across the board and do so with America's current yearly budget deficit at the crisis level of one trillion and eight hundred billion dollars per year. Even if President Trump were given free rein to ignore increasing the national debt which I will shortly explain why that is not an option to even just extend the 2017 tax cuts and not cause an immediate financial crisis by alarming increasing the budget deficit will require significant cuts in social program spending. Once this occurs President Trump and Congressional Republican leadership can forget about Democrat members of Congress providing votes to pass bills to fund the government the Democrats of course because they are not going to sell out their voter base would require restoration of most of the social program spending cuts which is not an option for Republicans. The bottom line is that if President Donald Trump wants to extend his signature 2017 tax cuts he is going to have to run the government meaning fund the government with only Republican votes in Congress and because he will then need to get on board the deficit/budget hawks in the Republican conference he won't be able to dramatically increase deficit spending which will mean that President Trump and Republican leadership will have to lower expectations about how much they can lower taxes and they will have to close a lot of the wasteful and unfair loopholes in the U.S. tax code to pay for their tax cuts and so they will have to fight the army of lobbyists in Washington!
Why is significantly increasing America's yearly budget deficits and America's national debt not an option for a responsible President and Congress. Because our national debt is so large that our nation is way past the concerns that it is morally wrong to deficit spend and leave our children and children's children and so forth to pay those bills and that the increases in future interest expenses from this increase in deficit spending that we are yearly adding to the nation's budget is money that won't be available to spend on improving the quality of life and standard of living for the American people. At the current time because the problem is so bad the American people have to contend with precipitating a sovereign debt crisis meaning that buyers of U.S. Treasury bonds demanding higher interest rates to buy those bonds a scenario like the 2009 country of Greece crisis where sovereign debt investors just skyrocketed the interest rates Greece needed to pay to sell bonds. If this Greece scenario hits America's U.S. treasury bond market it will trigger a massive selloff of U.S. Treasury bonds because holders of U.S. Treasury bonds will want to stem their losses because as the interest rates rise prior sold Treasury bonds with a lower set interest rate are worth less money the Treasury market will then collapse as there will be a shortage of buyers of treasury bonds in the market for the market will not be stable it will be collapsing and will truly collapse! This development will certainly cause a contagion in all bond markets because if the treasury interest rate increases commercial bond interest rates will likewise increase because bond sellers compete for investor money and again because buyers of commercial bonds in the market will be insufficient for the seller volume the commercial bond market will collapse. Further, the contagion will spread to the equity markets will collapse because the businesses in these markets will have lost capital as their bond holdings lost value and won't have access to capital as banks have a lot of their capital in bonds. America is such a keystone of the world economy the contagion will then spread to world bond and equity markets. One could say that the Federal Reserve Bank would step in and be an unlimited buyer of bonds in the respective markets and put a floor on these markets; one would hope but if the Federal Reserve Chairperson is an idealogue right winger that believes markets should correct themselves the full scope of catastrophic harm would not be stemmed. Even under the best scenario where the Federal Reserve Bank stems in if America suffers a Greece type of sovereign debt crisis America will be permanently left with higher interest rates across the board and so a permanent lower economic growth rate for America and a lower standard of living for our people as higher interest rates would lower their buying power.
One can sense a Greece like sovereign debt crisis coming on America just like the housing debt crisis that hit America in 2008 causing the Great Recession on that crisis one could see it coming if one focused on how many loans were being made with teaser rates that reset after a limited period of time and that borrowers could not afford to pay the reset interest rates the system was built on many buyers of homes flipping their homes and there a huge break down in mortgage lenders checking borrowers income and failing to confirm their income levels and that they would be able to pay their mortgages. A major sovereign debt crisis one can sense befalling America if one focuses on how sovereign debt investors are behaving very independent in current times normally when the Fed lowers the Fed funds rate Treasury bond rates drop accordingly not this time. Further Wall Street is crazy with greed bitcoin at $100,000 two year ago it was at $15000. Moreover, sovereign debt investors act like any other lender they base the interest rate on risk and what will be the value of their money when it gets paid back to them. Today, for America the interest paid on the national debt equals 19.5% of the incoming tax revenue if this deficit spending trajectory continues sovereign debt investors should and would be in fear of a populist President being elected in America that would default on the nation's debt a huge number of ordinary Americans would not be hurt by such a scenario so that it is becoming a very much possible outcome!
Why is significantly increasing America's yearly budget deficits and America's national debt not an option for a responsible President and Congress. Because our national debt is so large that our nation is way past the concerns that it is morally wrong to deficit spend and leave our children and children's children and so forth to pay those bills and that the increases in future interest expenses from this increase in deficit spending that we are yearly adding to the nation's budget is money that won't be available to spend on improving the quality of life and standard of living for the American people. At the current time because the problem is so bad the American people have to contend with precipitating a sovereign debt crisis meaning that buyers of U.S. Treasury bonds demanding higher interest rates to buy those bonds a scenario like the 2009 country of Greece crisis where sovereign debt investors just skyrocketed the interest rates Greece needed to pay to sell bonds. If this Greece scenario hits America's U.S. treasury bond market it will trigger a massive selloff of U.S. Treasury bonds because holders of U.S. Treasury bonds will want to stem their losses because as the interest rates rise prior sold Treasury bonds with a lower set interest rate are worth less money the Treasury market will then collapse as there will be a shortage of buyers of treasury bonds in the market for the market will not be stable it will be collapsing and will truly collapse! This development will certainly cause a contagion in all bond markets because if the treasury interest rate increases commercial bond interest rates will likewise increase because bond sellers compete for investor money and again because buyers of commercial bonds in the market will be insufficient for the seller volume the commercial bond market will collapse. Further, the contagion will spread to the equity markets will collapse because the businesses in these markets will have lost capital as their bond holdings lost value and won't have access to capital as banks have a lot of their capital in bonds. America is such a keystone of the world economy the contagion will then spread to world bond and equity markets. One could say that the Federal Reserve Bank would step in and be an unlimited buyer of bonds in the respective markets and put a floor on these markets; one would hope but if the Federal Reserve Chairperson is an idealogue right winger that believes markets should correct themselves the full scope of catastrophic harm would not be stemmed. Even under the best scenario where the Federal Reserve Bank stems in if America suffers a Greece type of sovereign debt crisis America will be permanently left with higher interest rates across the board and so a permanent lower economic growth rate for America and a lower standard of living for our people as higher interest rates would lower their buying power.
One can sense a Greece like sovereign debt crisis coming on America just like the housing debt crisis that hit America in 2008 causing the Great Recession on that crisis one could see it coming if one focused on how many loans were being made with teaser rates that reset after a limited period of time and that borrowers could not afford to pay the reset interest rates the system was built on many buyers of homes flipping their homes and there a huge break down in mortgage lenders checking borrowers income and failing to confirm their income levels and that they would be able to pay their mortgages. A major sovereign debt crisis one can sense befalling America if one focuses on how sovereign debt investors are behaving very independent in current times normally when the Fed lowers the Fed funds rate Treasury bond rates drop accordingly not this time. Further Wall Street is crazy with greed bitcoin at $100,000 two year ago it was at $15000. Moreover, sovereign debt investors act like any other lender they base the interest rate on risk and what will be the value of their money when it gets paid back to them. Today, for America the interest paid on the national debt equals 19.5% of the incoming tax revenue if this deficit spending trajectory continues sovereign debt investors should and would be in fear of a populist President being elected in America that would default on the nation's debt a huge number of ordinary Americans would not be hurt by such a scenario so that it is becoming a very much possible outcome!
