These debates usually ignore the reality that budget deficits (and thus debt) have primarily been driven by Republican revenue cuts rather than federal expenditures. Going back to Nixon presidency, budget deficits explode under Republican Presidents and recede under Democrat Presidents. (Just compare OMB data between the full fiscal year before each presidency and the last full fiscal year of each presidency over the last half century.) When deficits explode, federal debt accelerates.
Republican claims of fiscal responsibility are a sham, based on the data. Efforts to reduce deficits and debt should primarily focus on increasing revenue, especially from the rich, and a return to a truly progressive tax system, which was a key part of America’s past.
The sacred cow - military expenditures, waste and unfunded ghost wars ($2+ trillion) - is missing from this and all conversation.
The GAO highlights abuse regularly to Congress and they continue to not only rubber stamp projects too costly to fly or fail outright (F-35, naval frigates) delays, cost over runs and failures but INCREASE budgets. There is zero accountability or national policy towards projects, such as new nuclear armament programs or this Golden Dome. Both to add $trillions over the next decade.
Military experts and independent watch dogs detail where cost savings could occur, yet it never becomes a national conversation just a black hole of taxpayer dollars and its interest payments added to the debt. But scapegoating the social safety net for working poor, disabled, children and elderly is callously thrown around daily.
Politicians want to talk about waste, well find a mirror baby.
Reducing taxes is just another form of spending. Like all spending, you can spend to buy something useful or you can spend to buy something useless. The proposed tax cuts are to buy something we already have too much of: more money, and hence more power, in the hands of the oligarchs.
On your closing point, Barry Eichengreen (link below) reminds us of Winston Churchill's wisdom: “To build may have to be the slow and laborious task of years. To destroy can be the thoughtless act of a single day.”
I'm old enough to remember when 5% was considered the "natural" rate of interest.
I'm also old enough to remember double digit 30 year yields.
In my view (which is worth less than 2 cents) we are entering a new equilibrium for US rates. 5% will become the floor for at least the back end of the curve as it was decades ago.
Going further, this FT article cuts right to the chase. The US is not even close to anything resembling an A debt rating. The weighing part of this game will be most unpleasant.
Democrats will have an impact on Trump's big nasty bill because the Republicans are so deeply divided among themselves. Now is the time to be calling your Republican representative or senator if you are so unfortunate to have one. Read about it here:
The 30-year Treasury yield is flirting dangerously with the 5% threshold. Interest rates are not just raw numbers: they are signals, messages, clear indicators An episode of stress similar to what the UK experienced in October 2022 cannot be ruled out. In this case, however, it would affect the world’s reserve currency and the ultimate risk-free asset. The consequences could be nonlinear.
I find it curious that you didn’t also define “u” in more business terminology:
An endeavor is unsustainable if its revenue is less than its operating expenses. It’s uncompetitive and ergo ultimately unsustainable if its revenue isn’t sufficiently greater than opex to allow for capex.
Or put more simply, it’s unsustainable to perpetually borrow money in order to house and feed yourself.
You can clearly tie those back to a g/r model, but for me it’s easier to think in terms of living expenses and capital investments.
It's been unsustainable for an unsustainable length of time. LOL.
Your narrative is appropriately nuanced and hedged. However, long-term, the "U" routine has been the foundation of reactionary economic policy. Kill it with fire.
The question really is how much debt is too much debt. There is no easy answer. Obviously, if no one will buy government debt instruments, you’ve gone too far. Also, if you can’t pay the interest on the debts, you’ve gone too far. I would say that so long as people are buying government debt instruments at less than 10 percent interest, we’re pretty safe.
These debates usually ignore the reality that budget deficits (and thus debt) have primarily been driven by Republican revenue cuts rather than federal expenditures. Going back to Nixon presidency, budget deficits explode under Republican Presidents and recede under Democrat Presidents. (Just compare OMB data between the full fiscal year before each presidency and the last full fiscal year of each presidency over the last half century.) When deficits explode, federal debt accelerates.
Republican claims of fiscal responsibility are a sham, based on the data. Efforts to reduce deficits and debt should primarily focus on increasing revenue, especially from the rich, and a return to a truly progressive tax system, which was a key part of America’s past.
Regards, Bill S
The first of the year, you go to your boss and you tell him you'd like to have a cut in pay.
Your boss agrees and reduces your pay. You do the same thing on the first of every month.
At the end of the year, you discover that you don't have enough money to pay your bills.
If your conclusion is that "I'm spending too much money!!!," you're likely a Republican.
The sacred cow - military expenditures, waste and unfunded ghost wars ($2+ trillion) - is missing from this and all conversation.
The GAO highlights abuse regularly to Congress and they continue to not only rubber stamp projects too costly to fly or fail outright (F-35, naval frigates) delays, cost over runs and failures but INCREASE budgets. There is zero accountability or national policy towards projects, such as new nuclear armament programs or this Golden Dome. Both to add $trillions over the next decade.
Military experts and independent watch dogs detail where cost savings could occur, yet it never becomes a national conversation just a black hole of taxpayer dollars and its interest payments added to the debt. But scapegoating the social safety net for working poor, disabled, children and elderly is callously thrown around daily.
Politicians want to talk about waste, well find a mirror baby.
Reducing taxes is just another form of spending. Like all spending, you can spend to buy something useful or you can spend to buy something useless. The proposed tax cuts are to buy something we already have too much of: more money, and hence more power, in the hands of the oligarchs.
On your closing point, Barry Eichengreen (link below) reminds us of Winston Churchill's wisdom: “To build may have to be the slow and laborious task of years. To destroy can be the thoughtless act of a single day.”
I'm old enough to remember when 5% was considered the "natural" rate of interest.
I'm also old enough to remember double digit 30 year yields.
In my view (which is worth less than 2 cents) we are entering a new equilibrium for US rates. 5% will become the floor for at least the back end of the curve as it was decades ago.
The Eichengreen reference: https://www.project-syndicate.org/commentary/trump-ignores-three-lessons-from-britain-for-preserving-dollar-supremacy-by-barry-eichengreen-2025-04
Going further, this FT article cuts right to the chase. The US is not even close to anything resembling an A debt rating. The weighing part of this game will be most unpleasant.
https://www.ft.com/content/44fdf19d-cfdd-443a-99d3-841993f46ebe
Regarding unsustainable, remember Hemingway's great observation.
How does a man go bankrupt? Gradually and then suddenly.
Democrats will have an impact on Trump's big nasty bill because the Republicans are so deeply divided among themselves. Now is the time to be calling your Republican representative or senator if you are so unfortunate to have one. Read about it here:
Deflate Trump's ᗺig ᗺackassward ᗺoondoggle
kathleenweber.substack.com/p/trumps-ig-ackassward-oondoggle
kathleenweber.substack.com/p/republicans-start-to-fight-it-out
The 30-year Treasury yield is flirting dangerously with the 5% threshold. Interest rates are not just raw numbers: they are signals, messages, clear indicators An episode of stress similar to what the UK experienced in October 2022 cannot be ruled out. In this case, however, it would affect the world’s reserve currency and the ultimate risk-free asset. The consequences could be nonlinear.
And how about the gutting of the IRS?
The utra-rich cannot only look forward to a tax cut, but they, especially, will find that they can get away with paying fewer taxes...
I find it curious that you didn’t also define “u” in more business terminology:
An endeavor is unsustainable if its revenue is less than its operating expenses. It’s uncompetitive and ergo ultimately unsustainable if its revenue isn’t sufficiently greater than opex to allow for capex.
Or put more simply, it’s unsustainable to perpetually borrow money in order to house and feed yourself.
You can clearly tie those back to a g/r model, but for me it’s easier to think in terms of living expenses and capital investments.
It's been unsustainable for an unsustainable length of time. LOL.
Your narrative is appropriately nuanced and hedged. However, long-term, the "U" routine has been the foundation of reactionary economic policy. Kill it with fire.
The question really is how much debt is too much debt. There is no easy answer. Obviously, if no one will buy government debt instruments, you’ve gone too far. Also, if you can’t pay the interest on the debts, you’ve gone too far. I would say that so long as people are buying government debt instruments at less than 10 percent interest, we’re pretty safe.