Republicans abuse Supply-side economics, which argues that a tax cut increases the budget deficit in the short run but decreases the deficit in the long run. They are hostage to the baseless belief that all tax cuts are beneficial at all times. Republicans are not aware that a tax cut will not cure the common cold.
Democrats abuse Keynesian economics, which argues that budget deficits are good during recessions, which are repaid when the economy improves. They are hostage to the baseless belief that deficits don't matter. Democrats have never experienced an economy good enough to pay down the debt (except for Bill Clinton, who did.)
Unfortunately, both Supply-side economics and Keynesian economics have become religions. Austrian economics remains mere accounting, i.e., debits and credits.
For some reason, bond specialists in particular are true believers in Austrian economics. In a recent speech, the current "Bond King" Jeffrey Gundlach, said "This is almost a suicide mission. At some point, with debt and its service cost increasing, there will be a collision. There could be a solvency problem."
Think about it: interest rate increases are appropriate during the latter stages of business cycles. Budget deficits are more appropriate during the early stages. Assume you had an adjustable-rate mortgage, and you get notified that the rate will increase from 4.5% to 5.5%. Would you want to increase your mortgage amount, or would you want to start paying it down faster?
Our national debt is increasing while interest rates are increasing, which is very rare. A 1% increase in debt service on $20 trillion debt is $200 billion each and every year. That would be enough to fund the beloved "Wall" and build a dozen hospitals . . . each and every year.
The inevitable train-wreck is not in the foreseeable future, but it is out there.
Democrats abuse Keynesian economics, which argues that budget deficits are good during recessions, which are repaid when the economy improves. They are hostage to the baseless belief that deficits don't matter. Democrats have never experienced an economy good enough to pay down the debt (except for Bill Clinton, who did.)
Unfortunately, both Supply-side economics and Keynesian economics have become religions. Austrian economics remains mere accounting, i.e., debits and credits.
For some reason, bond specialists in particular are true believers in Austrian economics. In a recent speech, the current "Bond King" Jeffrey Gundlach, said "This is almost a suicide mission. At some point, with debt and its service cost increasing, there will be a collision. There could be a solvency problem."
Think about it: interest rate increases are appropriate during the latter stages of business cycles. Budget deficits are more appropriate during the early stages. Assume you had an adjustable-rate mortgage, and you get notified that the rate will increase from 4.5% to 5.5%. Would you want to increase your mortgage amount, or would you want to start paying it down faster?
Our national debt is increasing while interest rates are increasing, which is very rare. A 1% increase in debt service on $20 trillion debt is $200 billion each and every year. That would be enough to fund the beloved "Wall" and build a dozen hospitals . . . each and every year.
The inevitable train-wreck is not in the foreseeable future, but it is out there.
