Posted on 05/06/2016 5:38:20 AM PDT by reaganaut1
One day after assuring Americans he is not running for president “to make things unstable for the country,” the presumptive Republican nominee, Donald J. Trump, said in a television interview Thursday that he might seek to reduce the national debt by persuading creditors to accept something less than full payment.
Asked whether the United States needed to pay its debts in full, or whether he could negotiate a partial repayment, Mr. Trump told the cable network CNBC, “I would borrow, knowing that if the economy crashed, you could make a deal.”
He added, “And if the economy was good, it was good. So, therefore, you can’t lose.”
Such remarks by a major presidential candidate have no modern precedent. The United States government is able to borrow money at very low interest rates because Treasury securities are regarded as a safe investment, and any cracks in investor confidence have a long history of costing American taxpayers a lot of money.
Experts also described Mr. Trump’s vaguely sketched proposal as fanciful, saying there was no reason to think America’s creditors would accept anything less than 100 cents on the dollar, regardless of Mr. Trump’s deal-making prowess.
“No one on the other side would pick up the phone if the secretary of the U.S. Treasury tried to make that call,” said Lou Crandall, chief economist at Wrightson ICAP. “Why should they? They have a contract” requiring payment in full.
Mr. Trump told CNBC that he was concerned about the impact of higher interest rates on the cost of servicing the federal debt. “We’re paying a very low interest rate,” he said. “What happens if that interest rate goes two, three, four points up? We don’t have a country. I mean, if you look at the numbers, they’re staggering.”
(Excerpt) Read more at nytimes.com ...
The debate that we should be having in this country is whether the temporary inflation caused by protectionist tariffs are worth the added economic activity, decreased or no trade deficits, balanced Federal budgets, much lower unemployment, less social stress and increased national security they beget. It is a debate only adults can have but not doctrinaire Free Traitors™ who all seem incapable of anything that goes against their false religion of free trade. Other countries have this debate all the time but not in the USA where the economic rapist that prey on our economy won't let up.
Does it mean you'll stop making that erroneous claim?
When you stop claiming that an import tariffs cause EVERYTHING to go up in price. That is a lie.
When did I say that?
To: central_va
The only thing that will go up are goods and services made/created overseas.
And all the domestic goods and services that compete with those overseas goods and services.
136 posted on 5/7/2016 12:28:06 PM by Toddsterpatriot
Mostly when a products production goes overseas and is offshored it takes out all domestic manufacturing of that item. Cars being a notable exception. I fully expect Trane and other AC makers to off shore now. Sucks.
Wrong, and I do.
Actually, no. It would in theory raise $320B, while the current deficit is around $500B.
Regardless, the impact of such a tariff would be an average tax increase of about $2,500 per household, representing a reduction of economic activity of about 5%.
A 20% tariff instead of an income tax is one thing. A 20% tariff on top of an income tax is something else.
This is why it is so hard to reduce the deficit by increasing taxes of any type.
Issuing bonds when rates are low, and buying the same bonds back and retiring them when rates rise (and bonds sell at a discount) is standard practice for corporations.
However, it does not necessarily work with the government, because the government does not usually have excess cash around to purchase and retired debt. It could work for a government who was operating at a surplus.
The only way the government could do this would be to issue new debt, but the new debt would be priced exactly the same as the purchased debt, because of the fact the two bonds would be considered exactly the same risk.
In finance, there is a term called the “risk-free interest rate”. It is generally approximated by government bonds issued by large stable economies.
Let's see a 20% increase so the average family spends $12,000 on imported durable goods and services? Maybe.
The debate that we should be having, but seem incapable of having, is whether the temporary inflation caused by protectionist tariffs are worth the added economic activity, decreased or no trade deficits, balanced Federal budgets, much lower unemployment, less social stress and increased national security they begat. Other countries have this debate all the time but not in the USA.
Actually, I stand corrected. Imports are at about $2.75T, I saw somewhere else $1.6T, so the 20% tariff would in theory raise $550B, which would cover the current deficit.
However, my other comments apply, however the impact per household would be over $4,000, representing an economic activity reduction of about 8%.
I agree there may be less economic activity. But I doubt it. A 20% tariff would incentivize corporations to repatriate factories state side. That would greatly increase economic activity here. Killing the deficit( not the debt ) strengthens the dollar and lowers the general inflation rate. It may even open the door to a much needed interest rate increase benefiting savers for once.
I am basing my numbers by simply dividing the total dollar value of funds raised via tariff by the number of households in the nation.
I realize that is an oversimplification, but there is a trickle-down effect. Raw materials impacted by tariffs increase the COGS of consumer goods.
Given a large number of imported goods today are consumer ready manufactured goods, there would be a significant impact on consumers.
Regardless, the dollars going from consumers or business into the federal coffers are not available for other economic activity.
I still think a much better approach to addressing this issue would be the Fair Tax, and the second-best would be replacing the business income tax with a revenue tax, along the lines of Herman Cain’s proposed “9-9-9” plan, Rand Paul’s proposed tax plan, or Ted Cruz’s proposed tax plan.
I believe Paul’s business revenue tax replaced the employer contribution for FICA, but Cruz’s replaced both the employer and employee FICA contributions.
Cruz’s business tax plan would be applied to imports, and refundable on exports, so a 16% business revenue tax would create a 32% difference on imports vs. exports. Imports would face a 16% premium while exports would face a 16% discount.
Some call taxes like these VATs because VAT refunds on exports are common, but it is more a retail sales tax than a VAT, as it is only applied at one point in the value chain. Others have called these tax approaches de facto tariffs, but the same is rarely said of state and municipal retail sales taxes.
All taxes reduce economic activity, which is why they have to be carefully considered. However, the idea of taxing wage labor for the vast majority of federal government funding might have worked well in the 1950s, but it is a bad idea in the 21st century.
That is your mistake. The demand for imported durable goods will fall. Maybe not 20% but maybe 5% decrease. It will not take as much money out of out economy as the economy of the foreign country where the goods are produced. Decreasing factory orders will not affect employment here at all. If domestic manufactures get more market share that is an added benefit.
And you didn't address the repatriation of production to the USA. You kind of skipped right over that.
We have to get out of this mess and when the founding fathers found themselves in the same situation financially after the Revolutionary War, they used tariffs to get out if their mess instead of defaulting. That taxation system worked perfectly for 130 years.
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