"Economy Firing On All Cylinders"..What?!

[USGrant1962]

That tax cut was paid for by incurring more debt. The US Treasury recently announced that US debt has gone up 17% in 2018. A large part of that is due to the decrease in tax revenues going into the treasury. The shortfall of course is made up by printing bonds which are then sold to the Chinese. So you can thank them for your tax windfall.

Hmm, there is so much wrong here I don't know where to start. How about the first sentence - arguably true!

Second sentence - in FY2018 debt went from $20.245T to $21.516T - plus $1.271T for a 6.27% increase. Not good, but hardly 17%.

Data: https://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

Third sentence - Federal revenue (receipts) increased from 2017 to 2018, and are forecast to increase as far as the eye can see. Spending is increasing faster. In 2018 receipts increased by $24B, and outlays increased by $232B. The TCJA is forecasted to "cost" between $1T and $1.5T in receipts over the next 10 years, so say $150B in 2018 - add that to $24B that receipts actually increased and you are still $58B short of the spending increase.

Data: see page 117 https://www.whitehouse.gov/wp-content/uploads/2018/02/budget-fy2019.pdf

Third sentence - China owns about $1.2T of our $21T debt, less than 6%. The "China owns us" boogeyman is just that. About 70% of the U.S. debt is owned by Americans and American institutions.

Data: https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124

Fourth sentence - so keeping one's own money is a windfall? Hmmm.....

 

[TwoByFour]

I will take my tax cut.

Paid for by your grandchildren, who will have to repay the Chinese for the debt they are financing that funded said tax cut.

 

[TwoByFour]

Second sentence - in FY2018 debt went from $20.245T to $21.516T - plus $1.271T for a 6.27% increase. Not good, but hardly 17%.

Data: https://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

US Treasury end of year report for FY 2018 says 17%:

https://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/mts0918.pdf

 

[USGrant1962]

US Treasury end of year report for FY 2018 says 17%:

https://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/mts0918.pdf

Good data, I like it. But Deficit =/= Debt.

 

[Seagirt]

Responding to the OP, I think you have a few issues going on in your post, which aren't all that closely related.

The first is the issue of the US economy 'firing on all 4 cylinders', which to me just means it's in a period of strong growth. But economies work in cycles, just like everything else, there are busier times and then there are slower times. It's never going to be one way forever, because the underlying circumstances: energy, resources, trade, technology, society, are in constant flux.

Interest rates are set by the central banks. They can't just set arbitrary rates, they have to somewhat reflect the economic realities, but they make adjustments to try to keep prices and employment on an even keel for the benefit of citizens, rather than for the benefit of stock market investors (at least in theory). After the 2008 debacle, central banks recognize there is an economic risk from keeping interest rates too low, as it encourages bubbles. Investors like bubbles, or at least they act that way. So interest rates will go up, in spite of some protests.

The size of the US deficit is entirely a political decision. Obviously, you get votes by cutting taxes rather than raising them, and by spending money, rather than by cutting back. In an extremely competitive political environment, on a 2 year election cycle, the prospect that anyone will make it a priority to reduce the deficit is nil, I think. It will only happen if it causes a serious economic crisis of some sort. It hasn't in the past, who knows whether it will in the future.

 

[target2019]

So many indicators, so much time!
https://www.census.gov/economic-indicators/

I don't see a clear picture either way, but can't agree that all cylinders are firing. Time for more research, then Turkey Day.

 

[misanman]

I've concluded that twobyfour doesn't like the tax cut! (But I do)

 

[2soon2tell]

We had budget surpluses in FY 98-00 because we had excess SS contributions that went into the general fund. Without these surpluses we would have had budget deficits.

Our government can manipulate the inflation deflator in the GDP calculation to make GDP appear greater than it really is. Also how many people believe that the government reported unemployment numbers are an accurate measure of our economy?

 

[scrabbler1]

In the late 1990s, we also had strong PAYGO rules and decent spending caps. We also had the higher tax rates implemented by the 1993-94 Clinton budget. All 3 of those good budgetary items have disappeared, along with the surpluses they helped create.

 

[Qs Laptop]

That tax cut was paid for by incurring more debt. The US Treasury recently announced that US debt has gone up 17% in 2018. A large part of that is due to the decrease in tax revenues going into the treasury. The shortfall of course is made up by printing bonds which are then sold to the Chinese. So you can thank them for your tax windfall.

Mind blown by the misinformation in only one short paragraph.

Carry on...

 

[HFWR]

My quick-n-dirty calculations indicate my reduction in FIT owed is around 20%. I’ll take it, but I would be fine without it, and would appreciate more budgetary discipline... Once we’ve reached a “consensus”, i.e. passed a budget, taxes should be set to actually pay for what we voted for...

The problem with taking credit for the economy doing well is that you also get blamed when it isn’t, although the usual response is to deflect. Lower taxes and higher spending make great campaign slogans...

 

[GravitySucks]

Paid for by your grandchildren, who will have to repay the Chinese for the debt they are financing that funded said tax cut.

I bought some Govvies last month, so the Chinese and me.

Seriously though I would have l Iiked seeing the tax cuts offset by spending cuts. The "we will make up the money because the economy will improve so much even more will flow in" lie is coming up on 40 years and we are still buying it.

 

[TwoByFour]

I've concluded that twobyfour doesn't like the tax cut! (But I do)

I like tax cuts. But they should be offset by spending cuts. These weren't.

 

[explanade]

Tax cuts mostly go to very high income earners and corporations.

Tax cuts for low and middle income earners are set to evaporate.

 

[indiajust]

Excellent point, until the vagueness is removed, the subject is unknown and discussion impossible. Precise language necessary. You won't get precision from government or politicians, but we can hope to do better here.

 

[travelover]

I like tax cuts. But they should be offset by spending cuts. These weren't.

The spending cuts are coming - we just hope they affect our kids and grandkids and not us. In the meantime party down.

 

[haha]

Responding to the OP, I think you have a few issues going on in your post, which aren't all that closely related.

The first is the issue of the US economy 'firing on all 4 cylinders', which to me just means it's in a period of strong growth. But economies work in cycles, just like everything else, there are busier times and then there are slower times. It's never going to be one way forever, because the underlying circumstances: energy, resources, trade, technology, society, are in constant flux.

Interest rates are set by the central banks. They can't just set arbitrary rates, they have to somewhat reflect the economic realities, but they make adjustments to try to keep prices and employment on an even keel for the benefit of citizens, rather than for the benefit of stock market investors (at least in theory). After the 2008 debacle, central banks recognize there is an economic risk from keeping interest rates too low, as it encourages bubbles. Investors like bubbles, or at least they act that way. So interest rates will go up, in spite of some protests.

The size of the US deficit is entirely a political decision. Obviously, you get votes by cutting taxes rather than raising them, and by spending money, rather than by cutting back. In an extremely competitive political environment, on a 2 year election cycle, the prospect that anyone will make it a priority to reduce the deficit is nil, I think. It will only happen if it causes a serious economic crisis of some sort. It hasn't in the past, who knows whether it will in the future.

Good analysis. Pretty much explains modern life outside of Russia, China and a few small places. To hold power one has to please enough of the right people or kill them. Both strategies have been tried.

Ha

 

[dtbach]

10 years of near zero interest rates isn't a recovery, its life support.


And what would you have done different??

 

[USGrant1962]

10 years of near zero interest rates isn't a recovery, its life support.


And what would you have done different??

Not creating peak regulatory state?

 

[Quantum Sufficit]

Uh no... Tax revenue was at a record high this month despite the tax cut

 

[teejayevans]

Mine went up.

I’m guessing you live in a state with high income state taxes (CA,NY,NJ,NC...), you lost the state tax deduction. Otherwise the brackets are lower so that would not make sense.

 

[Spock]

10 years of near zero interest rates isn't a recovery, its life support.


And what would you have done different??

Thats a long list... the short version is

1. Step one is realizing you have a problem. The first step of realizing you have a problem is to rip away the fantasy that things are back to normal now and that all the money the "brave souls who stayed the course" made in the last 10 years is actually thanks to 16-20T of central bank intervention and stock buybacks with borrowed funds, etc. We've raked up unfathomable levels of public debt but haven't invested any it into anything that is going to generate future revenue to pay off that debt.
Governments are not only maniulating markets, in a lot of big countries they ARE the market:
US Fed Mortgage Backed Securities= 1.7TRILLION: https://fred.stlouisfed.org/series/MBST
BOJ's balance sheet is larger that the GDP of Japan: https://www.bloomberg.com/news/arti...oard-of-assets-is-now-bigger-than-the-economy
BOJ is the top-10 share holder in 40% of japanese companies: https://asia.nikkei.com/Economy/BOJ-is-top-10-shareholder-in-40-of-Japan-s-listed-companies
The Swiss National Bank holds more than $1 billion worth of seven companies: Apple, Alphabet (which owns Google), Microsoft, Facebook, Amazon, Johnson & Johnson, and Exxon. Its $3 billion position in Apple equals an ownership of 0.35% of the the company,
https://qz.com/1140322/check-out-the-swiss-central-banks-insane-90-billion-investment-portfolio/

2. Let more companies fail. The gov had to spend trillions to prop them up anyway. Instead of letting those funds go to bankster bonuses and business-as-usual, put those "too big to fail" instututions that got bailed out into receivership, break them up so they're not "too big", and put them back out on the market for investors to chose if the business lives or dies. Use what was spent on bailouts to pay off legitmate insured losses (and then get out of the business of insuring losses entirely.

There was a window there where some injections "for the good of the system" were necessary, but 10years later??
Everybody thinks the big crash was in 2008-2009. Take a look at the graph of Fed assets... the Fed was still actively expanding the balance sheet in Dec 2014, more than doubling it AFTER the the recession supposedly had ended in 2010. Unwinding the crisis driven balance sheet did even start until 2018 and look at how the market is reacting.
https://fred.stlouisfed.org/series/WALCL

That means investors need to actively engage in researching what they invest in as they will realize losses if their bet loses. Caveat Emptor. Buyer Beware.

3. Restore Glass-Stegall. Banks can gamble all they want, but not with taxpayer insured funds. "Privatizing gains while socializing losses" is life support, not a booming economy.

 

[Qs Laptop]

Uh no... Tax revenue was at a record high this month despite the tax cut

Where are you getting your data? Below is a portion of the US Department of Treasury Monthly Treasury statement. It compares tax revenues side-by-side for fiscal 2017 (Oct 2016 to September 2017) with fiscal 2018 (Oct 2017 to September 2018). The tax cuts "hit" workers paychecks in February 2018. Notice the only month that shows more tax revenue in 2018 over 2017 is April. That is the month when more people file (and pay) their taxes. Otherwise you can see that every month since the tax cuts went into effect has had less tax revenues than before the tax cuts.

https://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/backissues.htm