This is very good. An economist who understands that you shouldn't dazzle yourself with numbers and instead look at the real movement of goods and obligations. One quibble:
Shouldn't that be higher rates encourage domestic saving? Low rates encourage debt-driven spending, high rates put a higher premium on deferring consumption and saving instead. Other than that everything in this article is directionally correct.
> Shouldn't that be higher rates encourage domestic saving?
In context - going from reading the sentence to the entire paragraph - I think the proper interpretation is that spending will be redirected from buying foreign goods to buying domestic goods. So to synthesise the perspectives, the budget deficits and therefore total spending decline but that is nonetheless coupled with an increase in local spending because foreigners refuse to be involved.
Well, they are also massively cutting state worker jobs. Plus the tariffs will bring in tax money as well.
I'm not sure what the net effect will be of these together with the tax cuts.
There are some important caveats to that logic:
- the share of the budget spending from these worker cuts is minuscule, even the overall cost of all federal worker is a small percentage of spending, the bulk of spending is in entitlements and defense + debt repayment from deficit spending (which tax cuts always increase)
- if tariffs work at making manufacturing come back to the US then the tariff revenues will decrease since fewer products will be imported, and while they are in effect they are a tax increase which will slow down economic activity since they will directly affect consumer spending (unlike a tax increase on high earners would)
The Kalshi market for this has had 2:1 odds against them even reducing government spending, let alone lower the annual deficit (and lessening the debt is right out).
The last Republican president that managed to cut annual spending was Eisenhower. (Obama and Biden both pulled it off twice though.)
It's definitely not an easy answer. Cutting the involvement, or the support given by the state in everyday lives can have about any support for the individuals. And this goes beyond the impersonal numbers of the "tax money", with longer term effects we just don't really know yet. I also argument that the current administration doesn't care about the long term effects on the little guy, but maybe that's just me.
That's like cutting off your feet to save weight in a running race.
Yes, those government workers cost money, but no, cutting them will not improve the fiscal situation in the USA. The jobs are not being cut in anything even close to a thoughtful or intelligent way.
Even putting aside the obviously moronic ones like getting rid of IRS staff who bring in truckloads of money for pennies of spending, most of these cuts are just going to cause more chaos and inefficiencies than they prevent. E.g. USAID may seem like 'waste' to sociopathic creitns, but it also serves a very deliberate purpose in furthering the USA'S interests abroad and keeping the international community aligned with the USA and open to US businesses
> Higher interest rates encourage domestic spending,
Shouldn't that be higher rates encourage domestic saving? Low rates encourage debt-driven spending, high rates put a higher premium on deferring consumption and saving instead. Other than that everything in this article is directionally correct.
Coda: https://www.worldgovernmentbonds.com/spread/greece-10-years-...
Just now, Greek bonds are deemed a lower risk investment than US government bonds, because the tariff announcement has spooked the market.
The Republicans are not going to cut the debt: https://www.bbc.co.uk/news/articles/c7vnnv6n29no they're going to do deficit funded tax cuts again. The tried and tested Liz Truss budget.