For the problem of crowding out, we need to look at the deficit in comparison to net interest. If the two are similar, there can be no crowding out - although we are kicking the can down the road. If the Fed raises interest rates, net interest will be higher and the deficit will either go higher or we will tax those we are borrowing from (taffifs for China, et al, income taxes for the rich in the US). If we constantly rolled over the net interest costs to match the deficit, we could continue on indefeinitely, as long as our benefactors did not mind (because they consider our debt to be their asset for backing their currencies). We are in hog Heaven as long as China and Russia have an artificial currecy - if the Yuan reflected economic reality, we would have a problem, and as long as Europe does not unify their debt to back the Euro with payment by a Eurotax - such an arrangement would bring the kind of competition we dont want. Until that competition happens, however, there is little to worry about. The GOP certainly wont backt he real solution - increasing taxes so that the deficit is less than net interest. Not only do they not want to tax their donors (nor do the Democrats for that matter) but their donors LIKE having the US debt as an asset (I suspect that includes more than US donors).
Posted on: Thu, 04 Sep 2014 07:41:51 +0000
Trending Topics
Recently Viewed Topics
© 2015