Federal revenues in November rose $23 billion to $275 billion, a 9% increase from a year earlier.
Outlays jumped $88 billion to $589 billion, 18% higher than a year earlier. Interest payments on U.S. government debt accounted for $25 billion of the increase.
The outlay for interest on the debt in November, at
$80 billion, surpassed the$66 billionoutlay for national defense, which was up $8 billion from a year earlier. The outlay for the government-run Medicare health insurance program also rose by $8 billion, to$93 billion, while the outlay for the government-run Medicaid program for the poor and disabled climbed $2 billion to$50 billion.
TFW your interest payments approach medicare spending
The weighted average interest rate on the $26 trillion of outstanding Treasury securities rose to 3.10% last month from 2.22% in November of last year.
Seems nice in 
sense, if fed won’t drop interest rates in the next year, libertarian bugbear about deficits will come closer to fruition
There is nothing wrong with high budget deficit (neoliberal austerity myth needs to die). In fact, it’s the trickling down of the high interest payments that has been keeping the US economy from going into recession over the past 1.5 years.
Remember when all the right wing economists predicted a recession and hard landing? Lol this just shows you how completely out of touch the neoclassical economics is with reality.
The real problem is that the high interest rate is disproportionately enriching the wealthy (the top 1%) while burdening lower classes (who are struck with higher interests for their debt payment). This is how the wealth flows from the bottom 99% to the top 1%.
The US economy is now in a quandary. I have been saying for a long time that as long as the interest rates is high, there will be no recession in the US. BUT, when it starts lowering the interest rates, that’s when recession will come.
Fundamentally its sucking parked money from stock market and overseas into t-bills (why would you buy p/e 25 stock, when treasuries have p/e 20), but for that you need free money. They have not managed to suck stock market money, they’ve managed to suck overseas money though, usa stock market continues to ignore everything and hope for relief.
But free money are not limitless in the world, and the longer this goes the less buyers they will find
Like 1 or 2 trillion is fine, 5 trillion a year would be unbearable for the world i thinkThe US literally doubled the amount of dollars during Covid to keep the economy afloat, and the same during Obama’s years to bail out the failing banks:
Free money is indeed limited to the extent of the availability of labor, resources and technology. The problem is how those money were spent (mostly goes to the rich people instead of investing in public infrastructures and the real sector), not how much they were spent.
Yes, but also willingness of overseas banks to buy t-bills. If usa were not empire, internal market for treasuries is huge but not limitless - on par with total stock market and bond market of round 100 trillion.
If buyers suddenly can’t absorb new treasury bills, for lib economics that’s a huge problem. Yes, fed can accumulate them on their spreadsheet for a while, until people outside of the usa think its fine. Than, if they change their minds it will suddenly be very not fine
As a corollary, these rates must make dollar conversion attractive, which inflates the dollar, which makes investment in export goods even less attractive and worsens our trade imbalance.
Ancaps unironically think that this will be solved by having porky directly replace the government in its entirety and that porky will not just continue this shit.
If crypto has shown us anything it’s that porkies will centralize exchanges at their earliest convenience. Same goes for various levers of state power.
they’ve managed to suck overseas money
That’s interesting. Capital control now plz.
Money printer go brrr for rich people, who safely park their capital in high-yield Treasury notes before the market collapses.
The point of these high interest rates is to incentivize capitalists to pull out of the real economy, which shrinks jobs, which disciplines labor.
Good thing we’re once again blowing a massive hole in it by getting rid of inheritance taxes.
Billionaires children will become billionaires ant birth and never even have to pay a shatlre of their unearned millions. They’ll just get more money than most people have in a lifetime and then hoard it for their entire lives.
Really hard to take concerns about the deffecit seriously when the people bitching about it also all agree rich people don’t have to pay taxes.
Can’t wait for all the “WOW ECONOMY SO GOOD” wonks to completely ignore this indicator
Because it was right’s bugbear for so long to slash public spending over, but, like, you can’t do mmt at 5 % interest rate. Not that average person should care about it tbh, economy could be good with same indicators, if it were not for rent and inflation
Supposedly there’s gonna be three cuts to the interest rates in 2024 https://www.cnbc.com/2023/12/13/fed-interest-rate-decision-december-2023.html
its not a problem for now, but paying 1 trillion in debt service and having 1.7 trillion deficit is already problematic.
if there is new oil shock however( 🙏 ), they’ll remain that high, and the average rate will rise further, that would be a deep shit creek.
Sorry this is just neoliberal nonsense. The Federal Reserves creates money out of thin air, it will never not be able to service its debt.
Deficit simply means the money that the government has spent out and hasn’t collected back in taxes yet. Which is good because you want the money to stay in circulation to stimulate the economy. The Clinton administration had a record budget surplus (government taxes more money than they spend, meaning less money in circulation) in the 1990s which then what paved the way towards recession.
The problem with the US is how much of those deficit is spent disproportionately into the rich people’s hands (military industrial complex, interest payments to bondholders etc.) rather than investing into the real sector of the economy.
Fmr. Fed. Chm. Alan Greenspan: The United States can pay any debt it has because we can always print money to do that.
If we paid off the deficit then there would be no dollars left*, because every dollar was created out of thin air by the government.
*Except for the dollars created by private banks, but those dollars are cancelled 1:1 by the loan debts they were created for.
but the dollars created by the lower banks are leveraged on the existence of dollars they have? fractional reserve right?
I’m sure it’s true that if the debts were paid in full, banks would cease to function along with the rest of the economy. But fractional reserve is a myth.
I found a YouTube link in your comment. Here are links to the same video on alternative frontends that protect your privacy:
I found a YouTube link in your comment. Here are links to the same video on alternative frontends that protect your privacy:
Why would the government need to tax the money back if the Federal Reserve can create money out of thin air?
I think the answer is to control the amount of inflation. This explains why we saw high inflation after they turned the printer on overdrive. And they can’t just tax half of all money created back so they use other methods like increasing the interest rate. Higher interest rates means more incentive to save and fewer new loans therefore less new money being created.
But I’m no expert so please correct me if I’m wrong
The government needs taxation because it is drives the value of the (fiat) currency.
Think about it this way: why people would want to use your country’s currency in the first place? Why don’t every country simply use US dollar? Why don’t every country use gold? Why don’t everyone use the Hexcoin that I just minted billions of them digitally?
The reason is simple: to be a resident of that country, you have to pay taxes in the currency that the state demands. This means everyone will have to earn that currency in some way. The state will print that currency to purchase whatever it needs. The companies that sell stuff to the government will now earn that currency that state printed out of thin air. They will then pay wages and their suppliers in the same currency that they just earned from the state, which was created out of thin air. Keep propagating and now everyone in the country has some means to earn the state-issued currency, which they then use to pay taxes (returning some of your money to the state).
If you fail to pay your taxes, you get punished, and having your assets confiscated etc. This is what drives the value and demand of the currency.
So, a bunch of junk papers suddenly become a valuable item simply because you have to pay taxes with them. Simply because the state coerces you to.
Now, a VERY important concept to keep in mind: taxation and taxes are two separate things! The very act of taxation infuses the currency with value (makes them valuable), but the government doesn’t need taxes (the amount of money you pay back the government every year when you file your tax return) to fund their spending.
In other words, the power of taxation by the state drives the value of the currency. But, when you pay your taxes, that money simply get deleted. The state doesn’t need to earn your taxes to pay for itself. The state is the authority that created the money in the first place.
However, neoclassical school of economics teach that the state needs to earn revenues from taxes in order to fund their spending, which if you have understood the concepts above, is obviously wrong. Neoliberalism doesn’t want government to spend too much because the deficit (extra money created) will inevitably increase the income of the working class, and this is bad for neoliberalism because it means people need to take on less debt, and thus bad business for the financial sector. Unfortunately most governments in the world still adhere to this faulty thinking and they are all acting, consciously or not, in the interest of the bourgeoisie and the Western imperialists.
———
Now, let’s go back to your original question, and assume that some governments are ready to abandon neoclassical austerity. In this case, why would the government want to tax the money back? Again, once you have understood the concepts above, the answers become clear.
First, to take out excess currency in circulation because if you have too much money relative to the availability of labor, resource and technology of your country (i.e. productive capacity), then everything simply becomes more expensive (inflation) because the people have more money to spend but not enough productive capacity to satisfy those demand.
Second, to reduce wealth inequality. Rich people who disproportionately benefit from the system should pay a disproportionate amount of taxes - not because the government needs billionaires to fund their spending, but because the government can do that and they want to do that and they don’t want the billionaires to have excessive influence over the people.
Third, to shape behavior. For example, let’s say the state doesn’t want people to smoke, you can tag on extra tax on cigarettes to discourage smoking. Another example, let’s say the state wants to encourage green energy transition, so they can exempt EVs and green technology from additional taxes they can impose on to the fossil fuel sector.
As you can see, taxation is a tool that can be used to achieve specific socio-economic policies the government wants, but it is not needed to fund government spending as neoliberals would like you to believe.
Thanks for the detailed response! I didn’t think of the demand creation aspect. So inflation does play a part as well as incentivizing behaviors. And under capitalism, one way of limiting workers spending power to force them to work harder
I’d add that, especially on a local level, there is indeed a need for money to be shuffled around. The lower levels of government can’t print their own money, so the funding has to come from somewhere because, like you mentioned, the people doing the labor to get things done need to pay taxes and buy food. I think of it like if I were to play a chess master. In the same way that entitlements will inevitably be funded by the government, I will lose to the chess master. That doesn’t mean we can just not play the game and skip to the inevitable part. The pieces need to be shuffled around because those are the rules of the game. They’re human-created rules and could be changed, but the chances of a local municipality making sweeping changes to how food stamps are funded is only slightly less likely than me changing the formally agreed upon rules of chess.
Not only that, the federal/central government that creates the money can always pay off whatever financial hole the local government is in. Let’s say you have a state government that hasn’t been able to keep up with its finances (maybe because it is underdeveloped, or maybe there had been a natural disaster that wrecked the local economy), the federal government can always plug that deficit without having to take away from the richer states.
A better analogy is like two friends playing poker. If you are a better player than me, you will probably win more games against me throughout the night, and at some point I’m going to lose all my chips. But, we are not playing for money. We are playing because it is fun. You can always give me back the chips and we resume playing into the night. There is nothing that says we have to stop playing because I have already lost all my money.
Rich people who disproportionately benefit from the system should pay a disproportionate amount of taxes - not because the government needs billionaires to fund their spending, but because the government can do that and they want to do that and they don’t want the billionaires to have excessive influence over the people.
uhh what bourgeois dictatorship gives a shit about that?
Obviously this wouldn’t work in a bourgeois society, but that is still how fiat money works and when used properly, it is a very powerful tool to shape the specific socio-economic policies the government wants.
Taxing the money back out of the economy is standard Keynesian methodology for how to fight inflation but it’s literally never been successfully implemented because it’s too politically unpopular for anyone to actually do it
You’re wrong overall but right currently. The reserve can poof magic money into existence because of US dollar hegemony but that’s not guaranteed forever. Other nations couldn’t operate like the US currently does. It’s why modern monetary theory is a joke the second you look internationally. It only operates in a closed, autarkic system
This is not correct. You are confusing two separate things: monetary sovereignty and dollar hegemony.
The dollar hegemony simply allows the US to get “free lunches” all over the world because everyone wants dollar and the Fed can always print the money needed to get those free lunches. The treasury bonds serve to absorb the dollar surplus the US spent overseas and recycle them back to the US.
This is very different from monetary sovereignty, in which a country’s currency is not tied to any form of metal/resource or pegged to another currency, in other words, fiat currency. Here, the state in charge of money creation can always print as much money as is needed to drive economic growth so long as they are not limited by the availability of labor, resources and technology. For example, if you already have 100% employment rate, of course you cannot create more jobs (more money), and this will lead to inflation because there is not enough productive capacity to fulfill the excess demand.
The reason most other countries cannot do this is because they lack energy and food sovereignty. This is part of the post-war US imperialism in which through the creation of IMF, World Bank, IMF and various global financial institutions had severed the ability of most developing countries to grow their own food, nationalize their own natural resources including energy, and are forced to orientate their economies toward export crops to serve first world consumerism, while allowing foreign corporations to enter and destroy their domestic industries.
People always get confused by these two concepts. Hope this clears them up.
If they’re worried about the deficit they should make the people with all of the money give some of it up.
Instead they’re, once again, changing it so the people with all the money get to keep it and they continue to struggle how to get a bunch of money from people who don’t have any.
The solution is right there if anybody wants to solve it, it’s just their entire lives revolve around not doing that.
Healthcare plz?
Thread where
s discuss economics 
Tax the rich
