Yellen: Tax Cuts are Blowing Up the Budget
Posted by Mary Catherine Dunphy (+2890) 10 months ago
"Last year's aggressive tax cuts are at the heart of a worsening budget situation that will see deficits surge in the years ahead, according to an op-ed by former Fed Chair Janet Yellen and others.

The essay, published in Sunday's Washington Post, rebuts a study from Stanford University's Hoover Institution that blamed entitlement spending for the nation's worsening financial picture. Economists expect the shortfall to surpass $1 trillion in 2019 and worsen."

"The U.S. unemployment rate is down to 4.1 percent, and economic growth could well increase in 2018. Consumer and business confidence is high. What could go wrong?

A group of distinguished economists from the Hoover Institution, a public-policy think tank at Stanford University, identifies a serious problem. The federal budget deficit is on track to exceed $1 trillion next year and get worse over time. Eventually, ever-rising debt and deficits will cause interest rates to rise, and the portion of tax revenue needed to service the growing debt will take an increasing toll on the ability of government to provide for its citizens and to respond to recessions and emergencies."

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Posted by Mary Catherine Dunphy (+2890) 10 months ago
More bad news:

"Federal Budget Deficit Projected to Top $1 Trillion in 2020" by Thomas Kaplan, New York Times, April 9, 2018
Posted by Gunnar Emilsson (+12600) 10 months ago
Getting about time to cue up the Snowy Moran:

"But-but-but-....the deficit was the biggest ever under Obama!"

Der, der, der.
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Posted by The man from snowy plains (-241) 10 months ago
Another MCD questionable sources.
"Janet and others"
No she didn't get renamed by TRUMP.

Soooo disinformation goes on.

On a personal note, if you didn't have the brains too pay off your debt during the years of literal interest rates of below 1% interest, after the bankers ran off with the money and the spoon.
We could be on a good time too sell.
Here is just one idea.
You may have heard people talk about the "18-year property cycle." What does it mean? And where are we in the cycle right now?

According to experts, the economy rises and falls like clockwork. "We know that for centuries, the land value cycle has operated on an 18-year basis," economist and director of the Land Research Trust, Fred Harrison told The Epoch Times. "The fact is, there is a very clear 18-year pattern, which is always intersected with a mid-term recession."

Amar Manzoor, author of The Art of Industrial Warfare and creator of the 7Tao training system for manufacturing standards, agrees, describing the 18-year property cycle as "the Achilles heel in the performance of Western economies."

In a 2010 report, Steve Hanke of think tank Cato Institute attributed the problem to the land-value cycle, which has a knock-on effect on the construction cycle, the business cycle, and consequently the overall economy.

"With the exception of World War II, the peak of most real estate cycles is roughly every 18 years," wrote Hanke. He shows this has remained mostly consistent over the last 200 years with land value peaks in 1818, 1836, 1854, 1872, 1890, 1907, 1925, 1973, 1979, 1989, and 2006.

Harrison successfully predicted that housing prices would peak in 2007 in his book Boom Bust: House Prices, Banking and the Depression of 2010. He also previously predicted the 1989 peak and the 1992 property recession, which coincides with the 18-year model. According to Harrison, there are 14 years of stability or growth after a crash, followed by 4 years of recession. The cycle can also be broken up further into components of 7 years of slow, steady growth, then a mid-cycle recession occurs, followed by 7 years of rapid growth. After the final two years of the fastest growth, the prices will crash and 4 years of recession will follow straight after.

So where are we in the cycle right now? Using Harrison's model, we're coming up to a mid-cycle dip in 2018. If we take London as an example, it has followed the model of slow growth right after a market crash for several years, then rapid growth for the second half of the cycle. Based on previous patterns, this suggests we could be in for a property market tremble soon.

However, not all economists believe in the 18-year residential property price cycle. It isn't a precise rule, says Graeme Leach, chief executive and chief economist of Macronomics. "My problem with 18-year cycology is what happens to the house price to income ratio?" he writes on City A.M. "An 18-year cycle peaking in the mid 2020s would surely require house prices to rise by less than incomes, or only a little faster, for most of the period?" Figures from Hometrack in 2016 revealed that London houses cost 14 times the average earnings and that house prices have risen 86 percent since 2009.
Posted by David Schott (+13170) 10 months ago
Reply to The man from snowy plains (#375752)
The man from snowy plains wrote:
On a personal note, if you didn't have the brains too pay off your debt during the years of literal interest rates of below 1% interest...

I don't think many consumers (i.e. average people) were able to borrow money at 1% or less. However, a mortgage loan at 3%-4% is cheap money and if I was sitting on the cash to pay off such a loan I wouldn't be eager to do so as that money invested wisely can easily beat 3%-4% (especially if you can deduct the mortgage interest on your taxes).

You can thank your Tea Party-loving Montana legislators for not have the good sense to borrow money while it was cheap to borrow. Speaking of not having brains...
Posted by The man from snowy plains (-241) 10 months ago
I agree David, They were wrong. Pay me now or pay me later. Yes loans based on a Libor rate has it's advantage. At an advanced age, I'd just as soon not be in the markets. I go with the KISS principle...KEEP IT SIMPLE STUPID..just budget for taxes and accept the TRICKLE in interest.
Posted by Richard Bonine, Jr. (+13823) 10 months ago
I am gonna do some "Yellen", here... Can old-growth progressives ever get it through their sorry skulls that using conservative framing to discuss progressive ideas requiring changes in policy just confuses potential voters? Successful communication demands progressive abandon use of conservative framing and that they start saying what they mean using progressive way of thinking and speaking.

The truth is conservatives own the word "taxes". Conservatives have successfully redefined the word "taxes" to mean money the government steals out of your pocket. In their view, a tax cut becomes less money the government is stealing out of your pocket, which they portray as good policy. But that is only part of the story.

Tax cuts are REALLY reductions in revenue necessary to fund public infrastructure. Progressives must should stop using the tax cut framing and start using the reduction in revenue frame.

Reductions in revenue ALWAYS result in red ink. This is what we should be "Yellen"... Reductions in revenue ALWAYS result in red ink.

Private industry is dependent on public infrastructure. Privatizing functions which rightfully belong to, and are best performed, by government, undermines the the system and we end up with thousands of people in varying degrees of economic slavery. You shouldn't have to work multiple jobs to make ends meet just so the upper 1% of the population can shirk their responsibility and civic duty and pay less than their fair share. The burden to properly fund our infrastructure should be borne in an equitable manner

If progressives ever want to be trusted to be in charge, they have to begin changing their communication framework. Let's do better... Okay?