|...and your checks for free|
First, we have arrived at a point where the current rate of federal spending has been arbitrarily deemed the maximum possible. We can cut spending, but any process that increases revenues or the federal budget deficit is a political non-starter. And this is true for both parties - for the Democrats, mostly because they know that the Republicans in congress would block any net spending increase, but the fact that they don't even make the simple argument I am making here is telling. As for the Republicans, they don't actually mind large deficits - as long as they are created by revenue shortfalls rather than increased spending. All the major Republican candidates for President have released a budget document that includes massive tax cuts for the wealthy and for corporations without any revenue offsets. That these plans would blow up the deficit and force massive cuts to social welfare spending is a feature, not a bug.
The question is simple, and straightforward: Are deficits always 'bad'? If deficits are to be avoided at all times and under all circumstances, then the only mechanism available for raising government revenue is tax policy. But this is clearly and demonstrably not the case. If a nation borrows in its own currency, it can never 'go broke'. There are limits to how much new fiat money the Treasury should put into circulation, but in an economy approaching $20 Trillion annual GDP, those limits are correspondingly large. For nations like the US and other large economies, the key question is the cost of that money. Currently, the global economy is awash with funds seeking some kind of investment vehicle. While some portion of these funds are looking for higher returns, there is tremendous demand for American government bonds - so much demand, in fact, that real interest rates have been driven down to near zero. You don't have to take my word for it - here's the data from the Federal Reserve:
Short term inflation expectations and long term bond yields are hovering under 2%. But I'd especially call your attention to the green line on the chart. That is the 'breakeven' rate for the 10 year inflation-indexed bond. And, once again, it's sitting at zero. This makes sense - if the yield is 2% and inflation is 2% then the real interest rate on that instrument is zero. Now this raises the question that ALL American voters - left, right and center - should be asking. If we can invest in infrastructure, education, R&D, and other worthwhile endeavors at essentially zero cost, why does our government refuse to do so? When I repeatedly shout that it's the SYSTEM that is broken, and no amount of political jockeying can do anything about it until there is a functional system within which the political factions can work, this is exactly the kind of systemic failure I'm talking about. When they have created a system where an old guy sitting on his couch can clearly see the right way forward and not a single politician from either party has the political will to at least suggest it as a possibility, how is there any basis for hope?...