Biden ran as a relative moderate, but governed more to the left, creating inefficient policy and contributing to inflation.
Large and growing government debt reduces economic growth because that means the government is borrowing more money, which drives up interest rates, which drives down business investments and homebuilding. When borrowing from foreigners, you have to give some of your economic growth to them to repay them.
Republicans and Democrats are hurtling the U.S. toward a debt crisis. The trade deficit cannot be fixed by bullying foreign countries. To fix the country’s economic woes, the U.S. needs to lower spending to reduce or eliminate the budget deficit. The U.S. depends on the world to buy U.S. debt. If they buy less, interest rates will destroy the U.S. economy. The U.S. needs to fix the budget deficit to prevent this.
“President Donald Trump stood before a joint session of Congress less than six weeks ago and vowed to do something that has not been done in nearly a quarter century: balance the federal budget.
New numbers from the Treasury and recent developments in Congress suggest that’s not going to happen. Indeed, all indications are pointing in the opposite direction.
The federal government borrowed $1.3 trillion during the first six months of the current fiscal year, the Treasury Department reported last week. That’s the second-highest six-month total in history, bested only by the record set in the midst of the COVID-19 pandemic.”
“Maintaining current productivity rates would bring a continuation of the 2 percent economic growth rates that have prevailed over the past 25 years. As explained in the next section, pushing sustained economic growth rates up to 3 percent—which is a much greater jump than it may seem—would require nearly doubling long-term productivity growth rates. Nevertheless, such bold assumptions have long been a staple of GOP budgets. Major Republican tax cuts in 1981, 2001, and 2017 were each accompanied by assurances of colossal economic booms that would bring enough tax revenue to pay for the policies.”
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“In reality, these politician promises of aggressively accelerated economic growth are a lazy, longstanding gimmick meant to avoid the hard choices of restraining deficits and paying for their expensive proposals. They are based on little more than politicians’ wishful thinking and over-exuberant faith in the brilliance of their own policy agendas.
No magical economic growth lever exists in Congress or the White House. Economists can analyze which economic systems produce long-term prosperity, including whether or not certain policies are generally pro-growth. However, short- and medium-term economic growth rarely behaves according to forecasting models.”
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“There is little economic basis to expect permanent, sustained 3 percent growth rates to result from extending the 2017 tax cuts, repealing taxes on tips, overtime, and Social Security benefits, providing some regulatory relief, and imposing steep tariffs. Sure, policymakers should aspire to such growth, yet basing the federal budget on that assumption is reckless.”
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“Perhaps my economic analysis is too pessimistic. For the sake of argument, let’s imagine a world where Trump’s economic policies or an AI revolution nearly double productivity growth rates and thus produce sustained 3 percent economic growth despite the labor force headwinds. Would such growth provide enough budget savings to finance the Trump agenda and prevent deficits from escalating?
Unfortunately, the answer is still no. Calculations from the OMB show that permanently elevating annual economic growth rates from 2 percent to 3 percent would produce annual new tax revenues of $100 billion to $200 billion during Trump’s current presidential term, swelling to roughly $700 billion a decade from now. However, while revenues would grow quickly over time, so would the offsetting budgetary costs. Long-term Social Security expenses would climb because benefits are based on wage growth that also rises with faster economic growth (which is why improved economic growth would not significantly improve Social Security finances). Medicare and broader healthcare consumption also typically grow with rising incomes. Most importantly, faster economic growth tends to increase the demand for capital, which in turn raises interest rates. A corresponding 1 percent jump in interest rates would produce enough new national debt interest costs to consume the vast majority of first-decade growth revenues.”
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“Economic growth can solve a lot of problems, but entitlement-and-interest-driven budget deficits leaping towards $4 trillion within the decade is not one of them.”
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“even strong growth revenues would finance only a small fraction of the Trump/GOP policy agenda and none of the underlying baseline deficits that are growing so quickly.”
“The number of credit card holders making only minimum payments on their bills has jumped to a 12-year high, a study by the Philadelphia Federal Reserve found.
The level of cardholders only making minimum payments rose to 10.75% in the third quarter of 2024, the study found, continuing an upward trend from 2021.
The number of 30+ day delinquencies also rose during this period, up to 3.52%. That’s double the delinquency rate of 1.57% from the pandemic low in the second quarter of 2021.”
“Raising the pension age has long been one of the most contentious issues in French politics. The country enjoys a generous welfare state, but as public debt piles up, policymakers are increasingly desperate to make savings.”
“The Trump administration has unexpectedly taken down the online application form for several popular student debt repayment plans, baffling borrowers as well as experts who say the decision could create complications for millions of Americans with outstanding loans.”
“contrary to what Musk claimed, tackling “waste, fraud, and abuse” cannot possibly generate enough savings to eliminate the annual budget deficit, which was nearly $2 trillion in fiscal year 2024, let alone reduce the ever-climbing national debt, which currently exceeds $36 trillion, including $29 trillion in debt held by the public.”
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“Even if Musk succeeds in curtailing “waste, fraud, and abuse,” there is only so much he can accomplish by focusing on “driving change through executive action based on existing legislation,” which is how he described his agenda last November. Any serious attempt to reduce federal borrowing will require new legislation that addresses the main drivers of federal spending, including Social Security, Medicare, and the military budget. But the platform on which Trump ran takes all those things off the table while promising pricey policies that will only exacerbate the problem that Musk decries.”
“The problem for Trump is that for all of his talk of prioritizing loyalty in his second term, he has staffed his administration with a number of conservative ideologues who could have very different ideas about what the government should be doing — none more influential than his likely soon-to-be budget director, Russ Vought.
Vought is a well-known quantity on Capitol Hill from his time as a staffer there, to say nothing of his work as a Project 2025 author and all-around warrior for small government. Republicans there saw his fingerprints on the spending freeze — or the “Vought memo,” as some are calling it.
“This has Russ’s name written all fucking over it,” said one GOP aide who works in appropriations, adding, ”I see a disparity between what Trump wants to do and what Russ wants to do.”
In other words, the battle between fiscal hawks and populists is set to rage not only on Capitol Hill and elsewhere in the coming months, but inside the White House itself.
“There’s an undercurrent of the old Republican Party at play where they’re like, ‘We’re going to cut benefits’ and all this,” the lawmaker said. “And like the new Republican Party is like, ‘Yeah, we don’t care about that.’””
“Elon Musk — who, along with Vivek Ramaswamy, has been tasked by President-Elect Trump with running a new Department of Government Efficiency — posted on his platform X that he wants to “Delete CFPB,” referring to the Consumer Financial Protection Bureau. The agency, Musk said, was part of a problem of “too many duplicative regulatory agencies” in Washington. But there are no other agencies in the federal government returning money to Americans’ bank accounts in the way the CFPB does.
Since its founding, the agency has returned more than $19 billion in cash to people who have been scammed by financial institutions, including predatory payday lenders and even some of the largest banks in the country. It has done so under Republican and Democratic presidents, including major actions against Wells Fargo and Equifax during President Trump’s first term in office, which, combined, returned $425 million to consumers. (Those actions both began under the Obama administration, but Trump’s CFPB directors oversaw the execution of those fines.)”