Monica Showalter has an interesting column up at AT today about the ramping up of violence from the left. Parallel with this violence from the more radical elements I’ve also seen more strident and excessive rhetoric from the left friends I follow. I can’t imagine many of these people being more than keyboard warriors as I know them very well, but their statements continually shock me just because I thought I knew them well.
I am not a economist, but it seems to me that this talk of recession because of the tariffs is wrong. I do not know why the stock market is dropping, and I am not a conspiracy person, but – – – –
The stock market, in my experience, is subject to hysteria sometimes. We generally hang on and everything settles down.
Many analysts have been saying the market was somewhat overvalued for a while. Corrections happen.
Recessions are one thing, but as far as the stock market,
Based on Ontario, Canada, placing a 25% Tariff on “Electricity” coming into the United States, I have instructed my Secretary of Commerce to add an ADDITIONAL 25% Tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA, ONE OF THE HIGHEST TARIFFING NATIONS ANYWHERE IN THE WORLD.
This will go into effect TOMORROW MORNING, March 12th.
Also, Canada must immediately drop their Anti-American Farmer Tariff of 250% to 390% on various U.S. dairy products, which has long been considered outrageous. I will shortly be declaring a National Emergency on Electricity within the threatened area. This will allow the U.S to quickly do what has to be done to alleviate this abusive threat from Canada.
If other egregious, long time Tariffs are not likewise dropped by Canada, I will substantially increase, on April 2nd, the Tariffs on Cars coming into the U.S. which will, essentially, permanently shut down the automobile manufacturing business in Canada.
Those cars can easily be made in the USA!
I think there is a spending addiction in our society across the board. Evidence: the size of homes to raise families a fraction of the family size of previous generations. That’s a lot of purchasing start to finish to upkeep. Look around, how many giant storage space business are near you? Here in Los Angeles–unbelievable amount of multi-level storage spaces. This despite the huge rise in the number of multi-unit living complexes being erected everywhere you look, which seems to completely go against the concerns about “climate change”. Things seem to be out-of-control that depend on continued purchases of ultimately unnecessary stuff.
I see that the extremely well paid head of the teacher’s union, Randi Weingarten, is moaning about how, if the Department of Education is disbanded, and funding for education is sent back to the States, these states will likely use that money for “vouchers” i.e. to allow parents to pay for education for their children at the school of their choice.*
Perhaps I am reading too much into what I’ve seen on Youtube but, it seems to me that all of the postings by some subversive, purple haired “educators,” boasting about how they are indoctrinating their students into aspects of LGBTQ+ ideology, some doing things like making it acceptable for young children who might be confused about their sexual identity to change their names, genders, and clothing in their classes (and not tell these children’s parents about this, and moreover, telling these children to keep this secret from their parents).
And some boasting of deliberately circumventing the rules about what they are supposed to be teaching, have given the game away, and revealed that what they are actually “teaching” is left wing ideology, and not the reading, writing, and mathematics they are supposed to be teaching to prepare these students to succeed in life, and U.S. test results reveal their massive failure at their basic job.
Perhaps, then, parents are tired of this subversion, and want the freedom to send their children to good schools, schools which will teach their children how to read, to write, help them to acquire literacy, and to be able to do basic math (check out you local store to see the level of math skills among recent high school or even college graduates).
And, while they’re at it, parents might also want to be able pick schools which are free of violence and drugs, where patriotism is taught, and Judeo-Christian morality as well.
P.S. And, while they are at it, parents might also want to look for schools which are not drowning in violence and drugs, which teach Patriotism, and basic Judeo-Christian morality.
Sorry for the double post above.
When I initially clicked on the longer post above and looked it over again, the P.S. sentence I had added last was not there.
Posted the P.S. then, went back into Neo, and the original version of the last sentence was now part of my original, longer post. Go figure.
Kate and SHIREHOME – I think you’re whistling past the graveyard. Uncertainty drives market volatility and decline. It goes back to the old analysis that FDR’s “bold, persistent experimentation” actually prolonged the depression.
Well, Trump 2.0 is a lot like Roosevelt early in his tenure. He is a human uncertainty machine. Especially without those awful RINOs who checked his more destructive impulses the first time around.
Regardless, with Trump doing so much on tariffs, spending, and everything else, there is no way on God’s green earth that he’s going to be able to successfully blame a recession on Biden.
I hope that someone takes his keys on tariffs. Whether that happens or not, we had all better hope that the economy stays right side up.
Snow on Pine:
Some would blame Ukraine for delays in the comment process/edit pixies (goblins). 🙂
Nonapod on March 11, 2025 at 10:46 am
Nonapod has got the gist of today’s economic drama. The one thing he left out of his comment is the reason Trump is “declaring a National Emergency on Electricity within the threatened area” is because the governor of Ontario is hinting or threatening that he can switch off the electricity that Ontario provides to the US.
Just a few trading days ago I was lamenting the market declines and took a closer look. I hesitatingly reassured myself that we were still well short of a 10% correction. Today we have a 9.5% decline on the S&P500. Almost there.
The midterms are a long time out, but at this point I think the next election could be quite ugly. I think it was Rufus who pointed out that something like 50%+ of the electorate have substantial assets in the markets.
CC™ is back. Forgets the Democrat/Administrative State organized Resistance and pre COVID economic situation in 2016-2020. Should RINOS CBRC lumped with the Democrat/Administrative State Resistance, or just the Never Trumper Republicans?
Why such amnesia in CC™? Old habbits die hard.
Well, Trump 2.0 is a lot like Roosevelt early in his tenure. He is a human uncertainty machine. Especially without those awful RINOs who checked his more destructive impulses the first time around.
==
Chuckles. Remember Glitch McConnell’s humbug about ‘regular order’? This is a conciliar body that has been unable to pass an ordinary budget in the last 15 years. Which is evidently not an ‘uncertainty machine’.
I remember 2016-202 well om. That was back when “RINOs” like Paul Ryan, Mitch McConnell, and Bill Barr dastardly prevented Trump from being Trump.
We’ll see how it goes, but it’s beginning to look as though the so-called “RINOs” weren’t the problem after all.
“RINOs” like Paul Ryan, Mitch McConnell, and Bill Barr roamed the earth, dastardly preventing Trump from being Trump.
==
Roamed the Earth failing to produce a proper budget, failing to produce notable spending reductions, failing to allow the Export-Import Bank to expire, and failing to identify Epstein’s killer. Oh, happy day.
And when did Trump do any of those things Art Deco?
I am not a economist, but it seems to me that this talk of recession because of the tariffs is wrong.
If there’s a recession, it may not be primarily due to the tariffs, but this is a way to blame Trump. The reality is that at some point the price has to be paid for the recklessness of the last 4+ years.
Still, the tariffs are more damaging than they need to be because of the disruptions to the supply chain. US manufacturing involves many stages, with lots of intermediate products moving back and forth across the border. It’s not so easy to suddenly onshore everything. If Trump wants to help US manufacturing, he’s going about it all wrong in my opinion. I’m hoping it’s mainly brinkmanship. It’s true that our trading partners probably have a lot more to lose than we do, so maybe they will back down and lower their tariffs, and then Trump can declare victory and move on.
Looks like Trump has found a way to put maximum pressure on the hens…and the hens, bless ‘em, have responded favorably.
Smart ladies. (Hey maybe youse could have a little tete-a-tete with that, um, rooster north of the border?) https://instapundit.com/707617/
(Just a moment. How do you put tariffs on hens??)
“…uncertainty machine.”
I think yer onto something here…but for some reason you neglected to follow through, viz. that Obama/“Biden” WAS most definitely a CERTAINTY MACHINE…
…though I suppose that “certainty”, like everything else, depends on how one defined it (and also, perhaps more importantly, how long one is willing for that “certainty”—or “uncertainty”—to kick in).
I read the Greg Jensen WSJ article. — Mike Plaiss linked
He gives two cogent points on why the market is declining.
1) There is a lot of foreign money in our markets and continuing to flow into them. He claims just the cessation of that flow would be bad, and withdrawals much worse.
2) The feds have been spending tons of money, and big reductions in federal spending will hurt the economy.
OK, there may be an element of truth to 2), but not only is the effort (to reduce fed spending) worth the pain, it is essential. Elon Musk is correct. We MUST rein in federal spending for our sustainable future. Furthermore, the whole argument sort of specious.
Is there any positive aspect to wasteful spending? Perhaps. But the positives associated with targeted and very productive spending is vastly greater. And I think no spending is considerably better than wasteful spending. Didn’t Trump say something about “common sense?”
1) This is more worrisome to me. I’ve said before that it feels to me like an opening in some chess game. Who knows how this turns out? I will say that I think Trump is correct is assessing that our country can’t continue to offshore increasingly large tracts of our ability to produce things.
_______
Wait a few hours… We hit a 10% decline in the S&P some minutes ago.
Seems obvious that cutting $2t+ out of fed spending is going to cause something.
Somehow for some reason I remember that the unemployment rate just before the COVID (actually was A China Virus, CC™) was 4% at most.
CC™ just can’t bring himself to remember some things. Because, reasons. Somehow the sky is always falling in CC™ world and he knows who to blame; The Great Orange Whale.
“. . . will hurt the economy”
How about merely change the economy, and quite possibly long term, for the better?
2) The feds have been spending tons of money, and big reductions in federal spending will hurt the economy.
While it’s undoubtably true that reducing Federal spending (by doing things like laying off lots of Federal employees and generally cutting back on programs that are deemed wasteful and not in taxpayer interests) will have a short term negative impact on the economy, I think it’s a bit shortsighted to imply that these sorts of reductions in federal spending would directly result in longer term negative economic impacts.
The government itself doesn’t produce wealth, it only provides a framework/environment that allows a free market to exist and prosper by providing security and regulatory infrastructure. If it were true that government spending in and of itself produced, rather than simply enabled, significant long term economic growth, then macro economics would be pretty simple: Just increase government spending as much a possible and you’d end up with continuous growth rather than the debt, deficits, and inflation that we’re currently seeing after spending like drunken sailors for years and years.
@om I think the unemployment rate has been bogus for years and years. The last time I felt the economy was really chugging along was about twenty years ago, and it all fell down in 2008 and hasn’t fully recovered.
We’re likely headed for a recession for a couple of reasons. It’s likely necessary to control the persistent inflation. And that inflation makes it unlikely the Fed can apply the normal remedy for a recession– lowering interest rates.
And the government is likely not able to do the normal reaction, which is stimulus spending, since we’ve been stimulus spending ever since COVID (and before).
Why a recession? If we wean ourselves off the deficit spending a recession is a certainty, IMO. President Trump’s goal is to replace the government spending with growth in the private sector economy, rather than the government stimulated economy.
Since there is such a short time for Trump administration to make all these policy shifts before the 2026 election season begins– probably a year, everything needs to be done NOW, if voters are going to see enough results to feel reassured.
If the house goes back to the Democrats, an impeachment is a certainty, IMO and nothing else will get done other than an increase in deficit spending.
Right now the spending bill to finish out this fiscal year includes a massive reduction in spending of $7 billion. Apparently there isn’t much appetite to cut spending and yet we’re to believe we can reduce the $2 trillion annual deficit by magic (or DOGE).
IMO, there doesn’t seem to be a path to fix what happened when we shut down the economy in 2020 without some pain.
Unemployment is low because people left the job market. Looking at the labor participation rate since the Great Recession, when it was running around 66%, it declined steadily until 2016 when it stabilized below 63% and is now around 62.5%.
And when did Trump do any of those things Art Deco?
==
In 18 years as Senate Republican boss Glitch McConnell accomplished none of these things. In 10 years as chairman of the House Budget committee and Speaker of the House, Paul Ryan accomplished none of these things. The director of the federal jail in Manhattan reports to the director of the Federal Bureau of Prisons who reports to the Attorney-General, who accomplished none of these things. Glitch McConnell had to go out of his way to revive the Export-Import Bank, which would have expired without his intervention. In doing so, he lied to the face of another member of the Senate, who went on the floor of the Senate and reported that he had done so.
==
The president does not write appropriations bills, he does not in charge of procedure on the Senate floor, he does not pass out committee seats, and the person who runs the federal jail is not one of his direct reports. You’ve taken your usual fraudulence to the next level.
A withdrawal of excess Federal spending need not cause recession. The hidden assumption is that demand would be absent without that spending, but do we know that’s actually true?
The excess Federal spending is borrowed from people who want to lend it. Those people can lend to private actors, or spend the money themselves, or bank it and let their bank lend it.
Federal spending is just “seen” versus “unseen”. It’s also a lot easier in the short run to deal with one customer, the Federal government, then to do business with a lot of customers.
But provided people want to do something with their own money, the withdrawal of excess Federal spending need not involve more than a temporary reduction of demand while people reallocate their money.
This is before we ever get to the use to which the Federal spending has been put… when less money goes to pretend to build EV chargers, or pretend to roll out broadband, or pretend to replace perfectly good appliances, and more money goes to things that actually add value…
I thought there was a typo there, well possums dont dissapoint even agency spending seems weaponized against gop priorities
Once again, Niketas Choniates is on the money – no pun intended.
@ chuck > “I think the unemployment rate has been bogus for years and years.”
Substitute the statistic of your choice.
My “red pill” was learning that, when inflation got too high some years/decades ago, the government just decided to remove the cost of fuel and food from the list of inflation factors they were counting.
(Rough paraphrase as I remember the stories; economists / accountants probably can correct me.)
I think we have to balance the budget due to the immense pressure we are putting on the bond market. The sooner the better. Spending cuts and agency elimination is one tool in the kit; placing Social Security, Medicare, and Medicaid spending on a sustainable trajectory is another; doing the same with federal employee compensation is another; and new taxes and ancillary revenues would be another. I’m expecting nothing from our odious political class. Fragments of this are priority for DJT, not the rest.
As to whether all these Federal spending cuts will end up causing a recession, I’m uncertain.
The technical definition of a recession seems to have changed a bit over the years. I seem to recall that it once meant something along the lines of 2 or more quarters of negative growth, but these days it’s become more ambiguous in its definition. The National Bureau of Economic Research defines it as “a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” which appears to have too many subjective qualifiers to be very useful beyond a term the can be deployed for political purposes. As in declaring “We’re in a recession!” without any need to use definitive evidence for such a claim.
it does seem the way the nber seems to be doing it, they declared one in February 2007, if memory serves, they didn’t declare one in other instances, they declared one in the spring of 2020, when clearly two quarters weren’t effected,
we can reasonable conclude ‘words don’t mean things anymore, the way we understood the concepts, and we pretend they mean other things,
so in 2017 when Trump came into office, Ryan provided a very narrow tax cut, and
no appreciable cut in discretionary spending, he stood against building the wall, against the immigration pause et al
Do I need to be the fly in the ointment who points out that, for all of the sound and fury, DOGE hasn’t actually delivered any spending cuts yet? I have no doubt that it’ll deliver some spending cuts, maybe big spending cuts. But $2T? Balancing the budget? (All without touching entitlements?)
That’s crazy talk.
Well, I’ve now been schooled that ” the historically low black unemployment rate” that was widely reported, and the low unemployment and high wages in 2019/2020, a.k.a., the pre-COVID golden years were all an illusion.
Otay
My working years go back to the late 1960s, so I do recall when jobs were very hard to find, oil embargos, the collapse of major domestic industries (oil and gas), collapse of minor industries (uranium, silver mining) but those must be false memories too?
Those African Americans who had those imaginary jobs and voted for President Trump must have been doubly deceived. He is a wascally, wiley creature, The Great Orange Whale.
CC™ serves up a Strawman
“DOGE won’t be able to balance the budget!”
DOGE makes recommendations and finds abuses (waste, fraud, abuse), but wait for it CC™, Congress sets the budget (appropriates money).
Let me guess, Russian must not agree to a 30 day cease fire because yesterday Ukraine attacked Moscow?
A lot of fed spending creates fake economic demand that won’t be made up by the private sector. Example: electric school buses. Totally fake market.
My “red pill” was learning that, when inflation got too high some years/decades ago, the government just decided to remove the cost of fuel and food from the list of inflation factors they were counting.
==
It did not. There are two measures of inflation, headline inflation and core inflation. The former includes food and fuel, the latter does not. They decided to publish a measure which did not include it because food and fuel prices at that time were quite volatile.
It would be interesting if the Republicans immediately pushed for dropping taxes on SS income while simultaneously announcing an all hands on deck approach to both investigating and prosecuting fraud in SS and Medicare/ Medicaid. A major announcement. Make it a priority and see what the Dems do.
How would the Dems react?
Niketas C, Here’s a hitch in the idea that reduced government (borrowing) would free up money for economic activity. The level of indebtedness by consumers would restrict their ability to take on new debt.
Corporate debt has gone up in the last two decades in part due to historic low interest rates. Given the rise in interest rates, would they/could they take on new debt?
Private company debt in the U.S. jumped from $4.7 trillion in 2004 to $13.6 trillion in 2024—nearly tripling in nominal terms. As a share of GDP, it grew from 38.5% to 47.3%, a moderate rise reflecting a bigger economy but higher leverage. Compared to 20 years ago, it’s a 290% nominal increase and 23% higher relative to GDP.
I don’t know the excess capacity of existing manufacturing/financial industry, but without an anticipation of new markets/increased demand, what would be the incentive to do so?
@ AD – thanks for the additional information.
A couple of questions, because I don’t remember, if I ever knew:
I’m assuming the “they” in each case is whatever government office releases the stats, but it could in some cases be news outlets choosing which of the two to actually publish for the general public.
Do the stories “they decide to publish” always identify which type of inflation is being discussed, or hide that in a link to something that readers typically won’t click on? And back in mostly-print days, the reader would have even less access to the underlying information.
When the volatility at the time (which time?) ceased, did “they decide to publish” the headline inflation as before, or decide that it was just going to be volatile again sometime, and the core numbers were better, so why bother?
It seems to me that sometimes the stats “they decide to publish” are for the core, and sometimes for the headline, and that those change dependent on which one gives the best PR to the administration at that time.
Are any of those accurate observations?
Bauxite:
DOGE isn’t supposed to “deliver” any of those things.
om – You need to brush up on your English, or actually read the whole thread.
– Chases Eagles suggested at 1:36 PM that a 2T spending cut was affecting the economy.
– Art Deco suggested that we need to balance the budget at 3:41 PM.
You keep using this word “strawman.” I do not think it means what you think it means. Addressing points raised by other commenters is not a strawman.
And I’m not picking on Chases Eagles or Art Deco. Heck, I agree with both of them. I’m just pointing out that (I) spending cuts from DOGE haven’t really hit the economy yet; and (ii) even when they do, they’re probably going to be much, much less than 2T.
But I see the game you’re setting up. Trump will utterly fail to balance the budget because he’s produced no plan that is likely to cut spending by that much. When he inevitably fails to balance the budget, you will blame that on Congress. Trump can never fail, he can only be failed by the rest of the RINOS in the GOP.
Bauxite, this is in flux, but DOGE has found $8 billion in cuts this year and another $50-60 billion in savings that will have to be made by Congress.
Not huge, but I think that’s the low hanging fruit. They’ve only been looking at this for less than two months.
I think they’ve had more success in identifying waste that’s already been spent.
@Chases Eagles:A lot of fed spending creates fake economic demand
Agreed.
that won’t be made up by the private sector.
But why wouldn’t the money not spent the feds on fake demand, not get spent by private actors on real demand? I grant you they wouldn’t buy the electric buses, but they’d buy something they actually want instead.
this is why the state of Florida,
is so predominantly red,
honestly the ignorance or malice is stratospheric,
@Brian E:Here’s a hitch in the idea that reduced government (borrowing) would free up money for economic activity. The level of indebtedness by consumers would restrict their ability to take on new debt.
But your second sentence doesn’t have anything to do with your first. The money borrowed by the government was borrowed from people with money to lend. In the absence of government borrowing, that money can be lent or invested or spent. There’s no reason I can see why those things should not happen, and it’s not as though consumers taking on new debt (to replace the government debt? why?) should be assumed to happen instead.
“In the absence of government borrowing, that money can be lent or invested or spent.” – Niketas C.
We’re not in a tight money situation, so whether or not the government is borrowing money doesn’t affect corporations or individuals from accessing capital.
You’re premise the the private market will replace government spending doesn’t follow. Sure, it could– but what are the incentives in the current economic situation to do so?
The only way you are going to get me to spend money to make up for the fed’s egregious deficit spending is to give me more money. Cut my taxes on SS and I might spend more or … I might not. I think cutting $2t in deficit spending will reduce inflation which helps me but…
But 2t is the target and they ain’t there yet.
So much has been and is still being stolen it is hard to fathom. $5t and counting. I wonder how much of the $30t debt was just plain stolen by these rat bastards.
@Brian E:You’re premise the the private market will replace government spending doesn’t follow.
I strongly suspect you are trying to pigeonhole what I said into something somebody else said and you’re giving a response to that, instead of what I said…
a) That’s not my premise. My premise is that the people who gave the government the money that the government was spending, will look for something else to do with that money; they will seek to invest it, spend it, or lend it. (If they put it in a bank the bank will do one of those things for them.) Why would they hide the money in their mattress if the Treasury isn’t selling as many bonds?
b) A premise doesn’t follow, it’s an assumption. (That’s kind of a nitpick, granted).
c) If you conclude that people who were happily turning their money over to the government to spend, will now refuse to do anything whatever with it, not even deposit it in a bank, can you please show your work?
@ Niketas > “My premise is that the people who gave the government the money that the government was spending, will look for something else to do with that money; they will seek to invest it, spend it, or lend it.”
I completely agree with you that money in private hands is spent more productively than money in public hands, but your premise does assume that any money saved by eliminating the wasteful contracts and agencies and people will be returned to the people.
That only happens if the elimination is accompanied by tax cuts, and that is not yet a done deal.
A nitpick of my own: I don’t think anyone “gave” their money or happily turned it over to the government to spend. Both of those imply a voluntary transfer, which the majority of imposed taxes are NOT, except by a VERY far remove from personal agency.
Voting for legislators who enact reasonable taxation statutes to pay for necessary government functions is light years away from what actually is extorted from the taxpayers, as DOGE is making very clear.
@ Brian E > “I think they’ve had more success in identifying waste that’s already been spent.”
Agreed.
But that is a necessary precursor to making sure it doesn’t happen again.
@AesopFan:t your premise does assume that any money saved by eliminating the wasteful contracts and agencies and people will be returned to the people.
It has to be. The excess spending is borrowed money. If it is not borrowed, it is still in the hands of the people who would have lent it.
That only happens if the elimination is accompanied by tax cuts
The government borrows in order to spend more than it collects in taxes. If it collects the same taxes but borrows less, there was no tax cut, and the people who would have lent to the government are free to do something else with their money.
A nitpick of my own: I don’t think anyone “gave” their money or happily turned it over to the government to spend.
People who bought Treasuries did. You can too if you wish, or not, link is here. (Safest investment in the world, until when it suddenly isn’t, but that’s part of the fun!)
I have been talking about borrowed money this whole time, starting from my 3:04 pm
The excess Federal spending is borrowed from people who want to lend it. Those people can lend to private actors, or spend the money themselves, or bank it and let their bank lend it.
Not sure you why you decided I was talking about taxed money.
“A withdrawal of excess Federal spending need not cause recession.” Niketas C.
Yes, if entities buying US government debt didn’t buy the approximately $2 trillion in deficit spending the last few years, it could be used for other purposes. But given who the buyers of US government debt are, it’s unlikely they would use it in a way that would cause consumption in the economy and prevent a recession.
There’s no shortage of liquidity, so it’s not like the federal government is crowding out over borrowers.
Here are the major US holders of government debt:
Mutual Funds and Pension Funds: Hold ~$3–4 trillion combined. Pension funds favor long-term Treasuries for stability.
Banks: Depository institutions own 4.86% ($1.7 trillion) as of December 2023 (Statista), buying for liquidity and reserves.
Individuals: Via savings bonds and direct purchases, ~$1 trillion (Treasury estimates).
Intergovernmental holdings: ($7.4 trillion)
It could be invested. But they would most likely find other fixed income products to invest in. This money isn’t likely to go into equities.
This money isn’t likely to be “spent” in ways that would make up the difference that government spending would- employment and consumption. Spending drives approximately 70% of GDP (Bureau of Economic Analysis).
Ordinary business recessions shouldn’t unnerve us. The happen about every half-dozen years in response to monetary policy changes, external shocks of one sort or another, or widespread malinvestment. The usual consequence is that production declines by a small amount (1% or so) for a year and the unemployment rate might rise by 2-3 percentage points ‘ere declining. If we had a sensible configuration of spending and revenue collection, we could respond to recessions with some monetary policy tweaks and leave it at that. We’d run deficits for a couple of years as declines in production generated declines in revenue and as unemployment compensation expanded. The trouble right now is that we are already undertaking massive federal borrowing. We do not have massive excess capacity as there was in 1933 nor do we have a ruined labor market, so ‘fiscal stimulus’ doesn’t serve much of a purpose other than to provide an excuse for politicians’ wish lists. (Made grossly manifest in 2009 with the Democratic Party’s spending puke, but also manifest eight years earlier with the Bush-era income tax cuts).
==
Ideally, our revenue collection matches our planned spending over the course of a business cycle and our planned spending is driven by notions of advisable public policy. One might also hope that our means of revenue collection and our spending programs are not configured to shower bon bons on well-connected economic sectors. Fat chance, of course.
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Monica Showalter has an interesting column up at AT today about the ramping up of violence from the left. Parallel with this violence from the more radical elements I’ve also seen more strident and excessive rhetoric from the left friends I follow. I can’t imagine many of these people being more than keyboard warriors as I know them very well, but their statements continually shock me just because I thought I knew them well.
https://www.americanthinker.com/blog/2025/03/another_violent_attack_on_a_tesla_dealership_two_trantifa_thugs_picked_up_by_cops_for_last_two.html
I am not a economist, but it seems to me that this talk of recession because of the tariffs is wrong. I do not know why the stock market is dropping, and I am not a conspiracy person, but – – – –
The stock market, in my experience, is subject to hysteria sometimes. We generally hang on and everything settles down.
Many analysts have been saying the market was somewhat overvalued for a while. Corrections happen.
Recessions are one thing, but as far as the stock market,
https://archive.md/kR4h1
This editorial in today’s WSJ reasonably walks through the issues in play, and it ties into the tariff discussion that has been ongoing here.
Regarding the stock market drop, from a link JJ Sefton posted this morning:
https://nypost.com/2025/03/10/business/ignore-the-stock-market-wall-street-dealing-with-painful-detox-from-government-spending-addiction/
Trump seems to be playing hard ball with Canada now in terms of tarrifs.
I think there is a spending addiction in our society across the board. Evidence: the size of homes to raise families a fraction of the family size of previous generations. That’s a lot of purchasing start to finish to upkeep. Look around, how many giant storage space business are near you? Here in Los Angeles–unbelievable amount of multi-level storage spaces. This despite the huge rise in the number of multi-unit living complexes being erected everywhere you look, which seems to completely go against the concerns about “climate change”. Things seem to be out-of-control that depend on continued purchases of ultimately unnecessary stuff.
I see that the extremely well paid head of the teacher’s union, Randi Weingarten, is moaning about how, if the Department of Education is disbanded, and funding for education is sent back to the States, these states will likely use that money for “vouchers” i.e. to allow parents to pay for education for their children at the school of their choice.*
Perhaps I am reading too much into what I’ve seen on Youtube but, it seems to me that all of the postings by some subversive, purple haired “educators,” boasting about how they are indoctrinating their students into aspects of LGBTQ+ ideology, some doing things like making it acceptable for young children who might be confused about their sexual identity to change their names, genders, and clothing in their classes (and not tell these children’s parents about this, and moreover, telling these children to keep this secret from their parents).
And some boasting of deliberately circumventing the rules about what they are supposed to be teaching, have given the game away, and revealed that what they are actually “teaching” is left wing ideology, and not the reading, writing, and mathematics they are supposed to be teaching to prepare these students to succeed in life, and U.S. test results reveal their massive failure at their basic job.
Perhaps, then, parents are tired of this subversion, and want the freedom to send their children to good schools, schools which will teach their children how to read, to write, help them to acquire literacy, and to be able to do basic math (check out you local store to see the level of math skills among recent high school or even college graduates).
And, while they’re at it, parents might also want to be able pick schools which are free of violence and drugs, where patriotism is taught, and Judeo-Christian morality as well.
* See https://www.thegatewaypundit.com/2025/03/teacher-union-chief-randi-weingarten-admits-real-reason/
P.S. And, while they are at it, parents might also want to look for schools which are not drowning in violence and drugs, which teach Patriotism, and basic Judeo-Christian morality.
Sorry for the double post above.
When I initially clicked on the longer post above and looked it over again, the P.S. sentence I had added last was not there.
Posted the P.S. then, went back into Neo, and the original version of the last sentence was now part of my original, longer post. Go figure.
Kate and SHIREHOME – I think you’re whistling past the graveyard. Uncertainty drives market volatility and decline. It goes back to the old analysis that FDR’s “bold, persistent experimentation” actually prolonged the depression.
Well, Trump 2.0 is a lot like Roosevelt early in his tenure. He is a human uncertainty machine. Especially without those awful RINOs who checked his more destructive impulses the first time around.
Regardless, with Trump doing so much on tariffs, spending, and everything else, there is no way on God’s green earth that he’s going to be able to successfully blame a recession on Biden.
I hope that someone takes his keys on tariffs. Whether that happens or not, we had all better hope that the economy stays right side up.
Snow on Pine:
Some would blame Ukraine for delays in the comment process/edit pixies (goblins). 🙂
Nonapod on March 11, 2025 at 10:46 am
Nonapod has got the gist of today’s economic drama. The one thing he left out of his comment is the reason Trump is “declaring a National Emergency on Electricity within the threatened area” is because the governor of Ontario is hinting or threatening that he can switch off the electricity that Ontario provides to the US.
Just a few trading days ago I was lamenting the market declines and took a closer look. I hesitatingly reassured myself that we were still well short of a 10% correction. Today we have a 9.5% decline on the S&P500. Almost there.
The midterms are a long time out, but at this point I think the next election could be quite ugly. I think it was Rufus who pointed out that something like 50%+ of the electorate have substantial assets in the markets.
CC™ is back. Forgets the Democrat/Administrative State organized Resistance and pre COVID economic situation in 2016-2020. Should RINOS CBRC lumped with the Democrat/Administrative State Resistance, or just the Never Trumper Republicans?
Why such amnesia in CC™? Old habbits die hard.
Well, Trump 2.0 is a lot like Roosevelt early in his tenure. He is a human uncertainty machine. Especially without those awful RINOs who checked his more destructive impulses the first time around.
==
Chuckles. Remember Glitch McConnell’s humbug about ‘regular order’? This is a conciliar body that has been unable to pass an ordinary budget in the last 15 years. Which is evidently not an ‘uncertainty machine’.
I remember 2016-202 well om. That was back when “RINOs” like Paul Ryan, Mitch McConnell, and Bill Barr dastardly prevented Trump from being Trump.
We’ll see how it goes, but it’s beginning to look as though the so-called “RINOs” weren’t the problem after all.
“RINOs” like Paul Ryan, Mitch McConnell, and Bill Barr roamed the earth, dastardly preventing Trump from being Trump.
==
Roamed the Earth failing to produce a proper budget, failing to produce notable spending reductions, failing to allow the Export-Import Bank to expire, and failing to identify Epstein’s killer. Oh, happy day.
And when did Trump do any of those things Art Deco?
I am not a economist, but it seems to me that this talk of recession because of the tariffs is wrong.
If there’s a recession, it may not be primarily due to the tariffs, but this is a way to blame Trump. The reality is that at some point the price has to be paid for the recklessness of the last 4+ years.
Still, the tariffs are more damaging than they need to be because of the disruptions to the supply chain. US manufacturing involves many stages, with lots of intermediate products moving back and forth across the border. It’s not so easy to suddenly onshore everything. If Trump wants to help US manufacturing, he’s going about it all wrong in my opinion. I’m hoping it’s mainly brinkmanship. It’s true that our trading partners probably have a lot more to lose than we do, so maybe they will back down and lower their tariffs, and then Trump can declare victory and move on.
Looks like Trump has found a way to put maximum pressure on the hens…and the hens, bless ‘em, have responded favorably.
Smart ladies. (Hey maybe youse could have a little tete-a-tete with that, um, rooster north of the border?)
https://instapundit.com/707617/
(Just a moment. How do you put tariffs on hens??)
“…uncertainty machine.”
I think yer onto something here…but for some reason you neglected to follow through, viz. that Obama/“Biden” WAS most definitely a CERTAINTY MACHINE…
…though I suppose that “certainty”, like everything else, depends on how one defined it (and also, perhaps more importantly, how long one is willing for that “certainty”—or “uncertainty”—to kick in).
I read the Greg Jensen WSJ article. — Mike Plaiss linked
He gives two cogent points on why the market is declining.
1) There is a lot of foreign money in our markets and continuing to flow into them. He claims just the cessation of that flow would be bad, and withdrawals much worse.
2) The feds have been spending tons of money, and big reductions in federal spending will hurt the economy.
OK, there may be an element of truth to 2), but not only is the effort (to reduce fed spending) worth the pain, it is essential. Elon Musk is correct. We MUST rein in federal spending for our sustainable future. Furthermore, the whole argument sort of specious.
Is there any positive aspect to wasteful spending? Perhaps. But the positives associated with targeted and very productive spending is vastly greater. And I think no spending is considerably better than wasteful spending. Didn’t Trump say something about “common sense?”
1) This is more worrisome to me. I’ve said before that it feels to me like an opening in some chess game. Who knows how this turns out? I will say that I think Trump is correct is assessing that our country can’t continue to offshore increasingly large tracts of our ability to produce things.
_______
Wait a few hours… We hit a 10% decline in the S&P some minutes ago.
Seems obvious that cutting $2t+ out of fed spending is going to cause something.
Somehow for some reason I remember that the unemployment rate just before the COVID (actually was A China Virus, CC™) was 4% at most.
CC™ just can’t bring himself to remember some things. Because, reasons. Somehow the sky is always falling in CC™ world and he knows who to blame; The Great Orange Whale.
“. . . will hurt the economy”
How about merely change the economy, and quite possibly long term, for the better?
While it’s undoubtably true that reducing Federal spending (by doing things like laying off lots of Federal employees and generally cutting back on programs that are deemed wasteful and not in taxpayer interests) will have a short term negative impact on the economy, I think it’s a bit shortsighted to imply that these sorts of reductions in federal spending would directly result in longer term negative economic impacts.
The government itself doesn’t produce wealth, it only provides a framework/environment that allows a free market to exist and prosper by providing security and regulatory infrastructure. If it were true that government spending in and of itself produced, rather than simply enabled, significant long term economic growth, then macro economics would be pretty simple: Just increase government spending as much a possible and you’d end up with continuous growth rather than the debt, deficits, and inflation that we’re currently seeing after spending like drunken sailors for years and years.
@om I think the unemployment rate has been bogus for years and years. The last time I felt the economy was really chugging along was about twenty years ago, and it all fell down in 2008 and hasn’t fully recovered.
We’re likely headed for a recession for a couple of reasons. It’s likely necessary to control the persistent inflation. And that inflation makes it unlikely the Fed can apply the normal remedy for a recession– lowering interest rates.
And the government is likely not able to do the normal reaction, which is stimulus spending, since we’ve been stimulus spending ever since COVID (and before).
Why a recession? If we wean ourselves off the deficit spending a recession is a certainty, IMO. President Trump’s goal is to replace the government spending with growth in the private sector economy, rather than the government stimulated economy.
Since there is such a short time for Trump administration to make all these policy shifts before the 2026 election season begins– probably a year, everything needs to be done NOW, if voters are going to see enough results to feel reassured.
If the house goes back to the Democrats, an impeachment is a certainty, IMO and nothing else will get done other than an increase in deficit spending.
Right now the spending bill to finish out this fiscal year includes a massive reduction in spending of $7 billion. Apparently there isn’t much appetite to cut spending and yet we’re to believe we can reduce the $2 trillion annual deficit by magic (or DOGE).
IMO, there doesn’t seem to be a path to fix what happened when we shut down the economy in 2020 without some pain.
Unemployment is low because people left the job market. Looking at the labor participation rate since the Great Recession, when it was running around 66%, it declined steadily until 2016 when it stabilized below 63% and is now around 62.5%.
https://fred.stlouisfed.org/series/CIVPART/
And when did Trump do any of those things Art Deco?
==
In 18 years as Senate Republican boss Glitch McConnell accomplished none of these things. In 10 years as chairman of the House Budget committee and Speaker of the House, Paul Ryan accomplished none of these things. The director of the federal jail in Manhattan reports to the director of the Federal Bureau of Prisons who reports to the Attorney-General, who accomplished none of these things. Glitch McConnell had to go out of his way to revive the Export-Import Bank, which would have expired without his intervention. In doing so, he lied to the face of another member of the Senate, who went on the floor of the Senate and reported that he had done so.
==
The president does not write appropriations bills, he does not in charge of procedure on the Senate floor, he does not pass out committee seats, and the person who runs the federal jail is not one of his direct reports. You’ve taken your usual fraudulence to the next level.
A withdrawal of excess Federal spending need not cause recession. The hidden assumption is that demand would be absent without that spending, but do we know that’s actually true?
The excess Federal spending is borrowed from people who want to lend it. Those people can lend to private actors, or spend the money themselves, or bank it and let their bank lend it.
Federal spending is just “seen” versus “unseen”. It’s also a lot easier in the short run to deal with one customer, the Federal government, then to do business with a lot of customers.
But provided people want to do something with their own money, the withdrawal of excess Federal spending need not involve more than a temporary reduction of demand while people reallocate their money.
This is before we ever get to the use to which the Federal spending has been put… when less money goes to pretend to build EV chargers, or pretend to roll out broadband, or pretend to replace perfectly good appliances, and more money goes to things that actually add value…
I thought there was a typo there, well possums dont dissapoint even agency spending seems weaponized against gop priorities
Once again, Niketas Choniates is on the money – no pun intended.
https://www.liberalstudies.ca/wp-content/uploads/2014/11/Economics-in-One-Lesson_2.pdf
“Wait a few hours…”
“Uncharted Waters: How President Trump Can Navigate Toward A More Resilient Economy“—
https://www.zerohedge.com/political/uncharted-waters-how-president-trump-can-navigate-toward-more-resilient-economy
+ Bonus:
Looks like Ontario Premier was punching way, way below his weight (which, for him, was no problem at all)…
“Stocks Jump As Ontario Folds, Suspends Electricity Surcharge After Talk With White House”—
https://www.zerohedge.com/markets/loonie-tumbles-trump-retaliates-against-ontarios-electricity-tariff
@ chuck > “I think the unemployment rate has been bogus for years and years.”
Substitute the statistic of your choice.
My “red pill” was learning that, when inflation got too high some years/decades ago, the government just decided to remove the cost of fuel and food from the list of inflation factors they were counting.
(Rough paraphrase as I remember the stories; economists / accountants probably can correct me.)
I think we have to balance the budget due to the immense pressure we are putting on the bond market. The sooner the better. Spending cuts and agency elimination is one tool in the kit; placing Social Security, Medicare, and Medicaid spending on a sustainable trajectory is another; doing the same with federal employee compensation is another; and new taxes and ancillary revenues would be another. I’m expecting nothing from our odious political class. Fragments of this are priority for DJT, not the rest.
As to whether all these Federal spending cuts will end up causing a recession, I’m uncertain.
The technical definition of a recession seems to have changed a bit over the years. I seem to recall that it once meant something along the lines of 2 or more quarters of negative growth, but these days it’s become more ambiguous in its definition. The National Bureau of Economic Research defines it as “a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” which appears to have too many subjective qualifiers to be very useful beyond a term the can be deployed for political purposes. As in declaring “We’re in a recession!” without any need to use definitive evidence for such a claim.
Hens, continued…
Looks like Trump put the fear of God in this one:
“Family’s chicken lays ‘ginormous egg’ 3 times the normal size”—
https://www.foxnews.com/food-drink/family-chicken-lays-ginormous-egg-3-times-normal-size
it does seem the way the nber seems to be doing it, they declared one in February 2007, if memory serves, they didn’t declare one in other instances, they declared one in the spring of 2020, when clearly two quarters weren’t effected,
we can reasonable conclude ‘words don’t mean things anymore, the way we understood the concepts, and we pretend they mean other things,
so in 2017 when Trump came into office, Ryan provided a very narrow tax cut, and
no appreciable cut in discretionary spending, he stood against building the wall, against the immigration pause et al
Do I need to be the fly in the ointment who points out that, for all of the sound and fury, DOGE hasn’t actually delivered any spending cuts yet? I have no doubt that it’ll deliver some spending cuts, maybe big spending cuts. But $2T? Balancing the budget? (All without touching entitlements?)
That’s crazy talk.
Well, I’ve now been schooled that ” the historically low black unemployment rate” that was widely reported, and the low unemployment and high wages in 2019/2020, a.k.a., the pre-COVID golden years were all an illusion.
Otay
My working years go back to the late 1960s, so I do recall when jobs were very hard to find, oil embargos, the collapse of major domestic industries (oil and gas), collapse of minor industries (uranium, silver mining) but those must be false memories too?
Those African Americans who had those imaginary jobs and voted for President Trump must have been doubly deceived. He is a wascally, wiley creature, The Great Orange Whale.
CC™ serves up a Strawman
“DOGE won’t be able to balance the budget!”
DOGE makes recommendations and finds abuses (waste, fraud, abuse), but wait for it CC™, Congress sets the budget (appropriates money).
Time for Putin to man-up, and get off the pony.
https://redstate.com/wardclark/2025/03/11/ukraine-agrees-to-30-day-cease-fire-if-russia-concurs-n2186535
Let me guess, Russian must not agree to a 30 day cease fire because yesterday Ukraine attacked Moscow?
A lot of fed spending creates fake economic demand that won’t be made up by the private sector. Example: electric school buses. Totally fake market.
My “red pill” was learning that, when inflation got too high some years/decades ago, the government just decided to remove the cost of fuel and food from the list of inflation factors they were counting.
==
It did not. There are two measures of inflation, headline inflation and core inflation. The former includes food and fuel, the latter does not. They decided to publish a measure which did not include it because food and fuel prices at that time were quite volatile.
It would be interesting if the Republicans immediately pushed for dropping taxes on SS income while simultaneously announcing an all hands on deck approach to both investigating and prosecuting fraud in SS and Medicare/ Medicaid. A major announcement. Make it a priority and see what the Dems do.
How would the Dems react?
Niketas C, Here’s a hitch in the idea that reduced government (borrowing) would free up money for economic activity. The level of indebtedness by consumers would restrict their ability to take on new debt.
Corporate debt has gone up in the last two decades in part due to historic low interest rates. Given the rise in interest rates, would they/could they take on new debt?
Private company debt in the U.S. jumped from $4.7 trillion in 2004 to $13.6 trillion in 2024—nearly tripling in nominal terms. As a share of GDP, it grew from 38.5% to 47.3%, a moderate rise reflecting a bigger economy but higher leverage. Compared to 20 years ago, it’s a 290% nominal increase and 23% higher relative to GDP.
I don’t know the excess capacity of existing manufacturing/financial industry, but without an anticipation of new markets/increased demand, what would be the incentive to do so?
@ AD – thanks for the additional information.
A couple of questions, because I don’t remember, if I ever knew:
I’m assuming the “they” in each case is whatever government office releases the stats, but it could in some cases be news outlets choosing which of the two to actually publish for the general public.
Do the stories “they decide to publish” always identify which type of inflation is being discussed, or hide that in a link to something that readers typically won’t click on? And back in mostly-print days, the reader would have even less access to the underlying information.
When the volatility at the time (which time?) ceased, did “they decide to publish” the headline inflation as before, or decide that it was just going to be volatile again sometime, and the core numbers were better, so why bother?
It seems to me that sometimes the stats “they decide to publish” are for the core, and sometimes for the headline, and that those change dependent on which one gives the best PR to the administration at that time.
Are any of those accurate observations?
Bauxite:
DOGE isn’t supposed to “deliver” any of those things.
om – You need to brush up on your English, or actually read the whole thread.
– Chases Eagles suggested at 1:36 PM that a 2T spending cut was affecting the economy.
– Art Deco suggested that we need to balance the budget at 3:41 PM.
You keep using this word “strawman.” I do not think it means what you think it means. Addressing points raised by other commenters is not a strawman.
And I’m not picking on Chases Eagles or Art Deco. Heck, I agree with both of them. I’m just pointing out that (I) spending cuts from DOGE haven’t really hit the economy yet; and (ii) even when they do, they’re probably going to be much, much less than 2T.
But I see the game you’re setting up. Trump will utterly fail to balance the budget because he’s produced no plan that is likely to cut spending by that much. When he inevitably fails to balance the budget, you will blame that on Congress. Trump can never fail, he can only be failed by the rest of the RINOS in the GOP.
Bauxite, this is in flux, but DOGE has found $8 billion in cuts this year and another $50-60 billion in savings that will have to be made by Congress.
Not huge, but I think that’s the low hanging fruit. They’ve only been looking at this for less than two months.
I think they’ve had more success in identifying waste that’s already been spent.
@Chases Eagles:A lot of fed spending creates fake economic demand
Agreed.
that won’t be made up by the private sector.
But why wouldn’t the money not spent the feds on fake demand, not get spent by private actors on real demand? I grant you they wouldn’t buy the electric buses, but they’d buy something they actually want instead.
our local idiot
https://twitchy.com/amy-curtis/2025/03/11/ron-filipkowski-says-vance-lied-about-ukraine-confrontation-n2409597
this is why the state of Florida,
is so predominantly red,
honestly the ignorance or malice is stratospheric,
@Brian E:Here’s a hitch in the idea that reduced government (borrowing) would free up money for economic activity. The level of indebtedness by consumers would restrict their ability to take on new debt.
But your second sentence doesn’t have anything to do with your first. The money borrowed by the government was borrowed from people with money to lend. In the absence of government borrowing, that money can be lent or invested or spent. There’s no reason I can see why those things should not happen, and it’s not as though consumers taking on new debt (to replace the government debt? why?) should be assumed to happen instead.
“In the absence of government borrowing, that money can be lent or invested or spent.” – Niketas C.
We’re not in a tight money situation, so whether or not the government is borrowing money doesn’t affect corporations or individuals from accessing capital.
You’re premise the the private market will replace government spending doesn’t follow. Sure, it could– but what are the incentives in the current economic situation to do so?
The only way you are going to get me to spend money to make up for the fed’s egregious deficit spending is to give me more money. Cut my taxes on SS and I might spend more or … I might not. I think cutting $2t in deficit spending will reduce inflation which helps me but…
But 2t is the target and they ain’t there yet.
So much has been and is still being stolen it is hard to fathom. $5t and counting. I wonder how much of the $30t debt was just plain stolen by these rat bastards.
@Brian E:You’re premise the the private market will replace government spending doesn’t follow.
I strongly suspect you are trying to pigeonhole what I said into something somebody else said and you’re giving a response to that, instead of what I said…
a) That’s not my premise. My premise is that the people who gave the government the money that the government was spending, will look for something else to do with that money; they will seek to invest it, spend it, or lend it. (If they put it in a bank the bank will do one of those things for them.) Why would they hide the money in their mattress if the Treasury isn’t selling as many bonds?
b) A premise doesn’t follow, it’s an assumption. (That’s kind of a nitpick, granted).
c) If you conclude that people who were happily turning their money over to the government to spend, will now refuse to do anything whatever with it, not even deposit it in a bank, can you please show your work?
@ Niketas > “My premise is that the people who gave the government the money that the government was spending, will look for something else to do with that money; they will seek to invest it, spend it, or lend it.”
I completely agree with you that money in private hands is spent more productively than money in public hands, but your premise does assume that any money saved by eliminating the wasteful contracts and agencies and people will be returned to the people.
That only happens if the elimination is accompanied by tax cuts, and that is not yet a done deal.
A nitpick of my own: I don’t think anyone “gave” their money or happily turned it over to the government to spend. Both of those imply a voluntary transfer, which the majority of imposed taxes are NOT, except by a VERY far remove from personal agency.
Voting for legislators who enact reasonable taxation statutes to pay for necessary government functions is light years away from what actually is extorted from the taxpayers, as DOGE is making very clear.
@ Brian E > “I think they’ve had more success in identifying waste that’s already been spent.”
Agreed.
But that is a necessary precursor to making sure it doesn’t happen again.
@AesopFan:t your premise does assume that any money saved by eliminating the wasteful contracts and agencies and people will be returned to the people.
It has to be. The excess spending is borrowed money. If it is not borrowed, it is still in the hands of the people who would have lent it.
That only happens if the elimination is accompanied by tax cuts
The government borrows in order to spend more than it collects in taxes. If it collects the same taxes but borrows less, there was no tax cut, and the people who would have lent to the government are free to do something else with their money.
A nitpick of my own: I don’t think anyone “gave” their money or happily turned it over to the government to spend.
People who bought Treasuries did. You can too if you wish, or not, link is here. (Safest investment in the world, until when it suddenly isn’t, but that’s part of the fun!)
I have been talking about borrowed money this whole time, starting from my 3:04 pm
Not sure you why you decided I was talking about taxed money.
“A withdrawal of excess Federal spending need not cause recession.” Niketas C.
Yes, if entities buying US government debt didn’t buy the approximately $2 trillion in deficit spending the last few years, it could be used for other purposes. But given who the buyers of US government debt are, it’s unlikely they would use it in a way that would cause consumption in the economy and prevent a recession.
There’s no shortage of liquidity, so it’s not like the federal government is crowding out over borrowers.
Here are the major US holders of government debt:
Mutual Funds and Pension Funds: Hold ~$3–4 trillion combined. Pension funds favor long-term Treasuries for stability.
Banks: Depository institutions own 4.86% ($1.7 trillion) as of December 2023 (Statista), buying for liquidity and reserves.
Individuals: Via savings bonds and direct purchases, ~$1 trillion (Treasury estimates).
Intergovernmental holdings: ($7.4 trillion)
It could be invested. But they would most likely find other fixed income products to invest in. This money isn’t likely to go into equities.
This money isn’t likely to be “spent” in ways that would make up the difference that government spending would- employment and consumption. Spending drives approximately 70% of GDP (Bureau of Economic Analysis).
Ordinary business recessions shouldn’t unnerve us. The happen about every half-dozen years in response to monetary policy changes, external shocks of one sort or another, or widespread malinvestment. The usual consequence is that production declines by a small amount (1% or so) for a year and the unemployment rate might rise by 2-3 percentage points ‘ere declining. If we had a sensible configuration of spending and revenue collection, we could respond to recessions with some monetary policy tweaks and leave it at that. We’d run deficits for a couple of years as declines in production generated declines in revenue and as unemployment compensation expanded. The trouble right now is that we are already undertaking massive federal borrowing. We do not have massive excess capacity as there was in 1933 nor do we have a ruined labor market, so ‘fiscal stimulus’ doesn’t serve much of a purpose other than to provide an excuse for politicians’ wish lists. (Made grossly manifest in 2009 with the Democratic Party’s spending puke, but also manifest eight years earlier with the Bush-era income tax cuts).
==
Ideally, our revenue collection matches our planned spending over the course of a business cycle and our planned spending is driven by notions of advisable public policy. One might also hope that our means of revenue collection and our spending programs are not configured to shower bon bons on well-connected economic sectors. Fat chance, of course.