Economist professor explains how deficits and debt rip us off

[Problematic Pat]

Summary

• What is the primary reason governments borrow money according to the script?​

  -Governments borrow money primarily because they have more demands for spending than they can raise through taxes, leading to a deficit which they finance through borrowing.

• What is the term used to describe the amount a government borrows in a fiscal year?​

  -The term used to describe the amount a government borrows in a fiscal year is 'deficit', which is the difference between government spending and tax revenue.

• What is the difference between a government deficit and national debt?​

  -A government deficit is the amount by which government spending exceeds tax revenue in a given year, while national debt is the total amount of money that the government has borrowed over time and has yet to pay back.

• Why do governments issue IOUs when they borrow money?​

  -Governments issue IOUs, in the form of government securities, bills, or bonds, as a promise to repay the borrowed money with interest to the lenders.

• What is the role of taxes in the context of government spending and borrowing?​

  -Taxes are the primary means by which governments raise money to fund their activities. When tax revenue is insufficient to cover spending, governments borrow the difference, leading to deficits and national debt.

• How does the script describe the relationship between government borrowing and corporations or the rich?​

  -The script describes a situation where corporations and the rich benefit from tax evasion by lending money to the government instead of paying taxes, which then becomes a burden on the general public through deficits and national debt.

• What are some of the myths or misconceptions about national debt that the script aims to clarify?​

  -The script aims to clarify that national debt is not just a result of excessive government spending but is also a consequence of tax evasion by corporations and the rich, who lend money to the government
• paying their fair share of taxes.

• What is the script's stance on the use of lotteries and tariffs as forms of indirect taxation?​

  -The script criticizes the use of lotteries and tariffs as forms of indirect taxation that primarily affect the poor and middle class, while benefiting the government and corporations without them having to pay their fair share of taxes.

• What is the script's final message regarding the responsibility of the public in addressing the issue of national debt?​

  -The script's final message is a call to the public to understand and address the core issue of tax evasion by corporations and the rich, which contributes to national debt, and to not allow this scam to continue without challenging it.

 

[Arithmetic]

The US government is unlikely to ever make major cuts to Social Security or Medicare, given how popular those programs are among voters. They’re also unlikely to cut military spending while they’re in a geopolitical power competition with Russia and China. Lastly, they’re also unlikely to pass major tax hikes, assuming that the government remains relatively split between parties.

This means that the deficit will persistently remain large and the government will have to issue more Treasuries in order to finance the larger deficits that come with higher interest expense.

When democrats are in power, they like to spend more and are unwilling/unable to raise taxes enough to meet this structural deficit. When republicans are in power, they like to cut taxes and are unwilling/unable to cut spending. So what happens is that we have this structural budget deficit whether republicans or democrats are in power, but luckily the US is the global reserve currency that other sovereign nations are willing to finance their fiscal and current account deficit for longer and cheaper

 

[Problematic Pat]

The US government is unlikely to ever make major cuts to Social Security or Medicare, given how popular those programs are among voters. They’re also unlikely to cut military spending while they’re in a geopolitical power competition with Russia and China. Lastly, they’re also unlikely to pass major tax hikes, assuming that the government remains relatively split between parties.

This means that the deficit will persistently remain large and the government will have to issue more Treasuries in order to finance the larger deficits that come with higher interest expense.

When democrats are in power, they like to spend more and are unwilling/unable to raise taxes enough to meet this structural deficit. When republicans are in power, they like to cut taxes and are unwilling/unable to cut spending. So what happens is that we have this structural budget deficit whether republicans or democrats are in power, but luckily the US is the global reserve currency that other sovereign nations are willing to finance their fiscal and current account deficit for longer and cheaper

And this is where the US fumbled at the goal line by using the dollar as a financial weapon against other nations. A lot of governments resented this because it stripped them from their sovereignty and only one country made up all the rules which they also flagrantly violated with no consequences but forced them on other nations to follow.

Fast-forward to 2022 when Biden committed the death kneel of the dollar by ordering the seizure of Russias sovereign investment assets which signaled to other nations their investments in America weren't safe. So in order to be safe countries are agreeing to settle their trade deals outside the dollar and holding the dollar in their foreign reserves isn't a big of a necessity as more options become available through BRICs and SWIFT alternatives, the dollars days as the worlds reserve currency are numbered which is going to be a problem for anyone still holding the currency.

It's not known how the dedollarization process will unfold. Will it be a sudden or slow process taking months or years. The next BRICS summit in October might reveal how that bloc intends to move forward. If they decide to dump the currency at the same time it will have a ripple effect causing hyperinflation to countries still holding it. A global financial crisis will unfold but those other countries will be able to get through it unlike the US who could lose up to 2 decades minimum trying to get out of it