Pence: ‘Short term’ deficit growth possible under Trump tax plan

May 1, 2017

Vice President Mike Pence said Sunday that the Trump administration’s tax plan might raise the deficit in the short term, but overall the focus is on growing the economy.

Chuck Todd, the host of NBC’s “Meet the Press,” asked Pence repeatedly to explain how the plan would reduce the deficit, even as deficit reduction remains a Republican priority.

“I understand that people are happy about [the tax plan], but you are going to increase the deficit,” Todd prodded.

Pence shot back: “Maybe in the short term. But the truth is if we don’t get this economy growing at three percent, or more, as the president believes that we can, we’re never going to meet the obligations that we’ve made today.”

7 Comments - what are your thoughts?

  • CharlieSeattle says:

    Hey Pence?

    Where is the Election Fraud Report Trump asked you to prepare?

  • bobnstuff says:

    I think I have heard this song before and it doesn’t end well. If you cut taxes on the lower middle classes you can grow the economy but cutting taxes on the rich and on businesses hasn’t done it in the past. Reagan had to raise them before he left office. How did Bush’s tax cuts do? Cleaning up the tax code and making things simpler is great, getting the large companies that are making big profits and paying not taxes to pay their fair share is even better but deep cuts will only end badly for the country. History is pretty clear on this.

    1. gvette says:

      Picture this. You are bidding on a house, or a piece of art, or maybe a rare Honus Wagner baseball card and there’s a guy in the back of the room who keeps raising his hand to drive the price higher.

      And you already know this much about the guy — he’s in cahoots with the auctioneer. Plus — and this is what really irks you — you also know this other bidder has a printing press in his basement that he’s been using to churn out currency.

      So this shill really doesn’t care what he pays.

      I’ve just described US government bond auctions under what is called Quantitative Easing, or QE, which is ending soon after nearly six years.

      You have to know this much about the bond market before you keep reading: driving the price of bonds higher automatically reduces interest rates. It’s a teeter-totter: Rates go down when bond prices rise, and vice versa. No exceptions.

      The auctioneer in the case of QE is the US Treasury, which sells trillions of dollars of bonds each year to paper over the US government deficit. The shill is the Federal Reserve, which has been printing trillions in extra money to buy these government bonds.

      And the patsy is anyone who has been competing with the Fed for those bonds since QE began in November 2008.

      QE has been successful in some ways. It has kept interest rates artificially low, allowed people to refinance homes at great rates and helped financial institutions earn an outsized profits without taking much risk.

      It has also allowed Washington to pay less for the money it borrows. US government debt, already more than $17.7 trillion, would be substantially higher if the Treasury had been forced to pay normal interest rates to lenders over the past six years.

      Supporters will even argue that QE saved the world financial system. QE came into being at a time when Washington was convinced — and was convincing the nation — that the financial system was on the verge of collapse.

      And it was a time when interest rates were already very low, so the Fed’s normal monetary solutions were useless. And US debt was already outsized, so the idea of spending our way out of trouble was unrealistic.

      But ideas like QE are similar to new drugs. A drug maker doesn’t really have to prove efficacy. All it has to do is claim you would be worse off without the drug.

      How can you prove them wrong?

      This much we do know, however. The US economy hasn’t been growing by much since QE made its first appearance. And despite a recent upswing, job growth has been lackluster.

      While banks are been raking it in, they haven’t made loans more easily accessible to people and companies.

      And, really, who can blame them! All that talk about financial disaster that helped the Fed sell the idea of QE should have made banks more conservative when it came to loans.

      There’s one more thing that QE accomplished: it has made the stock market soar. Interest rates have remained so low for so long that investors have had no other choice but to move their money into the stock market, thus creating a bubble.

      Even those adverse to risk were forced to chase the better yields in stocks, no matter how dangerous that was.

      But for every winner in QE there are 99 losers. While the richest 1% of the US population has been loving the rise in stock prices and other QE amenities, Fed policy has been taxing on the masses of savers.

      In fact, “tax” is a perfect word. QE has been an invisible tax on savers beyond anything Washington could have ever conceived.

      Every dollar that has benefited a borrower during QE has come out of the pocket of a saver in the form of a lower return on their assets.

      In fact, QE is now widely recognized by both supporters and opponents as causing the single largest shift ever in wealth, from middle class savers to rich Wall Street investors.

      And that this should have happened under a Democratic president who came into office championing wealth redistribution in the other direction is both shocking and ironic.

      There’s more. Just because the Fed is ending its bond buying doesn’t mean the last chapter has been written for QE.

      The Fed’s balance sheet rose from $850 billion before the crisis to over $4 trillion. It now owns 25% of all outstanding US government securities and 30% of all mortgage-backed securities.

      The Fed can’t just sell them or all that extra money will cause inflation. And they can’t just be thrown in a pile and burned — at least, I don’t think they can. The fact that QE was unprecedented makes the ending to this story an unknown.

      And if the Fed — as has been proposed — is allowed to keep those bonds until maturity there is no telling what the effect will be on future economic activity.

      Will bond buyers in the year 2020 become reluctant to lend the US government money knowing that this pile of QE bonds owned by the Fed is still looming over the market?

      And what about the ordinary bond buyers — the patsies — who have been paying too much and getting too little turn over the last six years? Remember, as interest rates rise to more normal levels over the next few years, their bonds will lose value.

      Will the patsies still be happy customers of US bonds? If they aren’t, the US economy will be stymied by higher interest rates forever. And there might not be another set of chumps to bail us out.

      1. bobnstuff says:

        I agree that QE has created some real problems and it went on longer then it should have but it’s not as big a problem as what the government did with the money it browed. The gave it to the banks to loan to build the economy. This isn’t a bad idea if that had been what the banks did. The banks got the money for pretty much nothing. Instead of loaning this money to businesses or people the loaned it back to the government buy buying bonds at 3%. They also used the money to buy the smaller banks. We now have fewer banks. Had the money gone where it was intended to we would be in much better shape as a country. The biggest problem in business is raising capital. The smaller businesses have it the worst but even the larger ones are effected. When a company either can’t get the money or the cost is to high they cut back. They cut back on inventory and they cut back on capital expansion. The idea of flooding the market with cheep money was to get the capital to the companies to expand. When the recovery bill was put together there weren’t enough checks and balances put into it. This was either an oversight or a gift to the banks and to Wall St. It would be easy to blame Obama for this or the Democrats but there is enough blame to go around here. Everyone know about the problem pretty early on but no one did anything to fix it. There was to much money going around from it and both parties were getting their share of it. No one wanted to kill the goose that laid the golden egg.

        To make a long story short. We didn’t build the factories, we didn’t build up our inventories and the job that were created weren’t in the US but in the countries that spent the money building factories like China. It wasn’t cheep labor that sent the business over seas but the fact that they had factories up and ready to go. As of right now there is no savings by manufacturing in China but many companies no longer have a choice since we have no place in the US that can make their product today and they can’t afford to wait for someone to build them plus the banks still don’t want to give up their free money to invest. If you look most of the money being invested in building new factories is coming in from other countries like Japan.

        The other group that lost out in the deal was the guy with a savings account as you pointed out. Why would a bank pay you to use your money more then they paid the government to use theirs. I get .1% interest on my pass book savings account.

        1. gvette says:

          Bob, I posted it to point out Obama’s failure. Ob, buy the way, when you follow the money on QE-1, that went from Obama, to repay the party. Part of what it did, was the US, buying it’s own debt.

          1. bobnstuff says:

            I pointed out that the Qe-1 is only a part of a much bigger problem. A capitalist economic system needs capital to grow and ours has been starved for some time now.
            In case you didn’t know this the President doesn’t handle the money in this country, that honor goes to congress and all bills dealing with money must start in the house. In case you haven’t noticed the Republicans have had the house for most of Obama’s time in office. You say follow the money and that is just what I did. It went in a nice neat circle while were it’s needed is out of the loop. A large part of our national debt is owed to ourselves in IOU to social security among other things. Both parties have done well by Wall St. so just saying Obama repaid his party doesn’t cover it. With our new President the problem will most likely get worse because of the people he has brought into his cabinet. Trump isn’t a Wall St. guy and in fact he’s not a money guy at all. Trumps whole empire is build on Trumps gifts as a salesman and he has never been really good with the dollars and cents of things. He has talked a good game about caring for the common man but the actions he has done have in fact helped the wealthy many time more. The Healthcare reform is a joke if you think it will help anyone other then the Insurance companies and the Drug industry. His outline for tax reform once again helps the very rich instead of those people who voted for him. I’m not even sure he understands just what he is selling.

            In his infinite wisdom he has brought the blood suckers into his house. I’m not even sure he understands just how big a mistake he has made but he will find out by the end of the year.

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