The markets are holding their breath while waiting to see what happens with the debt ceiling crisis that Treasury Secretary Janet Yellen warns may happen in June. Both the stock and bond markets are remarkably stable considering that the fit may hit the Shan in a few weeks.
The NASDAQ index is climbing and copper suddenly dropped. Apart from that, there is almost no change from last week.
The METAR for next week is partly sunny.
Wendy
I think the markets are hoping someone blinks, or sides negotiate like adults they are supposed to be. I don’t know what will happen and getting a bit tense.
Unless a few reps break ranks we will default.
It does not matter how dishonest and power hungry the position truly is. Cutting the budget is a reckless proposal. We have to produce our way out of our mess. Cutting that off at the knees to get a future tax cut and make the country poorer is so dishonest.
I think we will default. The positions taken I think no one cares this time at all.
I think CNN is so shallow the network is not talking the upside of this budget going forward. The nation does not matter or the writers do not know anything. Whatever!
But it might only be the second of three bottoms in market during this period.
It’s either just talking points or political posturing because the USA will not be taken to the UN Bankruptcy Court, if there is one.
Question, is holding TSLA in June good or bad? Can Yellen please tell us what will benefit and what will suffer from the putative crisis? That would be much better that just trotting out a sky is falling scarecrow.
The Captain
Maybe the WEF can handle the problem… They seem to have the solution to everything… Let’s send a Congressional Junket to Davos in Private Jets
DOCU, UPST, ENPH, TSLA, and ARKK Breathing,
DOCU 5:01AM EDT 49.64 +0.79 +1.62%
UPST 6:36AM EDT 16.53 +0.14 +0.85%
ENPH 6:50AM EDT 168.78 +1.23 +0.73%
TSLA 6:50AM EDT 169.05 +1.07 +0.64%
ARKK 6:33AM EDT 37.75 +0.07 +0.19%
APPS and RIVN Holding their breath!
APPS 4:10AM EDT 12.19 -0.06 -0.49%
RIVN 6:42AM EDT 12.72 -0.19 -1.47%
The Captain
Raising the debt ceiling hasn’t solved anything in the past:
Nor will it the next time:
Time for a serious discussion about a return to sound money
And, again, the “news” last night said the government may stop paying SS benefits. As we discussed here before, SS is self funded. Even now, as the trust fund is drawn down, SS is still fully funded. Bonds in the fund that are redeemed are replaced by bonds sold to the public, hence, no net increase in the debt.
Medicare is a different patter. Part A, hospitalization, is payed by the payroll tax, thus fully covered. Part B and Part D are paid from general revenue.
Steve
Steve, while correct that SS and Medicare are fully funded by their own revenue streams this doesn’t fit the Shiny narrative that those programs must be cut to save our spending problem.
Until the Defense budget has a serious cut to it we’re just fooling ourselves.
Keep your eye on the Discharge Petition. It will only take four votes to get the bipartisan bill to pass - but from what I have read, the earliest a vote that can be held on it is June 7th and it still would have to be approved in the Senate - where it could be filibustered under current rules.
The problem with the Shiny narrative is even the people in their “base” have parents. Their followers don’t want to shoulder the cost of sustaining the old phartz, in spite of their repeating the “thought leader’s” mantra of “personal responsibility”.
So, the bull’s eye is placed on payouts that benefit “others”.
I did some quick math, and seems that eliminating all the money that is paid out to aid for the poor, along with federal money that goes to education, infrastructure, and a raft of other programs, would just about eliminate the deficit.
If I sit back and ponder, I could make a case for eliminating all aid to states and cities, on the principle of “if the states will not tax their people to pay for the services they want, why does it become the federal government’s job to pay for everything?”
Steve
It is estimated that the Fed’s will send $1 trillion to states in 2023.
What would happen if the fed stopped sending that money to states?
Well, the good news is that it would bankrupt a bunch of deep red states in about 4 hours.
The bad news is that it would cause a prolonged depression.
I’m all for a rational budget (which I think should include some spending cuts, tax increases for corporations that earn billions in profits but avoid paying taxes, and other upward tweaks at the top end for individual tax rates). But that’s a discussion for budget time, not when it comes to paying your bills.
I’m not sure this chart supports your claim. Seems like there are several blue states getting more than what they pay. The data is old though.
Federal Taxes Paid by State vs Received - Are You Giving or Getting? (howmuch.net)
I couldn’t get your link to work, but this is the site I used:
States Most Dependent on the Federal Government – 2022 Edition | SmartAsset.
Yes, I was getting a dig in, but mostly I was being a SmartAsset.
Adding to the deficit is not a problem.
Those who are fighting this never do it at their own political cost. During the supply side econ period it was cute.
Now we are hearing this morning from Yellen that there is some progress on a deal. I think that is a dance to see who the public will blame if/when we default.
We need to reindustrialize. That means higher taxes on the wealthy. That means at first adding this year and next to the debt to GDP ratio.
We need to create economies of scale in our manufacturing base. That is not supply side economics.
Ugh, that is a terrible chart (visually).
Easier just to view them by ranking:
While there is a high correlation between federal dependency and being a red state, the greater correlation (and actual causation) is state GDP. The lower the GDP, the greater federal dependacy - and while more red states have lower GDP, so do some blue (Vermont being the lowest of all).
More importantly than dependency is ROI - are the states that get this money actually doing something productive with it. New Mexico has the highest dependency score but also the highest ROI. For every $1 in fed funds, NM produces nearly $4 in revenue. And to be fair, there are about an equal number of red and blue states that have a negative ROI on their fed dollars. Delaware being the worst at just $0.32.
Read each article to see what they are counting. GCR’s link includes Social Security payments, while Alpha’s does not. Alpha’s link counts direct Federal payments that go straight to state government revenue, and Federal employees in the state, which would include bureaucrats, Federal law enforcement, Post Office, and military. Some of those Federal workers actually have a reason to be in a particular state: proximity to DC, for instance, or a large number of Border Patrol agents in a state with a long stretch of border, like Texas. Some Federal workers being in a particular state is pure pork.
Steve
Your article says they included Federal payments to individuals in each state, excluding Medicare, but does not say whether those are only payroll to Federal employees in the state, or also includes Social Security and pensions paid to former Federal employees in the state. To my way of thinking, SS and pension payments should not be counted, because that is money the individuals earned, and goes wherever the people decide to spend their retirement.
Found this bit in the article you linked:
“A really conservative state might choose to tax itself at a lower rate, which means by default, they can give fewer state-funded services,” explains Kathy Fallon, human services practice area director at Public Consulting Group. “That can exacerbate the situation.”
That is the question I am proposing: if a state shorts itself on tax revenue, because it makes a choice to give the “JCs” a free ride, or undertax it’s population in general, why does it become the Federal government’s job to pick up the slack?
Steve
Why is the difference between payments and taxes a question of “taking up the slack”? Medicare and Social Security, for example, are in no way motivated by the State finances.
I agree that SS and Federal pension payments should not be counted as “Federal welfare for state and local governments”, because pension money was earned by the individual, and goes where the individual goes. States with large proportions of the population composed of retirees only benefit indirectly by making their state a geezer magnet.
Steve
Do you realize that the Republican House bill simply asks for spending levels roughly equal to last year?!!
If the currently proposal was passed unchanged (which of course won’t happen), all it would do is slow the growth rate of federal spending…not reduce actual spending.
If that is a “reckless” proposal, then words have lost their meaning.
Cheers!
Murph