Trump, Musk, et al promise to start a depression

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Every depression in U.S. history began with a reduction in federal debt.

This is the penalty for ignorance:

Published by Rodger Malcolm Mitchell

MBA Northwestern, business turnaround expert, economist

Published

6 thoughts on “Trump, Musk, et al promise to start a depression”

  1. DOGE is supposedly looking for people to help “save” the government $2t annually, says Musk. I say “supposedly” because: A. The Dept. of Government Efficiency (DOGE) is not a real department since that can only be created by Congress, and B. Musk wants people to work for 80 hours/week for little or no pay. Yes, slavery will save lots of money!

    It’s not a serious request, but it still deserves a semi-serious response, so this is what I left in the DM to @DOGE and on X for everyone to see:

    @elonmusk
    @VivekGRamaswamy
    I sent @DOGE the following DM showing how I could, and HAVE, saved >$2t in the federal budget: I believe I can help DOGE cut spending and/or the debt (not the same thing!) by $2 trillion for several reasons:

    1. I’ve already done it. In 2010, I took a NY Times interactive survey of some of the largest options to cut in the federal budget. By 2015, the Times automated survey calculated I had produced a surplus of 1.975 Trillion. You can read specifically how I did it here: https://huffpost.com/entry/honey-i-balanced-the-fede_b_806067
    2. I took 4 years of alternative economics courses at the Henry George School of NYC, became a teacher there for ~2 years, created videos seen by over 250k viewers on economics and wrote 100s of articles and a book: America is Not Broke! which you can find on Amazon.

    The very abbreviated version:

    1. We can start to eliminate all federal domestic debt by reissuing United States Notes, as Lincoln did to double the federal budget to fight the Civil War (1862-1863). U.S. Notes are not included as debt & are specifically excluded in the quarterly Federal Debt Report because they are issued by the Treasury Department, not created in the debt-money system from the quasi-independent Federal Reserve Bank. Over time, repaying existing debt with U.S. Notes (electronically today) would wipe out all debt, one of the largest items in the Federal Budget ($882b), before any cutting even starts taking place.
    2. It’s possible for all states and large cities to drastically cut or eliminate the need for federal outlays ($1.1t) by simply cashing in the so-called pension funds (worth $30t-$60t cumulatively, or even more), which almost entirely go to the asset markets and fees. According to former Comptroller Scott Stringer, over a 10-year period, ending in 2015, the 5 NYC pension funds paid out zero dollars, net of fees. It’s actually even worse, because cities like NYC are required by law to top off their pension funds after bad years, like 2022, but even worse they have 5 years to do it, so that $6b (Crain’s magazine) is almost guaranteed to be invested after the market has hit new highs, thwarting future ROI too.

    That’s already more than $2t. There’s much more. DM me for details… https://x.com/messages/media

    =====

    Of course, the debt doesn’t hurt monetarily sovereign America, but Musk keeps saying America is about to go “bankrupt” even though that’s literally impossible, so there’s no direct reasoning with him. He’s a big Milton Friedman fan and his economic education seems to stop there, several decades ago, like much of his worldview, despite being a “futurist technologist.” So, about the only thing possible, maybe, is to slowly introduce him to new concepts.

    In reality, he loves poking at controversial grants and agencies, that are too small to make any kind of economic difference, and are way to small to get to $2t, even added together. In my NY Times answers, it was obvious one can’t balance the budget without seriously cutting social security, medicare, defense, etc., and since 2010, the debt payments themselves, since both Trump and Biden have increased the debt by over 2X.

    Even on monetarily ignorant terms, however, the $4t debt increase projected over TEN YEARS, is meaningless, since the CBO estimates the GDP will grow by $13.4t by 2034 (10 years) anyway, more than 3X as much.

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    1. Scott, congratulations on your “savings.”

      The federal “debt” is two, completely different things, connected by an ancient law requiring the government not to run an overage in its General Account. The so-called “debt” is:
      1. The total of outstanding Treasury Security accounts
      2. The net difference between taxes collected and spending.

      #1 can be reduced — eliminated, really — in a variety of ways. There is the Platinum Coin solution, in which the Treasury mints a $30 Trillion dollar platinum coin (it already has the legal right) and deposits it into the General Account at the Federal Reserve Bank. Poof! The entire debt disappears.

      Or the government simply could stop issuing T-securities. It never touches the money, anyway. The securities are not acquiring spending money. Again, poof, no more debt.

      I could name dozens of ways in which this “debt” could disappear.

      #2. Is a different problem, because BY FORMULA, if you reduce that you automatically cause a recession (which is exactly what we have done seven times in our history):

      GDP = Federal Spending +Nonfederal Spending + Net Exports.

      The only way to cut #2 without causing a depression would be to magically increase Net Exports enough to support the economy.

      The whole discussion of federal “debt” is filled with ignorance and bullshit. I regard my greatest failure as my inability to get people to stop thinking of federal debt as being like personal debt and to realize THE FUCKING GOVERNMENT CANNOT RUN SHORT OF FUCKING DOLLARS, SO SHUT THE FUCK UP ABOUT FEDERAL DEBT, YOU FUCKING FOOLS.

      Whew! I’ve been waiting a long time to do that, and if sure feels good.

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      1. Yes, this was my way, I hoped, to gently ease Musk, Ramaswamy, Trump, and their monetarily ignorant acolytes into understanding these are two different things. See my parenthetical note at the very beginning: “I believe I can help DOGE cut spending and/or the debt (not the same thing!) by $2 trillion for several reasons”

        With such a level of ignorance – based on 3 businessmen’s view of debt from a business POV – one has to chip away at the misunderstanding slowly. They have had success in business – at least in their own estimation, despite bankruptcies, lawsuits (Musk faces >20 of them at the federal and state government level, one of the reasons he needed Trump to win and take the heat off), and questionable drug efficacy claims (Ramaswamy). So they think they know it all.

        That debt isn’t what they’ve always thought it was, at the federal, but not state or city, government level, is a completely alien concept to them. I’m only trying to introduce doubt here, not to convert, but just to start questioning. None of these people is the radical outside-the-box thinker they believe they are. Even Musk promotes a 1950s suburban car-centric lifestyle and hates mass transit and diverse, vibrant, communities. And his rockets are an extension of 50-year old technology (Werner Von Braun designed a Mars-capable rocket in the 1950s too, and it didn’t need refueling like Starship does: https://en.wikipedia.org/wiki/The_Mars_Project).

        Anyway, if they answer at all, I figure we are ahead.

        You might want to post to @DOGE on X too. Others might repost your reply, and then catch their attention. I’m guessing these 3 are not reading your blog. I’m just keeping it real…

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    1. Musk, Ramaswamy, Trump, et al, won’t tell you everything is going to be OK. They want us fearful so they can ply their strategy; easier to manipulate the fearful and insecure. Meanwhile, the very well-off are gleefully rubbing their hands together as the Gap grows.

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  3. Without deficit spending the dollars won’t exist in the economy for a dozen trillionaires to be able to exist at the same time.

    They should be getting the government to spend more not less

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