Econ AP @Macalester. Aggregate resource constraints, Pepsi Zero, college 🏈 . Inflation is only somewhat a monetary phenomenon.
St. Paul, MN
Joined December 2010
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US debt/GDP increased by 1.6% to 100.2% from 2025Q3 to 2026Q3.
Primary deficits (+9.8%) and returns on reserves and rev. repos (+0.1%) were financed by returns on Treasuries (-0.7%), inflation (-4.6%), and real growth (-3%).
Percentages interpreted as contributions to debt/GDP.
Trump: "Certain levels of inflation will also pay off that debt very rapidly. Very rapidly."
This is the conclusion an optimizing fiscal authority comes to in my JMP (now R&R at JMCB). Fiscal's best case scenario is hyperinflation which effectively cancels its debt.
Trump says in his Time magazine interview the Fed's interest rate policies are hurting the U.S. "more than inflation is hurting our country."
On why it has been so difficult to slow the rise in the debt: "I don't want to tell you what those means are, but you can pay off the debt through other means."
"Certain levels of inflation will also pay off that debt very rapidly. Very rapidly." wsj.com/livecoverage/stock-m…
Tonight marks 25 consecutive years of U.S. budget deficits.
30% of Americans have yet to see their government run a surplus.
Joe Anderson retweeted
In the early days of Trump’s second term, his economic advisers laid out a simple theory: Show the bond market that Washington was serious about closing its gaping deficits and long-term interest rates would fall on their own. Trump could leave the Fed alone.
It hasn’t worked out that way.
The White House theory rested on fiscal restraint that never arrived and overlooked how much of Trump’s own agenda would feed the price pressures now pushing rates higher. Tariffs raised the cost of imported goods. The war with Iran sent oil and diesel prices soaring. wsj.com/economy/trump-econom…
Joe Anderson retweeted
“The central principle is that nobody takes care of somebody else’s property as well as he takes care of his own.”
— Milton Friedman
Imagine the message the ECB would send to EU members. "You may borrow without limit, we'll buy your debt and cancel it later when it comes due."
It's a helicopter drop with more steps. Fiscally-driven. Plus incentive for future irresponsible borrowing.
Joe Anderson retweeted
More unpleasant arithmetic for monetary policy acting on the shadow of debt.
Dogma says “raise rate when inflation or long term rates pick up.” We say no, if there’s a fiscal crisis looming.
It may be better to cause inflation earlier than later. Maybe paying an inflation tax today is a way to discipline governments.
static1.squarespace.com/stat…
Clinton's surpluses were eight years in the making, beginning with the "pay as you go" rule in 1990's Budget Enforcement Act. @grok, would you describe PAYGO, it's political success, and it's impact on fiscal budgets in the 90s?
This quoted post is unavailable.
Joe Anderson retweeted
Wealth Tax 2.0. Some comments on the new Sanders - Khanna bill and Saez and Zucman analysis.
grumpy-economist.com/p/wealt…
Given today's Treasury announcement:
For those interested in how the privately-held US liabilities' (the relevent debt metric in theory) average maturity has looked recently, here is a figure from my working paper. Avg. maturity up about 12 months since COVID.
Joe Anderson retweeted
This Milton Friedman insight is brilliant:
“When you hear people objecting to the market or capitalism, you’ll find that most of those objections are objections to freedom itself.”
“What most people are objecting to is that the market gives people what the people want, instead of what the person talking thinks the people ought to want.”
Joe Anderson retweeted
Elizabeth Warren comes out strongly against happy hour
Joe Anderson retweeted
Well, if the retirees are not, then it's everyone else.
📺 Nos retraités ne sont pas une variable d’ajustement budgétaire !
Ils ont travaillé toute leur vie et continuent de faire vivre nos familles, nos associations, nos communes.
❌ Désindexation des pensions, remise en cause de l’abattement de 10 % : le @RNational_off les défend.
Readers added context they thought people might want to know
Les 4 variables d’ajustement du système de retraite par répartition :
- montant des pensions (retraités),
- cotisations (actifs),
- âge de départ (actifs),
- dette (générations futures).
cor-retraites.fr
vie-publique.fr/en-bref/302729…
Joe Anderson retweeted
OK. Countries that issue a ton of debt and then start to run primary surpluses are doing exactly what we'd expect. It's the intertemporal budget constraint of the government. Just like households who take out a huge mortgage and start to make the large monthly mortgage payments. The more debt the government issues, all else equal, the larger the primary surpluses that it will have to run later on. Especially if your economy is not really growing fast
US debt/GDP returned to 2025Q2 levels (100.5%) in 2026Q2.
Primary deficits (+8.0%) and returns on reserves and rev. repos (+0.1%) were financed by returns on Treasuries (-0.1%), inflation (-4.9%), and real growth (-3.1%).
Percentages interpreted as contributions to debt/GDP.
Emphasis on this being per-capita, as is the case in the US. Not only are there more gvt. transfers to older gens because there are more people in them. Individuals themselves receive more than those in other gens on average.
Yesterday, I highlighted the distributional concerns raised by aged societies: those with high life expectancy and low fertility. Many readers objected that the elderly need fewer resources, since they often already own a home, are less active, and have no young children to support.
All of that may be true, but it is not how the political system works. No large group of voters ever concludes that it receives too much. If you are in academia, have you ever met a colleague who thinks they are overpaid and asks for a pay cut while keeping their current duties? Or that has walked into the chair’s office and asked for extra teaching because their current teaching load is too low?
Spain is a good illustration. Not because Spain matters much (though we do seem to know how to play football), but because it is a fairly aged society, because I have good data that a friend helped me put together, and because I understand the country well. I suspect Spain shows what is already happening elsewhere or is about to.
The figure plots income by age group in four panels. The top panel is market income: wages, capital income, and so on. Those between 65 and 85 have the lowest market income. (Figures for those above 85 are hard to come by, because the sample is small.) I then add government transfers (gross income, second panel), subtract taxes (disposable income, third panel), and add in-kind transfers, mainly health services, since Spain runs quite a generous national health system (extended disposable income, fourth panel).
The last panel is the most interesting. Once the government has finished redistributing, those between 65 and 85 have the highest income in the country, ahead even of those between 50 and 65, who are at the peak of their market income and, usually, of their professional careers.
In welfare terms, the picture is starker still. Extended disposable income leaves out the flow of services from owner-occupied housing. It also ignores the fact that retirement benefits are indexed to inflation each year, so the elderly bear far less income risk than those still in the labor market.
Is this outcome a surprise? Of course not. Those over 65, and those approaching it, are the largest voting bloc in Spain.
Why do you think your own country will be different?
