Friday, January 27, 2023

The Biden Whitehouse should negotiate on the debt. That would put the hot potato in the Republican's hands.

If I were Biden, I would at least be willing to negotiate with the Republicans on the budget deal. That would put the hot potato in Republican hands. Discussion of reducing the debt will likely not end well for Republicans. What do we cut? Pretty much any cut proposals will generate a political firestorm. Being willing to negotiate allows that firestorm to begin.

It's already began as some high up Democrats, in Congress, like Senator Schumer, have talked about it. The debt is a problem, but how serious a problem it is, compared to cutting programs, is open to debate. Cutting programs could be a more serious problem for the economy, not to mention political suicide.

On the other hand, some economists, including folks who follow something called Modern Monetary Theory, tend to be less worried about the debt. My somewhat superficial understanding of Modern Monetary Theory says that the debt isn't a problem due to the ability to create new money. The debt isn't a big problem until the creation of new money brings inflation, according to Modern Monetary Theory, as I understand it in a nutshell.

Yes, even that theory admits that new money leads to inflation which creates a check on unlimited spending. We have some inflation now, and Republicans, especially, are alarmed about it; Democrats less alarmed.

I still think overall inflation is less than 10% annually which doesn't seem catastrophic to me. The reason why I don't think it's catastrophic is that home value inflation and housing costs have been going up close to that figure for quite a few years. If having a home is a big percent of one's budget, one has been already living in a world of inflation for many years.

Higher income people notice that less, but a lot of modest income people have had problems keeping up with the cost of rent or first time home purchase for years.

We are now, under Biden, seeing more "across the board" inflation due to wages going up and other supply chain issues. New money has been part of that picture, but that factor isn't as new as most Republicans think. New money has inflated existing housing for many years.

Some of the supply chain inflation, we are experiencing now, may be here for good reason. Rising costs of natural resources, such as fossil fuels for energy, is one factor that may be inevitable due to our relationship with the environment; not to mention the war in Europe.

Wage inflation is another factor that has come just so workers can continue to afford to live in the communities they serve.

At times, it does seem like upper middle class and the super wealthy are too greedy. It isn't easy for anyone to live within their means. Our whole country lives beyond its means.

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