EconAir

Secretary of the Treasury UPDATE (10/2026) Some general background. Since 2000, the net government debt of America has tripled as a percent (share) of GDP. If the U.S. had to refinance (not reduce) all of its government debt at the current interest rate of a five-year bond, it would need higher taxes or spending cuts equal to 4.7% of GDP. That would cause a recession. Most of the U.S. national debt has to be refinanced in the next five years. Nobody believes yearly deficits will be eliminated or even reduced significantly. One reason is that interest expense is rising. The new (hopeful) goal is that government debt as a percent of GDP will fall over time. In other words, nominal GDP will grow faster than government debt. Possible but unlikely. Even to achieve a stable debt/GDP ratio, the government would have to run a "primary" budget surplus, that is, a budget surplus before interest expense. For the U.S., it would be about 1.0% of GDP (about $300 billion). Instead, the ...

There is a story, possibly true, that when the British surrendered to American and French forces at Yorktown, effectively ending British rule of America, someone in the British army sang or played an old English folk song, “The World Turned Upside Down.”    (See https://en.wikipedia.org/wiki/The_World_Turned_Upside_Down ) I think I know how the British felt.   Many of the assumptions economists have made about economic reality and economic policies now seem out-of-date or even reversed. UNITED STATES The Fed fought inflation; now it sets inflation targets when there is no inflation. The Fed worries about deflation even though the major source is a fall in energy and commodity prices. Another source is the fall in the prices of technology products. There is a large increase in the money supply, large government deficits, a large trade deficit, and a large decrease in the unemployment rate. Economic theory and past experience says that there should...