July 25, 2025 • 50 mins
On this episode of The Middle, we talk about what should be done about the nation's 36 trillion dollar debt. Jeremy is joined by CNBC senior economics reporter Steve Liesman and Stephanie Kelton, a professor of economics and public policy at Stony Brook University. DJ Tolliver joins as well, plus calls from around the country. #debt #nationaldebt #Fed #FederalReserve #interestrates #Trump #taxes #IRS
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
Welcome to the middle. I'm Jeremy Hobson, along with our
House DJ Tolliver, who is back this week. And Tolliver,
it turns out that the one billion dollars that Congress
just rescinded from the Corporation for Public Broadcasting did, let
me see here, absolutely nothing to reduce the national debt.
Speaker 2 (00:23):
Ye had to check their notes for that one. H Yes,
I've never heard of the debt going down.
Speaker 1 (00:28):
Is anyone here, I mean, well, it could happen. It
is something that is technically possible. But it turns out
the debt is increasing by almost four billion dollars per
day in this country. That is in part because of
all the interests we're paying on the thirty six trillion
dollars in total debt right now, and because we're adding
to that debt by more than a trillion dollars a
year by not bringing in as much in taxes as
(00:48):
we spend on everything from the military to social security.
The last time Tolliver, that the US took in more
than it spent was in the Clinton administration about twenty
five years ago, when there was a Democratic President, Bill Clinton,
and a report publican Speaker of the House the issue
of dealing with the debt is incredibly political, with each
side sticking to their party's priorities when it comes to
(01:08):
what can be cut. So we're going to see this
hour if there's a middle way. What can be done
to fix the national debt is our question and our
number is eight four four four middle That is eight
four four four six four three three five three, or
you can reach out at listen to themiddle dot com.
But first, last week on the show, we talked about
whether or not social media is safe for kids and teenagers,
(01:30):
and we heard from so many young people both during
the show and afterwards in our voicemail.
Speaker 3 (01:35):
My name is Andre from Baltimore, Maryland. I am seventeen,
and I have experienced social media, and you know, you
see public people's lies, but it's in this way that
it's curated, where you only see the good things. You
don't see the bad parts of someone's life, and I
think that's bad for these kids like me.
Speaker 4 (01:55):
My name is Si Drew. I am seventeen years old.
I'm calling in from many a List, Minnesota. Not to
be really difficult, but the best solution here is a
wider cultural shift, a wider cultural understanding that all of
us are having this problem. It's not just teenagers, it's
not just adult.
Speaker 5 (02:15):
Hey, this is Mitch from Charleston, South Carolina.
Speaker 6 (02:19):
I'm a younger person. It is a little crazy to see,
how I mean, really, it just seems people are and
I know even myself, I personally use Instagram. It's definite
like get sucked into it.
Speaker 7 (02:29):
I have no clue why we do it, Probably just
because we struggle with self control.
Speaker 6 (02:32):
But it's definitely a problem.
Speaker 1 (02:36):
Can you think any of any other show Tolliver where
you hear from multiple teenagers in the hour not Loving
Man and thanks to everyone who called in. You can
hear that entire episode on our podcast in partnership with
iHeart Podcasts, on the iheartapp or wherever you listen to podcasts.
So now to our question this hour, how can we
fix the national debt? Tolliver? How can people reach us?
Speaker 2 (02:54):
Yeah, you can call us at eight four four four
Middle that's eight four four four six four three three
five three, or you can write that listen to the
Middle dot com. You can also comment on our live
stream on YouTube. You can hit us up everywhere and
I'm gonna see it. Okay, So put your comments in
on Get Your on Air.
Speaker 1 (03:09):
Joining me this hour, CNBC senior economics reporter Steve Leasman, Steve, welcome.
Speaker 8 (03:13):
Back, great to be here, Thanks for having me.
Speaker 1 (03:15):
Carey and Stephanie Kelton is with US Professor of Economics
at Public Policy at stony Brook University. Her book is
called The Deficit Myth, Modern Monetary Theory and the Birth
of the People's Economy. Stephanie, welcome to you.
Speaker 9 (03:27):
Thank you. Nice to be with all of you.
Speaker 1 (03:29):
It's great to have you. So before we get to
the phones, I spent many years covering business and economic
news during and after the financial crisis of two thousand
and eight, and there were economists, Steve, who were worried
about how much the US was borrowing to stimulate the economy.
But there were also people who said, it doesn't matter
right now. The debt did not we can have this debt.
It seems like the conversation is kind of different now, Steve,
(03:52):
maybe because interest rates are higher or the debt is bigger.
But what are the people you talk to say about
this as a problem.
Speaker 8 (03:59):
Well, let me ask you, Jeremy, when were you doing
that reporting.
Speaker 1 (04:03):
Like eight through like twenty thirteen.
Speaker 8 (04:06):
So doesn't it seem quaint now the numbers they were
talking about, And I think that's kind of well. First
of all, I have to say one thing before we
get going, which is, whatever budget cuts you have to
go through, Jeremy, don't let Tolliver go because the tunes
are grooven and right. Just want to spend a minute
to say that. But and the mail, Stephen, Yes, none necessary,
(04:28):
just keep spinning. But here's the deal. It is true,
and it's important to point out that the debt has
been a source of catastrophic prediction for many years, and
those folks have been wrong. Right. We have had the
ability to borrow more and more and pay our debt
(04:49):
much beyond the capacity of what people have said. The
truth is, nobody knows what the actual limit is of
our debt to GDP, which is now a pro one
hundred percent and going to one hundred and twenty percent.
They say, by way of comparison, you can look back.
You can look at Japan right now, which has a
two hundred percent debt to GDP ratio. You can look
(05:11):
back to the seventeen hundreds and Britain, which fought many,
many wars and had a two hundred and two hundred
and fifty percent debt to GDP ratio. It grew its
way out of it through the Industrial revolution, technology and
productivity and budget austerity. We don't know, but I would
like to sort of quote Robert Rubin who said to
when I made these arguments him, he said, Okay, do
(05:33):
you really want to find out where that limit is?
And I don't think I want to find out. And
I don't know where that limit is. And I know
that there's been a lot of what's the word catastrophizing
of the debt to GDP, and it has been wrong.
I think Stephanie is chomping at the bit has something
to say about that. But just before I let her
(05:53):
have it, have the microphone, I would just point out
that over time, what's what's unusual and and and and
and worries some to me about the debt to GDP
right now is it's rising at a time of peacetime
and of expansion, right and that's the heating that is
most concerning. And so when it comes time to need
(06:16):
to help people and to boost aggregate demand in a recession,
I have concerns that the resources may not be there.
Speaker 1 (06:25):
So I was I was I was taught in college
economics that that you know, in good times you save
and then you can spend in the bad times. Let
me let Stephanie in here, and Stephanie, what do you
what do you think does a thirty six trillion dollar
national debt need to be dealt with?
Speaker 9 (06:39):
Well? No, I mean, look, I'll throw out an example,
and I'm only partly kidding, and actually I'm not really kidding.
I drive a Ford mock E. Okay, I bought it
a few years ago. I took advantage of a provision
and the Cares Act that kicked in a little bit
of money if people go out and buy an electric vehicle.
(07:01):
So I did that.
Speaker 1 (07:02):
So the way I.
Speaker 9 (07:03):
Think about this is it would be sort of like
me taking my MACKI into my mechanic tomorrow morning and saying,
I want you to take a look at the engine
and see if you can fix it. Okay, that would
be a really silly thing to do. There is no
engine in my car, so there's nothing to fix. And
I feel a lot like that's what this conversation is.
When people say to me, what are your ideas for
(07:25):
how we should go about you know, tackling or fixing
the national debt. I say, well, what is the evidence
that there's a problem that we need to resolve? And
the fact that it's a very large number is not
in itself evidence of a problem. I know it makes
people very nervous when you put lots of zeros behind
a number and you attach the word debt to it. Okay,
(07:47):
that automatically gets people concerned. But what I'm looking at
when I hear this word, I try not to focus
and fixate on the word debt. I prefer to try
to put this into context. What are we actually talking
talking about. We're talking about the number of dollars that
the federal government has spent into our hands over the
(08:08):
entire course of US history and not taxed away from us.
Those dollars resides are being held in the form of
treasury securities, so part of our savings and part of
our wealth. So you look at the summer and you say, well,
I don't know. Is thirty six trillion too much wealth
for people to have? Is it too much saving? Can
(08:29):
it create problems?
Speaker 10 (08:30):
Yes?
Speaker 9 (08:31):
And where I would look for problems would be in
something like inflation. But when somebody says, why are we
running these large deficits. The economy is doing really well
on employment is low, inflation's coming back down. I say,
exactly what problem are you pointing to?
Speaker 7 (08:47):
Right?
Speaker 9 (08:47):
Where is the evidence that?
Speaker 1 (08:49):
Yeah, go ahead, Stephanie. Did you see a connection between
the spending in it during COVID and inflation?
Speaker 8 (08:57):
Like?
Speaker 1 (08:57):
What is there a connection between the amount of debt
that was racked up and the inflation that we saw
in the last few years?
Speaker 9 (09:04):
Yes, And you used an important word, which was connection,
So we could use another word that maybe has a
similar meaning, which would be correlation. Yes, there's a correlation.
We'd be more interesting if we have a conversation about causation.
Did the amount of money that was spent, was it
largely responsible for did it cause the highest inflation that
(09:28):
we've had in some forty years now? People, you know,
can have reasonable disagreements about the extent to which the
various pieces of legislation contributed to inflation ry pressures. And
I'm certainly not here to say that they played no role.
But I think whether you're looking at, you know, work
(09:48):
coming out of Moody's or Goldman Sachs or the Federal
Reserve or the IMF, people who've taken a hard look
at this and sort of done the autopsy right to
say how much of the inflation that we experienced came
from an excess of fiscal support? The answer from economists
to very well known economists, former central banker Ben Bernanky
(10:12):
Olivier Blanchard, they'll say it played some role, but it
was a minor role. Overwhelmingly it was problems related to
COVID supply chain breakdowns, the war and the war, and
excuse me, Russia and Ukraine and that sort of stuff, energy,
food prices.
Speaker 7 (10:28):
On the like.
Speaker 1 (10:30):
Let me just bring Stephen for one minute here before
we have to take a quick break, which is there's this.
There are many people who would disagree with some of
what Stephanie has been saying. There's a study from Ernst
and Young that I read that says that rising debt
will lower income, reduce investment, eliminate millions of jobs, and
reduce GDP. What is the argument that says we can't
(10:54):
just allow the debt to continue to increase, Steve.
Speaker 8 (10:57):
So, there's a couple of arguments that I think you're
worth talking about. You don't one second, I'm just gonna
plug my computer in. But because the battery is dying.
But sorry about that.
Speaker 1 (11:06):
But anyway, actually, you know, see, we're gonna let you
do that. We're gonna let you do that because because
we we have to, we have to take a break
in the second anyway, And I will just remind our
listeners that you can reach eight four. This is the
first time that's ever the battery with that eight four
four four six four three three five three. You know. Tolliver,
(11:27):
Florida's Republican Senator Rick Scott would be a deficit hawk.
He says the so called big beautiful bill that just
passed that they said will add to the deficit, didn't
go far enough in cutting spending.
Speaker 2 (11:38):
Yeah, and he often cites his lower middle class upbringing
in Central Illinois, your home country, as an inspiration for
his fiscal conservatism. Here he is talking about the deficit
in an interview with CNBC.
Speaker 11 (11:50):
Let's get some fiscal sanity here. We're not going to
get inflation down, We're not going to get interest rates
down unless we get spending at the level of what
we we bring in. The public is told us what
they're going to give us in revenues. We have to
live within our means. You do businesses do. I balanced
a bunchet when I was governing in Florida, even though
it had not been balanced in twenty years. I paid
(12:11):
off a thurdstate debt because we went line by line.
We got rid of fraud, waste and abuse and things
that might be nice to have, but we can't afford it.
Speaker 1 (12:22):
And as we said, Rick Scott voted for the Big
Beautiful Bill, which adds to the debt. He's also from
Florida to Toliver. We're doing a very special episode of
One Thing Trump Did that's dropping in a few days.
That's going to be looking at how Florida's political machine
is affecting the whole country right now with all these
Floridians in very high positions of our government. That's going
(12:45):
to be a must listen to on the Middle podcast
wherever you listen to podcasts, will be right back with
more of the Middle. This is the Middle on Jeremy Hobson.
If you're just tuning, in the Middle is a national
call in show. We are focused on elevating voices from
the middle geographically, politically, and philosophically, or maybe you just
want to meet in the middle. This hour, we're asking
(13:05):
what can be done to fix the national debt tolliver,
what is the number to call in?
Speaker 2 (13:08):
It's eight four four four Middle. That's eight four four
four six four three three five three. You can also
write to us that listen to the Middle dot com
or on social media. The comments are flying in, so
getting that queue.
Speaker 1 (13:21):
And the calls are coming and we're going to get
to them in just a second. I'm joined by CNBC
senior economics reporter Steve Lee Span and Stephanie Calton, a
professor at Stonybrook University. Steve, back to you. So we
were talking about some of the downsides that experts warn
about at increasing debt.
Speaker 8 (13:36):
So I think you got to separate the problems. There's
economic issues related to it, and they're political issues. The
economic ones are very related by the way to confidence.
The whole thing is a massive confidence game, right. Thirty
six trillion dollars means of debt means there's thirty six
trillion dollars of paper floating out there that people are
holding that they believe the US government will pay off,
(13:59):
and that creates issues. Every time the government has a
rollover or debt becomes due or has to get more money,
it has to go out and sell those bonds to
the market, And the question becomes not really whether they
sell them. That's a separate issue we can discuss, which
would talk about an auction failure. Hasn't happened, probably won't happen,
(14:20):
But what is the price that we have to pay
for that? And that's really the issue, the price that
the government has to pay. And then it becomes a
political issue, which is how much money now is being
allocated through taxes to paying the debt and it has
now become a massive part of the budget. I believe
it's bigger than defense and bigger than education. And the
(14:41):
question is politically, what kind of government, what kind of
expenditures do you want to have? Stephanie's right, it goes
into the pockets of people, but which people doesn't go
into and politically doesn't create choices where, for example, Medicare
has to be cut so that we can reduce the
amount of the t deficit and spend more for paying
(15:02):
the debt service. So you have this confidence issue and
economic issue along with serious political issues. Just real quick, Jeremy,
let me tell you what the United States is. The
United States is a person that makes one hundred thousand
dollars a year, has one hundred thousand dollars of debt
and has five hundred thousand dollars in the bank. Our
(15:23):
debt to asset ratio is five to one. We're fine.
We're fine. It's not a question of do we have
the money to pay. The question is do we have
the political will right? And that's why we were downgraded
most recently, I believed by Moodies.
Speaker 1 (15:39):
They're always so fast on that. Moodies. Let's go to Nathan,
who is in Boulder, Colorado. Nathan, welcome to the middle
What do you think about this?
Speaker 7 (15:49):
Hi?
Speaker 6 (15:49):
Yeah, my name is Thinking Mason. I think that we
need to redefine what national defense means, because that's one
of our core issues is through keeping a very vague
answer what national defense means, that allows us to keep
going imperialistically and keep defending other nations other things that
(16:09):
ultimately does not turn back into good debt for us.
I also think that we need to roll Social Security
and Medicare into state budgets and the states are now
accountable for this so that we don't have to lose
money sending money to DC to back and processing fee and.
Speaker 1 (16:26):
Employment feed interesting Nathan, Thanks for that call, Stephanie. He
brings up social security and medicare to very big parts
of our spending. The last time social security was touched
was in the early eighties. Is it time to think
about raising the age or means testing it in order
to because national debt aside, they're going to run out
(16:49):
of money according to the experts in like ten years
and so not going to have enough to pay it
out fully. It would you touch that as an economist, No.
Speaker 9 (16:58):
I wouldn't look when it comes to social security there
I look at this and I focus on three things. Okay,
Alan Greenspan, you said the last time it was touched
nineteen eighty three. It was known as the Greenspan Commission.
Alan Greenspan, when he was FED chair, testified before Congress
and at the time then Paul Ryan, Congressman Paul Ryan
(17:19):
asked Alan Greenspan this question that you're basically asking, which is,
what do we do about the fact that social security
is running out of money? Shouldn't we begin to privatize
the system? Moved to personal retirement accounts, and Alan Greenspan said,
absolutely not. He said, and these are his exact words. Okay,
he said, there's nothing to prevent the federal government from
creating as much money as it wants and paying it
(17:40):
to someone. Those are his words. He said. The question is, though,
how do you set up a system that assures that
the real assets are created, that those benefits are employed
to purchase. In other words, Greenspan was trying to get
us to think about inflation. He's saying, we've made all
these promises to future retirees. They're dependent that disabled. There's
(18:01):
no problem making those payments. We can make the payments
in full, on time and perpetuity. But he said, we
got demographic changes taking place. How do we know that
when those checks go out, people who receive them are
going to be able to turn around and spend them
back into an economy that is productive enough, that's producing
enough goods and services to meet the needs of everybody
(18:22):
who's trying to spend without causing an inflation problem. So
this is not about ability to pay. It is not
about financial ability to pay. It cannot be. It's about
political will, which is what Steve was just talking about. Willingness,
the political will to make good. There is no economic
reason at all to touch social security.
Speaker 1 (18:42):
Okay, let's go to Joe, who's in Herndon, Virginia. Joe,
welcome to the middle, go ahead.
Speaker 8 (18:49):
Thank you.
Speaker 5 (18:50):
First of all, I want to echo Steve's earlier comment
loved the tunesos going. My question, sorry, was that it's
a big show.
Speaker 1 (19:02):
Thank you.
Speaker 5 (19:04):
Uh My, My question is kind of a first principles question.
I'm curious what you all think how much money should
exist and is are underfunded or under addressed? The saddle
problems that indicators of an insufficient money supply.
Speaker 1 (19:21):
So you're asking should like, should the Fed be printing
more money to make to make ends meet? Basically, yeah, what.
Speaker 5 (19:29):
You think we have decided? Or if we've come up
with a tax structure that isn't addressing things like social
security or climate change, or I mean, we could chalk
it up to political will. But if we've you know,
sent people for twenty five years and we keep coming
up with deficits in a big way, is that not
an indicator that maybe our system doesn't have enough money
(19:51):
flowing through it? Or how do y'all think about that?
Speaker 1 (19:54):
Interesting? Thank you for that call.
Speaker 8 (19:56):
I think Stephanie has added a great deal to the
economic discussion and her ideas about how government spending is
the inflation is one of the limitations on government spending,
and you can tell that you're spending too much through
the inflation numbers. I think that's important and important way
to think about it. There's another way to think about it,
which I also like, and Stephanie mentioned Olivia Blanchard, one
(20:20):
of the leading minds in economics today, and basically it's
that the return on the investment is greater than the
cost of investment, and so what you want to end
up doing is bringing interest rates down to a point
where the thing you invest in is returning greater than
the interest rate you're paying. And it's kind of the
problem we have right now is that we do need
(20:42):
to bring interest rates down, and part of that can
come through government spending. It can come through an increase
in revenue, which is talk about being on the show
the middle. I'm decidedly in the middle on this notion
of needing to reduce government spending. Somebody mentioned defense before,
that's a great target, but also raising revenue. I don't know.
(21:06):
I blew a gasket in the back of my head
earlier this week when they raised, for example, the cap
on the estate packs from fifteen million or up up
to fifteen million. This has been by the way, Jeremy,
the ace in the whole of government finances is this
massive transference of wealth that's happening between the Baby Boom
generation and the next generation. The government's going to get
(21:28):
a piece of that. Well, the Congress just decided it
wanted less of a piece of that than otherwise was
going to get. So that to me just I think
that's a two hundred billion dollar hit to revenue and
all these other things that were done the CBO this
week to three point four trillion additional deficits spending on
the big beautiful bill. The question becomes, is the investment returning.
(21:52):
You can make a discussion about climate change, you can
make a discussion about the IRA, but that's really the
key to the growth external We talked about that earlier. Yeah,
for productivity.
Speaker 1 (22:04):
Paul is calling from Smyrna, Tennessee. Paul, your thoughts on
bringing down the debt?
Speaker 12 (22:13):
Paul, go ahead, Well, you know, I sure I'd like
to see all these clowns in Washington take a pay cut,
you know, and h throughout my lifetime. And I'm sure
over the two hundred years or more than the country's
been in existence. When businesses get in trouble, they either
cut salaries or lay people off. And frankly, I'm a
little tired of some congressmen or some senator standing up
(22:35):
and saying, hey, we need to cut this or cut that,
when these jokers never take a cut. Never, you know,
do their pensions go into the what is it, the
something government fund and they write you back and say
all that pension no longer exists. No, they just bote
themselves some more money.
Speaker 1 (22:55):
And what do you think so angry that they're not
taking a pay cut themselves. Are you worried about the
amount of debt that's being racked up? Paul?
Speaker 5 (23:04):
Pardon me?
Speaker 1 (23:05):
Are you worried about the amount of debt that's being
racked up for all of us as a country? Oh?
Speaker 7 (23:11):
Sure?
Speaker 12 (23:11):
You know, when I start talking about three trillion dollars
in debt, I can't even imagine a trillion, much less three.
And this is from people that for years told us, oh,
we need to cut, we need to cut.
Speaker 1 (23:24):
Yeah. Well, Paul, thank you very much for that call.
And Stephanie, I have to say, you know, as somebody
who has worked in public broadcasting for my career, and
then the last week Congress cut the one billion dollars
over for two years of funding that they give to
the Corporation for Public Broadcasting. I can totally hear what
Paul is saying about, well, we got to cut this
(23:45):
to deal with it, but not any of these other things.
Speaker 9 (23:50):
Well, yeah, I mean, nobody's going to be surprised to
learn that there's a lot of hypocrisy in Washington, d C.
I mean, you know, we've listened for years and years.
It's usually the premise of this program is listening to
lawmakers on both sides of the aisle point the finger
at one another, and you know, cry and complain about
things that add to the deficit and increase the size
(24:12):
of the debt. Nobody likes it, but everybody does it.
And so you know, you point your finger at the
Democrats and say this is your fault. It's all spending
run amuck, and the Democrats point the finger at the
Republicans say no, it's not a spending problem, it's a
revenue problem. You keep giving away all the money in
the form of tax cuts and so forth. So, yeah,
it's not a very sincere conversation in many respects. That said,
(24:35):
cutting programs like NPR PBS, cutting a few federal salaries
doesn't make a debt in the size of the deficit.
It's a rounding error.
Speaker 1 (24:45):
At the end, Oliver the man of the hour, What's
coming in online?
Speaker 2 (24:49):
It's my show now. This is Jennifer and decalves. She says,
to say that the debt is not an issue because
of its size is ridiculous. All the tax dollars that
are going to pay interest could instead be paying for
ser us and benefits for the American people. Deborah says,
if a national immigration system was put in place that
actually worked, all of those revenues collected from that could
solve our national debt crisis. I'm not sure that what
(25:11):
that means. Kathleen and Saint Paul Minnesota says. Trump has
recently stated that the tariffs have brought in eighty eight
billion dollars in the last two months. Is this money
going towards paying off the debt? And I feel like
that's something we can get into with Steve.
Speaker 1 (25:25):
That is absolutely Steve. You know, wait, let me just
give you a number here. The Tax Foundation, which is
a non part as an organization, says a ten percent
universal tariff could bring in two trillion dollars over a decade.
Are we expecting these tariffs to start, you know, actually
having an impact on money coming in.
Speaker 8 (25:45):
Yes, over the short term and probably no over the
long term. Look, this was one of the biggest tax
tips i think since the early nineteen sixties, and it's
just remarkable to me that it's not been kind of
explained as that are. These are basically American corporations and
American consumers paying this money out there, and it is
(26:05):
going into the federal coffers. The trouble is that over
time this number will probably be reduced because people will
either live without or buy domestically. One or the other.
There'll be a kick on the other side of domestically,
but you also will have a reduction in GDP because
of this, because frankly, it's the least efficient way probably
(26:28):
for companies and other people to buy the things that
they need in a more expensive way, either to buy
domestically or for companies, especially that use imports as inputs
into their production. It's going to be a higher cost
and it will reduce productivity over time. So yeah, we're
going to get a nice boost to the revenue side,
(26:48):
but it's going to decline over time and bring down
GDP with it. Because it's a less efficient structuring of
the global trade system.
Speaker 1 (26:57):
People will go looking for the cheaper prices where they
can get them over the course of time.
Speaker 8 (27:02):
Yeah. Sure, but they may end up doing it in
the United States, which will be And the other thing
is you may do without it, right, I mean, that's
another thing. You may end up saying, you know, I
didn't need that, and so I won't get it. What
really strikes me as significant is what it does to
us innovation in that we have been able to innovate
(27:26):
through a global supply chain. Think about Apple. Apple is
a virtual manufacturing company. It doesn't manufacture anything. Everything. It
does all the manufacturing and outsources elsewhere. Okay, so bring
it back home. Now, ask yourself, does Apple exist if
all the production is domestic? What happens to the price
(27:48):
of an iPhone? Does the iPhone become the ubiquitous tool
that it is right now? If Apple had to make
it all domestically. And I think about this one woman
who I read about in a New York Times story
who's trying to care ate a solid state battery. She's
a Chinese immigrant educated in the United States, became an
American citizen, raised money from Mercedes in Germany, and is
(28:10):
making the prototypes in South Korea. That's what's happening. That's
the way the world works.
Speaker 1 (28:15):
Are Let's get to Maryland in Birmingham, Alabama. Maryland, welcome
to the middle of your thoughts on the debt.
Speaker 13 (28:26):
Well, I'd just like to say the debt was actually paid.
It was zero during the Clinton administration. Bill Clinton balanced
the budget. He's the only president in my lifetime and
I'm seventy three years old to ever balance the budget.
When George W. Bush came in, he ran it up
two trillion dollars right away. So my experience is the
(28:49):
Democrats paid the bills and the Republicans run them up.
Speaker 7 (28:54):
Okay, thank you, that's that.
Speaker 1 (28:56):
Thank you, Marylyn. And you're talking about the deficit, which
is the annual sort of imbalance between how much we're
bringing in and how much we're spending. That was balanced
back in I think two thousand under Bill Clinton. But Stephanie,
your thoughts on Maryland's comments there.
Speaker 9 (29:13):
Well, look, I have a lot of sympathy because you know,
it does sound like the kind of story that one
would you know, want to wave around and wear as
a sort of badge of honor as a Democrat and say, look,
we are the fiscally responsible party. We're the last guys
who eliminated the deficit and put the budget in surplus.
(29:33):
And this happened for four years. It started in nineteen
ninety eight. We had budget surpluses from ninety eight until
two thousand and one. And she's quite right that when
George W. Bush came in, the surpluses were gone and
we were back to deficits. But the part of the
story that got left out and most people just don't know,
is that those Clinton surpluses were always going to be
(29:57):
unsustainable because think about what a government surplus means. Means
the government is taking more money out of our hands
every year than it's prying back in. You can do
that for a period of time, but at some point
you push the rest of us. It was the US
private sector that was running deficits in that period. The
economy went into recession in two thousand and one as
a result. In the Bush tax cuts were you know,
(30:19):
maybe not everybody's favorite way of addressing the recession in
the slowdown, but it was the right move at least directionally.
Speaker 1 (30:26):
Well, and I remember Bush saying, it's not the government's money,
it's your money. Tolliver, Do you have any tape to
play for us that has said something to do with this?
Speaker 2 (30:35):
You know what I do. Here's former President Bill Clinton
outlining his plan back in nineteen ninety nine.
Speaker 10 (30:41):
Fiscal discipline has widened opportunity and created hope for all
working people in our country. Now we have a chance
to do even more, to use the fruits of our
prosperity today to strengthen our prospects for tomorrow, indeed for
tomorrow's well into the.
Speaker 8 (30:58):
Twenty first century.
Speaker 10 (31:00):
About twenty fifteen, this country can be entirely out of debt.
Speaker 1 (31:07):
Spoiler alert, Tolliver, That did not happen.
Speaker 2 (31:09):
In the eighteen ripped into a big sax solo right
after that.
Speaker 1 (31:12):
That's right, that's right. More of your calls coming up
on the Middle. This is the Middle. I'm Jeremy Hobson.
This hour, we're asking what should be done about the
national debt. If anything, you can call us at eight
four four four Middle. That's eight four four four six
four three three five three. You can also reach out
at listen to the Middle, dot com I'm joined by
Stephanie Shelton, a professor of economics and public policy at
Stonybrook University, and CNBC senior economics reporter Steve Leisman. Steve,
(31:40):
before we go back to the phones, one way that
it seems economists on both sides agree you can increase
tax revenues is to actually have enough people working for
the IRS to collect them, make sure that they're crossing
all the t's and doting in the ice. The IRS
workforce is down by a quarter since January, and the
Big Beautiful Bill cuts the numbers even further. Why does
(32:00):
Trump want to cut the I R s? And Republicans?
Why do they want to cut the I R s
by so much when it means that there will be
less revenue coming in?
Speaker 8 (32:10):
You know, I think some of it has to do
with a sense of the I R S being unfair
to Republicans during the Biden administration. I think that was
some of it. So they're kind of on the uh,
the the MAGA hit list. That's one thing. Look, I
think they want to maybe ultimately dismantle the structure of
the federal government the way it exists. And I mean
(32:32):
some of this dates back Jeremy to the thirties and
the establishment of some of the welfare system created by
FDR when it came to social security and other things.
And I think they they want to stop the ability
of the government to raise that revenue. It's it's if
you want to raise revenue and you care about that stuff,
you would not do what they're doing relative to I R. S. Employment.
(32:56):
I think that's again what they taught talk about. When
they talk about how to solve the deficit from a
revenue probably they talk about broaden the bass and collecting
the taxes that aren't paid, and that's a considerable number.
Speaker 1 (33:10):
Yeah, Mike is calling from Denver, Colorado. Mike, Welcome to
the middle What do you think should be done about
the debtor? What are your thoughts?
Speaker 5 (33:19):
Hi?
Speaker 14 (33:19):
Yeah, Mike from Denver, Colorado. Thanks for taking my call. Also,
I'm going to add a song to your song list,
The Day the Dollar Dies by Peter Tosh, which is
a good money song. But I'm really but I wanted
to ask, and I'm delighted to be able to ask
(33:43):
a question of Stephanie Helton and your other expert. But
if what we say is the deficit is all the
money that's out in the system. It's in people's pockets.
It's in the pockets of every American in the country.
The problem is, isn't the money not going into the
pockets of people who are going to respend it and
reinvested in the economy. It's going into the pockets of
(34:06):
the wealthy and corporations who are going to use buyback
stocks to increase the value of their stock, or they're
going to park their money in an offshore account somewhere.
So the money's not being reinvested in our country, and
therefore they can't be tax and therefore the deficit goes
up and up and up because the wrong people have
(34:26):
the money in their pockets and they aren't reinvesting in
the economy.
Speaker 1 (34:31):
Stephanie, that's to you.
Speaker 9 (34:33):
It's such a good and important point. So let me
say two things. First, a reminder, every deficit is good
for someone. The deficit, the thing we call the government deficit,
is just the difference between two numbers. The first number
is outlays how many dollars the government pushes out into
the economy every year. For simple numbers, let's call it
seven trillion right now. The other number is how many
(34:56):
they take back out, mostly in the form of taxation,
called that five trillion. If they put seven in and
take five out, what they're really doing is depositing to somewhere.
And this gets to the really important point. Every deficit
is good for someone. The question is for whom and
for what are those deficits helping us to address real
problems in the economy. Are we getting better healthcare, education, infrastructure, defense,
(35:20):
whatever it is, or as the caller just alluded to,
is that money pulling up in the hands of a
relatively small population of people who don't recirculate it through
the economic system so that it runs through the veins
of commerce and helps to support jobs and economic activity
more broadly, so, it's important every deficit's good for someone,
(35:43):
but not all deficits are created equal. It's a really
important point.
Speaker 1 (35:48):
Ryan is calling from Pittsburgh, Pennsylvania. Ryan, go ahead with
your thoughts.
Speaker 10 (35:54):
Heny.
Speaker 15 (35:55):
Thanks for taking my call tonight. I was hoping your
two commentators might be able to for some insight into
has there been in the past efforts to pass a
balanced budget amendment and more recently, is there anyone who
is trying to take this up, and if so, what
would the feasibility be of of getting this through or
(36:15):
is this something that actually people in both parties would
prefer not to actually happen.
Speaker 6 (36:20):
Thanks Thanks Ryan.
Speaker 1 (36:22):
Yeah, Steve. You know, it's interesting because even if you
believe that the that the deficit or the debt is
not a problem, the idea of passing an amendment that
says we've got to have a balanced budget that we
bring in what we spend could still be the case.
You could still want to do that.
Speaker 8 (36:36):
No, you wouldn't. But cores keep right and tie itself
to the mass so it won't be tempted by the
sound of the of the sirens. And and every time
the sirens sing, they untie the road. They passed all
kinds of things. There was a go and all sorts
of things. But let me let me try to go
(36:59):
to the thirty thousand foot level on debt, just real quickly,
which is debt is not bad. There's a wonderful book
written called Financing the American Dream, which is actually the
history of debt in America. And what this book tells
us is that we have had a history in this
country of thinking that debt is very, very bad morally.
(37:22):
While we borrow extensively, and it's part of our whole
kind of religious conflict with our capitalist system, which is
deeply ingrained in the contradiction of America. But first of all,
we want a large debt market. The world wants and
requires a large US debt market. It is the grease
(37:45):
that lubricates the world. We benefit enormously and inordinately from
this large debt market. We have foreigners buying our debt.
They desperately want our dollars so they can buy our
debt and they sell us stuff and we can get
it to the whole trade thing if you like. But
that's a real reason for the massive trade deficit, is
if people want our dollars in parts so they can
(38:07):
buy our assets because they love our assets, because they
love our debts, our debt, and they buy it and
they keep interest rates down. And ultimately, we do not
want to get rid of our debt. We'd like to
control our debt. It would not take very much, jeremy,
in my opinion, for the US government to say we
have a plan over a ten or twenty year period
(38:28):
to control our finances, and this could bring down interest rates.
I don't know what, maybe fifty basis points or half
a percentage point or maybe a percentage point if the
United States showed it had some responsibility for the that's
just the problem. The problem I think it's definitely led
out earlier is every party comes in and says, you know,
they preach their austerity and they act and spend like
(38:52):
mostly drunken sailors.
Speaker 1 (38:54):
But well, the other problem, the other problem Steve with
with with having a tenor pie teen. Your plan is
that the president is only in there for you know,
four years, so then they could do the next one
could come in and completely change it. But you have
a full, full roster of calls here, So let me
get to another one and let's go to Sean in
San Mateo, California. Hi, Sean, go ahead with your thoughts.
Speaker 16 (39:18):
Hi, thanks for taking my call. So I want to
touch on something that was just mentioned, actually right before
I got I got on, which is that I don't
think the debt is a problem. It's the deficit, and
it's the debt service payment as a share of GDP.
And what I mean when I say that is I
think there is a runaway point where if our foreign
(39:43):
debtors don't believe that we can realistically pay it back,
or that we're you know, we're less reliable. You know,
you see recently the debt premium, the risk premium go
up on long term treasury.
Speaker 1 (39:56):
Yeah.
Speaker 16 (39:57):
Yes, and that that actually is a vicious because that
means our debt service payments just keep growing as a
result of that, which means it crowds out public investments
that we could make in private public sector and private sector,
and then we get slower economic growth as a result
of that, and it's a runaway train where our economic
(40:18):
growth never catches up to our debt service growth. And
one more point I would put on this is that
I can't I don't think there's ever been a moment
in time where we've actually grown our way to to
toward a smaller deficit. We ran up all in all,
close to eight trillion during COVID, and that added to
(40:40):
the deficit. And we're not going to have that kind
of peak growth going forward because of our shrinking labor force.
We'll never go We're never going to grow like we
did the past couple of years, is my point, and
so I don't see growing out of this. I think
we just need to take some reasonable steps to show
bondholders that we're going to keep this in check.
Speaker 1 (41:00):
And Okay, that's a lot there, Sean, Yeah, thank you
so much, Stephanie. Let's let's just talk about the fact.
What he brings up, which is true, is that the
premium on the debt, the yield on the treasury bonds,
has been going up. It's higher than it was a
few years ago. We're spending more money to have this debt.
Speaker 9 (41:19):
Is that a problem, Well, it depends what you mean
by a problem. If what you mean is and he
sort of started with this was to say something about
whether we can pay it. It isn't about whether we
can pay, it's there's a willingness to pay argument. When
the rating agencies take a look at US debt and they,
(41:42):
you know, grade the US sovereign risk, they are usually
careful to say, we're talking not about the country's ability
to pay, but we have concerns about willingness to pay.
Sometimes we play around with the debt sealing limit, we
threaten to default or something like that. So separate the two,
the willing to pay versus the ability to pay. But
(42:04):
it isn't the case that because interest becomes a very
large percentage of the federal budget, that somehow the government
isn't going to be able to afford to make investments
in other parts of the economy. This is exactly the
same argument we heard in twenty seventeen when the Republicans
passed the tax cuts that were called the Tax Cuts
and Jobs Act. There were a lot of economists on
(42:26):
the left, Democrats, people who served in Democratic administrations, who said,
if the Republicans are successful and they push these tax
cuts through, One very well known economists said, I'll tell
you exactly what he said. He said, the United States
of America will be living on a shoe string for
decades to come because of the increases in the deficits. Okay,
(42:47):
that was Larry Summers, another one that Steve referred to
earlier as Jack Lou. Jack Lou said, if we get
into some kind of military conflict, if we have an
economic downturn, some other kind of financial crisis, the money
won't be there because the Republicans spent it all in
tax cuts. Boy, was that wrong? How do we know
it was wrong? Because COVID happened. And when COVID happened,
(43:08):
there was the crisis. And what did we do. Congress
put the legislation together, the votes were there, and trillions
and trillions of dollars went out the door. So again,
if you don't like the fact that you're spending more
on interest than you're spending on defense, there's always the
option to spend more on defense. We could also explore
maybe ways to spend less on interest over time. But
(43:28):
these are political decisions. They're not economic constraints. They're not
financial constraints on the federal government.
Speaker 7 (43:35):
Right.
Speaker 1 (43:36):
Fazzio is joining us from Minneapolis. Fazio, welcome to the
middle of your thoughts.
Speaker 7 (43:43):
Hi, I've been a big fan of professor Culton, ever
sad seeing her ted talk, so it's triggered Diamateur's self
study of macroeconomics starting with your book. So thanks for that.
Speaker 9 (43:54):
Thank you.
Speaker 7 (43:54):
I have an answer. I have an answer in the question.
If you don't mind, I'll try to be quick. What's
the best story I use when asked about the size
of the debt is that I hate to admit that
I am old enough to remember the Reagan's excuts that
pushed the national debt past the milestone one trillion dollars
in nineteen eighty two. There was a large outpouring of
(44:16):
concern and commentary expressed in the media with such metaphor
oracle weeping and nashing fifties rendering of garments over this
milestone and the millstones that we were hanging on our grandchildren.
Well we are now thirty seven times that amount and
two generations removed, and I haven't seen any people wandering
around with millstones or any financial or other consequences from this.
(44:40):
So you know, kind of use your own eyes as
they say so. But my question now is the US
has been running a chronic trade deficit for a long time.
Warren Moslarn perhaps your other MMT colleagues claim that foreigners
get the cash, but we get the goods, the net
positive for us. My mother is such as Professor or
(45:01):
Steve's keen claim, and has modeled in his system dynamics
simulator that long term trade deficits are damaging to the economy.
So I'm curious to hear Professor Kelton's position on chronic
trade deficits. Should we be concerned?
Speaker 1 (45:17):
I okay, thank you so much for that, Fasio, And
before yes, I'm going to actually though ask Steve Leeman
to step in first, and then we'll go to Professor
Kelton on that since Steve's been off the air for
at least a few minutes at this point.
Speaker 8 (45:28):
Well, I don't want to take the ability of the
car to get an answer from Stefan. I'll just say no.
The answer is no. The trade deficit is just the
other side of our current account surplus. We have massive
dollar infos from all around the world. America is a
stride of the global capitalist system. The President says, the
world is taking advantage of us. That's not really true.
(45:50):
America really is the recipient of Laura Jessum all over
the world, and when they buy, they give us good
goods and we give them funny pieces of paper. I'll
take that trade all day long.
Speaker 1 (46:05):
Stephanie Kelton does the trade, what about the trade deficit?
Speaker 9 (46:08):
Look, I think I'm mindful of time. I'm watching the clock.
I'm largely going to agree with the way Steve just
put it. That's how I opened the chapter on trade
in my own book, But then I went much much deeper.
Trade is a thorny issue. There's a lot of nuance here.
It isn't all good, It isn't all bad for either
(46:30):
side of the trade party in these things. So can
it lead to problems can offshoring lead to some job
losses domestically, Sure, are there things that we could do
to respond to that domestically to re employ people in
other ways? Of course there are. So even when there
are problems associated with chronic trade deficits, there are policy
(46:53):
responses that we didn't choose, that we should have chosen
that would have allowed us to reap even more of
the benefits of trade.
Speaker 1 (47:02):
Tolliver just a comment or two from online Sure.
Speaker 2 (47:05):
Carolyn in Colorado Springs says, raise the income level limit
for Social Security taxes to seven hundred and fifty thousand dollars,
close tax loopholes, and regulate and penalize overseas tax havens.
And then Paul in Kansas City says, many conservatives are
following President Trump's lead to call them the FED to
lower interest rates. How would that likely affect the national debt?
We've sort of covered that one. Oh, and here's the one.
Speaker 1 (47:26):
I will actually wait, let me let me, let me
let me just pick up on that for one, because
we do have FED. We do have FED expert Steve
lee span here. Steve, There's been a lot of talk
about whether Donald Trump is going to fire the FED
Chairman Jerome Powell, who, by the way, he appointed in
his first term. Do you expect that to happen or
(47:47):
do you expect Powell to submit to the pressure and
lower interest rates while we have you here.
Speaker 8 (47:54):
I do not expect them to do that, and I
don't expect the President of the fire Powell, at least
not today. Earlier this week, the President was singing a
different team. We believe he was spoken to by cooler
heads within the administration. We told him to back off,
that there was a meeting today at the construction site.
That the President has created an issue out of nothing,
(48:17):
this idea of this renovation of this FED building, which
is really nothing issue. It's a lot of money, but
it's irrelevant to policy. And really it's the President wanting
the FED to lower interest rates. But I do not
expect the chair to knuckle under to the President here.
He'll go down fighting on this one.
Speaker 1 (48:35):
Just for people haven't been paying attention that the President
is focused on the renovation cost at the FED, because
then if he could figure out a way to fire
Jerome Powell for cause, he would be able to do that.
But he can't just fire him for no reason. I
want to thank my guest so much, CNBC Senior Economics
reporter Steve Lee Spent and Stephanie Helton, Professor of economics
and public Policy at Stonybrook University. You've been great. Thank
(48:55):
you so much to both of you. Thanks for having
used I Forget the Middle, available as a podcast in
partnership with iHeart Podcasts on the iHeart Apple where you
listen to podcasts, and next week on the Middle will
be back here asking if crime is an issue where
you live and what can be done to address it.
Speaker 2 (49:11):
As always, I'll be with us. You can call it
an eight four four four middle. That's eight four four
four six four three three five three, or you can
reach out at Listen to the Middle dot com. You
can also sign up for our free, free weekly newsletter
and support us with a text deductible contribution.
Speaker 1 (49:26):
The Middle is brought to you by Longnok Media, distributed
by Illinois Public Media in Urbana, Illinois, and produced by
Harrison Patino, Danny Alexander Samburmastas, John barth On, Akadessler, and
Brandon Condritz. Our technical director is Steve Mork. Thanks to
our satellite radio listeners, our podcast audience, and the more
than four hundred public radio stations, making it possible for
people across the country to listen to the Middle and
(49:50):
our YouTube audience. I'm Jerey Hobson. I'll talk to you
next week. The sp
Welcome to the middle. I'm Jeremy Hobson, along with our
House DJ Tolliver, who is back this week. And Tolliver,
it turns out that the one billion dollars that Congress
just rescinded from the Corporation for Public Broadcasting did, let
me see here, absolutely nothing to reduce the national debt.
Speaker 2 (00:23):
Ye had to check their notes for that one. H Yes,
I've never heard of the debt going down.
Speaker 1 (00:28):
Is anyone here, I mean, well, it could happen. It
is something that is technically possible. But it turns out
the debt is increasing by almost four billion dollars per
day in this country. That is in part because of
all the interests we're paying on the thirty six trillion
dollars in total debt right now, and because we're adding
to that debt by more than a trillion dollars a
year by not bringing in as much in taxes as
(00:48):
we spend on everything from the military to social security.
The last time Tolliver, that the US took in more
than it spent was in the Clinton administration about twenty
five years ago, when there was a Democratic President, Bill Clinton,
and a report publican Speaker of the House the issue
of dealing with the debt is incredibly political, with each
side sticking to their party's priorities when it comes to
(01:08):
what can be cut. So we're going to see this
hour if there's a middle way. What can be done
to fix the national debt is our question and our
number is eight four four four middle That is eight
four four four six four three three five three, or
you can reach out at listen to themiddle dot com.
But first, last week on the show, we talked about
whether or not social media is safe for kids and teenagers,
(01:30):
and we heard from so many young people both during
the show and afterwards in our voicemail.
Speaker 3 (01:35):
My name is Andre from Baltimore, Maryland. I am seventeen,
and I have experienced social media, and you know, you
see public people's lies, but it's in this way that
it's curated, where you only see the good things. You
don't see the bad parts of someone's life, and I
think that's bad for these kids like me.
Speaker 4 (01:55):
My name is Si Drew. I am seventeen years old.
I'm calling in from many a List, Minnesota. Not to
be really difficult, but the best solution here is a
wider cultural shift, a wider cultural understanding that all of
us are having this problem. It's not just teenagers, it's
not just adult.
Speaker 5 (02:15):
Hey, this is Mitch from Charleston, South Carolina.
Speaker 6 (02:19):
I'm a younger person. It is a little crazy to see,
how I mean, really, it just seems people are and
I know even myself, I personally use Instagram. It's definite
like get sucked into it.
Speaker 7 (02:29):
I have no clue why we do it, Probably just
because we struggle with self control.
Speaker 6 (02:32):
But it's definitely a problem.
Speaker 1 (02:36):
Can you think any of any other show Tolliver where
you hear from multiple teenagers in the hour not Loving
Man and thanks to everyone who called in. You can
hear that entire episode on our podcast in partnership with
iHeart Podcasts, on the iheartapp or wherever you listen to podcasts.
So now to our question this hour, how can we
fix the national debt? Tolliver? How can people reach us?
Speaker 2 (02:54):
Yeah, you can call us at eight four four four
Middle that's eight four four four six four three three
five three, or you can write that listen to the
Middle dot com. You can also comment on our live
stream on YouTube. You can hit us up everywhere and
I'm gonna see it. Okay, So put your comments in
on Get Your on Air.
Speaker 1 (03:09):
Joining me this hour, CNBC senior economics reporter Steve Leasman, Steve, welcome.
Speaker 8 (03:13):
Back, great to be here, Thanks for having me.
Speaker 1 (03:15):
Carey and Stephanie Kelton is with US Professor of Economics
at Public Policy at stony Brook University. Her book is
called The Deficit Myth, Modern Monetary Theory and the Birth
of the People's Economy. Stephanie, welcome to you.
Speaker 9 (03:27):
Thank you. Nice to be with all of you.
Speaker 1 (03:29):
It's great to have you. So before we get to
the phones, I spent many years covering business and economic
news during and after the financial crisis of two thousand
and eight, and there were economists, Steve, who were worried
about how much the US was borrowing to stimulate the economy.
But there were also people who said, it doesn't matter
right now. The debt did not we can have this debt.
It seems like the conversation is kind of different now, Steve,
(03:52):
maybe because interest rates are higher or the debt is bigger.
But what are the people you talk to say about
this as a problem.
Speaker 8 (03:59):
Well, let me ask you, Jeremy, when were you doing
that reporting.
Speaker 1 (04:03):
Like eight through like twenty thirteen.
Speaker 8 (04:06):
So doesn't it seem quaint now the numbers they were
talking about, And I think that's kind of well. First
of all, I have to say one thing before we
get going, which is, whatever budget cuts you have to
go through, Jeremy, don't let Tolliver go because the tunes
are grooven and right. Just want to spend a minute
to say that. But and the mail, Stephen, Yes, none necessary,
(04:28):
just keep spinning. But here's the deal. It is true,
and it's important to point out that the debt has
been a source of catastrophic prediction for many years, and
those folks have been wrong. Right. We have had the
ability to borrow more and more and pay our debt
(04:49):
much beyond the capacity of what people have said. The
truth is, nobody knows what the actual limit is of
our debt to GDP, which is now a pro one
hundred percent and going to one hundred and twenty percent.
They say, by way of comparison, you can look back.
You can look at Japan right now, which has a
two hundred percent debt to GDP ratio. You can look
(05:11):
back to the seventeen hundreds and Britain, which fought many,
many wars and had a two hundred and two hundred
and fifty percent debt to GDP ratio. It grew its
way out of it through the Industrial revolution, technology and
productivity and budget austerity. We don't know, but I would
like to sort of quote Robert Rubin who said to
when I made these arguments him, he said, Okay, do
(05:33):
you really want to find out where that limit is?
And I don't think I want to find out. And
I don't know where that limit is. And I know
that there's been a lot of what's the word catastrophizing
of the debt to GDP, and it has been wrong.
I think Stephanie is chomping at the bit has something
to say about that. But just before I let her
(05:53):
have it, have the microphone, I would just point out
that over time, what's what's unusual and and and and
and worries some to me about the debt to GDP
right now is it's rising at a time of peacetime
and of expansion, right and that's the heating that is
most concerning. And so when it comes time to need
(06:16):
to help people and to boost aggregate demand in a recession,
I have concerns that the resources may not be there.
Speaker 1 (06:25):
So I was I was I was taught in college
economics that that you know, in good times you save
and then you can spend in the bad times. Let
me let Stephanie in here, and Stephanie, what do you
what do you think does a thirty six trillion dollar
national debt need to be dealt with?
Speaker 9 (06:39):
Well? No, I mean, look, I'll throw out an example,
and I'm only partly kidding, and actually I'm not really kidding.
I drive a Ford mock E. Okay, I bought it
a few years ago. I took advantage of a provision
and the Cares Act that kicked in a little bit
of money if people go out and buy an electric vehicle.
(07:01):
So I did that.
Speaker 1 (07:02):
So the way I.
Speaker 9 (07:03):
Think about this is it would be sort of like
me taking my MACKI into my mechanic tomorrow morning and saying,
I want you to take a look at the engine
and see if you can fix it. Okay, that would
be a really silly thing to do. There is no
engine in my car, so there's nothing to fix. And
I feel a lot like that's what this conversation is.
When people say to me, what are your ideas for
(07:25):
how we should go about you know, tackling or fixing
the national debt. I say, well, what is the evidence
that there's a problem that we need to resolve? And
the fact that it's a very large number is not
in itself evidence of a problem. I know it makes
people very nervous when you put lots of zeros behind
a number and you attach the word debt to it. Okay,
(07:47):
that automatically gets people concerned. But what I'm looking at
when I hear this word, I try not to focus
and fixate on the word debt. I prefer to try
to put this into context. What are we actually talking
talking about. We're talking about the number of dollars that
the federal government has spent into our hands over the
(08:08):
entire course of US history and not taxed away from us.
Those dollars resides are being held in the form of
treasury securities, so part of our savings and part of
our wealth. So you look at the summer and you say, well,
I don't know. Is thirty six trillion too much wealth
for people to have? Is it too much saving? Can
(08:29):
it create problems?
Speaker 10 (08:30):
Yes?
Speaker 9 (08:31):
And where I would look for problems would be in
something like inflation. But when somebody says, why are we
running these large deficits. The economy is doing really well
on employment is low, inflation's coming back down. I say,
exactly what problem are you pointing to?
Speaker 7 (08:47):
Right?
Speaker 9 (08:47):
Where is the evidence that?
Speaker 1 (08:49):
Yeah, go ahead, Stephanie. Did you see a connection between
the spending in it during COVID and inflation?
Speaker 8 (08:57):
Like?
Speaker 1 (08:57):
What is there a connection between the amount of debt
that was racked up and the inflation that we saw
in the last few years?
Speaker 9 (09:04):
Yes, And you used an important word, which was connection,
So we could use another word that maybe has a
similar meaning, which would be correlation. Yes, there's a correlation.
We'd be more interesting if we have a conversation about causation.
Did the amount of money that was spent, was it
largely responsible for did it cause the highest inflation that
(09:28):
we've had in some forty years now? People, you know,
can have reasonable disagreements about the extent to which the
various pieces of legislation contributed to inflation ry pressures. And
I'm certainly not here to say that they played no role.
But I think whether you're looking at, you know, work
(09:48):
coming out of Moody's or Goldman Sachs or the Federal
Reserve or the IMF, people who've taken a hard look
at this and sort of done the autopsy right to
say how much of the inflation that we experienced came
from an excess of fiscal support? The answer from economists
to very well known economists, former central banker Ben Bernanky
(10:12):
Olivier Blanchard, they'll say it played some role, but it
was a minor role. Overwhelmingly it was problems related to
COVID supply chain breakdowns, the war and the war, and
excuse me, Russia and Ukraine and that sort of stuff, energy,
food prices.
Speaker 7 (10:28):
On the like.
Speaker 1 (10:30):
Let me just bring Stephen for one minute here before
we have to take a quick break, which is there's this.
There are many people who would disagree with some of
what Stephanie has been saying. There's a study from Ernst
and Young that I read that says that rising debt
will lower income, reduce investment, eliminate millions of jobs, and
reduce GDP. What is the argument that says we can't
(10:54):
just allow the debt to continue to increase, Steve.
Speaker 8 (10:57):
So, there's a couple of arguments that I think you're
worth talking about. You don't one second, I'm just gonna
plug my computer in. But because the battery is dying.
But sorry about that.
Speaker 1 (11:06):
But anyway, actually, you know, see, we're gonna let you
do that. We're gonna let you do that because because
we we have to, we have to take a break
in the second anyway, And I will just remind our
listeners that you can reach eight four. This is the
first time that's ever the battery with that eight four
four four six four three three five three. You know. Tolliver,
(11:27):
Florida's Republican Senator Rick Scott would be a deficit hawk.
He says the so called big beautiful bill that just
passed that they said will add to the deficit, didn't
go far enough in cutting spending.
Speaker 2 (11:38):
Yeah, and he often cites his lower middle class upbringing
in Central Illinois, your home country, as an inspiration for
his fiscal conservatism. Here he is talking about the deficit
in an interview with CNBC.
Speaker 11 (11:50):
Let's get some fiscal sanity here. We're not going to
get inflation down, We're not going to get interest rates
down unless we get spending at the level of what
we we bring in. The public is told us what
they're going to give us in revenues. We have to
live within our means. You do businesses do. I balanced
a bunchet when I was governing in Florida, even though
it had not been balanced in twenty years. I paid
(12:11):
off a thurdstate debt because we went line by line.
We got rid of fraud, waste and abuse and things
that might be nice to have, but we can't afford it.
Speaker 1 (12:22):
And as we said, Rick Scott voted for the Big
Beautiful Bill, which adds to the debt. He's also from
Florida to Toliver. We're doing a very special episode of
One Thing Trump Did that's dropping in a few days.
That's going to be looking at how Florida's political machine
is affecting the whole country right now with all these
Floridians in very high positions of our government. That's going
(12:45):
to be a must listen to on the Middle podcast
wherever you listen to podcasts, will be right back with
more of the Middle. This is the Middle on Jeremy Hobson.
If you're just tuning, in the Middle is a national
call in show. We are focused on elevating voices from
the middle geographically, politically, and philosophically, or maybe you just
want to meet in the middle. This hour, we're asking
(13:05):
what can be done to fix the national debt tolliver,
what is the number to call in?
Speaker 2 (13:08):
It's eight four four four Middle. That's eight four four
four six four three three five three. You can also
write to us that listen to the Middle dot com
or on social media. The comments are flying in, so
getting that queue.
Speaker 1 (13:21):
And the calls are coming and we're going to get
to them in just a second. I'm joined by CNBC
senior economics reporter Steve Lee Span and Stephanie Calton, a
professor at Stonybrook University. Steve, back to you. So we
were talking about some of the downsides that experts warn
about at increasing debt.
Speaker 8 (13:36):
So I think you got to separate the problems. There's
economic issues related to it, and they're political issues. The
economic ones are very related by the way to confidence.
The whole thing is a massive confidence game, right. Thirty
six trillion dollars means of debt means there's thirty six
trillion dollars of paper floating out there that people are
holding that they believe the US government will pay off,
(13:59):
and that creates issues. Every time the government has a
rollover or debt becomes due or has to get more money,
it has to go out and sell those bonds to
the market, And the question becomes not really whether they
sell them. That's a separate issue we can discuss, which
would talk about an auction failure. Hasn't happened, probably won't happen,
(14:20):
But what is the price that we have to pay
for that? And that's really the issue, the price that
the government has to pay. And then it becomes a
political issue, which is how much money now is being
allocated through taxes to paying the debt and it has
now become a massive part of the budget. I believe
it's bigger than defense and bigger than education. And the
(14:41):
question is politically, what kind of government, what kind of
expenditures do you want to have? Stephanie's right, it goes
into the pockets of people, but which people doesn't go
into and politically doesn't create choices where, for example, Medicare
has to be cut so that we can reduce the
amount of the t deficit and spend more for paying
(15:02):
the debt service. So you have this confidence issue and
economic issue along with serious political issues. Just real quick, Jeremy,
let me tell you what the United States is. The
United States is a person that makes one hundred thousand
dollars a year, has one hundred thousand dollars of debt
and has five hundred thousand dollars in the bank. Our
(15:23):
debt to asset ratio is five to one. We're fine.
We're fine. It's not a question of do we have
the money to pay. The question is do we have
the political will right? And that's why we were downgraded
most recently, I believed by Moodies.
Speaker 1 (15:39):
They're always so fast on that. Moodies. Let's go to Nathan,
who is in Boulder, Colorado. Nathan, welcome to the middle
What do you think about this?
Speaker 7 (15:49):
Hi?
Speaker 6 (15:49):
Yeah, my name is Thinking Mason. I think that we
need to redefine what national defense means, because that's one
of our core issues is through keeping a very vague
answer what national defense means, that allows us to keep
going imperialistically and keep defending other nations other things that
(16:09):
ultimately does not turn back into good debt for us.
I also think that we need to roll Social Security
and Medicare into state budgets and the states are now
accountable for this so that we don't have to lose
money sending money to DC to back and processing fee and.
Speaker 1 (16:26):
Employment feed interesting Nathan, Thanks for that call, Stephanie. He
brings up social security and medicare to very big parts
of our spending. The last time social security was touched
was in the early eighties. Is it time to think
about raising the age or means testing it in order
to because national debt aside, they're going to run out
(16:49):
of money according to the experts in like ten years
and so not going to have enough to pay it
out fully. It would you touch that as an economist, No.
Speaker 9 (16:58):
I wouldn't look when it comes to social security there
I look at this and I focus on three things. Okay,
Alan Greenspan, you said the last time it was touched
nineteen eighty three. It was known as the Greenspan Commission.
Alan Greenspan, when he was FED chair, testified before Congress
and at the time then Paul Ryan, Congressman Paul Ryan
(17:19):
asked Alan Greenspan this question that you're basically asking, which is,
what do we do about the fact that social security
is running out of money? Shouldn't we begin to privatize
the system? Moved to personal retirement accounts, and Alan Greenspan said,
absolutely not. He said, and these are his exact words. Okay,
he said, there's nothing to prevent the federal government from
creating as much money as it wants and paying it
(17:40):
to someone. Those are his words. He said. The question is, though,
how do you set up a system that assures that
the real assets are created, that those benefits are employed
to purchase. In other words, Greenspan was trying to get
us to think about inflation. He's saying, we've made all
these promises to future retirees. They're dependent that disabled. There's
(18:01):
no problem making those payments. We can make the payments
in full, on time and perpetuity. But he said, we
got demographic changes taking place. How do we know that
when those checks go out, people who receive them are
going to be able to turn around and spend them
back into an economy that is productive enough, that's producing
enough goods and services to meet the needs of everybody
(18:22):
who's trying to spend without causing an inflation problem. So
this is not about ability to pay. It is not
about financial ability to pay. It cannot be. It's about
political will, which is what Steve was just talking about. Willingness,
the political will to make good. There is no economic
reason at all to touch social security.
Speaker 1 (18:42):
Okay, let's go to Joe, who's in Herndon, Virginia. Joe,
welcome to the middle, go ahead.
Speaker 8 (18:49):
Thank you.
Speaker 5 (18:50):
First of all, I want to echo Steve's earlier comment
loved the tunesos going. My question, sorry, was that it's
a big show.
Speaker 1 (19:02):
Thank you.
Speaker 5 (19:04):
Uh My, My question is kind of a first principles question.
I'm curious what you all think how much money should
exist and is are underfunded or under addressed? The saddle
problems that indicators of an insufficient money supply.
Speaker 1 (19:21):
So you're asking should like, should the Fed be printing
more money to make to make ends meet? Basically, yeah, what.
Speaker 5 (19:29):
You think we have decided? Or if we've come up
with a tax structure that isn't addressing things like social
security or climate change, or I mean, we could chalk
it up to political will. But if we've you know,
sent people for twenty five years and we keep coming
up with deficits in a big way, is that not
an indicator that maybe our system doesn't have enough money
(19:51):
flowing through it? Or how do y'all think about that?
Speaker 1 (19:54):
Interesting? Thank you for that call.
Speaker 8 (19:56):
I think Stephanie has added a great deal to the
economic discussion and her ideas about how government spending is
the inflation is one of the limitations on government spending,
and you can tell that you're spending too much through
the inflation numbers. I think that's important and important way
to think about it. There's another way to think about it,
which I also like, and Stephanie mentioned Olivia Blanchard, one
(20:20):
of the leading minds in economics today, and basically it's
that the return on the investment is greater than the
cost of investment, and so what you want to end
up doing is bringing interest rates down to a point
where the thing you invest in is returning greater than
the interest rate you're paying. And it's kind of the
problem we have right now is that we do need
(20:42):
to bring interest rates down, and part of that can
come through government spending. It can come through an increase
in revenue, which is talk about being on the show
the middle. I'm decidedly in the middle on this notion
of needing to reduce government spending. Somebody mentioned defense before,
that's a great target, but also raising revenue. I don't know.
(21:06):
I blew a gasket in the back of my head
earlier this week when they raised, for example, the cap
on the estate packs from fifteen million or up up
to fifteen million. This has been by the way, Jeremy,
the ace in the whole of government finances is this
massive transference of wealth that's happening between the Baby Boom
generation and the next generation. The government's going to get
(21:28):
a piece of that. Well, the Congress just decided it
wanted less of a piece of that than otherwise was
going to get. So that to me just I think
that's a two hundred billion dollar hit to revenue and
all these other things that were done the CBO this
week to three point four trillion additional deficits spending on
the big beautiful bill. The question becomes, is the investment returning.
(21:52):
You can make a discussion about climate change, you can
make a discussion about the IRA, but that's really the
key to the growth external We talked about that earlier. Yeah,
for productivity.
Speaker 1 (22:04):
Paul is calling from Smyrna, Tennessee. Paul, your thoughts on
bringing down the debt?
Speaker 12 (22:13):
Paul, go ahead, Well, you know, I sure I'd like
to see all these clowns in Washington take a pay cut,
you know, and h throughout my lifetime. And I'm sure
over the two hundred years or more than the country's
been in existence. When businesses get in trouble, they either
cut salaries or lay people off. And frankly, I'm a
little tired of some congressmen or some senator standing up
(22:35):
and saying, hey, we need to cut this or cut that,
when these jokers never take a cut. Never, you know,
do their pensions go into the what is it, the
something government fund and they write you back and say
all that pension no longer exists. No, they just bote
themselves some more money.
Speaker 1 (22:55):
And what do you think so angry that they're not
taking a pay cut themselves. Are you worried about the
amount of debt that's being racked up? Paul?
Speaker 5 (23:04):
Pardon me?
Speaker 1 (23:05):
Are you worried about the amount of debt that's being
racked up for all of us as a country? Oh?
Speaker 7 (23:11):
Sure?
Speaker 12 (23:11):
You know, when I start talking about three trillion dollars
in debt, I can't even imagine a trillion, much less three.
And this is from people that for years told us, oh,
we need to cut, we need to cut.
Speaker 1 (23:24):
Yeah. Well, Paul, thank you very much for that call.
And Stephanie, I have to say, you know, as somebody
who has worked in public broadcasting for my career, and
then the last week Congress cut the one billion dollars
over for two years of funding that they give to
the Corporation for Public Broadcasting. I can totally hear what
Paul is saying about, well, we got to cut this
(23:45):
to deal with it, but not any of these other things.
Speaker 9 (23:50):
Well, yeah, I mean, nobody's going to be surprised to
learn that there's a lot of hypocrisy in Washington, d C.
I mean, you know, we've listened for years and years.
It's usually the premise of this program is listening to
lawmakers on both sides of the aisle point the finger
at one another, and you know, cry and complain about
things that add to the deficit and increase the size
(24:12):
of the debt. Nobody likes it, but everybody does it.
And so you know, you point your finger at the
Democrats and say this is your fault. It's all spending
run amuck, and the Democrats point the finger at the
Republicans say no, it's not a spending problem, it's a
revenue problem. You keep giving away all the money in
the form of tax cuts and so forth. So, yeah,
it's not a very sincere conversation in many respects. That said,
(24:35):
cutting programs like NPR PBS, cutting a few federal salaries
doesn't make a debt in the size of the deficit.
It's a rounding error.
Speaker 1 (24:45):
At the end, Oliver the man of the hour, What's
coming in online?
Speaker 2 (24:49):
It's my show now. This is Jennifer and decalves. She says,
to say that the debt is not an issue because
of its size is ridiculous. All the tax dollars that
are going to pay interest could instead be paying for
ser us and benefits for the American people. Deborah says,
if a national immigration system was put in place that
actually worked, all of those revenues collected from that could
solve our national debt crisis. I'm not sure that what
(25:11):
that means. Kathleen and Saint Paul Minnesota says. Trump has
recently stated that the tariffs have brought in eighty eight
billion dollars in the last two months. Is this money
going towards paying off the debt? And I feel like
that's something we can get into with Steve.
Speaker 1 (25:25):
That is absolutely Steve. You know, wait, let me just
give you a number here. The Tax Foundation, which is
a non part as an organization, says a ten percent
universal tariff could bring in two trillion dollars over a decade.
Are we expecting these tariffs to start, you know, actually
having an impact on money coming in.
Speaker 8 (25:45):
Yes, over the short term and probably no over the
long term. Look, this was one of the biggest tax
tips i think since the early nineteen sixties, and it's
just remarkable to me that it's not been kind of
explained as that are. These are basically American corporations and
American consumers paying this money out there, and it is
(26:05):
going into the federal coffers. The trouble is that over
time this number will probably be reduced because people will
either live without or buy domestically. One or the other.
There'll be a kick on the other side of domestically,
but you also will have a reduction in GDP because
of this, because frankly, it's the least efficient way probably
(26:28):
for companies and other people to buy the things that
they need in a more expensive way, either to buy
domestically or for companies, especially that use imports as inputs
into their production. It's going to be a higher cost
and it will reduce productivity over time. So yeah, we're
going to get a nice boost to the revenue side,
(26:48):
but it's going to decline over time and bring down
GDP with it. Because it's a less efficient structuring of
the global trade system.
Speaker 1 (26:57):
People will go looking for the cheaper prices where they
can get them over the course of time.
Speaker 8 (27:02):
Yeah. Sure, but they may end up doing it in
the United States, which will be And the other thing
is you may do without it, right, I mean, that's
another thing. You may end up saying, you know, I
didn't need that, and so I won't get it. What
really strikes me as significant is what it does to
us innovation in that we have been able to innovate
(27:26):
through a global supply chain. Think about Apple. Apple is
a virtual manufacturing company. It doesn't manufacture anything. Everything. It
does all the manufacturing and outsources elsewhere. Okay, so bring
it back home. Now, ask yourself, does Apple exist if
all the production is domestic? What happens to the price
(27:48):
of an iPhone? Does the iPhone become the ubiquitous tool
that it is right now? If Apple had to make
it all domestically. And I think about this one woman
who I read about in a New York Times story
who's trying to care ate a solid state battery. She's
a Chinese immigrant educated in the United States, became an
American citizen, raised money from Mercedes in Germany, and is
(28:10):
making the prototypes in South Korea. That's what's happening. That's
the way the world works.
Speaker 1 (28:15):
Are Let's get to Maryland in Birmingham, Alabama. Maryland, welcome
to the middle of your thoughts on the debt.
Speaker 13 (28:26):
Well, I'd just like to say the debt was actually paid.
It was zero during the Clinton administration. Bill Clinton balanced
the budget. He's the only president in my lifetime and
I'm seventy three years old to ever balance the budget.
When George W. Bush came in, he ran it up
two trillion dollars right away. So my experience is the
(28:49):
Democrats paid the bills and the Republicans run them up.
Speaker 7 (28:54):
Okay, thank you, that's that.
Speaker 1 (28:56):
Thank you, Marylyn. And you're talking about the deficit, which
is the annual sort of imbalance between how much we're
bringing in and how much we're spending. That was balanced
back in I think two thousand under Bill Clinton. But Stephanie,
your thoughts on Maryland's comments there.
Speaker 9 (29:13):
Well, look, I have a lot of sympathy because you know,
it does sound like the kind of story that one
would you know, want to wave around and wear as
a sort of badge of honor as a Democrat and say, look,
we are the fiscally responsible party. We're the last guys
who eliminated the deficit and put the budget in surplus.
(29:33):
And this happened for four years. It started in nineteen
ninety eight. We had budget surpluses from ninety eight until
two thousand and one. And she's quite right that when
George W. Bush came in, the surpluses were gone and
we were back to deficits. But the part of the
story that got left out and most people just don't know,
is that those Clinton surpluses were always going to be
(29:57):
unsustainable because think about what a government surplus means. Means
the government is taking more money out of our hands
every year than it's prying back in. You can do
that for a period of time, but at some point
you push the rest of us. It was the US
private sector that was running deficits in that period. The
economy went into recession in two thousand and one as
a result. In the Bush tax cuts were you know,
(30:19):
maybe not everybody's favorite way of addressing the recession in
the slowdown, but it was the right move at least directionally.
Speaker 1 (30:26):
Well, and I remember Bush saying, it's not the government's money,
it's your money. Tolliver, Do you have any tape to
play for us that has said something to do with this?
Speaker 2 (30:35):
You know what I do. Here's former President Bill Clinton
outlining his plan back in nineteen ninety nine.
Speaker 10 (30:41):
Fiscal discipline has widened opportunity and created hope for all
working people in our country. Now we have a chance
to do even more, to use the fruits of our
prosperity today to strengthen our prospects for tomorrow, indeed for
tomorrow's well into the.
Speaker 8 (30:58):
Twenty first century.
Speaker 10 (31:00):
About twenty fifteen, this country can be entirely out of debt.
Speaker 1 (31:07):
Spoiler alert, Tolliver, That did not happen.
Speaker 2 (31:09):
In the eighteen ripped into a big sax solo right
after that.
Speaker 1 (31:12):
That's right, that's right. More of your calls coming up
on the Middle. This is the Middle. I'm Jeremy Hobson.
This hour, we're asking what should be done about the
national debt. If anything, you can call us at eight
four four four Middle. That's eight four four four six
four three three five three. You can also reach out
at listen to the Middle, dot com I'm joined by
Stephanie Shelton, a professor of economics and public policy at
Stonybrook University, and CNBC senior economics reporter Steve Leisman. Steve,
(31:40):
before we go back to the phones, one way that
it seems economists on both sides agree you can increase
tax revenues is to actually have enough people working for
the IRS to collect them, make sure that they're crossing
all the t's and doting in the ice. The IRS
workforce is down by a quarter since January, and the
Big Beautiful Bill cuts the numbers even further. Why does
(32:00):
Trump want to cut the I R s? And Republicans?
Why do they want to cut the I R s
by so much when it means that there will be
less revenue coming in?
Speaker 8 (32:10):
You know, I think some of it has to do
with a sense of the I R S being unfair
to Republicans during the Biden administration. I think that was
some of it. So they're kind of on the uh,
the the MAGA hit list. That's one thing. Look, I
think they want to maybe ultimately dismantle the structure of
the federal government the way it exists. And I mean
(32:32):
some of this dates back Jeremy to the thirties and
the establishment of some of the welfare system created by
FDR when it came to social security and other things.
And I think they they want to stop the ability
of the government to raise that revenue. It's it's if
you want to raise revenue and you care about that stuff,
you would not do what they're doing relative to I R. S. Employment.
(32:56):
I think that's again what they taught talk about. When
they talk about how to solve the deficit from a
revenue probably they talk about broaden the bass and collecting
the taxes that aren't paid, and that's a considerable number.
Speaker 1 (33:10):
Yeah, Mike is calling from Denver, Colorado. Mike, Welcome to
the middle What do you think should be done about
the debtor? What are your thoughts?
Speaker 5 (33:19):
Hi?
Speaker 14 (33:19):
Yeah, Mike from Denver, Colorado. Thanks for taking my call. Also,
I'm going to add a song to your song list,
The Day the Dollar Dies by Peter Tosh, which is
a good money song. But I'm really but I wanted
to ask, and I'm delighted to be able to ask
(33:43):
a question of Stephanie Helton and your other expert. But
if what we say is the deficit is all the
money that's out in the system. It's in people's pockets.
It's in the pockets of every American in the country.
The problem is, isn't the money not going into the
pockets of people who are going to respend it and
reinvested in the economy. It's going into the pockets of
(34:06):
the wealthy and corporations who are going to use buyback
stocks to increase the value of their stock, or they're
going to park their money in an offshore account somewhere.
So the money's not being reinvested in our country, and
therefore they can't be tax and therefore the deficit goes
up and up and up because the wrong people have
(34:26):
the money in their pockets and they aren't reinvesting in
the economy.
Speaker 1 (34:31):
Stephanie, that's to you.
Speaker 9 (34:33):
It's such a good and important point. So let me
say two things. First, a reminder, every deficit is good
for someone. The deficit, the thing we call the government deficit,
is just the difference between two numbers. The first number
is outlays how many dollars the government pushes out into
the economy every year. For simple numbers, let's call it
seven trillion right now. The other number is how many
(34:56):
they take back out, mostly in the form of taxation,
called that five trillion. If they put seven in and
take five out, what they're really doing is depositing to somewhere.
And this gets to the really important point. Every deficit
is good for someone. The question is for whom and
for what are those deficits helping us to address real
problems in the economy. Are we getting better healthcare, education, infrastructure, defense,
(35:20):
whatever it is, or as the caller just alluded to,
is that money pulling up in the hands of a
relatively small population of people who don't recirculate it through
the economic system so that it runs through the veins
of commerce and helps to support jobs and economic activity
more broadly, so, it's important every deficit's good for someone,
(35:43):
but not all deficits are created equal. It's a really
important point.
Speaker 1 (35:48):
Ryan is calling from Pittsburgh, Pennsylvania. Ryan, go ahead with
your thoughts.
Speaker 10 (35:54):
Heny.
Speaker 15 (35:55):
Thanks for taking my call tonight. I was hoping your
two commentators might be able to for some insight into
has there been in the past efforts to pass a
balanced budget amendment and more recently, is there anyone who
is trying to take this up, and if so, what
would the feasibility be of of getting this through or
(36:15):
is this something that actually people in both parties would
prefer not to actually happen.
Speaker 6 (36:20):
Thanks Thanks Ryan.
Speaker 1 (36:22):
Yeah, Steve. You know, it's interesting because even if you
believe that the that the deficit or the debt is
not a problem, the idea of passing an amendment that
says we've got to have a balanced budget that we
bring in what we spend could still be the case.
You could still want to do that.
Speaker 8 (36:36):
No, you wouldn't. But cores keep right and tie itself
to the mass so it won't be tempted by the
sound of the of the sirens. And and every time
the sirens sing, they untie the road. They passed all
kinds of things. There was a go and all sorts
of things. But let me let me try to go
(36:59):
to the thirty thousand foot level on debt, just real quickly,
which is debt is not bad. There's a wonderful book
written called Financing the American Dream, which is actually the
history of debt in America. And what this book tells
us is that we have had a history in this
country of thinking that debt is very, very bad morally.
(37:22):
While we borrow extensively, and it's part of our whole
kind of religious conflict with our capitalist system, which is
deeply ingrained in the contradiction of America. But first of all,
we want a large debt market. The world wants and
requires a large US debt market. It is the grease
(37:45):
that lubricates the world. We benefit enormously and inordinately from
this large debt market. We have foreigners buying our debt.
They desperately want our dollars so they can buy our
debt and they sell us stuff and we can get
it to the whole trade thing if you like. But
that's a real reason for the massive trade deficit, is
if people want our dollars in parts so they can
(38:07):
buy our assets because they love our assets, because they
love our debts, our debt, and they buy it and
they keep interest rates down. And ultimately, we do not
want to get rid of our debt. We'd like to
control our debt. It would not take very much, jeremy,
in my opinion, for the US government to say we
have a plan over a ten or twenty year period
(38:28):
to control our finances, and this could bring down interest rates.
I don't know what, maybe fifty basis points or half
a percentage point or maybe a percentage point if the
United States showed it had some responsibility for the that's
just the problem. The problem I think it's definitely led
out earlier is every party comes in and says, you know,
they preach their austerity and they act and spend like
(38:52):
mostly drunken sailors.
Speaker 1 (38:54):
But well, the other problem, the other problem Steve with
with with having a tenor pie teen. Your plan is
that the president is only in there for you know,
four years, so then they could do the next one
could come in and completely change it. But you have
a full, full roster of calls here, So let me
get to another one and let's go to Sean in
San Mateo, California. Hi, Sean, go ahead with your thoughts.
Speaker 16 (39:18):
Hi, thanks for taking my call. So I want to
touch on something that was just mentioned, actually right before
I got I got on, which is that I don't
think the debt is a problem. It's the deficit, and
it's the debt service payment as a share of GDP.
And what I mean when I say that is I
think there is a runaway point where if our foreign
(39:43):
debtors don't believe that we can realistically pay it back,
or that we're you know, we're less reliable. You know,
you see recently the debt premium, the risk premium go
up on long term treasury.
Speaker 1 (39:56):
Yeah.
Speaker 16 (39:57):
Yes, and that that actually is a vicious because that
means our debt service payments just keep growing as a
result of that, which means it crowds out public investments
that we could make in private public sector and private sector,
and then we get slower economic growth as a result
of that, and it's a runaway train where our economic
(40:18):
growth never catches up to our debt service growth. And
one more point I would put on this is that
I can't I don't think there's ever been a moment
in time where we've actually grown our way to to
toward a smaller deficit. We ran up all in all,
close to eight trillion during COVID, and that added to
(40:40):
the deficit. And we're not going to have that kind
of peak growth going forward because of our shrinking labor force.
We'll never go We're never going to grow like we
did the past couple of years, is my point, and
so I don't see growing out of this. I think
we just need to take some reasonable steps to show
bondholders that we're going to keep this in check.
Speaker 1 (41:00):
And Okay, that's a lot there, Sean, Yeah, thank you
so much, Stephanie. Let's let's just talk about the fact.
What he brings up, which is true, is that the
premium on the debt, the yield on the treasury bonds,
has been going up. It's higher than it was a
few years ago. We're spending more money to have this debt.
Speaker 9 (41:19):
Is that a problem, Well, it depends what you mean
by a problem. If what you mean is and he
sort of started with this was to say something about
whether we can pay it. It isn't about whether we
can pay, it's there's a willingness to pay argument. When
the rating agencies take a look at US debt and they,
(41:42):
you know, grade the US sovereign risk, they are usually
careful to say, we're talking not about the country's ability
to pay, but we have concerns about willingness to pay.
Sometimes we play around with the debt sealing limit, we
threaten to default or something like that. So separate the two,
the willing to pay versus the ability to pay. But
(42:04):
it isn't the case that because interest becomes a very
large percentage of the federal budget, that somehow the government
isn't going to be able to afford to make investments
in other parts of the economy. This is exactly the
same argument we heard in twenty seventeen when the Republicans
passed the tax cuts that were called the Tax Cuts
and Jobs Act. There were a lot of economists on
(42:26):
the left, Democrats, people who served in Democratic administrations, who said,
if the Republicans are successful and they push these tax
cuts through, One very well known economists said, I'll tell
you exactly what he said. He said, the United States
of America will be living on a shoe string for
decades to come because of the increases in the deficits. Okay,
(42:47):
that was Larry Summers, another one that Steve referred to
earlier as Jack Lou. Jack Lou said, if we get
into some kind of military conflict, if we have an
economic downturn, some other kind of financial crisis, the money
won't be there because the Republicans spent it all in
tax cuts. Boy, was that wrong? How do we know
it was wrong? Because COVID happened. And when COVID happened,
(43:08):
there was the crisis. And what did we do. Congress
put the legislation together, the votes were there, and trillions
and trillions of dollars went out the door. So again,
if you don't like the fact that you're spending more
on interest than you're spending on defense, there's always the
option to spend more on defense. We could also explore
maybe ways to spend less on interest over time. But
(43:28):
these are political decisions. They're not economic constraints. They're not
financial constraints on the federal government.
Speaker 7 (43:35):
Right.
Speaker 1 (43:36):
Fazzio is joining us from Minneapolis. Fazio, welcome to the
middle of your thoughts.
Speaker 7 (43:43):
Hi, I've been a big fan of professor Culton, ever
sad seeing her ted talk, so it's triggered Diamateur's self
study of macroeconomics starting with your book. So thanks for that.
Speaker 9 (43:54):
Thank you.
Speaker 7 (43:54):
I have an answer. I have an answer in the question.
If you don't mind, I'll try to be quick. What's
the best story I use when asked about the size
of the debt is that I hate to admit that
I am old enough to remember the Reagan's excuts that
pushed the national debt past the milestone one trillion dollars
in nineteen eighty two. There was a large outpouring of
(44:16):
concern and commentary expressed in the media with such metaphor
oracle weeping and nashing fifties rendering of garments over this
milestone and the millstones that we were hanging on our grandchildren.
Well we are now thirty seven times that amount and
two generations removed, and I haven't seen any people wandering
around with millstones or any financial or other consequences from this.
(44:40):
So you know, kind of use your own eyes as
they say so. But my question now is the US
has been running a chronic trade deficit for a long time.
Warren Moslarn perhaps your other MMT colleagues claim that foreigners
get the cash, but we get the goods, the net
positive for us. My mother is such as Professor or
(45:01):
Steve's keen claim, and has modeled in his system dynamics
simulator that long term trade deficits are damaging to the economy.
So I'm curious to hear Professor Kelton's position on chronic
trade deficits. Should we be concerned?
Speaker 1 (45:17):
I okay, thank you so much for that, Fasio, And
before yes, I'm going to actually though ask Steve Leeman
to step in first, and then we'll go to Professor
Kelton on that since Steve's been off the air for
at least a few minutes at this point.
Speaker 8 (45:28):
Well, I don't want to take the ability of the
car to get an answer from Stefan. I'll just say no.
The answer is no. The trade deficit is just the
other side of our current account surplus. We have massive
dollar infos from all around the world. America is a
stride of the global capitalist system. The President says, the
world is taking advantage of us. That's not really true.
(45:50):
America really is the recipient of Laura Jessum all over
the world, and when they buy, they give us good
goods and we give them funny pieces of paper. I'll
take that trade all day long.
Speaker 1 (46:05):
Stephanie Kelton does the trade, what about the trade deficit?
Speaker 9 (46:08):
Look, I think I'm mindful of time. I'm watching the clock.
I'm largely going to agree with the way Steve just
put it. That's how I opened the chapter on trade
in my own book, But then I went much much deeper.
Trade is a thorny issue. There's a lot of nuance here.
It isn't all good, It isn't all bad for either
(46:30):
side of the trade party in these things. So can
it lead to problems can offshoring lead to some job
losses domestically, Sure, are there things that we could do
to respond to that domestically to re employ people in
other ways? Of course there are. So even when there
are problems associated with chronic trade deficits, there are policy
(46:53):
responses that we didn't choose, that we should have chosen
that would have allowed us to reap even more of
the benefits of trade.
Speaker 1 (47:02):
Tolliver just a comment or two from online Sure.
Speaker 2 (47:05):
Carolyn in Colorado Springs says, raise the income level limit
for Social Security taxes to seven hundred and fifty thousand dollars,
close tax loopholes, and regulate and penalize overseas tax havens.
And then Paul in Kansas City says, many conservatives are
following President Trump's lead to call them the FED to
lower interest rates. How would that likely affect the national debt?
We've sort of covered that one. Oh, and here's the one.
Speaker 1 (47:26):
I will actually wait, let me let me, let me
let me just pick up on that for one, because
we do have FED. We do have FED expert Steve
lee span here. Steve, There's been a lot of talk
about whether Donald Trump is going to fire the FED
Chairman Jerome Powell, who, by the way, he appointed in
his first term. Do you expect that to happen or
(47:47):
do you expect Powell to submit to the pressure and
lower interest rates while we have you here.
Speaker 8 (47:54):
I do not expect them to do that, and I
don't expect the President of the fire Powell, at least
not today. Earlier this week, the President was singing a
different team. We believe he was spoken to by cooler
heads within the administration. We told him to back off,
that there was a meeting today at the construction site.
That the President has created an issue out of nothing,
(48:17):
this idea of this renovation of this FED building, which
is really nothing issue. It's a lot of money, but
it's irrelevant to policy. And really it's the President wanting
the FED to lower interest rates. But I do not
expect the chair to knuckle under to the President here.
He'll go down fighting on this one.
Speaker 1 (48:35):
Just for people haven't been paying attention that the President
is focused on the renovation cost at the FED, because
then if he could figure out a way to fire
Jerome Powell for cause, he would be able to do that.
But he can't just fire him for no reason. I
want to thank my guest so much, CNBC Senior Economics
reporter Steve Lee Spent and Stephanie Helton, Professor of economics
and public Policy at Stonybrook University. You've been great. Thank
(48:55):
you so much to both of you. Thanks for having
used I Forget the Middle, available as a podcast in
partnership with iHeart Podcasts on the iHeart Apple where you
listen to podcasts, and next week on the Middle will
be back here asking if crime is an issue where
you live and what can be done to address it.
Speaker 2 (49:11):
As always, I'll be with us. You can call it
an eight four four four middle. That's eight four four
four six four three three five three, or you can
reach out at Listen to the Middle dot com. You
can also sign up for our free, free weekly newsletter
and support us with a text deductible contribution.
Speaker 1 (49:26):
The Middle is brought to you by Longnok Media, distributed
by Illinois Public Media in Urbana, Illinois, and produced by
Harrison Patino, Danny Alexander Samburmastas, John barth On, Akadessler, and
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(49:50):
our YouTube audience. I'm Jerey Hobson. I'll talk to you
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