Keep in mind that deficits don’t matter – when you are a Republican.
Democrats find it hard to complain about government spending and really hate doing the whole ‘austerity’ fan dance. So they rarely give Republicans a hard time about deficits.
At the end of the day budget deficits are something that are used by Republicans to beat Democrats over the head.
Anyway who needs a deficit ?
We have the Federal Reserve – that defender of free markets and friend of the Republic – to help Mr Trump to deliver on his promises.
How so you say?
Try this on for size.
Donald Trump announces in his first hundred days that rebuilding the infrastructure of the United States is a national priority and will get Americans back to work in real jobs.
It is time to build some Trump-o-bhans
He announces that he is going to set up a Bobbie-Mac – as a little brother organisation to Freddie Mac and Fannie Mae – and this organisation will be charged with reviewing and approving the building projects of state governments on the infrastructure front.
Green lights for new bridges, freeway extensions, very fast trains etc will be forthcoming and Hi-Vis will be the new black.
“Can we fix it?” Yes we can!
State governments will be told to ‘create’ infrastructure bonds that pay a tiny 0.00005% (interest is not really the point of this exercise) and sell them to “Bobbie-Mac”.
The Federal Reserve which once was gobbling down securitised housing mortgages from Freddie and Fannie like they were going out of style – to keep the housing market on life support – will now start recycling the maturing proceeds – from its $1.25T RMBS portfolio – in the securitised bonds ‘IBS’ Infrastructure Backed Securities being created by “Bobbie-Mac” or even just crank out some fresh accounting entries to pay for the IBS and expand that Federal Reserve balance sheet by another lazy trillion or two.
Yum they taste good and as we know it is not printing money – it is just an “asset swap” – some accounting entries for IBS.
And they don’t appear on the Federal Budget either. Bonus points !!!
Now some might say that the Federal Reserve has no business buying bonds for new highways, railways, bridges etc and perhaps they are right and perhaps the state governments will never pay back “Bobbie-Mac” for the funds they receive in exchange for their 0.000005% bonds.
But who cares? – with the mountain of private and public debt out there driving deflation across the globe a bit of ‘asset swap’ cash that never makes its way home to the Federal Reserve is not going to be an issue (until the economy is running at full capacity) and who is going to complain anyway?
Progressives whinging about President Trump rebuilding public infrastructure and putting Joe 6-pack back to work?
Republicans with happy donors delirious from padding out construction tenders?
No Federal Government deficit blow out as it is just the Federal Reserve expanding its ‘independent’ balance sheet. Just an “Asset Swap” a few more securities in the Federal Reserve filing cabinet and the Federal Reserve paid for it all with a few accounting entries.
Time for some MMT – really Modern Monetary Trumpery.