Time To Pay the Piper

 Popular Economics Weekly

 “The time to repair the roof is when the sun is shining. [State of the Union Address January 11 1962]” President John F Kennedy

Wikipedia

Two of our largest domestic economies are heeding President Kennedy’s words, “when the sun is shining”; it’s time to begin paying our national debt during this record-breaking stock market run that is currently benefiting the wealthiest Americans.

We are drowning in a federal debt that is endangering our good faith and credit while crowding out domestic spending on the public services that make life more bearable for ordinary Americans. We have a federal debt that is now 120% of the annual output of the U.S. economy (Gross Domestic Product).

New York City’s Mayor Zohran Mamdani, and California Governor Gavin Newsom have announced that it’s possible to balance a budget. Maybe that’s something Republicans should also heed if they want to remain relevant to America’s future by offering more than tax cuts and bloated military budgets.

New York City is the largest U.S. city with an 8.5 million population, and the State of California has the fourth largest economy in the world behind the U.S., China and Japan.

Mayor Mamdani announced the $124.7 billion Fiscal Year (FY) 2027 Executive Budget, putting New York City on firm financial footing while protecting the services working people rely on. “Through strong fiscal management, Mayor Mamdani balanced the budget through a combination of aggressive savings, new tax revenue, partnership with Albany and critical new investments.”

California’s 2026-27 budget, as revised by Governor Gavin Newsom on May 14, 2026, “projects no deficit for that year and the next budget year (2027-28), with a structural deficit eliminated through July 2028.”

It’s a sign that Americans in Democratic states at least want to move on from the trickle-down economic policies that Republicans have practiced since 1980, resulting in five recessions including the Great Recession on their watch.

It has perpetrated the greatest income and wealth inequality of all—red states depriving their own citizens of a livable minimum wage and social services that make their lives bearable, with no minimum wage higher than the national minimum wage of $7.25 per hour (portrayed in the Wikipedia map), or state taxes to pay their bills and provide adequate health care.

That’s a reason most Republican-led, so-called red states, have fallen far behind in growth compared to Democrat-led blue states –many with surplus tax revenues that go to many of the red states in the form of benefit payments to balance their budgets.

California, for instance, has the largest tax ‘imbalance’ in the nation. Varying estimates show Californians pay between $83billion and $275billion more to the IRS than the federal government returns to the state in the form of Social Security, healthcare, military contracts, and disaster aid.

Whereas red states like Kentucky require $Billions from the federal coffers to meet their budget needs. For instance, 10 red states have no Medicaid health insurance for their low-income residents.

The results show the glaring damage the minimal, ‘bare bones’ red state budgets wreak on the health and safety of their citizens. Red states exhibit higher premature mortality rates and higher incidences of death from major internal causes, such as heart disease, cancer, and stroke. Blue state citizens on average live longer.

NIH research shows a clear partisan health divide in the United States, with "blue" (Democratic-leaning) states consistently outperforming "red" (Republican-leaning) states across major public health metrics, including life expectancy, infant mortality, and preventable chronic illnesses.

The New York City and California examples show that state and federal governments know how to balance a budget that benefits all Americans, not just the wealthiest. The Clinton Administration even created four consecutive years of budget surpluses in the 1990s that paid down the federal debt.

A consensus is building that our national debt must be dealt with. Balancing budgets are the responsible way to deal with it, not the trickle-down economic policies that have created the monstrous debt from the many Republican tax cuts that have deprived red states’ citizens of a decent standard of living.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Who Benefits From America's IOU's?

 Financial FAQs

WASHINGTON (AP) — The U.S. government’s gross national debt has surpassed $37 trillion, a record number that highlights the accelerating debt on America’s balance sheet and increased cost pressures on taxpayers. AP

FREDdebtGDP

Trump and his Republicans’ trade war and big, beautiful tax bill resemble a giant Ponzi scheme in several ways that has created the greatest wealth and income inequality in the developed world. 

It is in essence robbing Peter to pay Paul, by using the revenues from the highest tariff rates since the Great Depression, cutting $billions from Medicare, Medicare and Obamacare benefits, Doge-slashing important health and climate research departments as well as foreign aid spending, because Trump must pay down the record national debt that he has declared is a national emergency.

Yet it was generated by generations of mostly Republican tax cuts. President Reagan created the first major national debt in fighting the cold war and Central American contra wars, GW Bush created the first $trillion deficit with his war on terror largely based on fabricated intelligence, and Donald Trump will manage to add some $ 9 trillion to what is now a record $37 trillion from his trade war with almost no understanding or knowledge of foreign trade, as Nobelist Paul Krugman has pointed out several times.

And President Trump just fired the head of the Bureau of Labor Statistics so that he could replace her with someone who will cook the books on inflation and real job numbers.

The history of deficits is portrayed in the above graph of U.S. national debt calculated as a percentage of GDP.

Tump’s original Tax Cuts and Jobs Act (TCJA) had already added $5 trillion to the national debt that peaked at 132.8% as a percentage of GDP in Q1 2020 during the COVID-19 pandemic and it has since dropped to 120% because of the aid bills that the Trump and Biden administrations signed into law boosting economic growth to almost 3% annually.

The White House appeal to the foreign trade court to leave Trump’s tariff war in place is his attempt to keep the Ponzi scheme from imploding, rather than negotiating with congress that has the actual power to make foreign trade agreements.

Executive orders without congressional approval are illegal, unless there is a national emergency. And the soaring national debt could become one, if Trump succeeds in destroying the good faith and credit of the U.S. in renewing the TCJA.

On May 16, Moody’s Ratings downgraded the U.S. credit rating, citing an “inability of the nation to address large and growing deficits.” This downgrade means that for the first time ever, all three major credit ratings agencies have downgraded U.S. credit below their top AAA rating.

Trump is therefore begging an appeals court to allow the tariffs. It could lead to a “GREAT DEPRESSION” Trump said on social media, with Americans “forced from their homes” that will threaten social security and Medicare.

Yet the financial markets aren’t panicking this time, maybe for the wrong reasons, as I said in an earlier column. This is while the Final Demand Producer Price Index has jumped to 3.3% annually, the highest in three years since the COVID-19 induced supply shortages, lessening the chances of Federal Reserve rate cuts.

Wall Street’s over enthusiasm, which was first termed irrational exuberance by Fed Chair Alan Greenspan in the mid-1990s as a warning that stocks were overpriced, has created a new asset bubble much like the dot-com asset bubble, and housing bubble that led to the Great Recession.

And it has led to the greatest income inequality in the developed world which has impoverished Republican-led red states above all, whose citizens are most easily cowed by their policies.

And what will happen when foreign investors, mainly governments, realize a $37 trillion national debt isn’t sustainable indefinitely?

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

No Art of the Trade Deal

 Financial FAQs

“The point is that Trump doesn’t feel bound by trade deals America has made in the past. Why should anyone expect him to honor any new deals he makes, or claims to make, now?

Huffington Post

“Obviously this behavior isn’t unique to tariffs. Many domestic institutions, from law firms to universities, have discovered that attempting to appease Trump buys you at best a few weeks’ respite before he comes back for more.” Paul Krugman

Nobel Laureate Paul Krugman won his Nobel Prize for his research in International Trade, so his remarks on Donald Trump’s behavior in negotiating trade deals is a good way to understand what Donald Trump has done his whole life—bullied people and institutions—because that’s all he knows how to do.

And Krugman fears it will mean Trump will continue his tariff wars, regardless of the outcomes. This certainly means some level of stagflation; higher inflation with slower economic growth, according to most economists and even Wall Streeters. Maybe not on the level of the 1970s stagflation induced by the OPEC Arab Oil Embargo.

It’s Trump’s paranoid personality if you can call it that. It’s the reason he is the con man who has lied and obfuscated his whole life and could only negotiate with lawsuits. He doesn’t really know how to negotiate so that both parties win, and therefore it is a stable relationship between parties. He only wants to overpower a perceived enemy, much like Putin or Xi, real dictators who torture and kill and their own people to maintain power.

I have written about Trump’s poor negotiating skills in past Huffington Post articles and elsewhere. Author Tony Schwarz was the first to seriously write about Trump in Trump: The Art of the Deal, his biography that created the myth that Trump was a skilled wheeler-dealer.

But it wasn’t real, Schwartz said later to New Yorker Magazine’s Jane Mayer in a famous 2016 interview.

“I put lipstick on a pig,” he said. “I feel a deep sense of remorse that I contributed to presenting Trump in a way that brought him wider attention and made him more appealing than he is.” He went on, “I genuinely believe that if Trump wins and gets the nuclear codes there is an excellent possibility it will lead to the end of civilization.”

The just announced reciprocal tariffs on Japan and Korea area a good example, says Krugman. President Trump sent out tariff letters to U.S. trading partners on Monday as he had promised, starting with Japan and South Korea before targeting Malaysia, Indonesia and other countries.

He has labeled them “reciprocal” tariffs because of his perceived unfairness of their tariff policies, but Japan and South Korea charge little or no tariffs on U.S. imports because of long standing agreements, says Krugman, so have little to negotiate.

“How were the South Koreans supposed to end unfair trade practices that exist only in Trump’s imagination?” says Krugman?

Then why is Trump proposing tariffs on them anyway?

“The only possible out here would be a series of fake deals, in which countries pretend to have offered significant concessions and Trump claims to have won big victories. Some people still think that will happen — the new tariffs aren’t supposed to take effect until Aug. 1. But the tone of those letters and Trump’s clear obsession with tariffs make me doubt that he’ll call the tariffs off, in part because of my last observation: Attempts to mollify Trump always end up emboldening him to demand more.”

Then why does Trump do it and cause what will be more huge financial market dips with the loss of more $trillions in equities, many trade disruptions, and alienation of our allies?

Being ‘reciprocal’ has nothing to do with it. Trump will charge at least a 10 percent tariff on the imports from all countries because he needs the import taxes to pay down the huge budget deficit that’s been generated by his Big Beautiful Bill that Congress has just passed.

Therefore his real objective, rather than fairness, is to extract as many concessions as possible from every other country in the world that is dependent on imports to the U.S, regardless of the economic consequences.

Isn’t that what he really wants, to pay for more tax cuts for Trump and the Oligarchs, which will mean the wholesale disruption of world trade, regardless of the possible destruction of our own economy burdened with an unsustainable national debt?

Harlan Green © 2025

Follow Harlan on Twitter: https://twittter.com/HarlanGreen

Republicans' Unchecked Greed

 Popular Economics Weekly

“George Will, the conservative pundit, gave the best description of Trump’s incompetence in a Washington Post Op-Ed: “It is urgent for Americans to think and speak clearly about President Trump’s inability to do either. This seems to be not a mere disinclination but a disability. It is not merely the result of intellectual sloth but of an untrained mind bereft of information and married to stratospheric self-confidence.”

George Will was only partially right in 2017, when he reacted to Trump’s flailing first term attempts to run our government. His Republican administration's’ seeming incompetence is motivated by unchecked greed. Most of his first cabinet was populated with former lobbyists. And it is wrecking the fastest growing economy in the developed world that was inherited from the Biden administration.

They are choosing to remain ignorant of the most basic economic facts in their attempt to extend Trump’s 2018 Tax Cut and Jobs Act during the current debate on the budget for the fiscal year. The financial markets are making them pay for their ignorance, which will hurt his red state supporters most.

“The budget plan that House Republicans passed today paves the way to take Medicaid health coverage and food assistance through SNAP away from millions of people, to partially pay for huge tax giveaways for wealthy households and businesses that will drive up deficits and fiscal risk,” said Sharon Parrott, President of the Center for Budget and Policy Priorities, a non-partisan economic think tank,

What are the markets saying? It’s the wrong time to have a budget debate, “when the President’s tariffs, chaotically crafted and applied, have caused business uncertainty to soar and raised the risk of a recession, higher unemployment, and surging prices,” said CBPP’s Parrott.

CBPP.org

This is also at a time of record income inequality when the income gains of the top one percent dwarf that of the bottom 20 percent per the above graph.

Professors Thomas Piketty and Emmanuel Saez were the first to examine 100 years of income tax returns that highlighted the wide swings in income equality. They found that the periods of greatest inequality were just before a major recession, such as the Great Recession and the Great Depression itself, I said in an earlier blog post.

What does that tell US when we are at another period of greatest equality? More than just red staters will be harmed, as the full faith and credit of the U.S. of A is endangered with the record national budget deficit of $36 billion and growing.

This happened during the Great Recession as well, triggered by GW Bush’s tax cuts at a time when the Clinton Administration had just created four years of budget surpluses that were frittered away with GW’s tax cuts and the wars on terror.

“Add to the budget plan and constantly shifting tariff policy the Administration’s chaotic and deeply harmful executive action agenda — which is wrecking Social Security and other core government functions, unlawfully stopping funding for public services and investments, hollowing out and politicizing the civil service, and undermining basic governance — and you have a triple threat agenda that will make millions of families far worse off,” continued Parrott.

Can it get even worse? Our national debt is not sustainable. Yahoo Finance just reported in an April 14 article that S&P Global Ratings hinted that it could lower the US credit rating, currently at AA+, by another notch if any of a number of things happen to make the US's fiscal situation worse.

“The outcome of the US government's budget process and policy negotiations over the coming months will help determine policies that inform our view of US sovereign creditworthiness,” S&P said. “These discussions could affect our view of the US's fiscal profile.”

So, there’s a good reason Greed is one of the seven deadly sins, maybe the deadliest if its Republican practitioners cause another Great Recession or Depression.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen