So what happens now?
Trump's economic plan is very similar to the House Republican plans. Generally, I think it is positive to institute growth, but it doesn't address federal over-spending.
The latter is going to be an issue. Right now, because the Fed has kept rates so low, the interest burden is pretty light (given the VERY high levels of debt). Though this to me seems like a teaser rate on a McMansion mortgage; all is well and good until the rates go up.
If interest rate were to rise (say where they were in the later '80s), debt service could eventually eat up over 40% of the federal budget. You could also see a crash in bonds as many long term bonds would be locked into rates that won't even keep up with inflation.
With the Fed's money printing, I think we are backed economically into a corner. The Fed will raise rates if growth picks up, which in turn could lead into an explosion of more debt as the Treasury will have to borrow to service the existing debt.
Without massive cuts in Federal spending (on the order what was done during the Harding administration), I don't see how the Fed unwinds this mountain of debt (much of it on its own balance sheet) without causing severe economic shocks.
Trump's economic plan is very similar to the House Republican plans. Generally, I think it is positive to institute growth, but it doesn't address federal over-spending.
The latter is going to be an issue. Right now, because the Fed has kept rates so low, the interest burden is pretty light (given the VERY high levels of debt). Though this to me seems like a teaser rate on a McMansion mortgage; all is well and good until the rates go up.
If interest rate were to rise (say where they were in the later '80s), debt service could eventually eat up over 40% of the federal budget. You could also see a crash in bonds as many long term bonds would be locked into rates that won't even keep up with inflation.
With the Fed's money printing, I think we are backed economically into a corner. The Fed will raise rates if growth picks up, which in turn could lead into an explosion of more debt as the Treasury will have to borrow to service the existing debt.
Without massive cuts in Federal spending (on the order what was done during the Harding administration), I don't see how the Fed unwinds this mountain of debt (much of it on its own balance sheet) without causing severe economic shocks.