Re: QE can theoretically pay for any amount of debt, but only at the necessary cost of hyper-inflation.
Mmmm. Thats what the fiscal hawks were screamin in 2008. As usual, they were wrong. See any hyperinflation here ?
In a larger sense, paygo makes any new program more difficult to get thru. You will either have to pay thru cutting other programs, which makes enemies or a tax raise which is blindly resisted by many. Paygo is a DNC move to cut out the legs under climate action and new social programs.
sidd
In response to the GFC, the Federal Reserve created about $4 trillion. And no, that didn't create inflation, because we were in a severe economic downturn. Without that much stimulus, we would have had deflation.
Annual budget deficits are now running about $1 trillion *per year*. QE was $4 trillion *total*.
Rational economic policy in a downturn looks very different from rational policy when growth is strong.
Trillion-dollar deficits cannot be sustained indefinitely. Here's why:
As Debt Rises, the Government Will Soon Spend More on Interest Than on the Militaryhttps://www.nytimes.com/2018/09/25/business/economy/us-government-debt-interest.html"Finding the money to pay investors who hold government debt will crimp other parts of the budget. In a decade, interest on the debt will eat up 13 percent of government spending, up from 6.6 percent in 2017.
“By 2020, we will spend more on interest than we do on kids, including education, food stamps and aid to families,” said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, a research and advocacy organization.
Interest costs already dwarf spending on many popular programs. For example, grants to students from low-income families for college total roughly $30 billion — about one-tenth of what the government will pay in interest this year. Interest payments will overtake Medicaid in 2020 and the Department of Defense budget in 2023."
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Pay-Go just keeps us from digging ourselves into a deeper hole faster. That's the bare minimum of rational decision-making right now.
Regardless, as Bivens points out in the EPI article, a Pay-Go rule for the House makes no difference in the end. A statutory Pay-Go rule exists regardless. Circumventing that law requires agreement of both houses, and avoiding a veto. All Pelosi has done is to signal to the public that she wants to be less insane than the Republicans. I can't see anything wrong with that.