if you ask Lyman Stone.

A country that was once typified by a sense that anyone could be or do anything is now hidebound by an increasingly heavy weight of rules and regulations. While this trend toward more regulation and greater constraints on regular life can be seen across all walks of life, this report focuses on five main areas:
• Increasing stringency of land use regulations such as zoning,
• Greater prevalence of restrictions on work such as occupational licensing,
• Unusually high incarceration rates given currently low crime rates,
• An education system that forces people to spend more years in school for a higher cost and less value, and
• Growing debt and other financial burdens among households and at all levels of government.

On the debt issue, Timothy Taylor writes,

Interest payments are already 9% of federal spending. Before just brushing past that number too quickly, it’s worth noting that net interest is 1.8% of GDP–call it about $360 billion that the government is spending because of past borrowing, and thus doesn’t have available for current spending, tax cuts, or deficit reduction. On the current path, interest spending will be 20% of all federal spending by 2049.

…This is a “current law” projection. It has become standard practice for the federal budget to play games by forecasting that certain spending programs will be cut and certain taxes will rise in the future. But when the actual date of such changes approaches, they are then pushed back a few more years. The CBO also constructs an “alternative fiscal scenario” which doesn’t assume that these spending cuts and tax increases scheduled for the future will actually happen. In that scenario, the rise in deficits, health care spending, interest payments, and debt is much larger.

Have a nice day.

Jared Bernstein writes,

as economist Brad DeLong recently showed in a Vox interview. DeLong, who calls himself a “Rubin Democrat” (a reference to Clinton’s centrist treasury secretary, Bob Rubin), argues that the moment is such that “The baton rightly passes to our colleagues on our left. We are still here, but it is not our time to lead.” “DeLong believes,” according to the piece, that “the time of people like him running the Democratic Party has passed.”

In fact, there seems to be a widespread sentiment on the (formerly) center-left of saying about the hard left “If you can’t beat ’em, join ’em.”

To me, it seems that it is not just that the political discussion is moving toward the hard left. I see something similar going on among economists. Some prominent recent examples:

1. Emmanuel Saez and Gabriel Zucman.

2. Olivier Blanchard.

3. Jason Furman and Lawrence H. Summers.

What I call hard-left economics argues that high marginal tax rates on the rich have little or no adverse consequences. It argues that large government deficits have little or no adverse consequences. As a result, the bumper-sticker version of these papers would be:

Government should tax the rich more, because it can.

Government should spend more, because it can.

I can remember how economists on the left excoriated George W. Bush for squandering the budget surplus that President Clinton had started to build. That surplus was supposed to help avoid a collision of Baby Boomer retirement with fiscal capacity. DeLong once snarked that President Bush thought it was fine to run big deficits “because there are still checks in the checkbook.”

“There are still checks in the checkbook” has become the new fiscal wisdom.

John Cochrane grumps,

A sovereign default is bad enough. But if the banks are stuffed with government debt, then a sovereign default brings down the banking system. Depositors lose their shirts, and the banks, who know how to distinguish good from bad borrowers, are shut down. A calamity becomes a catastrophe. And an economy with failing banks will be bringing in a lot less tax revenue and more likely to default.

This is what I call the “two drunks” model. The banks are one drunk, leaning on the government for guarantees. The government is the other drunk, leaning on the banks to fund its debt. But will the drunks be able to support one another and stagger home?

Read the whole post. Government, which purports to be our bulwark against financial fragility, is more likely the main contributor.

Several Hoover Institution scholars write,

In recent months, we have seen an inevitable rise in interest rates from their low levels of recent years. Rising interest rates and increasing deficits threaten to build upon each other to send public debt spiraling upward even faster. When treasury debt holders start to doubt our government’s ability to repay, or to attract future lenders, they will demand higher interest rates to compensate for the risk. If current spending and tax policy continue unaltered, higher interest costs will have to be financed by even more debt. More borrowing puts more upward pressure on interest rates, and the spiral continues.

If, for example, interest rates were to rise to 5 percent, instead of the Trump administration’s prediction of just under 3.5 percent, the interest cost alone on the projected $20 trillion of public debt would total $1 trillion per year. More than half of all personal income taxes would be needed to pay bondholders. Such high interest payments would crowd out financing of needed expenditures to restore our depleted national defense budget, our domestic infrastructure and other critical government activities.

See the post from John Cochrane, one of the authors. If investors, including the Chinese government, grow leery of U.S. government debt, then my guess is that we will see the tactics that are known as “quantitative easing.” That is, the Fed will grow the supply of reserves, so that it and the rest of the banking system absorb a lot of government debt. The trick will be to keep banks from doing a lot of lending other than to the government. My guess is that paying a low rate of interest on reserves won’t be sufficient, and instead some form of financial repression will be needed. By that I mean regulating banks in such a way that buying government debt is approved while making business loans is frowned on.