The flaw I see is centered around this paragraph.

> How can rates come down? The present uncertainty around tariffs and a potential crisis could create conditions that pressure interest rates downward before those Treasury securities mature, by influencing Federal Reserve policy.

Rising prices due to tariffs won't pressure the Fed to lower interest rates. It will increase inflation and worries of inflation, which will actually pressure the Fed to RAISE interest rates. A slowing economy won't stop inflation... We are likely entering into a period of "stagflation". The way out last time was very high interest rates and short term economic hardship.

> I don't see anyone mentioning that the United States needs to manage its massive national debt, currently in the trillions, by issuing Treasury securities. These securities mature at varying intervals and require continuous "rolling" or refinancing to pay off old debt with new borrowing.

No one is mentioning this because no one cares, least of all the guy who just signed massive tariffs.

What you're describing is the end result of 30-ish years of Republicans implementing "Read my lips: no new taxes" and this country refusing to have to a mature conversation about revenues. Also, over that period, wages remained stagnant, meaning more people look to the government for assistance, which then costs money in the form of deficit spending. The numerous expensive wars didn't help, either.

There's no good fix to this other than some serious revenue raising through taxes on people who can afford it. Of course, those people are of the opinion that they're entitled to net worths that measure as a significant portion of a trillion dollars, and will simply push the costs onto consumers in order to maintain share prices since that's what most of the net worth sits in.

You have to break those people of that idea. Talk of interest rates, Treasury securities, Federal Reserve policy, it's all just noise. The money going in must be a larger portion of the money going out, and significantly burdening the average American with more tax debt isn't going to solve the problem before causing social upheaval.

> I don't see anyone mentioning that the United States needs to manage its massive national debt, currently in the trillions, by issuing Treasury securities.

It's very hard to even assume that's a concern of the current US administration, based on not only the fundamentalist goal of radically cutting taxes and regulations, coupled with the fact that it's purposely pushing a recessive economic policy that defies any logic or reason.

The very least that you'd expect is a progressive tax policy that didn't excluded corporations and mega-rich. You're not seeing any of that.

Tariffs increase prices. This tends to cause a wage-price spiral, and indeed that's one of the stated objectives (increase US wages by onshoring manufacturing). The increase in prices and wages is inflation. This will cause the Treasury to raise rates to force contraction.

Now, so far rates have indeed spiked downwards, but not a huge amount: https://tradingeconomics.com/united-states/government-bond-y...

The next consideration is: what is the budget actually going to look like? Is it going to cut spending and leave taxes where they are, resulting in debt paid down, or is it going to be a huge tax giveaway to the top few % while increasing the deficit? (personally I'd bet on the latter)

Then the consideration: other players also get a move. What do the retaliatory tariffs look like? Does cutting off the ability of other countries to earn dollars negatively impact US exports?

Devaluing the dollar against other currencies will also force up rates by the arbitrage principle.

S&P down 4% so far today. Do we think that indicates the measures are good or bad for US industries?

I know there is a crowd that talks about debt alot and these are all legitimate concerns

However they could also raise taxes on capital gains and top end income brackets - which are at ludicrously low levels for folks of significant wealth - which would go a very long way here. Some estimates suggest it could put the US back in a surplus quite quickly

edit: I'm saying there is an argument for raising taxes. I don't think its off the table like some people suggest. I know it may not be popular with some but we could discuss the merits.

Cutting fundamental government services feels wrong too

> What are the flaws in this thinking?

That the national debt matters.

A) The Fed & Treasury have the ability to buy back the securities at any time if they wanted, since they can basically poof the currency into existence. And t-bonds are as good as cash anyways, so that money is basically already in the economy.

B) The country's national debt is also our citizens' savings accounts. Every major company in the country (and the gov't itself) holds an absurd amount of t-bonds because its the best place to store billions of dollars for safe keeping. Paying off the debt means this capital needs to go somewhere. Should it go to China? The EU? Canada? American real estate?

The national debt is probably the most misunderstood concept in the country. It's denominated in USD, unlike other countries, whose debt is borrowed in currencies they don't control. And "paying off" the national debt risks capital flight and/or asset bubbles - both of which are detrimental to the economy.

The system we have in place is a good one.

Thought experiment: consider what would happen if the US Treasury decided interest rates are negative. That is, you pay $10,000 for a bond and receive back $9,900 after 10 years. What do you think this would do to the economy?

Now ratchet up that negative rate to 100%, that is, you pay $10k for a t-bond and eventually it's worth $0 after 10 years. That's pretty much what paying off the national debt would do (in fact, that's probably how the national debt would be paid off, if ordered to do so, the fed would purchase these bonds and the treasury would use the proceeds to buy existing bonds off the open market). It's two sides to the same coin, but instead of prohibiting the purchase of t-bonds, you just disincentivize it.

Many critical flaws. Your getting lost confusing the forest for the trees.

For starters you are focusing on the % on the interest payments which is a line item. However when all of your allies stop buying your goods and services you run into bigger problems.

Bonus problem: If one of your internal metrics is that you want to have a trade deficit but nobody to sell to because you have created a hostile environment for trade.

An economic crisis will reduce tax income though, reducing the ability of government to pay even if the interest is lower

The flaw is that the USD is massively dropping because of the tarifs. This will push up interest rates on US bonds, because bond holders want compensation for the value loss of their bond.

>Treasuries are considered safe during such crisis.

This isn’t a law of nature. The behavior the admin is displaying is exactly the type of thing that leads to your statement not being true anymore.

>The country is at risk of a debt spiral.

The US owes US dollars and can also issue US dollars. There are complications but it's not like you run up a credit card and can't pay.

» The country is at risk of a debt spiral.

This is impossible by definition:

The U.S. dollar is the world's dominant reserve currency.

I don't see any way the actions we've already seen haven't moved up drastic action on the US debt by at least a decade. And it's only been a very-few months.

We were probably screwed when we cut taxes going into two crushingly-expensive wars, and certainly were when we cut taxes again, but now we're rushing toward crisis instead of trying to at least delay it.

A plan like that could backfire, as one of the primary things that the Fed looks at when setting interest rates is inflation. Increasing the costs of imports across the board will likely increase inflation, which would make a rate cut less likely.

But in general, I think this is too complicated. The simpler explanation for all this is the Executive branch is currently held by isolationist.

How about a higher income tax or 1% wealth tax?

> the United States needs to manage its massive national debt,

> The present uncertainty around tariffs and a potential crisis could create conditions that pressure interest rates downward before those Treasury securities mature, by influencing Federal Reserve policy.

> What are the flaws in this thinking?

Flaw #1:

Massive treasury rollovers isn't new.

22% of all Treasuries have a duration of 1 year or less.

The only new thing is that rates have gone up.

Uncertainty is a short term solution to a long term problem.

Flaw #2:

Economic uncertainty and supply side shocks risks a recession.

Recessions usually increase national debt.

Flaw #3:

The right answer to reducing national debt is to ensure incomes exceed outgoings.

The current administration is so focused on extending trillion dollar tax cuts, no amount of tariffs or government efficiency is going to lower the national debt.

Flaw #4:

Treasuries only really go down during a recession.

Recessions are bad, not good.

If you think finding a tech job is hard now, or that your RSUs are hurting, wait until you see a serious recession.

The flaw is that it's like setting your house on fire because it's cold outside. It may well achieve your goal in the short term, but it won't last, and it's just going to make things much worse in the longer term.

One thing I am not sure about is how much reluctance foreign holders of US treasuries will have to buy more treasuries. My guess is both foreign government and commercial holdings will edge down quite a bit, even without any reciprocal activity. Just because they will have reduced US reserves, and in effect need for treasuries.

God knows what happens if reciprocal activity starts towards using another currency also for global trade.

> Increased demand for Treasuries pushes their prices up and yields down, effectively lowering interest rates.

> What are the flaws in this thinking?

Not sure why international investors would want to buy more t-bonds when the country issuing them is starting a trade war and their money could effectively be locked abroad.

The key, IMHO, is to maintain the status quo of the USD as the safe haven which also has the ability to destroy other safe havens. As long as the USD is the primary safe have the amount of debt is irrelevant.

The trade deficit is balanced by USD flows, which are ultimately reinvested with leverage into American capital markets.

In many ways the US trade deficit combined with the USD reserve currency status is thus what enables the high budget deficit in the first place.

If the Trump admin's goal were to reduce the national debt it would make way more sense to use fiscal policy (increase taxes) rather than some roundabout way to force the Fed's hand on monetary policy. The tariffs do basically function as a massive regressive tax increase in the form of a sales tax, but that comes with truly immense risks on the demand side of the economy. Guess what happens to tax revenue during a recession.

> The cost of servicing this debt — paying interest rather than reducing principal — is already a major budget item, surpassing Medicare, approaching Defense and Social Security levels.

Military ("defense") expenditures are always understated. Over $180 billion in veteran's benefits were paid last year. This is not counted as military expenditures. Also the debt you talk about is to not only pay for the money sent to Israel and the Ukraine last year, but still for the adventures in Afghanistan, Iraq etc. That just becomes generic debt in the skewed analysis, alienated from its past military adventures. The military budget is higher than stated.

Trump is a wildcard, but I could see the US defaulting on its debt, probably in some way that focuses the default burden on foreign countries holding US debt with some relief for domestic holders. I would definitely not be holding it over the coming few years.

I think what’s happening backstage in this magic show are desperate moves to recapitalize the country. Foreign and domestic investors are pledging to spend trillions, probably under duress. Stocks are being crashed to create a flight to treasuries. Dollars are partially anchored to crypto by so-called stable coins. Federal assets are getting dumped and operating costs cut.

Maybe we will get out of this without having to survive on cat food, but I’m not holding my breath.

I agree with you. To just offer a counterpoint, I sometimes see quotes like this one:

  But plenty of economists looked at the economic hole left by the 2008 financial crisis,
  and concluded the stimulus policies on the table weren't nearly big enough to fill it.
  The size of the hole is all that matters.
  Whatever level of deficit spending is required to fill it is the right level of deficit spending.[1]

  We need the government to be out there borrowing money because of the long-term investments it's making in our economy[2]

1) The government is special because it can go to extreme measures to repay loans if necessary (i.e., print more money or raise taxes)

2) The reliability of the government means that it can borrow at a low rate (say, 3%) and make investments that are worth far more than that (say, 10%).

Put those together, and the government's borrowing amounts to a net benefit to society.

This argument reminds me of the 'then a miracle occurs' comic [3]. It doesn't hold water because

1) The extreme measures are very harmful - they cause high inflation and hardship amongst taxpayers.

2) Even if we accept that government investment makes a good return (a highly questionable assertion), that return does not go to the government. If the government borrows money to build a new road, then there is no doubt some economic benefit, but the government does not receive that benefit, and they are on the hook for the repayment anyway. So government spending does represent a pure cost - not an "investment". And in any case, interest payments represent investment that can no longer happen.

I would also point out that back when we ran briefly ran a surplus in the late 1990s, economists were not exclaiming about how terrible this was, or how paying off the debt represented a missed opportunity or a catastophe in the making. Everyone agreed at that time that surpluses were good, and that paying down the debt was good. The current "this is fine" thinking smacks of economists who have a predisposition to accept and justify the status quo, whether it is objectively good or not.

So all of that is to say that I'm with you - government debt is bad. We are in danger of some combination of insolvency, default, or very high inflation. And once we enter that spiral it will be impossible to get out of it without permanent damage to the economy and the global standing of the US (such as it is).

[1] https://theweek.com/articles/618419/why-americas-gigantic-na...

[2] https://markets.businessinsider.com/news/bonds/us-debt-econo...

[3] https://duckduckgo.com/?q=Sidney+Harris+comic+miracle+occurs...

This is just delusional. Everybody is looking for some reason that makes this less stupid than it looks, but there is none.

Intentionally causing a recession to lower the debt burden makes no sense, neither politically nor economically. Besides that the US is not some third world country that issues debt in a currency they have no sovereignty over.

> What are the flaws in this thinking?

-> Treasuries are considered safe during such crisis.

Is that truly still the case? Does the world consider the US stable right now?

I am astonished at how effectively the administration has blown up every pillar upholding the US economy, short, medium, and long term. The damage done here is incalculable. In all of human history never has so much wealth been destroyed so quickly.

Fed rate influences treasury rates, but it's not a direct impact. If creditors lose faith in our fiscal situation, rates will rise no matter what the Fed does.

Tax receipts drop during recessions, generally governments have to issue even -more- debt during them.

> Treasuries are considered safe during such crisis.

No. Not during such crisis. It's already visible in prices of traditional safe havens (those based on US credibility) that this crisis isn't like the others. They are dropping like flies. Only gold remains.

"If the fed won't lower the interest rate I'll tank the economy until they do!"

The F-35 jet will cost over $1.5 Trillion, doesn't work and won't be used

Cancel it and stop making everyone's daily life absolute hell by doubling the prices of groceries, car payments, etc. every month

National Debt is not a problem for a country that will be around for 1000+ years unless you know of something that is going to greatly shorten that.

There are nearly 1,000 BILLIONAIRES in the US, the debt is their problem, they can pay more taxes until it's down to a number you like.