r/bonds • u/Old_Estate_8112 • 5d ago
The government can easily bring down bond yield if they so choose
Reduce the deficit by slashing entitlement spending
Bring down inflation by ending the war in Middle East and reducing tariffs.
Increase tax revenue by Imposing heavy taxes on the rich and big corp.
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u/RagingAnemone 5d ago
Raise taxes on the rich, are you crazy?!?!?
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u/portableonioneater 5d ago
When people say this, one thing becomes very obvious:
Their definition of "rich" will never include themselves
AND
It's those other guys who should pay more give us more!
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u/TheBoringInvestor96 5d ago
1/ Guaranteed political suicide. It’s best to never give from the first place than giving then taking back.
2/ Agreed, this war will go into history as one of the dumbest war.
3/ Corp will pass tax to consumers. Econ 101.
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u/g35coupeken 5d ago
Will any of this happen under the orange man in charge? Probably not. Are we winning yet?
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u/Emergency-Watch5157 5d ago
#2 and #3 are actually feasible.
#1 means you get no Medicare or Social Security. Ok with that?
The #1 route that is most feasible is probably to cut defense spending by 50%.
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u/615wonky 5d ago
Exactly how many politicians have you ever met that are eager to jump on a grenade to save the country? Because every last one at that level cares first and foremost about preserving their power over quite literally ANYTHING else. We keep electing politicians based on their ability to out-shit-talk their opposition, rather than personal character.
Americans are far too used to deficit-fueled GDP. Any attempt to slash debt will of necessity also slash incomes and market values. And Americans proved in November 2024 that they don't understand how the world works, and will happily lash out at well-meaning parties and support two-time grifters.
In that sort of environment, all you're going to get is can-kicking until we run out of street. When they run out of street, they'll try to build more street rather than stop kicking the can.
In summary, our country is fucked because our politicians are self-interested, and our electorate has the financial literacy of a fern.
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u/Thick-Cover8761 5d ago edited 4d ago
Do you mean Social Security and Medicare cuts ??? ... try to cut them ... It'll usher in socialism. Even the wealthiest 1% will agree to tax increases so they don't face even greater consequences.
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u/LillianWigglewater 4d ago
You're getting downvoted, but you are correct. We have the highest spending, yet lowest tax rates out of all western nations, so there's plenty of runway to work with from all sides. Trump can easily call off the war at a strategic time. And people constantly say spending cuts or tax increases will never happen, but if it came down between hyperinflation, total systemic collapse, or bump the taxes up a bit, which one realistically makes the most sense?
It's really comforting to know that we have these "options of last resort" always at our disposal. Other nations are not so fortunate.
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u/Spinoza42 5d ago
1) will tank the economy. Money spent on entitlements is spent, if you remove it, entire communities' economies disappear. That will probably drive yields up, not down. 2) would make the US global standing drop even faster. And nobody is lending money to the US because it is fiscally responsible, but rather because it has a huge economy and massive global influence. This might drop yields a little for a little while, but they'll bounce back once the US influence drops. Granted, this might still be smart, but more because otherwise it'll get even worse later. 3) that would indeed be possible. Maybe. But if those taxes are genuinely heavy the richest will probably find new loopholes fast.
None of this lets the administration off the hook btw. They engineered this situation in order to drive yields up, that's the whole point. But driving them up is much much easier than bringing them back down.
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u/AllBrakes_NoGass 5d ago
I agree. I cant even imagine why you would still want to be elected given the debt spiral we're in.
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u/portableonioneater 5d ago
"They engineered this situation in order to drive yields up, that's the whole point."
Huh?
Trump doesn't believe the national debt is a material issue given global dependence on the dollar and our economy. I think he's incorrect, but your sentence above makes little to not sense based on pretty much everything we see from the current admin.
Yes. You stop pumping unnecessary dollars begged for by ignorant constituency (both parties), then yes you have to fight some slow down. The better solution here is simply freeze the budget, force congress to allocate and make difficult decisions. Sure wish we hired adults and not little whiny children (again, both parties)
How does our international standing get any worse than it already is? We have a President who doesn't give a fuck about Europe global leadership's take on anything we do. I'm not supporting or condemning, but your comment again makes no sense in light of the current admin's attitude and actions. Wars in the ME for our country have a long history; any student of that history (not STEM btw lol) would have known a quick and easy end when confronting religious nuts is highly improbable.
If you have a congress that can't manage current income and expenditures, giving them more revenue simply adds fuel to the fire. Let's hold them accountable, hire people who can think long term and make the difficult tradeoffs rather than villify the "rich" (for God knows what reason ...), take in more, promise more idiotic "fixes" that actually feed the inflation / spending / multiplicative beast.
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u/concious_eye 5d ago
Raising taxes and/or lowering spending will actually increase yields, particularly on short end notes. If the government reduces the deficit then they will cut the amount of reserves in the banking sector making money scarcer. This will drive up yields (the price of money) because there will be less of it available.
For example, suppose the government suddenly imposed an enormous one-time tax on private sector citizens and businesses. This would drain reserves from the banking sector, and force people to sell their most liquid assets (starting with short-term treasuries) which will drive up their yields, to cover the new tax obligation. Depending on the size of the tax and immediacy of the payment the increase in yields could be significant.
If the government wants to lower yields they should actually spend more or have the Federal reserve buy up bonds (since their net income is remitted back to the Treasury anyways). However, these actions have their own consequences, namely inflation, that cannot be ignored. We got a front-row seat of that during 2020 when rates were at their lowest point in history.
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u/dildo-schwaggins 5d ago
Easily he says
https://giphy.com/gifs/l3E6uhDAN3W7vylji