Trump signs deal to increase govt spending by $US300b

Mixed result for Trump: With the Republican majority in Congress split over his spendup plans, Democrat support was needed to get them through - necessitating even more spending

US president Donald Trump has signed a budget deal that will see close to $US300 billion in new government spending over the next two years, facilitated by the temporary suspension of federal debt limits.

The spending bill, which ended a brief government shutdown, is a messy compromise, necessitated by the fact various Repubublicans in the Senate and House opposed the legislation as fiscally irresponsible — meaning despite the party's majority in both houses, Republican leadership had to buy the support of Democrats to get it through. 

The $US300 billion consists of a hike in military spending requested by the Trump administration, around $US90 billion for disaster relief for states hit by last year's destructive hurricanes, plus top-ups to various domestic programmes required to get Democrats onboard.

There was talk that Mr Trump favoured an extended shutdown to force Democrats into concessions on immigration issues, but in the end, the president stayed largely on the sidelines.

Broadly, there was relief that the two-year deal would break the monthly cycle of stand-off negotiations as the government brushed up against its debt limits.

However, some Republicans continued to voice their opposition.

"I believe it is a monumental mistake and a sad day," said House of Representatives chairman Jeb Hensarling in a statement.

“By eviscerating the 2011 budget caps and agreeing to a debt ceiling increase with zero spending reforms, I feel Republicans are allowing the removal of what little spending discipline remains in Washington. With rising interest rates and baby boomers continuing to pressure our entitlement programs, there are now trillion dollar deficits as far as the eye can see," the Texas Republican said.

“There is a true spending-driven debt crisis in America. It is the greatest existential threat to our country that receives little to no attention in Washington."

And Republican Senator Rand Paul — who forced a brief government shutdown — by stalling the Senate vote with a multi-hour speech said it was hypocrisy for Republicans to champion debt limits when President Barak Obama was in power, then vote for their suspension under the Trump administration.

And while Mr Trump hailed the deal for boosting military spending, Senator Paul maintained a larger deficit would make America weaker.

Congress has already passed permanent tax cuts for business and temporary tax cuts (until 2025) for some individuals, a move that the independent Office of Budget Management says will add $US1.5 billion to the US's $US20 trillion deficit. Boosters say the stimulus of tax cuts will mean they pay for themselves (though some have also fretted that about the potential inflationary effect, which in turn has contributed to this week's turbulence on Wall Street).

On Tuesday, Mr Trump is expected to reveal details of his $1.5 trillion infrastructure plan, originally due to be detailed around the time of its State of the Union address two weeks ago 

The president has previously indicated the infrastructure spending plan will include incentives for private sector participation.

Source: Dow Jones

Wall Street finishes in positive territory
Wall Street had another volatile session today, but all the major indexes closed in the green.

The Dow Jones Industrial Average was up 1.38%, the S&P 500 up 1.49% and the Nasdaq up 1.44%.


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14 Comments & Questions

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Can anyone explain to me how you repay $20 trillion? It's mind-boggling.

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It doesn't include around $US3 trillion of debt held by state and local govts, either.

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The debtors are owed $U.S. The simplest way is to print them. That satisfies the debt.
The consequences of printing it are something else.

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Easy. Just fork over $20 per year foe a trillion years, plus interest of course. Trump will fix it. No one is, like, real smart like him. He said so.

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Yes. Ben Bernanke knows how. It’s call helicopter money

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Indebtedness. A condition motivated by greed rather than need.
Trouble is, we've all become addicted to it, and like most addictions, it will get us one way or another in the end.

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Yes, I for one are interested in how it's all going to end up. Defaults first maybe?

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But for the build up in debt,, the world would have been in deep depression over the last 10 years.

Your choice.

Trump wanting to increase the deficit and debt now of course is an entirely different matter. But then, Americans have never been the brightest of people, have they? So conditioned they are that the world owes them a living.

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No one knows the long term effect of printing billions of dollars. Maybe the depression has been delayed and is yet to happen. Throughout history depressions come about every 70 years or 3 generations. We need to enter the 4th generation before the lessons of the past are forgotten and we make the same mistakes again.

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I wouldn't worry about the USA too much. Little o'l NZ has proportionally more debt than America. In the 1980s under Reagon. the US debt was about 1 trillion, climbed to 10 trillion under Clinton and Bush then the biggest rise of all was Obama from 10 to 19 trillion. More debt than all the other presidents put together.
Debt isn't a bad thing depending on what its spent on. Capital goods, infrastructure, new business policy direction is what Trump is aiming for compared to Obama's welfare and gender neutral school toilets etc.

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In all that time their debt has only grown. The question that I have, and one that no one seems to know the answer too, is how is it all going to be paid back?

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It is not going to get paid back. That’s the reality of US economy and the US as a country.

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Not pay it back, how does that work?

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The cut revenue + borrow + spend more equation will surely lead to the US having to increase the interest it offers in order to attract enough buyers of US debt. Especially as they increase their annual deficits.

And then...with better options on the table at the same rate, NZ will have to increase the interest it pays in order to attract lending, in turn.

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