Tuesday, June 5, 2018

Howard Schultz Confused Concern About National Debt

Howard Schultz, who was the key driver of Starbucks growth and who is stepping down from his current position as executive chairman of Starbucks, talked to CNBC this morning amidst speculation that he is considering a 2020 run for the presidency.

He told CNBC that one of his key concerns was the Trump administration adding to U.S. debt levels, which he called "reckless" and the "greatest threat domestically to the country."

"We are going to pay for this in terms of the next generation and it's unfair," he said, describing the more than $21 trillion in debt.

Debt, of course, is a problem but Schultz gave no indication if he wanted to solve this problem by cutting government spending or by cutting taxes. It was a half answer reminiscent of Slick Willy.

He also is confused about the debt problem. It is most certainly a
here and now problem, not just a "next generation" problem.

I explained in 2017:
The usual take is that the deficit will hurt future generations when the debt will have to be paid off.

But this view is largely inaccurate. To be sure, when a country takes on so much debt that creditors are no longer willing to loan it more money, a debt crisis emerges (See: Greece). But until the debt reaches such crisis levels the debt can grow and grow for a very long time.

It has done so for a very long time in the United States. No one has "paid it off."

But there is an immediate problem with ballooning government debt that is hardly ever mentioned---and this is a problem that exists far before any debt crisis emerges.

It is that money borrowed by the government is money that would otherwise remain in the private sector. This is a major immediate hit to the economy.

Instead of money ending up in the hands of businesses serving consumers, consumers themselves, and entrepreneurs, The money ends up in the political world of special interests, politicians, bureaucrats, cronies and the Deep State.

In other words, the deficit problem is in the here and now as soon as the deficit expands. A growing deficit crowds out and suffocates the private sector immediately, resulting in an immediate lowering of the general standard of living.
In short, Schultz is spouting half-informed economic policy concerns that you could get from almost any customer sitting in a Starbucks cafe drinking a $4.45 Grande Starbucks Blonde Cold Foam Cappuccino.


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