You've found your way to another correct take here, but it's uncharacteristically lukewarm: in fact this problem is much worse than you say.
For one thing, entitlement trust funds running out of money is a fake issue - everyone in DC knows we'll keep funding the entitlements at the same rates and simply borrow more to do so. Nobody is voting against the "save grandma's social security act" or whatever enacts that change.
That's only one instance of the genuinely terrible political economy on fiscal issues right now. Anyone remotely serious about fiscal policy knows - and has known for decades - that we must either raise taxes or cut entitlements. Preferably both. We used to have one party that wanted to raise taxes and one that wanted to cut entitlements, so a grand bargain seemed possible.
But voters hate taxes and love entitlements, so they revolted from both sides against any compromise. Now both parties have learned that lesson and only talk about further cutting taxes or further expanding entitlements. Your faith that financial realities will "force" politicians back to reason is kind of autistic - if voters keep demanding something for nothing, politicians absolutely can, and will, drive the car off the cliff. Hyperinflation, sovereign default, the works.
Frankly you should be putting the general public on blast here. How did we get so irresponsible?
Yeah, good take. Voters are really asleep on this issue. A lot of them think talk about deficits is mostly fake since discussion about it comes up once a decade or so, not much progress is made, and then it falls away from the public consciousness. But things really are getting dire, and the longer we can-kick the worse the pain will be, and the less likely it is that we'll be able to get to some reasonable compromise rather than just doing a soft-default.
The median voter would prefer the US have the vibes of being "fiscally responsible", but they're *vastly* more interested in things like shovelling another trillion to the Olds.
Well we can only hope for an AI powered abundance in the coming decades, so entitlements will become irrelevant. If we can automate everything, food and goods will become extremely cheap. Old people will no longer need welfare to buy food.
Food is already dirt freaking cheap by almost all historical standards. The rock bottom "buy enough food to stay alive and adequately nourished" amount is already less than $5 a day. Albeit it would be a lot of boring food like dried rice. You can already buy pork chops for like $3.
Don't use the word 'deflation' lightly like that, use something like 'lower costs' or 'higher output'. Deflation, especially MASSIVe deflation is 99% of the time bad.
Did budget constraints prevent socialism from capturing Argentina, Venezuela, or anywhere else? The math never works, but that simply creates a doom loop of government expropriation until there's nothing left.
Sorry, but where did you learn arithmetic? US GDP is 32 Trillion. 5% of GDP - which is 5% of the total value added in the USA is 1.6 Trillion. 15% is 5 Trillion. 15% will cover the current budget deficit PLUS medicare for all.
You can read the link at the CBO site. They are suggesting a VAT which excludes services provided by the government (who gets charged a VAT for your kid's elementary school education?), sale of existing housing etc.
In most of the EU (and places like Aus and NZ) a VAT is charged on every transaction deemed a good or service. When a business sells materials to another business, there is tax on the transaction. A lot of countries do charge VAT on private school education because it is a service.
In contrast the US only adds sales tax at the end for the final consumer.
In Europe, the typical VAT is about 22%, but the average VAT program only raises 7% of GDP in revenue. There are many reasons for this, including the fact that VATs don't apply to business taxes or depreciation (both a part of GDP). Nor do VATs apply to investment or government output. The taxes don't even apply to all forms of consumption, such as implicit rent on owner-occupied residences.
That isn’t quite how a VAT works. CBO estimates a 5% VAT raises $300 bn/yr, which helps but doesn’t make a meaningful change in the deficit. You’d need more like a 20% VAT
You make the mistake of thinking the DSA really wants the "S" through means of "D". They do not. The "D" is a smokescreen, as it was in the USSR. They already advocate abandoning the constitution, and they say that openly. Once you eliminate democracy, plenty of "unthinkable" things become possible for the socialists.
The fundamental error here is defining socialism as a larger welfare state. Medicare for All, free college and Social Security are redistributive programs entirely compatible with capitalism. Socialism is the democratization of the economy itself—ownership, workplaces, investment, production and the social surplus.
Ironically, the argument that markets and capital would punish an elected socialist government until it retreated illustrates the socialist critique perfectly: political democracy remains subordinate to the unelected power of capital.
The fiscal crisis is real, but the real Marxist question is which class will be forced to pay for it? That is class struggle, not accounting.
This is a compelling argument about the limits of American social democracy. It isn't an argument against socialism.
Real socialism would repudiate the government debt and confiscate the assets of all the major Corporations. Not that I advocate that, but expanding social spending is not socialism.
This is a compelling comment. Communism of course will drive America off a cliff, and unleash untold horrors in the long term. But in the short term it could provide a way for the US to default on its debt while preserving the possibility for future investors to believe it will not do that again, having the cake and eating it too if you will.
Elect communists to power, have them both default on the debt and destroy the economy to a degree never seen in the history of the country, four years later elect a Pinochet figure to clean up, and four years later back to the scheduled program of liberal democratic capitalism.
Indeed. Some of the most vocal opponents of "socialism" are older people (boomers) currently collecting Social Security and getting health care from Medicare. Some people who are stuck in a cold war mentality, with the propaganda of that era. It would be helpful if "social democracy" were rebranded to a new name which didn't contain the word "social".
You are focused on the welfare state, but socialists also want to nationalize industries or regulate them so tightly it has the same effect. When they realize they don't have an easy way to get what they want on the welfare state, I fully expect the socialists to pivot toward the "controlling the means of production" part of their agenda. This wouldn't have any direct impact on the budget, but it would be very bad, probably even worse for growth and dynamism than getting their way on the welfare state.
While those 3 sources (Tax hikes, entitlement cuts and borrowing) are the obvious levers, i reckon running higher than target inflation (as the FED has done so far) will also be one of the levers, to inflate away some of the debt (and thereby interest costs in nominal terms), however this obviously cannot be a long-term strategy (higher inflation expectations raises long-term rates), which is also why Bessent is trying to intervene in bond-markets.
I mentioned politics briefly above, but they probably deserve more space here. Libertarian-minded people keep talking about how there’s too much red tape and the economy is being throttled. And less libertarian-minded people keep interpreting it as not caring about the poor, or not understanding that government has an important role in a civilized society, or as a “dog whistle” for racism, or whatever. I don’t know why more people don’t just come out and say “LOOK, REALLY OUR MAIN PROBLEM IS THAT ALL THE MOST IMPORTANT THINGS COST TEN TIMES AS MUCH AS THEY USED TO FOR NO REASON, PLUS THEY SEEM TO BE GOING DOWN IN QUALITY, AND NOBODY KNOWS WHY, AND WE’RE MOSTLY JUST DESPERATELY FLAILING AROUND LOOKING FOR SOLUTIONS HERE.” State that clearly, and a lot of political debates take on a different light.
"""
If we could get to more reasonable healthcare and housing prices, medicare and social security costs go down and the tradeoff is less painful
"When people talk about what economic ideas they’d like to see implemented, there’s usually an underlying assumption that “we” (whoever that is) are in control of our destiny."
But that assumes government has any legitimate role in directing the economy in the first place.
Politics and economics are fundamentally different disciplines.
The sole purpose of government is to protect individual rights through the courts, police, and military. When the state is restricted to those functions, a free-market capitalist system naturally emerges.
Any state action beyond that boundary represents a slide toward authoritarianism and poverty.
We need a total separation of state and economics, framed in the exact same spirit as the separation of church and state.
Progressives lost their best and last hope for socialized healthcare in 1948 when Truman and the Fair Deal were at its apex. That was a time when New Deal liberalism was in ascendancy, health insurance as it exists now didn’t exist, no hospital and physician consolidation or Big Pharma bribing Congress. Since then LBJ could only get Medicare for 65 and up. ( and that did the insurance carriers a favor since that took a sick demographic that took a beating to their bottom line ) Nixon tried and it went nowhere in Congress.
Like I said, the powers that be have their hands too far into the cookie jar that it is almost impossible to change the system
The unnecessary and rather dumb tax cuts (mainly to the wealthy) of both G.W. Bush and even worse by Trump are the #1 reason why the federal debt has ballooned.
As Dr. Paul Krugman, Nobel Prize winning economist, who has written so more collage level textbooks on economics than most people have ever even read in their lives explains....
"Debt and Tax Cuts
How did U.S. debt get so big? The answer may surprise you"
"The reality, however, is that U.S. debt would be much lower as a percentage of GDP, and would barely be in the news at all, without the revenue loss from tax cuts enacted by Republican presidents: George W. Bush in the 2000s, then Donald Trump during both of his terms."
The fear mongering of what a handful of "DSA activists" (the total number of members of the DSA is about 120,000) is unhinged and demagogic.
Much more troublesome is the lunatic economic and trade "polices" (theses are more whims of a demented moronic clown that actual well thought out "polices") that are the real threat as Trump alienates the whole world (especially our (used to be) closest allies, embraces authoritarian regimes (that used to be our enemies) in N. Korea and Russia, and has handed the future to China with his insane war against renewable energy, and will dampen future American growth by his white supremacy attack on immigration.
Kind of right-wing magic thinking: If I don't give $100 for health care to the government, but instead cut taxes, I have somehow saved $100 despite actually now spending $120 on private health care.
The flaw is thinking universal government good represent a new service that nobody was paying for in the past. Just because you avoid paying for it through government doesn't mean those services somehow become free.
Does Richard think private enterprise is so good hearted they just deliver health care and education free of charge to citizens?
Of course not.
In the end you have to look at total expenses: Both taxes and out of pocket expense to private sector services and goods.
You've found your way to another correct take here, but it's uncharacteristically lukewarm: in fact this problem is much worse than you say.
For one thing, entitlement trust funds running out of money is a fake issue - everyone in DC knows we'll keep funding the entitlements at the same rates and simply borrow more to do so. Nobody is voting against the "save grandma's social security act" or whatever enacts that change.
That's only one instance of the genuinely terrible political economy on fiscal issues right now. Anyone remotely serious about fiscal policy knows - and has known for decades - that we must either raise taxes or cut entitlements. Preferably both. We used to have one party that wanted to raise taxes and one that wanted to cut entitlements, so a grand bargain seemed possible.
But voters hate taxes and love entitlements, so they revolted from both sides against any compromise. Now both parties have learned that lesson and only talk about further cutting taxes or further expanding entitlements. Your faith that financial realities will "force" politicians back to reason is kind of autistic - if voters keep demanding something for nothing, politicians absolutely can, and will, drive the car off the cliff. Hyperinflation, sovereign default, the works.
Frankly you should be putting the general public on blast here. How did we get so irresponsible?
Yeah, good take. Voters are really asleep on this issue. A lot of them think talk about deficits is mostly fake since discussion about it comes up once a decade or so, not much progress is made, and then it falls away from the public consciousness. But things really are getting dire, and the longer we can-kick the worse the pain will be, and the less likely it is that we'll be able to get to some reasonable compromise rather than just doing a soft-default.
The median voter would prefer the US have the vibes of being "fiscally responsible", but they're *vastly* more interested in things like shovelling another trillion to the Olds.
"discussion about it comes up once a decade or so, not much progress is made, and then it falls away from the public consciousness"
You can tell a Republican's in office when the media start taking the budget seriously. Spending will go back to being a nonissue under president AOC.
Because democracy is rule by the people, but the people are retarded
Well we can only hope for an AI powered abundance in the coming decades, so entitlements will become irrelevant. If we can automate everything, food and goods will become extremely cheap. Old people will no longer need welfare to buy food.
Food is already dirt freaking cheap by almost all historical standards. The rock bottom "buy enough food to stay alive and adequately nourished" amount is already less than $5 a day. Albeit it would be a lot of boring food like dried rice. You can already buy pork chops for like $3.
Yeah but boomers do not want to buy $5 a day food. They want to buy their Whole Foods and locally ground coffee.
AI will implement depopulation!
Well that’s not the full picture. I’m hoping for massive deflation (eventually)
Don't use the word 'deflation' lightly like that, use something like 'lower costs' or 'higher output'. Deflation, especially MASSIVe deflation is 99% of the time bad.
"Inflation causes misery. Deflation causes wars."
(Can't remember who said it.)
Did budget constraints prevent socialism from capturing Argentina, Venezuela, or anywhere else? The math never works, but that simply creates a doom loop of government expropriation until there's nothing left.
A 15% EU style VAT could buy a lot of socialism.
It wouldn't even close the budget deficit.
CBO scores a 5% VAT at around $400B a year, so let's say $1.2T for 15%. The deficit is about $2T a year now.
I support a VAT, my point here is we are in BAD fiscal trouble. Worse than normie voters realize, let alone the DSA
https://www.cbo.gov/budget-options/60961
Sorry, but where did you learn arithmetic? US GDP is 32 Trillion. 5% of GDP - which is 5% of the total value added in the USA is 1.6 Trillion. 15% is 5 Trillion. 15% will cover the current budget deficit PLUS medicare for all.
You can read the link at the CBO site. They are suggesting a VAT which excludes services provided by the government (who gets charged a VAT for your kid's elementary school education?), sale of existing housing etc.
In most of the EU (and places like Aus and NZ) a VAT is charged on every transaction deemed a good or service. When a business sells materials to another business, there is tax on the transaction. A lot of countries do charge VAT on private school education because it is a service.
In contrast the US only adds sales tax at the end for the final consumer.
Exactly - if you want tax, you just tax every value added. Not exempt 80% of value added activities.
In Europe, the typical VAT is about 22%, but the average VAT program only raises 7% of GDP in revenue. There are many reasons for this, including the fact that VATs don't apply to business taxes or depreciation (both a part of GDP). Nor do VATs apply to investment or government output. The taxes don't even apply to all forms of consumption, such as implicit rent on owner-occupied residences.
That isn’t quite how a VAT works. CBO estimates a 5% VAT raises $300 bn/yr, which helps but doesn’t make a meaningful change in the deficit. You’d need more like a 20% VAT
You make the mistake of thinking the DSA really wants the "S" through means of "D". They do not. The "D" is a smokescreen, as it was in the USSR. They already advocate abandoning the constitution, and they say that openly. Once you eliminate democracy, plenty of "unthinkable" things become possible for the socialists.
The fundamental error here is defining socialism as a larger welfare state. Medicare for All, free college and Social Security are redistributive programs entirely compatible with capitalism. Socialism is the democratization of the economy itself—ownership, workplaces, investment, production and the social surplus.
Ironically, the argument that markets and capital would punish an elected socialist government until it retreated illustrates the socialist critique perfectly: political democracy remains subordinate to the unelected power of capital.
The fiscal crisis is real, but the real Marxist question is which class will be forced to pay for it? That is class struggle, not accounting.
This is a compelling argument about the limits of American social democracy. It isn't an argument against socialism.
Hanania is responding to the explicit policy demands of the most prominent self described socialists in the states.
"political democracy remains subordinate to the unelected power of capital."
nature, to be commanded, must be obeyed.
Man, to be commanded, must be incentivized.
Real socialism would repudiate the government debt and confiscate the assets of all the major Corporations. Not that I advocate that, but expanding social spending is not socialism.
This is a compelling comment. Communism of course will drive America off a cliff, and unleash untold horrors in the long term. But in the short term it could provide a way for the US to default on its debt while preserving the possibility for future investors to believe it will not do that again, having the cake and eating it too if you will.
Elect communists to power, have them both default on the debt and destroy the economy to a degree never seen in the history of the country, four years later elect a Pinochet figure to clean up, and four years later back to the scheduled program of liberal democratic capitalism.
Ok cool, doesn't tackle the core issues this article was discussing lmao.
Indeed. Some of the most vocal opponents of "socialism" are older people (boomers) currently collecting Social Security and getting health care from Medicare. Some people who are stuck in a cold war mentality, with the propaganda of that era. It would be helpful if "social democracy" were rebranded to a new name which didn't contain the word "social".
You are focused on the welfare state, but socialists also want to nationalize industries or regulate them so tightly it has the same effect. When they realize they don't have an easy way to get what they want on the welfare state, I fully expect the socialists to pivot toward the "controlling the means of production" part of their agenda. This wouldn't have any direct impact on the budget, but it would be very bad, probably even worse for growth and dynamism than getting their way on the welfare state.
While those 3 sources (Tax hikes, entitlement cuts and borrowing) are the obvious levers, i reckon running higher than target inflation (as the FED has done so far) will also be one of the levers, to inflate away some of the debt (and thereby interest costs in nominal terms), however this obviously cannot be a long-term strategy (higher inflation expectations raises long-term rates), which is also why Bessent is trying to intervene in bond-markets.
From "Considerations on Cost Disease": https://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/
"""
I mentioned politics briefly above, but they probably deserve more space here. Libertarian-minded people keep talking about how there’s too much red tape and the economy is being throttled. And less libertarian-minded people keep interpreting it as not caring about the poor, or not understanding that government has an important role in a civilized society, or as a “dog whistle” for racism, or whatever. I don’t know why more people don’t just come out and say “LOOK, REALLY OUR MAIN PROBLEM IS THAT ALL THE MOST IMPORTANT THINGS COST TEN TIMES AS MUCH AS THEY USED TO FOR NO REASON, PLUS THEY SEEM TO BE GOING DOWN IN QUALITY, AND NOBODY KNOWS WHY, AND WE’RE MOSTLY JUST DESPERATELY FLAILING AROUND LOOKING FOR SOLUTIONS HERE.” State that clearly, and a lot of political debates take on a different light.
"""
If we could get to more reasonable healthcare and housing prices, medicare and social security costs go down and the tradeoff is less painful
Have leftists been getting stupider lately?
"When people talk about what economic ideas they’d like to see implemented, there’s usually an underlying assumption that “we” (whoever that is) are in control of our destiny."
But that assumes government has any legitimate role in directing the economy in the first place.
Politics and economics are fundamentally different disciplines.
The sole purpose of government is to protect individual rights through the courts, police, and military. When the state is restricted to those functions, a free-market capitalist system naturally emerges.
Any state action beyond that boundary represents a slide toward authoritarianism and poverty.
We need a total separation of state and economics, framed in the exact same spirit as the separation of church and state.
Progressives lost their best and last hope for socialized healthcare in 1948 when Truman and the Fair Deal were at its apex. That was a time when New Deal liberalism was in ascendancy, health insurance as it exists now didn’t exist, no hospital and physician consolidation or Big Pharma bribing Congress. Since then LBJ could only get Medicare for 65 and up. ( and that did the insurance carriers a favor since that took a sick demographic that took a beating to their bottom line ) Nixon tried and it went nowhere in Congress.
Like I said, the powers that be have their hands too far into the cookie jar that it is almost impossible to change the system
Mr Hanania is ignoring the elephant in the room.
The unnecessary and rather dumb tax cuts (mainly to the wealthy) of both G.W. Bush and even worse by Trump are the #1 reason why the federal debt has ballooned.
As Dr. Paul Krugman, Nobel Prize winning economist, who has written so more collage level textbooks on economics than most people have ever even read in their lives explains....
"Debt and Tax Cuts
How did U.S. debt get so big? The answer may surprise you"
https://paulkrugman.substack.com/p/debt-and-tax-cuts
"The reality, however, is that U.S. debt would be much lower as a percentage of GDP, and would barely be in the news at all, without the revenue loss from tax cuts enacted by Republican presidents: George W. Bush in the 2000s, then Donald Trump during both of his terms."
The fear mongering of what a handful of "DSA activists" (the total number of members of the DSA is about 120,000) is unhinged and demagogic.
Much more troublesome is the lunatic economic and trade "polices" (theses are more whims of a demented moronic clown that actual well thought out "polices") that are the real threat as Trump alienates the whole world (especially our (used to be) closest allies, embraces authoritarian regimes (that used to be our enemies) in N. Korea and Russia, and has handed the future to China with his insane war against renewable energy, and will dampen future American growth by his white supremacy attack on immigration.
Gee, you have it all figured out. We should install you as Emperor and Most Absolute Dictator;
What a weirdly dumb comment.
The singularity is coming and you’re worried about—social security spending? Relax, we’ll be fine (if the robots don’t kill us).
I asked my robot and it promised me it won’t.
Kind of right-wing magic thinking: If I don't give $100 for health care to the government, but instead cut taxes, I have somehow saved $100 despite actually now spending $120 on private health care.
The flaw is thinking universal government good represent a new service that nobody was paying for in the past. Just because you avoid paying for it through government doesn't mean those services somehow become free.
Does Richard think private enterprise is so good hearted they just deliver health care and education free of charge to citizens?
Of course not.
In the end you have to look at total expenses: Both taxes and out of pocket expense to private sector services and goods.
Nothing ever happens!