It's an interesting article, but the number of typos makes me wonder how rigorous it is.
It also takes as an unstated given that we need or want to stabilize deficit/GDP or debt/GDP ratios.
The US dollar is still a global reserve currency. The US situation might therefore be "special" or "privileged" compared to other countries that have non-reserve "local" currencies.
The other question I have, is "does debt/GDP & deficit/GDP matter in absolute terms, or only in relative terms?". One could imagine a world where most governments have similar debt problems, and their currencies have similar inflation problems. For someone holding currency, there would be little reason to pick another currency in this scenario. One would instead predict a rush to place money in assets, causing asset inflation. That sounds like our present calamity, perhaps from different or more varied causes.
The choice to pay interest on what is in fact a balancing item in the accounts is a political choice. Just don't do that and then those ratios are irrelevant.
We have a floating rate exchange system. Quite why people think ratios from a fixed exchange rate era remain relevant is difficult to understand.
Other than that is what they really want to go back to - one world currency with no variation and governments completely unable to direct resources for the benefit of their own people, rather than global capital.
The world has excess production. Where is the untapped source of demand that will replace the current net import nations? There isn't any. That's why those with excess production swap that excess production for promises, rather than physical output.
That's interesting, where do you get that from? I have a hard time seeing people creating a new money system purposely building one that they expect from the beginning to fail.
If you want to use the “printing money” analogy because you can’t grok the correct credit and debit process then you have to accept that taxation “shreds money” and saving money (which is what a deficit is) “puts it in a drawer”.
How does people putting money in a drawer cause a problem?
>That's why those with excess production swap that excess production for promises, rather than physical output.
That's the thing. Mercantilism never really went away. It is just more subtle nowadays.
The greek crisis can be boiled down to this: "Germany is exporting to Greece, because the absence of exchange rates makes German products unreasonably cheap in comparison to Greek products. Greece therefore buys from Germany, but Germany doesn't buy from Greece."
So if Greece still would have had the Drachme, Germany would have bought more olive oil, Greece would have bought less machines and everything would have been honky dory?
Huh? They did all the time, albeit at higher rates.
Do you think Greece never had any national debt before joining the EU? They’ve had multiple defaults, and then built up more debt, etc. long before joining.
Lending is really a balancing item on the accounts. By default it happens automatically and costlessly in the currency of issue.
It’s only when the currency in question is somebody else’s currency that what most people understand as lending and borrowing actually happens.
With a country’s own currency it’s more refinancing to a higher interest rate to provide a basic income to those who already have money - all based upon the belief that there is a magical unobservable interest rate that will balance the system. If only we could find it.
A state operating its own currency is self financing. [0]
Russia is like China. They are technically lending to us, and it doesn’t matter. Nor does it matter to them if we delete that debt as they use the rouble [1]
Sure but then it is just like a ponzi scheme, where the lenders hope they get out before the default and others are left holding the bag. Argentina shows that most lenders are not willing to take that risk and demand far more strings attached to their loans.
It would all be hunky dory because for Germany to export as much as it has done to Greece it would have to hoard Drachma, the drain of which the Greeks could then simply accommodate via a fixed wage Job Guarantee - ending unemployment permanently.
As it stands the ECB refuses to do the necessary reflection of the German Target2 hoard into the Greek economy and the result is excessive unemployment and reduced production in Greece due to lack of monetary circulation.
All to service a belief about the medium of exchange that isn’t actually the case - that people won’t hold it without monetary incentive (aka an interest payment).
We need to chuck out this damaging interest-obsessed monetary religion. The price anchor and stabilisation policy needs to be in the market for labour, not the market for money.
There’s no political will to raise taxes and cut government spending. One or the other may happen but not both. Both are required to get us out of this mess. We don’t have politicians that think long term.
As a consequence, the Fed will be forced to lower interest rates as low as possible again so the government can escape crushing interest payments and let inflation inflate away government debt.
Expect long term inflation, asset prices, and commodity prices that keeps rising as a consequence.
One would think a rating agency might call time on debt growing beyond what a declining population pyramid can support (through ratings downgrades). Even if the Fed lowers rates, investors might not have appetite for declining quality sovereign debt that will never be paid back. But maybe Japan and the BOJ show this is immaterial.
These are banks, I’m referring to sovereign debt. As a nation state, when you issue sovereign debt, that is a promise to repay that debt in the future. Who will be paying that debt back? Workers generating output that will be taxed in some way, with taxes servicing and retiring future debt obligations. What will there be less of in the future? Workers (structural demographics, total fertility rate rapidly declining globally, etc). The collateral (future worker aggregate productivity) doesn’t exist at the forward curve with the promises to repay in the future, therefore the debt should be rated as higher risk and less likely to be paid back. This would force interest rates higher on issued debt (more risk demands higher yields), but whether the market has an appetite for debt issued with more realistic fundamental expectations remains to be seen.
We think we know the approximate trajectory of future population growth. We might be wrong though.
We definitely don’t know the future trajectory of productivity growth. There might be inflection points that more than compensate for slowing worker growth. This is in fact the basis for investor excitement about clean energy, robotics, artificial intelligence, new health care technologies, etc.
Sovereign Debts are the Treasury Bonds. There is no chance in hell, it will have a lower rating. The debt will always be paid off, at the cost of higher yields for the future. Its an extremely unpleasant situation but inflation and higher taxes are first in line before even any possibility of Treasuries defaulting.
Why do people suggest inflating away debt rather than just defaulting on it? I'd guess that the debt markets would punish the two options equally, because bonds would lose the same amount of real value either way. But inflation also screws up your economy as a side effect.
Defaulting on debt is the fastest way to turn the US into a third world country. Banks would fail, since they invest our deposits in long-term assets including treasuries. Companies typically store their cash in treasuries and money markets, so companies would go under (or have to issue more shares under duress), crashing the stock market. Retirees would stop receiving Social Security payments, and retirees' nest eggs are normally mostly bonds.
The US would piss off other countries who lent us money, who'd come knocking with a country-scale baseball bat demanding their money. But two thirds of that $35T is owed to Americans. There'd be a good chance of either a civil war or global war. We'd likely lose our status as the world's reserve currency, devaluing the dollar and leading to inflation.
Nobody would trust the government enough to lend them money, so they'd have no choice but to print money to pay expenses at this point. So, we'd have inflation either way.
> Why do people suggest inflating away debt rather than just defaulting on it? I'd guess that the debt markets would punish the two options equally, because bonds would lose the same amount of real value either way. But inflation also screws up your economy as a side effect.
Defaulting would impact the value of Treasurys far more than inflation, a bond’s price is merely the sum of its future cash flows, pricing in a default would push yields waaay higher than they would from inflation alone. There would also be massive liquidity problems since banks and companies hold a ton of Treasurys along with pensions and retirees.
There’s far more negative impacts from a debt default that sibling comments already elaborated on.
There are very few black swan scenarios that would cause me to liquidate the assets in my retirement accounts for cash, but a US sovereign default would be one of them.
> Why do people suggest inflating away debt rather than just defaulting on it?
Because one ultimately still keeps the debt obligation in place, whilst the latter causes debt confidence collapses & the destruction of faith in repayments from the government.
Would you rather take a 2% value loss via inflation, or a 90-100% value loss as the government declares default? Most people would take the former rather than the latter, as the impact of one is much softer than the other.
2% inflation per year is a healthy amount. To inflate away 90% of debt, I imagine 1000% of inflation would be needed over some amount of time (and this amount of time better be short enough that you don't accumulate significant debt during it).
That is true. We have mostly elected politicians that promise to bring as much federal tax dollars home as possible. When you have promised the moon, telling your constituents that the rocket needs to be dismantled and sold off is political suicide.
It's similar to when folks say "big corporations" or "oil companies" are responsible for climate change. No Karen, you are the reason those companies can and do sell their products. It's a method of diverting personal responsibility, IMHO.
No, it is the oil companies and that oil is permitted to be used.
When something is permitted, it becomes mandatory to somebody, and oil is used widely. Personally choosing to avoid products that used oil in their manufacturing would basically relegate you to having to farm your own food by hand. That is not feasible in a society with competition.
Obviously the transition away from oil should be gradual, and the sectors which are hardest to transition could be given more time to do so. But there's no fundamental need for large scale use of oil, it's just the current infrastructure and limited tech that's the problem.
Hundreds of millions will die due to climate change if we don't act.
I don't buy that, making it a personal responsibility problem was an implemented strategy by those responsible to avoid having to pay the price of doing anything about it.
We literally have no choice but to make small insignificant changes that does not harm the bottom line of those responsible too much.
No, things should be regulated so that individuals have no choice but to do the right thing. It's governments responsibility to steer Karen towards more sustainable consumption choices. Either tax unsustainable business to make it unprofitable, or tax purchase of their services so that it's not rational for Karen to buy their product / services. The ecological choice should be made the cheapest.
Universally in this world people live most ecologically in parts of the world where they are too poor to act otherwise, not where they are most climate or environment conscious. Voluntary personal responsibility gets you nowhere when it comes to solving large-scale problems.
> Either tax unsustainable business to make it unprofitable, or tax purchase of their services so that it's not rational for Karen to buy their product / services. The ecological choice should be made the cheapest.
That sounds great and all until your granny can’t afford heat in the winter or there’s no food in the stores, etc. Then people will vote out the politicians making the policies or revolt.
That’s what I’m talking about personal responsibility. Not regarding individual actions per se, but accepting that most of us in the developed world are as complicit as the big oil companies.
That said, technology is improving to where the cheapest option is the ecological one for power. A fair bit of that has been due to individual actions of many folks wanting and paying for solar power and electric vehicles, etc.
Ironically to me, the individual preferences of the Green Party members also put lots of political pressure to shutdown nuclear power in Germany. That caused Germany to fallback to coal and natural gas.
Hey don’t get me wrong, we kinda suck in first world countries, but oil companies are run by people with full awareness of what they’re doing and the agency to stop who choose not to stop singly because they’re too interested in raking in money they will never even find a use for.
Ultimately the end consumer has little to no control, or knowledge, to enact this.
Yes everyone should be ethical in their consumption. If I gave you an arbitrary product and asked you to tell me if its ethically sourced, there's a high chance you can't. Even if I give you the internet and a week to research.
So, that's one problem. Another problem is that even if you could tell what is/isn't ethical you can't necessarily switch away.
Sometimes the more ethical choices aren't available, or are too expensive, or are outlandish. I'm sure everyone in the US would love to eat grass fed pasture raised beef. Meredith, who works two shifts at the town Dairy Queen, who's trying to give her son some protein, so his tiny muscles don't atrophy, doesn't have the funds for that.
Cars and oil are perhaps the most clear-cut example of this. People don't drive because they want to, they do it because they have to. It's literally life or death. A car in the US isn't just a box on wheels, it's a lifeline.
Is it Karen’s fault when she is told by her media for thirty years that climate change is bs? Is it her fault that she tries to recycle, but most of the plastic she puts in the bin is misleadingly labeled and has to be sorted out? Is it Karen’s fault she drives a gas car to work because public transit is underdeveloped and electric cars are too expensive? Framing climate change as a matter of personal responsibility is extremely counterproductive IMHO.
Which is true. Who votes for someone promising to raise taxes and give you less for it? People only vote for that to happen to other people, not to themselves.
The problem with voting for candidates who solve problems with unpopular approaches is that they lose elections to people who campaign on making the problem worse.
>Then OP is essentially saying that we appear not to choose politicians that are prescribing bitter medicine.
Sort of. I think it's more accurate to say that there are just enough fiscally irresponsible politicians in office to prevent a government that pays as it goes via taxes. The vast majority of those politicians are Republican, taught by Ronald Reagan that they could have massive spending AND tax cuts without political penalty (indeed, Reagan was rewarded with adulation for nearly tripling the national debt). Democrats have been fairly consistent in reducing the deficit, and if they'd had their political druthers, would've reduced it even further with additional taxes. The reality is that maintaining a modern superpower of over 300 million people requires much more in annual taxes than voters realize, at least in part because they've been misled by Republican leadership to believe that taxes (particularly progressive taxes) are unnecessary.
> There is plenty of political will of every kind.
There's no direct election, and despite "every kind" of politician existing, the representatives of two parties with very similar polices overall, differing only in pointless stuff, keep taking turns in the presidency since forever. The choices are quite constrained.
One side is willing to raise taxes on billionares and continue to have democracy. The other not so much.
your argument stopped having any semblance of merit at least decade ago. Now it is laughably unbelievable.
Now, ought there be more direct representation? Of course!
Should we have more than two major parties? Of course!
Guess what, a lot of people on this forum I am sure make plenty of money to be able to afford going to a few fundraising events for local politicians that they favor.
It's not too expensive to start paying for fundraising dinners for your local representatives, mayors, congress persons, etc.
You can help get people elected into local positions that align with your interests. AND some of those people will continue to build their career in politics and may become Senator or Governor someday.
That's influence. That's buying into the system to make it how you think things will be better.
> We, the population, vote for the persons with specific political wills. We choose what to enact.
Except that this is far from the reality.
We elect people with specific views but they seem to vote regardless of their constituent interests, let alone their supporters’. Instances of this fact are very easily searchable online.
The idea that these representatives can just vote without accountability is absurd, and clearly a weakness money has uncovered in the US political system. (I refuse the claim status quotitians make that “elections are accountability“)
My suggestion is elected representatives act as litigators to their side of the argument and they need to make their claim to a jury overseen by a judge. That jury determines if a bill passes.
Who you elect as your representatives still matters, but now their ability to litigate persuasively is the number one quality of consideration when choosing those representatives.
This should remove the power that money has in bills being passed, as well as completely remove the “rider compromises” where officials compromise by including unrelated clauses to encourage the passing of a bill.
I want a representative government and I think expanding the powers of justice by jury will help in further enshrining that goal in our political systems.
The Fed is expected to cut soon regardless, not to bail out the government but because inflation is falling. I imagine that will be the resolution to this. Perhaps rates won't go as low as you're suggesting, but they are expected to be decently lower than they are now.
They wouldn't get voted in. You said it yourself. What kind of platform is "let me cut your benefits/raise your taxes for temporary pain now so that hopefully in 10 years some good thing (that you might not even notice) will happen if everything goes according to plan"?
First - you don't need both - if you cut Social Security and Medicaid altogether, and use the surplus to start paying down debt, that solves 100% of the deficit and starts chipping away at the debt, while this would actually reduce taxes rather than raising them. I'm not asserting that the political will exists to do this (it doesn't), but the idea that you can't balance the budget without raising taxes is obviously false - taxes are nonzero, but you could reduce spending to zero.
Second - you don't actually need either - if you hyperinflate the currency, the value of the existing debt becomes negligible. To wit, I fundamentally agree with the message of the remainder of your post.
The whole point of "getting out of this mess" is so that you don't hyperinflate the currency, with all the economic and political damage that causes. "Don't bother doing either, just hyperinflate" is therefore not doing anything at all, just resigning yourself (and the country) to your fate.
Hyperinflation is a different mess from unsustainable debt. I took "getting out of this mess" literally, rather than meaning "getting out of this mess while avoiding getting into any other messes in the process".
> if you cut Social Security and Medicaid altogether, and use the surplus to start paying down debt
How is making me and almost everyone over 60 homeless going to result in a surplus? There would be all the dead lawmakers to bury, and so much security to try to protect the rest.
That's a "let them eat cake" level of breaking the social contract you're considering
I already noted that this is a political impossibility, we're talking about strict hypotheticals from a budget analysis perspective, not serious proposals.
I'm sympathetic to your struggles if OASI is the difference between you being homeless and not 60+ years into your life. Just know that your benefits are slated to be reduced by a minimum of 21%, automatically starting in 2033 when the trust fund is depleted, per laws already on the books.
Social Security and Medicare are, fundamentally, classic pyramid schemes. They rely on an infinitely increasing number of people to remain fiscally viable. We're at the end of that road now though, U.S. TFR is down ~1.6. These programs are going to crack soon, and anyone under the age of 40 today will never see a penny from either of these programs despite paying in for their entire lives.
I understand that ripping away benefits you already paid for is unfair to your generation, but being forced to fund benefits we'll never receive is also unfair to my generation, to say nothing of all the generations after mine.
We could fund both of them easily with no strain by removing the contribution cap at 250K of income and not raiding the fund for extra change every time the government is pressed for money. The US is not in a demographic situation where Medicare and Social Security are untenable, but removing these programs would impact young people by making them responsible for their elders. It's easier to bear the burden when everyone pays in than everyone having to consider how they're going to afford to support their parents, etc and how they'll afford their definitely sky high private insurance. These two programs are the lesser of evils for the problem of elders.
I don't believe I've posed the arguement that 21% and 100% are the same thing, just that an automatic 21% reduction is where we are headed if nothing changes, as the way the program is currently structured and funded is unsustainable and is going to deplete the trust fund by 2033, which is a projection from the SSA themselves.
I'm sure you actually understand reduction of 21% does not mean you will "not see a penny" (i.e. a 100% reduction) yet that's what you wrote, so here we are.
The people who are expecting benefits in 2033 and the people under 40 are two entirely separate generations. The latter will not inherit a Social Security system that is more fiscally stable than the former, only worse.
How does this compare to the fiscal situation at the time of WWI or WWII? And how does it compare relative to other factors like other countries' finances?
Basically the US now is approching WW2 level debt. Just outside of a war. Without all the growth. Without all the other destroyed countries in desprate need of rebuilding. Without the young population. With massive unfunded liabilities in its social programs. With massive amounts of crumbling infrastructure.
Basically after WW2, as soon as the war was over debt started dropping. Before the great societ stuff, the US didnt have so many future liabilities. Debt was dropping during Korean War.
"In our best scenario analysis, stabilising the fiscal outlook will take years to accomplish, but also require significant action already in the short run, operating on both spending and taxation. A consolidation over a long horizon should not be confused with procrastination. Waiting is costly: the size of the required correction is already sizeable. With debt growing at a sustained rate, delaying action can only make the required correction larger. Even more, waiting is risky."
I was saying exactly this was true in the 1970's and unfortunately that's when the significant action failed to be taken. It really was needed in the short run right then but for lenders there was too much to be made by completing the shift away from the stable debt/asset ratio << 1 which had built the country, rapidly over to a variable payment/cash-flow ratio instead. This is not a perfect simulation since real assets are important, but the main thing is it allows the lenders to avoid shrinking themselves, or even grow a bit during times of no actual growth in the "economy" at large. And the payment/cash-flow ratio can be focused on and "responsibly" maintained below 1 since that is a widely-agreed "bad thing" which leads to certain collapse for a financier.
But acceptance of this allowed the newly deprecated debt/asset ratio to rise exponentially from its near-zero starting point since additional debts (often at less-attractive terms for the payers) could be piled on more discreetly, and assets themselves are virtually out of the equation too and more ripe for the taking if opportunities presented themself. There was so much more money to be made by making deeper debtors out of those who were established, and adding new debtors to the rolls whose underlying assets were too low to be reasonable under normal times.
Assets of the most well-heeled can be better protected, and assets of the masses tapped into in different ways and neither will effect the overall equations or outlook when the equations are based on "money supply" and "velocity" rather than (remaining) net wealth or real assets. It's a slippery slope but if assets are being tapped into they dwindle, regardless of how the payment/cash-flow figure may take prominence and provide untold opportunities for those adjacent to the cash pipeline. Debt/asset can then smoothly climb much closer to 1 without gaining enough attention, and even smoothly move above 1 with no further apparent effect !
But let that "hidden" debt/asset ratio remain above 1 long enough, or even above 0.5 beyond "2 whole periods of time" and assets will not stop declining toward zero until done. Automatically, without additional debt being incurred. And the ratio goes through the roof even faster. Unless something major is done about it. Meanwhile the sky remains blue and nothing can be seen on the horizon that looks any more threatening than it has been the last few decades.
The action needed now is the cost of waiting this long.
I find it fascinating that the right wing in the US is massively pro Russia.
It didn't happen in the UK, probably because of a populist prime minister (Johnson) who wanted to be seen as a Churchill figure throwing immense and unconditional support to Ukraine, it meant that pro-Russia elements couldn't really get any traction.
There are remarkably few overlaps between the geopolitical situation of the UK vs the US. It isn't unexpected that people take different positions - the only thing the right wing parties are expected to agree on are some broad economic and social principles. With a lot of caveats and "maybe"s.
It is like being fascinated that the Indian right have different opinions, or the South African right. Or the Russian right. Or different factions of the US right wing. It is fascinating, but the UK voters aren't expected to be on the same wavelength as the States; Johnson or no Johnson. They have different interests and motivations.
(Genuine questions here!) Is paying less interest an option? Either "refinancing" the debt at lower interest rates, or simply declaring that existing bonds will be paid out at a lower rate? People will presumably still want to hold US Treasuries because of their other properties.
Also Japan has a debt to GDP much, much greater than the US, and still seems to function fine as a country, so how do they do things differently?
The federal reserve can just buy the debt from the government using newly created central bank reserves, but this increases the money supply so in the long run it will cause inflation (eventually you end up with Weimar/Zimbabwe style hyperinflation, although that's a long way from where we are now).
Japan has essentially been doing this (the mechanics are a bit more complicated, but the effect is essentially the same), and they've been able to get away with it because inflation has been low for the last three decades due to external factors such as globalisation.
Now inflation is starting to rise even in Japan, so they may have some issues in the not too distant future.
that’s the governments in the EU deflecting blame and not admitting they messed up telling people to stay home, in some countries up to a year, and then paying those people to stay home (literally money printing) that it had no direct influence on inflation or wasa primary driver of it.
I mean you’d have to be completely stupid to believe that what they did had no impact on inflation.
It's definitely controversial and in the short term it's probably dwarfed by other factors (velocity of money and external factors), but it stands to reason that if M1 increases by 300% while population remains roughly static and GDP increases by 50%, in the long run there will be inflation.
If tripling the amount of base money has no effect then logically destroying 70% of the base money would also have no effect, but I never see people advocating that
The original definition of inflation was literally an increase in the money supply. Economists only changed the term to mean an increase in prices when they also latched onto the idea that they can print new money and inject it into the system without consequence.
It seems relevant when the GP claim is that money growth and inflation have no connection.
The definition was changed only because economists decided inflating the money supply was a brilliant economic policy and the old definition became inconvenient.
When you realize they changed the definition only for better optics it's easier to question the underlying principles.
> The definition was changed only because economists decided inflating the money supply was a brilliant economic policy and the old definition became inconvenient.
That probably isn't true, both because it isn't that obvious that the economists thought it was a good idea or that they were the ones who changed the definition. "Economists" don't have any power over anything and the consensus position seems to tend towards disagreement with government policy.
Inflation is one of those topics where there seems to be a dearth of actual economic evidence bought to the conversation. The policy justification in the public discourse tends towards just-so stories.
This is a good overview of the history of the term "inflation."
Ideally people would specify which inflation they're referring to, like monetary Inflation or price inflation. Short of that though, until we started moving to full fiat currencies inflation without any qualifier was inflation of the money supply. After the move to fiat they repurposed the braod term to mean price inflation, presumably because monetary inflation isn't meaningful when your system is based entirely on manipulating the money supply.
It doesn’t necessarily mean making everyone poorer, when population is increasing and there are significant increases in actual economic output.
In fact, in those situations it’s necessary to increase the money supply to avoid deflation and other issues, as the existing folks with money/resources otherwise just have to sit on their hands and squeeze everyone else to get rich.
In an actual growth environment, Printing more money keeps everyone roughly the same level of poor/rich overall.
The issue is when population is decreasing or actual economic output is decreasing, but rather than withdrawing money to compensate, more money is printed to try to keep the graph going up and to the right.
IMO that has been an ever increasing trend since around the 90’s in the US.
That still depends on which inflation your talking about.
Monetary inflation = money creation by definition. Whether that makes everyone poorer depends on other factors though, like how the money enters the money supply and what current market dynamics are.
Price inflation doesn't equal money creation though. Printing money can cause price inflation, but other things can as well. Printing money too slowly relative to the economy could actually not keep up, prices can fall even though the money supply increase. There may be a corner case or two, but I do pretty much agree though that price inflation makes everyone poorer.
> In europe the inflation was caused by the supply chain crisis
Then we'd expect to see deflation when the supply chain crisis is resolved - which seems unlikely but I suppose it cannot yet be ruled out. I doubt anyone will be held accountable if that deflation doesn't materialise though.
It is an interesting question where CPI inflation is supposed to be coming from if not inflation in the money supply.
Funny enough, the US government is in a large part in debt to... the US government. So for that part at least, it feels more like an accounting mechanism than anything.
Its only an accounting mechanism rather than fraud because there's no one to enforce it. I've never understood how a government being so massively in debt to itself isn't seen as a joke proving that the whole thing is a sham.
Its one thing when outside parties offer debt to a government, its effectively a show of faith in the government to pay its liabilitirs and still exist long enough to do so. Buy what does it even mean for a government to extend debt to itself?
Oh I have read about it, I just fundamentally disagree with both MMT and Keynes.
What I was trying to ask there is what does it mean for debt to exist when there is no relative risk?
When a third party extends debt in good faith, it says something about their estimation of risk.
When a government extends debt to itself it literally means nothing, if one party fails they both do. More importantly, there's no recourse if the debtor defaults. The debt there exists purely as smoke and mirrors, it is created only so they can claim money wasn't made out of thin air.
> When a government extends debt to itself it literally means nothing
I get where you are coming from. If I'm not mistaken, and according to MMT, a government buying its own debt induces future inflation and a decrease to interest rates.
All money nowadays is fiat (i.e. created out of thin air by a few actors), so it's not like any form of money creation and destruction means much more than changes to the inflation rate, interest rate and the derived swings to the economic cycle.
Yeah that's my understanding how MMT would explain the system as well. I just take issue with that approach.
When you peak behind the curtain and see how an MMT system actually works, it's pretty clear that the whole thing is just for a game and, at best, a benign one.
As long as it isn't hurting anyone, I can see it being plenty useful given what we can do with it even if the system is just a game. As soon as the system starts harming people though, say because they can't access basic goods or live a happy life, simply because of how the game works then it skips right past being an entertaining game and into the realm of being a dangerous, arguably evil, weapon.
I always think about it like how you're never supposed to use a self-signed TLS cert, but all the root certs are self-signed (because who else would sign them?). I always think of the fed as the root authority in our implementation of fiat currency.
You get the market rate for your highly fungible regulated market instrument.
Investors are not emotional they can sell that shit and buy anything else from Silver to TSMC shares in a heartbeat. What makes it shit? Being a penny more expensive than the quant's model.
They can borrow from the FED real cheap using QE. But the only free lunch is the big bang! Printing money causes inflation especially in asset prices and causes bubbles.
I'm not going to comment on the article because most electively-undertaken fiscal projections are colored with the theories harbored by the authors.
However, I'd like to point out that the budget hawks of yesteryear (Reagan, Simpson, McCain) were at least logically consistent in that they were pro-immigration.
Immigration's positive impact on US fiscal policy is so large that not even right-wing think-tanks can refute it. [1] It raises the fraction of the population currently in the labor force. As a separate, compounded effect, the average immigrant contributes more to the social services pot than they draw out. The bonus to Social Security is even larger because of the undocumented population, which pays payroll taxes but is ineligible for retirement benefits. This effectively foots the bill for 2-3 million American retirees. [2]
So when today's populists peddle nativism while posing as budget hawks, it really fits in nicely with the rest of their bill of goods.
> However, I'd like to point out that the budget hawks of yesteryear (Reagan, Simpson, McCain) were at least logically consistent in that they were pro-immigration.
Being pro immigration does not mean you’re pro illegal immigration.
> The bonus to Social Security is even larger because of the undocumented population, which pays payroll taxes but is ineligible for retirement benefits. This effectively foots the bill for 2-3 million American retirees.
If they don’t have social security numbers, they’re not paying payroll taxes.
> This distinction is mostly out the window with today's populists, see e.g. repealing jus soli and all the other racist dogwhistles.
There are already some limitations on birthright citizenship, for example we do not grant it to children born to diplomats visiting the USA. It's not an unreasonable position to limit it to legal immigrants.
Foreign embassies are considered US soil for jurisdictional purposes. If an army forced their way in to an embassy so that their pregnant battalion could deliver their babies within the embassy, should they get citizenship? If it doesn't apply to the embassy, how about if they do the same thing to a small island controlled by the USA or even the southern USA border?
You're right, I can picture this. A pregnant battalion of the Mexican army breaches the border and invades the US to give birth, 18 years later the kids are employed cleaning American bathrooms. Mexico wins and America is not great once again.
> There are already some limitations on birthright citizenship, for example we do not grant it to children born to diplomats visiting the USA.
That's largely because the US is a signatory of the Vienna convention on diplomatic relations. Children of foreign diplomats born in the United States are not automatically granted citizenship because they are not considered subject to the jurisdiction of the United States.
> ...repealing jus soli and all the other racist dogwhistles.
Australia did the exact thing. Switch from Jus Soli to Jus Sanguinis. Some Jus Sanguinis countries have switched to some hybrid system that allows legal immigrants to get citizenship at birth.
Australia also has Vegemite and the Sydney funnel web spider. No desire to imitate those either.
There's no reason to punish US-born babies just because their parents committed a misdemeanor jumping the border fence. If they're born here and grow up here they're as American as anybody else, descendants of the Mayflower border-jumpers included.
To undertake the process of a constitutional amendment just to deny them that is one of the most racist policies being debated in this country since Reconstruction and the Jim Crow era.
This verbiage is just muddying the waters. When people say they're in favor of "legal immigration" we generally don't mean that we're fine providing a legal fig-leaf to the record high illegal immigration levels that we're seeing today.
We mean that we're fine with the rate of immigration that as a country we've agreed that we're okay with (i.e. "legal immigration") and that it isn't okay to ignore these compromises and just let in anyone who shows up.
> record high illegal immigration levels that we're seeing today
As of 2022, the undocumented population was still about 10% below its 2007 peak. [1] The population of the US grew by 11% over the same period, so as a fraction it's well below the recent maximum.
Some of the statistics at the border increased massively in recent years because a lot of immigrants are now turning themselves in as refugees. [2] This allows them to "ride the disfunction" in the backlogged immigration courts, granting them legal work authorization and deportation protection in the meantime. If we fixed the disfunction, they would just stop turning themselves in once again.
The level we've "agreed that we're okay with" is far from set. Every time we've tried to set it in recent years [3], restrictionists like you have spared no tactic to gum up the works. That's because you figured (correctly) that the level of legal immigration that we would compromise upon is higher than the level we currently have.
Restrictionists are the primary reason we have a vast underclass of semi-serfs.
They are set. You appear to not like those levels, but they are well defined. Movements to change those levels are also fine, but again, legal immigration paths are well defined.
>restrictionists like you
We have a system by which we make these decisions as a society (i.e. the federal government). That system has not materially changed immigration recently. That isn't "gumming up the works" that's the system working as designed.
>Restrictionists are the primary reason we have a vast underclass of semi-serfs.
No. We have a underclass of semi-serfs because we have systematically and for decades chosen to turn a blind eye to (or actively encouraged) illegal immigration. We could enforce laws as they exist today and not have this human exploitation.
> They are set. You appear to not like those levels, but they are well defined
> We could enforce laws as they exist today
You can't have it both ways, either the system is broken or it isn't. You don't want to fix it because the overall level would increase. So you push for "enforcement," but that does nothing to address e.g. the asylum claims situation. The system cannot be fixed without updating the law.
The immigration system has been broken for more than a generation. There have been large majorities in favor of reforming it for almost as long. Doing nothing in this context is not how the system is supposed to work. It's actually amazing how a narrow-but-loud minority of visceral racists has managed to gum up the works for so long.
I'm completely unbothered by the implied accusations of racism (e.g. "only racists oppose my position. You oppose my position. The remainder of the problem is left as an exercise to the reader.") and it shows that you're increasingly unable to justify your stance.
>you can't have it both ways
We have a system of government and that through that system we've defined legal immigration. That system is no longer being enforced, which is less of a system-problem and more of a meta-problem. I don't have any solutions to the meta-problem[1], but it is self-evident to me that even if we have immigration reform the system won't work if those who are sworn to uphold it neglect to do their part (that is, if there is a meta-problem, no within-system solutions will work).
[1] I hope it will work itself out in the polls but I guess we'll see
> it shows that you're increasingly unable to justify your stance.
Funnily I'm making the same claim about you.
> the system won't work if those who are sworn to uphold it neglect to do their part
As is, the system is only serving the interests of the restrictionist minority. The situation is similar to where marijuana enforcement was a decade ago, and LGBTQ rights a decade before that. Many states have had to make-do with the situation and ended up building their own mini-immigration systems.
If this is the context in which someone is thinking "gee, but I'd really like to get millions of people deported and lock the rest out, how can I accomplish that?", well, it's just possible that perhaps they haven't come to terms with the reason why. They can call a spade a spade if and when they're ready.
> What exactly is racist about being against jus soli?
Pretty much everything?
If some new country like South Sudan was picking a rule from scratch, one could perhaps convincingly claim to be against jus soli for reasons other than racism. But to push for a constitutional amendment to deny citizenship to babies that are American in every way betrays the obvious reason for doing so. It just doesn't fool anyone.
Just sounds like you feel very strongly about this and want to say "everyone who disagrees with me is racist".
The majority of the world's population lives in countries that don't do birthright citizenship.
Jus Soli definitely gets abused. Cheap international flights didn't exist in 1866 when birthright citizenship became part of US law.
I could see merit in amending those laws, perhaps not abolishing it but maybe tightening it to only apply to children of legal residents or something like that. That's a system that many countries use, including progressive European states.
Trying to put motivations out of bounds over whether something is racist or not has historically been the core tactic in the bigot's playbook.
We're all in favor of voters being literate, aren't we?
The literacy test was a law that was colorblind on paper but that furthered a racist outcome in practice, which is why it was passed by bigots.
The jus soli repeal is a constitutional amendment that's colorblind on paper but that furthers a racist outcome in practice, which is why it's being promoted by bigots.
> Being pro immigration does not mean you’re pro illegal immigration.
I can't really know what anyone believes in their heart, but I doubt that the oligarchs who extol the free market (including the market for labor) really care about any of the demographic details of those they would employee as long as they produce as expected.
Fake and reused social security numbers work just fine for withholding. Most companies are not doing E-Verify. The companies profiting from illegal labor are working with the system as designed.
There's a very simple fix to both issues you raise, change the immigration system to allow more legal immigration.
We write the rules on what is and isn't legal. Writing the rules and then using them to say immigration is great unless it's illegal is very circular logic.
Yes, as written that is circular. I believe it is shorthand for legal immigration << actual immigration (legal + illegal) and that people in favor of "legal immigration" are in favor of much lower, selective immigration.
aren't you sorta talking besides the point? I don't see how immigration less or more reduces government debt meaningfully. I understand paying for social security (SS) is a decent fraction of the debt load for the US but solving SS does not plug the holes.
if I'm generous with your proposal; wouldn't you still find immigrants applying for citizenship and eventually pulling from SS? most immigrants are younger and we should both be able to agree, they'd likely want to stay if they could.
I feel like your biases are coming through with a lot of this, the answer to our debt problems will not factor heavily with immigration.
If immigrants are unskilled the productivity per capita decreases which lowers effective wealth, this is a minor effect compared to a housing policy that assumes no immigration and ends up screwing the young and increasing the wealth of the elderly.
That's not how productivity works. In fact it's the other way around for the native born: to make X widgets it takes 1 CEO, 1000 middle managers, 10000 white-collar workers and 30000 blue-collar workers. If you bring in 30000 new immigrant blue-collar workers, you allow 11001 native workers to move up the ladder.
As for housing, it's screwed because of land-use policies that intentionally strangle supply to artificially inflate property values, such as suppressive zoning. If there was less demand the cartel would just restrict supply further.
The Cato paper linked above measured the net per-capita fiscal impact on the government. The receipts/outlays ratio for 2018 is 1.427 for immigrants and 0.757 for 3rd-generation natives.
People who advocate for enforcing current, on-the-books laws on immigration are dog-whistle racists, but advocating for an underclass of laborers without regard to their ability to function effectively in society (due to the legal status) is somehow not racist?
Legal or not, this is the "homo economicus" view of humanity. Working-class Americans don't suddenly become CEOs, Middle managers, and white-collar professionals because we import more working class. If that was the case, the Rust Belt and Appalachia would be booming.
What actually happens is that the price of working-class labor decreases (due to more supply) and the higher classes make more money off the under-classes, leading to increased wealth inequality. Which is exactly what we've observed for the last 40-years.
The only reason you would claim they can't "function effectively due to legal status" is that they don't have the status. But they actually do function anyway, and it follows they would function even better with status. Duh.
They happen to enter at the least-educated, often unskilled level. This necessarily pushes everyone else up. A CFO that strives to be CEO but couldn't cut it yesterday does today, a director becomes CFO, and so on. This is not rocket science, especially for HN.
When you deliberately fail to appreciate direct logical consequences like this, your unbridled disdain for them is showing through. The same is true when you dismiss the countless economic studies that have proven that the overall benefits of immigration exceed the costs to a narrow segment of the labor market.
There are very few natives interested in cleaning bathrooms and picking vegetables. They haven't given up on their dream bathroom-cleaning jobs - quite the contrary. They have been able to pursue better jobs because there were immigrants willing to clean bathrooms. Those immigrants created demand for all other products. The table becomes bigger, and everyone scoots over. Again, not rocket science.
Something visceral gets activated about this issue, which is why it's ripe for populist con-men to ride it, logic and reason be damned.
You've made a toy model of human economic activity and while I have no doubt you are internally consistent about the rules in your model, that model has no bearing on how human society and economic activity actually work.
e.g. In real life, 1 blue collar worker does not get promoted to a white collar job for every 1000 blue collar workers that enter the labor pool after them.
In real life, that's actually how the dust settles. The implications of how the economy operates are not on written on a "log of promotions" anywhere. Rather, the system of wages and prices adjusts as needed until people are employed consistently with production functions. If the functions imply we don't need 1100 middle managers, people change jobs and make different education decisions until there are ~1000. There are attritions and transaction costs in the short term, but they cancel out in the medium run.
I understand this is inconveniently at odds with your visceral disdain for immigrants, but that's how the law of large numbers shakes out.
If this were true we'd see wages keeping pace with productivity. We'd also see wealth inequality remain constant. The US is famous for neither of those things being true. Your toy model of US economic activity is flawed with respect to real life.
> If this were true we'd see wages keeping pace with productivity. We'd also see wealth inequality remain constant.
These are macroeconomic variables that are affected by many factors. The production function argument I made is strictly microeconomic and independent of these.
If immigrants are unskilled and there isn't work for them to do (which is not the case), then the solution is to train them into skilled labor we need.
Ignoring xenophobia based justifications against immigration, the only reason why the right wing has a major push against immigration is because unskilled illegal immigrant labor is better for businesses than unskilled legal immigrant labor.
Illegal immigrants can be paid below minimum wage and without proper tax or benefits contributions (forcing the immigrant to bare the company's tax cost if they want to actually be squared away with the IRS). Illegal immigrants also don't know their rights and/or are afraid of reporting issues to the DOL or OSHA out of fear of deportation (despite deportation protections for whistleblower immigrants). Illegal immigrants are also less likely to unionize because if they "make trouble" the company can just threaten to report them to ICE.
All in all illegal immigration is an exploitative relationship that overwhelmingly benefits the people and companies that most aggressively rally against it.
If you eliminate this exploitative arrangement and provide an easy safe path for immigrants to engage with the labor market, most of this lowering of effective wealth that occurs for workers goes away.
> this is a minor effect compared to a housing policy that assumes no immigration
Given that unskilled immigrant labor is predominantly seasonal migrant labor, this really isn't as much of an issue as you'd assume. And the solution to this is again opening up the legal immigration path and adjusting policy decisions to reflect that.
Overwhelmingly the costs associated with immigration are costs associated with illegal immigration and they are predominantly self-inflicted in an attempt to optimize profits for the capital owning class.
Thanks for the response, I would add that Canada has found that not planning for housing for mass migration has affected their housing market (which increases wealth of the elderly and decreases wealth of the youth):
I've read your comment a couple times and can't make sense of it, so please let me know if I've arrived at an interpretation that doesn't represent your intent...
I agree that illegal immigration is highly exploitative. I disagree that it most benefits the people who are most vocally against it. Since you just assert this without presenting your logic, I reject it on similar grounds.
You also conflate seasonal labor with housing. Seasonal laborers need a place to live all year around, not just when/where they're employed.
The rest is just word salad solutions "adjust policy decisions to reflect that..." and "optimizing for the capital owning class".
> The US interest bill is rising. In 2024, it is projected to exceed the entire military budget.
This is the one that is mind blowing. The military is fucking gigantically huge. And every single years a militray budget worth of stuff simple gets burned for 'nothing'.
The problem in the US is that most of the money is already commited. The future money is already promissed. And the rest is mostly military and debt service. And what is left over isnt enough to cut to be effective.
I really dont see a solution.
I'm happy that in my country we have strict limits in place and debt/gpd is only 40%. Not have the huge debt servicing ever year seems usuful to stabilze your budget long term.
I very much agree with your distaste for simulations and modelling. How, though, are you coming up with predictions for such specific future failures in everything from fracking to Netflix to gold without modelling?
The US has abundant land and natural resources, a single language and fairly uniform culture, no real threats on its borders and, and least so far, a reliably peaceful means of getting rid of bad leaders.
It may not be as dominant going forward as it was in the second half of the 20th century but the idea that it’s going to be relegated to some kind of banana republic status is laughable given the problems of the competition.
English is spoken everywhere and other countries have even more severe water problems and far more profound language difficulties. These are hardly damning charges. Americans will have to stop watering their Kentucky grass in the desert but they're a long way for queuing all day for drinking water.
The sign in the article is out of date, it claims the US debt is ~$31 trillion. That is off by about $4 trillion; which I think dates the photo to sometime last year or the year before.
Most is owed to Social Security. The money paid into that is invested in US Bonds. That is based upon an article I say a while ago.
As for taxes, the past few GOP admins lowed taxes for the ultra wealthy and corporations. If they had stayed at the same level, the debt would be much lower. Plus Bush's invasion of Iraq, for no reason, added quite a bit also.
The article is a bit doom and gloom. The debt to GDP levels are fairly middling against other developing countries. Also historically what usually happens to government debt is that it isn't really paid back but sits there and is reduced in value over time by inflation. That will probably happen here.
Based on the amount of debt, inflation may exceed 2-3%, and there will be complaints. To fix the debt load, a combination of inflation, taxes, and spending cuts will be needed.
Additionally, the intergenerational transfer of wealth from Boomers to Millennials and Zoomers will occur over the next 20ish years as Boomers die off. This wealth transfer could be used to increase tax revenues.
One tax that could be raised would be the estate tax, which would be unpopular among the wealthy, but if lowered to 1MM-1.5MM (maybe 10% rate) and over 50MM (50% rate) would help to fill the deficit. The more likely scnario is the government allows higher inflation rates and we have a bag of cheetos costing $10 in <10 years.
Who knows but back 30 years the US consumer price index is up 2.13x. My guess is that in another 30 years the debt will be there but reduced in value by something like that. And the CPI tends to understate inflation a bit.
The CEPR is an EU think tank supported by the French Government [0]
France and Germany have been lobbying against US stimulus packages like the IRA and IIJA, and economic protectionism that has become mainstream politically [1]. It is becoming a trade war [2]
Western European allies can tell the US what to do when they start carrying their weight like Poland, Romania, Czechia, etc.
It's absolutely a biased piece of advice because it has subsidized American industrial players at the expense of players across Europe - which is why the EU has been in the process of lobbying against American deficit spending that is primarily being used for subsidizing industrial policy.
Western European austerity has clearly hobbled France and Germany while the US was able to weather the GFC and COVID recsssion by using it's deficit.
> And France isnt in a position anyway to do that, since they have the exact same problem as the US.
Yet they are as Macron's lobbying blitz in 2022-23, the French Govt's Institue Montagaine has pointed out, and the French govt supported CEAP has been lobbying against.
That you don't like the messenger doesn't change the reality of the situation.
You can find much of the same analysis from various institutions in the US who have come to the same conclusions.
If you want argue that deficit spending is fine and no problem, then just do that. You don't have to sell us on how CEPR is an evil arm of French propaganda.
I don’t think there’s a scenario where you can look at any country with this much debt, break the news, and then have it not sound like gloom and doom.
This just reminds me of the Mel Brooks Robin Hood Movie: “Maybe, if you break the bad news to me, but in a good way, then it won’t sound so bad!”
True; but the UK had at least three advantages: Huge post-war economic growth, a high export market (rebuilding Europe takes material) boosted by US aid to those countries, and the Bretton-Woods system made negotiating the debt easier by ironically relying on the stability of the US dollar.
The US would not have any of those advantages. There's not a more stable dollar alternative to look to, there's not an obvious ludicrous economic boom on the horizon, the export market's probably not growing that much, and US taxes don't have much headway to go up before being counterproductive and stalling growth (if they haven't already been doing so). Stalled growth results in less tax revenue, defeating the point of the tax increase.
In a nutshell, the UK was partially saved by the US and countries rebuilding themselves. The US has no savior.
The US has the world reserve currency thing making it easier to borrow although I think that is a bit overrated. It is also the world leader in a lot of the most important industries especially tech and AI which should help things.
An optimist might see the combination of plentiful non-fossil fuel energy, AI, and advanced robotics as a potential pathway to a ludicrous economic boom. Although it is certainly not a given.
You don’t need to be an optimist to see that the USA will only pull ahead on its genAI dominance and that genAI will power this boom and the next several.
because it's not? revenue was reduced a ton by the 2017 tax scam. The number one sign of a weak nation state is the inability to collect taxes from their elites.
I love how when people talk about making America Great Again they are generally talking about a time where the highest marginal tax rate was like 70% (of course no one paid that but people don't pay the top rate now either). I would love to bring that piece of history back. I love America and have benefitted a lot from it, I'm happy to pay more for my fellow Americans (which I do now via some donations but I need to do more)
People pay much more of the theoretical top rate today than they did of the higher top rate back then. Federal tax revenues as a percentage of GDP has been basically flat since 1950: https://fred.stlouisfed.org/series/FYFRGDA188S.
“Contrary to common perceptions, the CBO data indicate that: (1) income earned after taxes and transfers has increased over the past several decades for all income groups, (2) the federal tax system is progressive and has become more progressive over the past three decades, and (3) the federal system relies heavily on higher earners to raise revenue for government services and means-tested transfers.”
The data starts at 1979, before Reagan’s major tax reform in 1986: “In contrast, the effective federal tax rate for the top 1 percent has remained relatively high over this period, ranging between 25 and 35 percent since 1979.”
Reagan’s tax reform wasn’t a gimmick: it broadened the tax base (to encompass more kinds of income) and lowered rate to keep the effective tax rate basically the same.
The biggest problem is we simply doesn’t tax enough. We want to grow the scope of our government to be more like Europe, but we aren’t willing to tax the middle and upper middle class the way they do in Europe. We had an au pair from Germany. Our effective tax rate in a blue state as a dual income professional couple was the same as she paid at her entry level office job.
According to the data, the share of federal taxes paid by the top 1% increased from about 15% in 1979 to 25% in 2019, while the share paid by the bottom 20% decreased from about 20% to 15%.
That's absolute dollars right? As in, they're paying more total dollars in income tax, despite a lower tax rate, because they're making so much more compared to 79? (Income inequality has steadily gone up).
What was their effective rate in those years? What percentage of their income are they paying compared to the nonrich, and how did it trend?
you’re assuming that the tax bills had no effect on the economy…instead, the 80’s saw a massive reduction in inflation and tremendous economic growth that helped all parts of society. Is it possible that the tax cuts and the economic growth were related?
I contend that taxing higher earned incomes at higher and higher rates is not progressive. Real wealth is made via appreciation in property prices, and those mostly detractive and rent seeking members of society are the least taxed.
Also I want to point out that a significant chunk of the "increasingly progressive" nature is driven by increases in income inequality over that same timeframe. Both pre and post tax income even for higher earners has increased (as a percentage rate) much much faster than lower earner so anything other than "increasingly progressive" would be an absurdity.
Not saying I entirely disagree with it. I just don't think that data is that compelling since it's a pretty shallow analysis of taxation and income of high earners (which is fine, not every article needs to be that deep)
Since WW2, US tax revenue as a percentage of GDP has never left the range of of 13-20%, and spent a lot of time in a much tighter cluster of 16-17%. [1]
This time span covers top marginal tax rates from as high as 90% to as low as 35%. The truth here is that we cannot significantly increase tax revenues by raising tax rates, as when taxes get too high, people are simply incentivized to earn less, or to spend more on finding, developing, or exploiting loopholes in the tax code to reduce their taxes. Accordingly, actual economists have understood for the last 50 years that simply raising taxes blindly can counterintuitively decrease overall tax revenue. This effect is part of what's referred to as the Laffer Curve. [2]
But to your first point, that there is no problem, I'd like to point out that interest spending has exceeded defense spending. [3]
But hey, don't take my word for that constituting a problem, take it from Jerome Powell, chair of the U.S. Federal Reserve:
"The U.S. federal government’s on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don’t think that’s at all controversial." [4]
In summary:
• No, everything is not perfectly fine. The United States is on a fiscally unsustainable path.
• No, the TCJA is not the big proximal contributor to the problem, routine deficit spending resulting in unsustainable debt is.
• No, we can't easily fix the problem by raising taxes on everyone, let alone by only raising them on the rich.
I find the appeals to authority unconvincing, especially in light of there being other models concerning taxation like modern monetary theory. It leaves yet more confounding variables uncontrolled for and makes policy decisions based on only one perspective feel myopic at best.
what you call an ‘appeal to authority’ is what some of would call a “citation” - feel free to post citations to the evidence you feel supports your argument.
What you call a citation I call chicken bone divination. Just because economists believe in technical analysis doesn’t mean the rest of the world has to buy into their scam. Chiropractors are still frauds despite insurance companies going along with their scam.
To clarify, it sounds like you're just arguing against the validity of the Laffer Curve, not of the integrity or accuracy of Federal Reseve data, or of Jerome Powell's speech?
If this is incorrect, please feel free to correct me.
Also, what is your takeaway from this, after discounting the validity of the Laffer Curve, that the US as a whole ought to simply enact dramatic tax hikes, which will solve fiscal stability issues?
I'll contest the applicability of the Laffer curve (really, Rolle's lemma for anyone who's taken real analysis) to any public finance model approaching what we actually operate in. Public finance is plainly way, way more involved than the effects of one marginal tax rate in isolation.
That's before we get into the (lack of?) empirical data. I'm finding it hard to come up with any citations that offer an existence proof of a Laffer curve for real, actual public finance systems. The Cato Institute and Brookings have things to say, but they're encumbered by policy goals. Ebrill, also encumbered by policy goals near as I can tell, urges caution. Espanhol's master's thesis concludes that a Laffer curve doesn't exist in its investigation of corporate tax rates across the Eurozone.
So, frankly, I'm keener just to throw out the academics here.
That's also before we get into what debt is and how it works. It isn't a call option: the persons, fictitious and natural, to whom the US government is indebted cannot exercise those debts on a whim in an effort to get paid. They have a maturity schedule. What matters to these creditors (and all creditors more broadly) is that there's faith that their debt instruments will eventually fully mature. For natural persons, that's likely decades from now. For fictitious persons like governments, that could very well be on the order of centuries.
It's for this reason why I also reject the appeal to Jerome Powell's authority: he doesn't express a concrete reason why he expects the faith that those persons, fictious and natural, have in the federal government to erode to the point where default is some notion of imminent. Does he expect the executive branch to stop payments suddenly? Does he expect that the tax base will collapse in the very near future? (Malthusians in particular are fond of crying the latter, predicting widespread famine.)
Furthermore, that's all before we get into taxation and how it works. It's a sticky subject academically, even after you peel away the conflicting policy goals. Is taxation revenue? Is it a constraint on the money supply? Is it economic dead weight? The answer to all of these is, "It really depends." One model says one thing, and another says something else, and there isn't a whole lot of real consensus on which one fits best where. (Economics, it turns out, is one of those social sciences, which means that most experimentation is thorny unless you abandon ethics. When all you have is models...)
The thing that matters at the end of the day is that someone (maybe you!) will cheerfully accept my greenbacks for what I reasonably feel like they're worth, and as long as that remains the case, I'll happily render unto Caesar until we finally find a way to kill him for good.
It was balanced due to the Internet bubble providing unsustainable revenues coupled with age demographics. The large cohort of the population had hit peak earnings years. The govt revenue as a % of GDP hit all time highs, not because of careful planning and choices, but because of luck and unsustainable timing.
When that bubble popped, and as the cohort in peak earning years shrunk as people aged out of it, so did the revenue, and then the budget became un-balanced again. Certainly the unpaid for Bush Tax cuts have made it worse, but the fall began before Bush even took office, and certainly was well gone by the time Bush passed the tax cuts.
It was not balanced by some stroke of government genius.
> people refuse to accept there is a growing problem
I think because this implies change. And over the past couple decades it's become more and more acceptable to simply be against all change. It's political viable to be the guy who doesn't change things, and you can slam other people just by saying "look, he changes things!"
I mean, lately it feels like there's a lot of political will to take a "do nothing and hope it works" approach to everything. It's frustrating.
Social Security's current obligations are the largest single spending category of the entire U.S. Federal Government, and are continuing to grow rapidly.
The SS trust fund is projected to be depleted by 2033, at which point benefits will be automatically reduced to just 79% of their current level, by laws that are already on the books. This information is freely available from the Social Security Administration themselves. [1]
Keep in mind, Social Security's and Medicare's unfunded future liabilities grossly exceed the current liabilities of these programs.
These defined benefit programs are mathematically reliant on a growing, rather than shrinking population, yet a shrinking population is what the entire industrialized world is currently on track for with our sub-2.1 TFRs.
Social Security is going to end up being yet another one of those ladders that the Boomers pull up once they're done benefiting from it. Just like low home prices and cheap college tuition.
Not the poster, but IMO it’s a bit like saying Gen Z is responsible for TikTok.
If they weren’t there, or this was 100 years earlier, or Gen Z was fundamentally different than they had been raised to be, then yeah TikTok likely would not exist, or at least not be a notable problem.
Post WW2 was an economic and population boom time. The boomers resulted from that boom, and the programs for them helped them, and that boom continued.
Booms continue to grow until the fundamentals fall apart and the leverage can’t keep it going anymore - and then you get a bust.
The longer and unhinged the boom, usually the longer and unhinged the bust.
Correct, I realize my comment may have been ambiguous.
Money is now, and will continue to do more so in the immediate future, flow out from the gov’t/taxes/money printer, and into retirees pockets through SS and other means. Up until recently, it had gone from major inflows to mostly neutral on that front.
For the reasons you’re mentioning.
So yeah, either we need to start producing more economic activity - or more likely - just print more money and hope it all works out.
We’re not in as bad a crisis as Japan, but it’s the same kind of problem.
Interestingly, with the US as the worlds reserve currency this is going to have a global effect.
Another factor to keep in mind is that life expectancy has changed dramatically since the introduction of these programs, which is ultimately good if you're pro-humans-living.
When SS was formed in 1935, average life expectancy at birth was just 60, whereas the full retirement age was 65. In effect, this resulted in close to 150 people paying in for every 1 recipient.
These days, full retirement age is almost done being hiked to 67, while life expectancy at birth was up to 78 the last time I checked. This results in fewer than 3 people paying into the program for every 1 recipient.
If the full retirement age was simply indexed to (life expectancy at birth + 5), that would also solve the fiscal problems with Social Security, though it's a political impossibility.
I think people forget that the actual name of the "Social Security" program that people think of as "retirement" is OASI - Old Age Survivorship Insurance. I use Social Security in quotes because there are other components too, like DI - disability insurance, though that's negligible compared to OASI.
It was never meant be a retirement program, it was meant to be insurance in case you accidentally lived for a lot longer than you were expected to.
> When SS was formed in 1935, average life expectancy at birth was just 60, whereas the full retirement age was 65. In effect, this resulted in close to 150 people paying in for every 1 recipient.
Extraordinary claim (less than 1% lived beyond 65)! Any citations?
Note that LEAB of 60 does not imply that fewer than 1% live beyond 65, nor does a payer:payee ratio above 100.
For most of human history, deaths followed a largely bimodal distribution - high infant mortality, lower morality in mid life, and then high mortality (approaching 100%) in old age. Put more simply: if you lived to, say, 3, you were much more likely than a newborn to make it to 70. A large enough portion didn't make it past infancy that it dragged down the entire average.
Much of the improvement in LEAB has been from improvements in infant mortality, not people living longer at the end of their lives (though that is increasingly a factor as medical care is improving).
Part of the discrepancy of the payer:payee ratio was due to more people having more kids, and a big part of that change is explained by our switch from a regular population distribution (many more young people than old people) to an inverted pyramid population distribution, like Japan's (a larger cohort of old people, increasingly smaller cohorts of younger people).
Lawmakers do shenanigans with social security funding all the time, but it’s all moving money around and zero of it puts us at risk of defaulting on social security or related. The government will fund social security for as long as it exists in this current form, at 100% of expected pay out. I’m willing to bet significant money on this against naysayers, as I know that they aren’t just wrong but are aggressively wrong.
>The government will fund social security for as long as it exists in this current form, at 100% of expected pay out.
You are entitled to this belief, but I'd be remiss to not remind you that the Social Security Administration itself explicitly disagrees with your hypothesis, here:
"The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79 percent of scheduled benefits."
> Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.
Do you need a growing population if the next generations increase their productivity instead? Then what do you actually need for “social security”? If it’s a house, there will be plenty of those left over when the population declines. Maybe we get to a point where people feel secure without government assistance and the program shrinks.
It's not middling. At 122%, we are just behind basket cases Italy and Greece. We are above France or Spain, and more than double well-run countries such as Germany or the Netherlands. The EU target is 60% debt to GDP. Moreover, our debt is growing faster. Our deficit as a percentage of GDP, at 6.3%, is more than double the EU target.
I'd be hesitant about calling us Germans well run. We're lacking money for everything and the past 16 years's greatest accomplishment was pushing maintenance further back to purse a balanced budget. Not spending money has its own costs as we now have to suffer through.
Germany doesn't lack money, it just reveres the lack of debt a bit too much. It's cheap for Germany to borrow and invest, and in all likelihood be able to debts down and benefit from the investments, but they don't, because debt scary.
A mountain of unrealized goodwill. It's such a pity, because indeed much of infrastructure is barely maintained.
Well there was that one time Germany owed everyone a lot of money after the Treaty of Versailles and it kind of directly led to Hitler’s rise to power and another World War… makes sense for them to be a bit more conservative than other countries.
I think there are some similarities. There's also a lot of demand for housing now, but it's mostly for affordable housing. Most housing was affordable after WWII, compared to now when a lot of housing isn't affordable.
Population growth has slowed, but there's a good chance it would increase if affordable housing was available.
We are in a unique place now, and I think we were in 1946 too. I'm not saying everything will be fine, but I don't think it benefits us to say that this is uncharted territory either.
The US has been in similar places during a world war where they were asserting global dominance.
It appears there is no further reasonable headroom for debt should a third world war break out -- the Americans will be up "shit creek without a paddle". In that scenario, roaring inflation would destroy whatever is left of the current economy as globalist trade routes collapse.
The recent wars and posturings of Western rivals (Iran, China, Russia) are no surprise. They are sharks circling what they perceive as a failing economic system in a winner-takes-all game.
I think that's accurate to some degree. If global economic trade were to shut down, it would significantly increase prices because a lot of resource extraction/processing and factories would have you relocate to North America. That has already happened to some degree with Russia/Ukraine.
I wouldn't characterize what Iran, North Korea, and Russia is doing as sharks circling a failed US economic system.
Russia making a play for control of Ukraine and control of FF/agricultural production/exports, is more about their economic reliance on on FF exports/etc and the West moving towards renewables. The fact that they're willing to throw away so much of their military and population on it shows how much of a threat they think it is.
It could also be because of a perceived threat from NATO, but if that was the case they would have backed off when other countries started taking about joining NATO. Instead they doubled down and NATO is more powerful than it was before.
Iran and North Korea and using their resources to support Russia in exchange for technology/etc.
China is making moves to strengthen their economy during all of this, but I think they're acting as opportunistic towards Russia as they are towards the West.
That's why they're being really heavy handed in negotiations with Russia. They know there isn't anywhere else for Russia to sell a lot of it's gas, and they see this as an opportunity to gain an advantage over Russia.
The US can't just withhold payments and wait for inflation to run its course. The debt is largely in government bonds and other debt securities. Payments have to be made on the debt securities when they are obligated to be due.
It is and isn't how it works, depending how nuanced a look you give the initial comment. On one hand you're absolutely right, i.e. 30 year treasury bonds have to be paid back in 30 years - right from the name even. That said it's not quite right the government expects to withhold payment as the way to avoid having to actually "pay back the debt" long term. Instead the fed expects to continue selling new 30 year bonds to pay off the old 30 year bonds as they have for many loops now. Usually people accept buying new bonds in this kind of scenario because it's an extremely low risk and easy to manage method of holding your e.g. retirement money without just having it sit there completely.
Of course another level of nuance to that conversation is then asking "and what could happen to break that cycle and what would result"?
That the US will continue to sell debt securities at some level in the future is incontrovertible. That is not what I was responding to, which was that idea that "historically what usually happens to government debt is that it isn't really paid back but sits there and is reduced in value over time by inflation".
This is referring to current debt, not the idea of ending the debt cycle. The US doesn't have the option of letting current debt just sit for an arbitrary amount of time and get reduced by inflation, but has to pay according to the obligations of the outstanding debt securities. It also doesn't buy back the debt securities before they are due. The real value will be reduced due to inflation until the point where obligations are due, but there isn't a choice to arbitrarily let it sit.
The strong interpretation of GP was not having "the debt" refer to "the batch of securities providing the current proceeds of the debt" but instead "the outstanding balance owed". Conflating refinancing the debt balance with repayment of the debt only adds confusion to the conversation.
You seem to be under some misled notion that there is a conception of an outstanding sovereign debt balance separate from the securities. The aggregate outstanding balance is wholly constructed of debt securities. This is literally what the debt balance is referring to. The debt securities do not just exist to pay interest on the debt, but represent the debt themselves. The so-called outstanding balance is an aggregation of the principal of all of the levels of separately maturing securities.
The CEPR is an EU think tank supported by the French Government [0]
France and Germany have been lobbying against US stimulus packages like the IRA and IIJA, and economic protectionism that has become mainstream politically [1]. It is becoming a trade war [2]
Western European allies can tell the US what to do when they start carrying their weight like Poland, Romania, Czechia, etc.
All of the countries you named as "carrying their own weight" have the curious commonality of being net recipients of massive amounts of money from the EU cohesion budgets (i.e Western Europe) over the last 10 years. Very easy to spend money on big guns and other projects when you are Poland and get something like 10 billion euro net on average for the last decade.
EU scary hours will begin in something like 10-15 years when Poland will be asked to become a net contributor (after they converge and some W. Europe country will inevitable come up with the idea of plugging fiscal deficits by cutting EU contributions).
Doesn't mean Americans should undermine our Industrial Policy because French and German players are nowhere near as competitive.
At least Eastern European allies help cover and support American defense spending in Europe, while Western European players like France and Germany are opposed to Atlanticism unless SHTF
Important to consider that all the debt was created during a time of relative peace. Now, the U.S. is potentially facing three simultaneous wars having already increased the debt to these levels.
There are changes in international settlement that bypass the dollar. China and Russia and others have been advancing ways around needing to use the U.S. which is already having consequences as some of this would have found its way to funding the rising U.S. deficit.
Most likely through buying Government debt and there is a chance we will know when the debt party is over if there is ever a Treasury issuance that cant find a buyer.
Given that part of the problem is the system where there is always a buyer of last resort and so much of the debt is money we owe ourselves. Which reduces but does not eliminate the impact of the move away from the dollar.
It is clearly unsustainable and certain measures like the reverse repo market show a sort of short term liquidity and it is interesting to compare it to future issuance of debt.
The resulting effect then would have to be increased inflation until spending reaches and equilibrium again. Though with all of the potential threats around the world, anything can happen.
It just isn't sustainable and there seems to be a collective delusion that it is.
One could take a cynical view that the collective delusion is necessary to sustain increasing wealth inequality. Americans are highly unlikely to accept such inequality if it is accompanied by large reductions in the standard of living. On paper, the debt isn’t a big deal if the government could close out the balance with private assets.
It isn't just wars. Infrastructure is crumbling because it's well past replacement age, climate change avoidance and mitigation is going to require massive investments over the next few decades, and the aging population is going to result in a big spending increase while tax income from the working is going to shrink.
Even if the US manages to not get involved in yet another expensive overseas war, it's still going to have significant budget issues. Decades of prosperity have been squandered with zero long-term vision, let's hope the backlash from it in the near future won't be too bad.
People forget that the economy is not about money, it's about stuff - the goods and services that add (economic) value to our lives: food, shelter, video games, medical treatments, shoes, etc.
The problem isn't the deficit - it's the spending. When the government spends money, it takes people away from whatever other economic activity that person would be doing, and consumes their labor in service of the government instead. This reduces economic productivity, and we all end up with less stuff as a result.
The key is to focus on productivity in terms of stuff (not money) - everything else takes care of itself.
This is important because focusing on money and the deficit often inspire solutions that attempt to solve those problems, but at the cost of hurting productivity. Higher taxes, for example. Raising taxes may (arguably) raise revenue and reduce the deficit - but may well also reduce productivity. That would be bad.
Yes, because the government does things like staff a building with 100 government employees that could have been replaced by a simple website if it was done by a private company.
Or, more the point, staffed by 100 employees that could have otherwise been producing houses, shoes, food, medicine, movies etc. But they aren't doing those things because they are busy working for the government.
There is no chance that the 100 employese making the website would have been making houses, shoes, food, medicine, etc., because they wouldn't have the skills to do any of that.
The alternative to working for government making a useful website that would be productively used by millions of their fellow citizens is working for yet another "startup" making Yet Another Pointless Social Media or AI scam with no revenue model beyond getting acquired by a bigger company.
I've seen a private company spend thousands of dollars developing a website and then not even launch it. Bad decisions exist across the entire human experience, public and private.
Theoretically the government is spending productivity for services so the argument that government spending is not creating stuff is a little weird (though obviously they are often less efficient). There are even lots of situations where government spending increases productivity in significant way (e.g. public education)
I don't think this is universally true. I mean, take a look at the New Deal.
The problem here, in my opinion, is that the US does not make enough stuff. We have a lot, and I mean a lot, of "fake" jobs. Jobs that move things, not produce things.
All the actual stuff we consume is made overseas. We've essentially given up our economy in exchange for making middle men of middle men of middle men. Our economy, I feel, is largely theoretical.
If we look historically at times of economic boon, there's a common thread. Huge increases in manufacturing and production of goods. The 50s weren't prosperous because of taxes, they were prosperous because of WWII. And, if you look, most of this increase stems from the government. Whether it be war or triple letter agencies making stuff.
It is weird to me to have so many people complain about inflation and have so many people say that our deficits won't cause inflation. We have been hiding inflation for so long and it finally hit us. Unfortunately I haven't met a politician yet that will actually try to balance the budget. It is a bunch of spend more and cut taxes that win elections.
Austerity is miserable. It does not win elections. Even if a party bit the bullet, locked in and fixed this mess, they would be handing both the credit for any success and at least the best few future elections to the other party.
Our system seems designed to fail from some angles.
It is a similar thing with climate change to be honest. We have been spending at a pace we cannot keep up with. In my mind, of course we won't have the same luxuries as our parents, they bought that life with CO2 debt.
Bernie and other hardcore progressives will balance it, but the tax increases that would come from that will have everyone accusing them on being pinkos.
The debt doesn't matter too much... what matters the most for any country is if they have a lot of educated and talented people living there or not, the companies they work for, and a stable society and political environment. This is not going to change due to federal accounting tricks.
It would be better to live in the U.S. with a 100x debt/gdp than live in Haiti, Niger, or South Sudan with a 0.1x debt/gdp.
Better then a 3rd world country in a civial war isnt the goal most people aspire too.
Servicing the exisiting debt already cost the US a whole militaries worth of budget. And that is after decades of low interest rates. If interest rates go up even slightly, you have to refinance all the debt with a higher rate. And if the private market ever decide to lower the rating on US debt, or starts to expect higher inflation. The debt servicing alone could consume pretty much the whole discretionary budget.
And remember the are massive budget issue on town and state level in the US too. And they expect the federal government to fund all the massive infrastructure spending they need. Plus all the federal infrastructure.All that infrastructure from the 60-70 is falling apart.
The backlog is already huge and getting bigger, that from the discretionary budget.
So debt absolutly matters, it has mattered to every government for at least 5000 years.
A societ that is stable can be made unstable, and debt is usually involved. France just had massive demostrations because they wanted to increase retierment age. And that was a drop in the bucket compared to what France needs. That has lead to massive victory for outright nazi party in France, and the far left who want to ignore this problem has also won.
And this is in normal peacful times. What if another finacial crisis happen?
Lets see how stable everything is once taxes double or social services get cut massively. That how you get people elected with programs that are the opposite of a stable political envoirment.
Yes the debt matters, but compared to other factors in a nation with its own currency, it's quite insignificant. My point is other people are acting like its doomsday if the debt goes too high but I don't think it's that big of a deal in the grand scheme of things.
You are spending literally a whole US military budget worth of money EVERY YEAR on just debt servicing. And that is gone go up by a lot more in the next 20 years if nothing fundamental changes. And if you actually look at your discretionary budget, that discretionary will be continually under pressure.
And having your own currency isn't magic. All it allows you do, is use inflation to take money from your citizens without having to get something threw parliament.
The US has had a history of extremely fiscally conservative governments. After each major war they instantly reduced debt again. So Americans somehow think this isn't a problem, because in US history it has never been much of a problem. But for the last 40 the US political environment has changed and now the opposite is true, neither party is interested at all in reducing the debt.
The reality will catch up with the US as it has with 100s of other nations over the last couple 100 years of history.
> compared to other factors
The things you call 'other' aren't that 'other'. They are linked to money and money is linked to debt.
Getting educated people isn't free. You have to spend money, from pre-school all the way to university.
Companies need infrastructure. Infrastructure cost money. How much you can invest depends on debt.
And that political stability depends people getting basic needs met.
You act like debt was some separate problem that has little impact on anything else, but this historically just isn't the case.
> people are acting like its doomsday
No people are not acting like its 'doomsday', they are simply pointing out some basic realities about the topic and saying 'this is a problem we need to actually take seriously'.
As long as US imperialism exists, the US dollar will be reserve currency and the US will be able to print away problems. This is the exorbitant privilege the US has which is effectively extracting tribute from all international transactions in dollar.
The dollar is the reserve currency because there are no viable alternatives.
It’s not about imperialism or hegemony, which are fashionable reasons used by the poor. It’s literally because there are no alternatives.
The US also is in the unique position of stabilizing the entire world financial system, something it does on an occasional basis. I’m not sure you understand what the price of financial chaos is, but it generally involves massive amounts of human suffering.
As an aside, imperialism is generally better than anarchy. Ask Libyans and Somalians how anarchy is working out for them.
294 comments
[ 2.8 ms ] story [ 122 ms ] threadIt also takes as an unstated given that we need or want to stabilize deficit/GDP or debt/GDP ratios.
The US dollar is still a global reserve currency. The US situation might therefore be "special" or "privileged" compared to other countries that have non-reserve "local" currencies.
The other question I have, is "does debt/GDP & deficit/GDP matter in absolute terms, or only in relative terms?". One could imagine a world where most governments have similar debt problems, and their currencies have similar inflation problems. For someone holding currency, there would be little reason to pick another currency in this scenario. One would instead predict a rush to place money in assets, causing asset inflation. That sounds like our present calamity, perhaps from different or more varied causes.
The choice to pay interest on what is in fact a balancing item in the accounts is a political choice. Just don't do that and then those ratios are irrelevant.
We have a floating rate exchange system. Quite why people think ratios from a fixed exchange rate era remain relevant is difficult to understand.
Other than that is what they really want to go back to - one world currency with no variation and governments completely unable to direct resources for the benefit of their own people, rather than global capital.
The world has excess production. Where is the untapped source of demand that will replace the current net import nations? There isn't any. That's why those with excess production swap that excess production for promises, rather than physical output.
It’s not that you need to do anything about it at all, but eventually your economy will completely collapse.
The vast majority of money systems were designed to be disposable and to only last a few hundred years though.
If you want to use the “printing money” analogy because you can’t grok the correct credit and debit process then you have to accept that taxation “shreds money” and saving money (which is what a deficit is) “puts it in a drawer”.
How does people putting money in a drawer cause a problem?
That's the thing. Mercantilism never really went away. It is just more subtle nowadays.
The greek crisis can be boiled down to this: "Germany is exporting to Greece, because the absence of exchange rates makes German products unreasonably cheap in comparison to Greek products. Greece therefore buys from Germany, but Germany doesn't buy from Greece."
Can’t do a reset on a currency that isn’t yours.
Do you think Greece never had any national debt before joining the EU? They’ve had multiple defaults, and then built up more debt, etc. long before joining.
[https://www.toptal.com/finance/financial-consultants/greek-d...]
Same with Argentina, Brazil, etc.
Someone is always willing to lend money, just rarely at the rate the country is willing to pay.
It’s a category mistake to conflate the two
Bonus if you can compare lending to Russia too.
It’s only when the currency in question is somebody else’s currency that what most people understand as lending and borrowing actually happens.
With a country’s own currency it’s more refinancing to a higher interest rate to provide a basic income to those who already have money - all based upon the belief that there is a magical unobservable interest rate that will balance the system. If only we could find it.
A state operating its own currency is self financing. [0]
Russia is like China. They are technically lending to us, and it doesn’t matter. Nor does it matter to them if we delete that debt as they use the rouble [1]
[0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4890683
[1] https://new-wayland.com/blog/why-the-russian-oil-price-cap-w...
They could inflate or deflate that half they had when they needed to do other things. It wouldn’t always work well, but it existed.
With debt denominated in Euros AND a local economy operating on Euros, they control zero halves.
So defaulting now screws them out of their grocery money too, and not just out of their lambo money like it did before.
The same (pre-Euro) situation is true of all the other examples, including Russia.
That happens automatically when government makes a payment
As it stands the ECB refuses to do the necessary reflection of the German Target2 hoard into the Greek economy and the result is excessive unemployment and reduced production in Greece due to lack of monetary circulation.
All to service a belief about the medium of exchange that isn’t actually the case - that people won’t hold it without monetary incentive (aka an interest payment).
We need to chuck out this damaging interest-obsessed monetary religion. The price anchor and stabilisation policy needs to be in the market for labour, not the market for money.
So this was the case before Greece joined the Euro?
You left off the prior in your rush to attack the conclusion, but no, if you separate the necessary condition then the event will no longer occur.
Despite EU bonds not existing the EU unified bond yields, and the had a greek government that did take full advantage of this.
There was a reason the EU had rules, and then those rules were ignored in favor of an idiological political project.
As a consequence, the Fed will be forced to lower interest rates as low as possible again so the government can escape crushing interest payments and let inflation inflate away government debt.
Expect long term inflation, asset prices, and commodity prices that keeps rising as a consequence.
We definitely don’t know the future trajectory of productivity growth. There might be inflection points that more than compensate for slowing worker growth. This is in fact the basis for investor excitement about clean energy, robotics, artificial intelligence, new health care technologies, etc.
Did we read the same article?
A huge amount of debt is to Americans, American institutions and the states.
The US would piss off other countries who lent us money, who'd come knocking with a country-scale baseball bat demanding their money. But two thirds of that $35T is owed to Americans. There'd be a good chance of either a civil war or global war. We'd likely lose our status as the world's reserve currency, devaluing the dollar and leading to inflation.
Nobody would trust the government enough to lend them money, so they'd have no choice but to print money to pay expenses at this point. So, we'd have inflation either way.
Defaulting would impact the value of Treasurys far more than inflation, a bond’s price is merely the sum of its future cash flows, pricing in a default would push yields waaay higher than they would from inflation alone. There would also be massive liquidity problems since banks and companies hold a ton of Treasurys along with pensions and retirees.
There’s far more negative impacts from a debt default that sibling comments already elaborated on.
There are very few black swan scenarios that would cause me to liquidate the assets in my retirement accounts for cash, but a US sovereign default would be one of them.
Because one ultimately still keeps the debt obligation in place, whilst the latter causes debt confidence collapses & the destruction of faith in repayments from the government.
Would you rather take a 2% value loss via inflation, or a 90-100% value loss as the government declares default? Most people would take the former rather than the latter, as the impact of one is much softer than the other.
We, the population, vote for the persons with specific political wills. We choose what to enact.
When something is permitted, it becomes mandatory to somebody, and oil is used widely. Personally choosing to avoid products that used oil in their manufacturing would basically relegate you to having to farm your own food by hand. That is not feasible in a society with competition.
Hundreds of millions will die due to climate change if we don't act.
The problem I think, is that oil would still be mandatory because of competition between countries. Especially if there were wars.
We literally have no choice but to make small insignificant changes that does not harm the bottom line of those responsible too much.
Universally in this world people live most ecologically in parts of the world where they are too poor to act otherwise, not where they are most climate or environment conscious. Voluntary personal responsibility gets you nowhere when it comes to solving large-scale problems.
That sounds great and all until your granny can’t afford heat in the winter or there’s no food in the stores, etc. Then people will vote out the politicians making the policies or revolt.
That’s what I’m talking about personal responsibility. Not regarding individual actions per se, but accepting that most of us in the developed world are as complicit as the big oil companies.
That said, technology is improving to where the cheapest option is the ecological one for power. A fair bit of that has been due to individual actions of many folks wanting and paying for solar power and electric vehicles, etc.
Ironically to me, the individual preferences of the Green Party members also put lots of political pressure to shutdown nuclear power in Germany. That caused Germany to fallback to coal and natural gas.
Good luck clawing back the 10% of SNAP benefits spent on soda.
Yes everyone should be ethical in their consumption. If I gave you an arbitrary product and asked you to tell me if its ethically sourced, there's a high chance you can't. Even if I give you the internet and a week to research.
So, that's one problem. Another problem is that even if you could tell what is/isn't ethical you can't necessarily switch away.
Sometimes the more ethical choices aren't available, or are too expensive, or are outlandish. I'm sure everyone in the US would love to eat grass fed pasture raised beef. Meredith, who works two shifts at the town Dairy Queen, who's trying to give her son some protein, so his tiny muscles don't atrophy, doesn't have the funds for that.
Cars and oil are perhaps the most clear-cut example of this. People don't drive because they want to, they do it because they have to. It's literally life or death. A car in the US isn't just a box on wheels, it's a lifeline.
Sort of. I think it's more accurate to say that there are just enough fiscally irresponsible politicians in office to prevent a government that pays as it goes via taxes. The vast majority of those politicians are Republican, taught by Ronald Reagan that they could have massive spending AND tax cuts without political penalty (indeed, Reagan was rewarded with adulation for nearly tripling the national debt). Democrats have been fairly consistent in reducing the deficit, and if they'd had their political druthers, would've reduced it even further with additional taxes. The reality is that maintaining a modern superpower of over 300 million people requires much more in annual taxes than voters realize, at least in part because they've been misled by Republican leadership to believe that taxes (particularly progressive taxes) are unnecessary.
There's no direct election, and despite "every kind" of politician existing, the representatives of two parties with very similar polices overall, differing only in pointless stuff, keep taking turns in the presidency since forever. The choices are quite constrained.
your argument stopped having any semblance of merit at least decade ago. Now it is laughably unbelievable.
Now, ought there be more direct representation? Of course!
Should we have more than two major parties? Of course!
Guess what, a lot of people on this forum I am sure make plenty of money to be able to afford going to a few fundraising events for local politicians that they favor.
Y'all have influence here if you want to use it.
This is prohibitively expensive for anyone, even the largest corporations.
You can help get people elected into local positions that align with your interests. AND some of those people will continue to build their career in politics and may become Senator or Governor someday.
That's influence. That's buying into the system to make it how you think things will be better.
Such is life in Palo Alto.
It appears that Palo Alto has elections for city council every 4 years.
Here's an election guide:
https://www.cityofpaloalto.org/Departments/City-Clerk/Munici...
https://www.cityofpaloalto.org/Departments/City-Clerk/Munici...
Except that this is far from the reality.
We elect people with specific views but they seem to vote regardless of their constituent interests, let alone their supporters’. Instances of this fact are very easily searchable online.
https://act.represent.us/sign/problempoll-fba
You want me to believe that the majority of constituents represented by these 193 republican representatives are against an insulin price cap?
https://images.dailykos.com/images/1054844/story_image/FPNbI...
My newest advocacy addresses this problem.
I call it “extend the powers of justice by jury”.
The idea that these representatives can just vote without accountability is absurd, and clearly a weakness money has uncovered in the US political system. (I refuse the claim status quotitians make that “elections are accountability“)
My suggestion is elected representatives act as litigators to their side of the argument and they need to make their claim to a jury overseen by a judge. That jury determines if a bill passes.
Who you elect as your representatives still matters, but now their ability to litigate persuasively is the number one quality of consideration when choosing those representatives.
This should remove the power that money has in bills being passed, as well as completely remove the “rider compromises” where officials compromise by including unrelated clauses to encourage the passing of a bill.
I want a representative government and I think expanding the powers of justice by jury will help in further enshrining that goal in our political systems.
They wouldn't get voted in. You said it yourself. What kind of platform is "let me cut your benefits/raise your taxes for temporary pain now so that hopefully in 10 years some good thing (that you might not even notice) will happen if everything goes according to plan"?
Disagree on multiple counts.
First - you don't need both - if you cut Social Security and Medicaid altogether, and use the surplus to start paying down debt, that solves 100% of the deficit and starts chipping away at the debt, while this would actually reduce taxes rather than raising them. I'm not asserting that the political will exists to do this (it doesn't), but the idea that you can't balance the budget without raising taxes is obviously false - taxes are nonzero, but you could reduce spending to zero.
Second - you don't actually need either - if you hyperinflate the currency, the value of the existing debt becomes negligible. To wit, I fundamentally agree with the message of the remainder of your post.
How is making me and almost everyone over 60 homeless going to result in a surplus? There would be all the dead lawmakers to bury, and so much security to try to protect the rest.
That's a "let them eat cake" level of breaking the social contract you're considering
I'm sympathetic to your struggles if OASI is the difference between you being homeless and not 60+ years into your life. Just know that your benefits are slated to be reduced by a minimum of 21%, automatically starting in 2033 when the trust fund is depleted, per laws already on the books.
Social Security and Medicare are, fundamentally, classic pyramid schemes. They rely on an infinitely increasing number of people to remain fiscally viable. We're at the end of that road now though, U.S. TFR is down ~1.6. These programs are going to crack soon, and anyone under the age of 40 today will never see a penny from either of these programs despite paying in for their entire lives.
I understand that ripping away benefits you already paid for is unfair to your generation, but being forced to fund benefits we'll never receive is also unfair to my generation, to say nothing of all the generations after mine.
Considering your argument is based on your belief 21% equals 100%, I should hope so!
Basically after WW2, as soon as the war was over debt started dropping. Before the great societ stuff, the US didnt have so many future liabilities. Debt was dropping during Korean War.
From the 2024 article:
"In our best scenario analysis, stabilising the fiscal outlook will take years to accomplish, but also require significant action already in the short run, operating on both spending and taxation. A consolidation over a long horizon should not be confused with procrastination. Waiting is costly: the size of the required correction is already sizeable. With debt growing at a sustained rate, delaying action can only make the required correction larger. Even more, waiting is risky."
I was saying exactly this was true in the 1970's and unfortunately that's when the significant action failed to be taken. It really was needed in the short run right then but for lenders there was too much to be made by completing the shift away from the stable debt/asset ratio << 1 which had built the country, rapidly over to a variable payment/cash-flow ratio instead. This is not a perfect simulation since real assets are important, but the main thing is it allows the lenders to avoid shrinking themselves, or even grow a bit during times of no actual growth in the "economy" at large. And the payment/cash-flow ratio can be focused on and "responsibly" maintained below 1 since that is a widely-agreed "bad thing" which leads to certain collapse for a financier.
But acceptance of this allowed the newly deprecated debt/asset ratio to rise exponentially from its near-zero starting point since additional debts (often at less-attractive terms for the payers) could be piled on more discreetly, and assets themselves are virtually out of the equation too and more ripe for the taking if opportunities presented themself. There was so much more money to be made by making deeper debtors out of those who were established, and adding new debtors to the rolls whose underlying assets were too low to be reasonable under normal times.
Assets of the most well-heeled can be better protected, and assets of the masses tapped into in different ways and neither will effect the overall equations or outlook when the equations are based on "money supply" and "velocity" rather than (remaining) net wealth or real assets. It's a slippery slope but if assets are being tapped into they dwindle, regardless of how the payment/cash-flow figure may take prominence and provide untold opportunities for those adjacent to the cash pipeline. Debt/asset can then smoothly climb much closer to 1 without gaining enough attention, and even smoothly move above 1 with no further apparent effect !
But let that "hidden" debt/asset ratio remain above 1 long enough, or even above 0.5 beyond "2 whole periods of time" and assets will not stop declining toward zero until done. Automatically, without additional debt being incurred. And the ratio goes through the roof even faster. Unless something major is done about it. Meanwhile the sky remains blue and nothing can be seen on the horizon that looks any more threatening than it has been the last few decades.
The action needed now is the cost of waiting this long.
Also, according to https://fiscaldata.treasury.gov/americas-finance-guide/feder... and https://www.cfr.org/article/how-much-us-aid-going-ukraine , the amount spent on Ukraine as a percentage of total government spending seems to be around 3%, not taking into account the fact that some of that might have been spent anyway (for example, old munitions that would have otherwise been replaced were sent to Ukraine).
It didn't happen in the UK, probably because of a populist prime minister (Johnson) who wanted to be seen as a Churchill figure throwing immense and unconditional support to Ukraine, it meant that pro-Russia elements couldn't really get any traction.
It is like being fascinated that the Indian right have different opinions, or the South African right. Or the Russian right. Or different factions of the US right wing. It is fascinating, but the UK voters aren't expected to be on the same wavelength as the States; Johnson or no Johnson. They have different interests and motivations.
Also Japan has a debt to GDP much, much greater than the US, and still seems to function fine as a country, so how do they do things differently?
Japan has essentially been doing this (the mechanics are a bit more complicated, but the effect is essentially the same), and they've been able to get away with it because inflation has been low for the last three decades due to external factors such as globalisation.
Now inflation is starting to rise even in Japan, so they may have some issues in the not too distant future.
Additionally some experts say that the inflation was bigger in Europe because the governments didn't do investments with new debt.
I mean you’d have to be completely stupid to believe that what they did had no impact on inflation.
If tripling the amount of base money has no effect then logically destroying 70% of the base money would also have no effect, but I never see people advocating that
The definition was changed only because economists decided inflating the money supply was a brilliant economic policy and the old definition became inconvenient.
When you realize they changed the definition only for better optics it's easier to question the underlying principles.
That probably isn't true, both because it isn't that obvious that the economists thought it was a good idea or that they were the ones who changed the definition. "Economists" don't have any power over anything and the consensus position seems to tend towards disagreement with government policy.
Inflation is one of those topics where there seems to be a dearth of actual economic evidence bought to the conversation. The policy justification in the public discourse tends towards just-so stories.
This is a good overview of the history of the term "inflation."
Ideally people would specify which inflation they're referring to, like monetary Inflation or price inflation. Short of that though, until we started moving to full fiat currencies inflation without any qualifier was inflation of the money supply. After the move to fiat they repurposed the braod term to mean price inflation, presumably because monetary inflation isn't meaningful when your system is based entirely on manipulating the money supply.
In fact, in those situations it’s necessary to increase the money supply to avoid deflation and other issues, as the existing folks with money/resources otherwise just have to sit on their hands and squeeze everyone else to get rich.
In an actual growth environment, Printing more money keeps everyone roughly the same level of poor/rich overall.
The issue is when population is decreasing or actual economic output is decreasing, but rather than withdrawing money to compensate, more money is printed to try to keep the graph going up and to the right.
IMO that has been an ever increasing trend since around the 90’s in the US.
Monetary inflation = money creation by definition. Whether that makes everyone poorer depends on other factors though, like how the money enters the money supply and what current market dynamics are.
Price inflation doesn't equal money creation though. Printing money can cause price inflation, but other things can as well. Printing money too slowly relative to the economy could actually not keep up, prices can fall even though the money supply increase. There may be a corner case or two, but I do pretty much agree though that price inflation makes everyone poorer.
Then we'd expect to see deflation when the supply chain crisis is resolved - which seems unlikely but I suppose it cannot yet be ruled out. I doubt anyone will be held accountable if that deflation doesn't materialise though.
It is an interesting question where CPI inflation is supposed to be coming from if not inflation in the money supply.
Its one thing when outside parties offer debt to a government, its effectively a show of faith in the government to pay its liabilitirs and still exist long enough to do so. Buy what does it even mean for a government to extend debt to itself?
You may be interested in reading about Modern Monetary Theory (MMT).
I'm not an economist, but had a mild interest in macroeconomy some years ago and found MMT eye opening.
What I was trying to ask there is what does it mean for debt to exist when there is no relative risk?
When a third party extends debt in good faith, it says something about their estimation of risk.
When a government extends debt to itself it literally means nothing, if one party fails they both do. More importantly, there's no recourse if the debtor defaults. The debt there exists purely as smoke and mirrors, it is created only so they can claim money wasn't made out of thin air.
I get where you are coming from. If I'm not mistaken, and according to MMT, a government buying its own debt induces future inflation and a decrease to interest rates.
All money nowadays is fiat (i.e. created out of thin air by a few actors), so it's not like any form of money creation and destruction means much more than changes to the inflation rate, interest rate and the derived swings to the economic cycle.
When you peak behind the curtain and see how an MMT system actually works, it's pretty clear that the whole thing is just for a game and, at best, a benign one.
As long as it isn't hurting anyone, I can see it being plenty useful given what we can do with it even if the system is just a game. As soon as the system starts harming people though, say because they can't access basic goods or live a happy life, simply because of how the game works then it skips right past being an entertaining game and into the realm of being a dangerous, arguably evil, weapon.
You get the market rate for your highly fungible regulated market instrument.
Investors are not emotional they can sell that shit and buy anything else from Silver to TSMC shares in a heartbeat. What makes it shit? Being a penny more expensive than the quant's model.
They can borrow from the FED real cheap using QE. But the only free lunch is the big bang! Printing money causes inflation especially in asset prices and causes bubbles.
However, I'd like to point out that the budget hawks of yesteryear (Reagan, Simpson, McCain) were at least logically consistent in that they were pro-immigration.
Immigration's positive impact on US fiscal policy is so large that not even right-wing think-tanks can refute it. [1] It raises the fraction of the population currently in the labor force. As a separate, compounded effect, the average immigrant contributes more to the social services pot than they draw out. The bonus to Social Security is even larger because of the undocumented population, which pays payroll taxes but is ineligible for retirement benefits. This effectively foots the bill for 2-3 million American retirees. [2]
So when today's populists peddle nativism while posing as budget hawks, it really fits in nicely with the rest of their bill of goods.
[1] https://www.cato.org/blog/fiscal-impact-immigration-united-s...
[2] https://www.americanprogress.org/article/improving-lives-str...
Being pro immigration does not mean you’re pro illegal immigration.
> The bonus to Social Security is even larger because of the undocumented population, which pays payroll taxes but is ineligible for retirement benefits. This effectively foots the bill for 2-3 million American retirees.
If they don’t have social security numbers, they’re not paying payroll taxes.
This distinction is mostly out the window with today's populists, see e.g. repealing jus soli and all the other racist dogwhistles.
> If they don’t have social security numbers, they’re not paying payroll taxes.
They're using SSNs, often false or not their own. Read about the Earnings Suspense File at the SSA in the second link I posted.
your enemies aren't all dumb. the smart ones aren't likely to talk to you based on your attitudes towards them.
There are already some limitations on birthright citizenship, for example we do not grant it to children born to diplomats visiting the USA. It's not an unreasonable position to limit it to legal immigrants.
Foreign embassies are considered US soil for jurisdictional purposes. If an army forced their way in to an embassy so that their pregnant battalion could deliver their babies within the embassy, should they get citizenship? If it doesn't apply to the embassy, how about if they do the same thing to a small island controlled by the USA or even the southern USA border?
That's largely because the US is a signatory of the Vienna convention on diplomatic relations. Children of foreign diplomats born in the United States are not automatically granted citizenship because they are not considered subject to the jurisdiction of the United States.
Australia did the exact thing. Switch from Jus Soli to Jus Sanguinis. Some Jus Sanguinis countries have switched to some hybrid system that allows legal immigrants to get citizenship at birth.
There's no reason to punish US-born babies just because their parents committed a misdemeanor jumping the border fence. If they're born here and grow up here they're as American as anybody else, descendants of the Mayflower border-jumpers included.
To undertake the process of a constitutional amendment just to deny them that is one of the most racist policies being debated in this country since Reconstruction and the Jim Crow era.
> If an army forced their way in to an embassy so that their pregnant battalion
Most people prefer to live in the real world rather then in absurdist fantasy land.
But it doesn't matter anyway because heat death of the universe.
We mean that we're fine with the rate of immigration that as a country we've agreed that we're okay with (i.e. "legal immigration") and that it isn't okay to ignore these compromises and just let in anyone who shows up.
As of 2022, the undocumented population was still about 10% below its 2007 peak. [1] The population of the US grew by 11% over the same period, so as a fraction it's well below the recent maximum.
Some of the statistics at the border increased massively in recent years because a lot of immigrants are now turning themselves in as refugees. [2] This allows them to "ride the disfunction" in the backlogged immigration courts, granting them legal work authorization and deportation protection in the meantime. If we fixed the disfunction, they would just stop turning themselves in once again.
The level we've "agreed that we're okay with" is far from set. Every time we've tried to set it in recent years [3], restrictionists like you have spared no tactic to gum up the works. That's because you figured (correctly) that the level of legal immigration that we would compromise upon is higher than the level we currently have.
Restrictionists are the primary reason we have a vast underclass of semi-serfs.
[1] https://www.pewresearch.org/short-reads/2024/07/22/what-we-k...
[2] https://tradingeconomics.com/united-states/asylum-applicatio...
[3] https://en.wikipedia.org/wiki/Border_Security,_Economic_Oppo...
They are set. You appear to not like those levels, but they are well defined. Movements to change those levels are also fine, but again, legal immigration paths are well defined.
>restrictionists like you
We have a system by which we make these decisions as a society (i.e. the federal government). That system has not materially changed immigration recently. That isn't "gumming up the works" that's the system working as designed.
>Restrictionists are the primary reason we have a vast underclass of semi-serfs.
No. We have a underclass of semi-serfs because we have systematically and for decades chosen to turn a blind eye to (or actively encouraged) illegal immigration. We could enforce laws as they exist today and not have this human exploitation.
> We could enforce laws as they exist today
You can't have it both ways, either the system is broken or it isn't. You don't want to fix it because the overall level would increase. So you push for "enforcement," but that does nothing to address e.g. the asylum claims situation. The system cannot be fixed without updating the law.
The immigration system has been broken for more than a generation. There have been large majorities in favor of reforming it for almost as long. Doing nothing in this context is not how the system is supposed to work. It's actually amazing how a narrow-but-loud minority of visceral racists has managed to gum up the works for so long.
>you can't have it both ways
We have a system of government and that through that system we've defined legal immigration. That system is no longer being enforced, which is less of a system-problem and more of a meta-problem. I don't have any solutions to the meta-problem[1], but it is self-evident to me that even if we have immigration reform the system won't work if those who are sworn to uphold it neglect to do their part (that is, if there is a meta-problem, no within-system solutions will work).
[1] I hope it will work itself out in the polls but I guess we'll see
Funnily I'm making the same claim about you.
> the system won't work if those who are sworn to uphold it neglect to do their part
As is, the system is only serving the interests of the restrictionist minority. The situation is similar to where marijuana enforcement was a decade ago, and LGBTQ rights a decade before that. Many states have had to make-do with the situation and ended up building their own mini-immigration systems.
If this is the context in which someone is thinking "gee, but I'd really like to get millions of people deported and lock the rest out, how can I accomplish that?", well, it's just possible that perhaps they haven't come to terms with the reason why. They can call a spade a spade if and when they're ready.
What exactly is racist about being against jus soli?
Personally, I think birthright citizenship solves more problems than it causes but I also see the arguments against it.
Most countries in Africa, Europe, and Asia don't have it.
None of the Nordic countries have it - are they racist? I thought those were the countries everyone says we should try and be more like?
Pretty much everything?
If some new country like South Sudan was picking a rule from scratch, one could perhaps convincingly claim to be against jus soli for reasons other than racism. But to push for a constitutional amendment to deny citizenship to babies that are American in every way betrays the obvious reason for doing so. It just doesn't fool anyone.
Just sounds like you feel very strongly about this and want to say "everyone who disagrees with me is racist".
The majority of the world's population lives in countries that don't do birthright citizenship.
Jus Soli definitely gets abused. Cheap international flights didn't exist in 1866 when birthright citizenship became part of US law.
I could see merit in amending those laws, perhaps not abolishing it but maybe tightening it to only apply to children of legal residents or something like that. That's a system that many countries use, including progressive European states.
https://en.wikipedia.org/wiki/Literacy_test
The argument that a rule is color-blind on paper doesn't make systems that are incredibly racist any less so.
The jus soli repeal is a constitutional amendment that's colorblind on paper but that furthers a racist outcome in practice, which is why it's being promoted by bigots.
I can't really know what anyone believes in their heart, but I doubt that the oligarchs who extol the free market (including the market for labor) really care about any of the demographic details of those they would employee as long as they produce as expected.
We write the rules on what is and isn't legal. Writing the rules and then using them to say immigration is great unless it's illegal is very circular logic.
I do not see a logical flaw in this stance.
if I'm generous with your proposal; wouldn't you still find immigrants applying for citizenship and eventually pulling from SS? most immigrants are younger and we should both be able to agree, they'd likely want to stay if they could.
I feel like your biases are coming through with a lot of this, the answer to our debt problems will not factor heavily with immigration.
As for housing, it's screwed because of land-use policies that intentionally strangle supply to artificially inflate property values, such as suppressive zoning. If there was less demand the cartel would just restrict supply further.
Legal or not, this is the "homo economicus" view of humanity. Working-class Americans don't suddenly become CEOs, Middle managers, and white-collar professionals because we import more working class. If that was the case, the Rust Belt and Appalachia would be booming.
What actually happens is that the price of working-class labor decreases (due to more supply) and the higher classes make more money off the under-classes, leading to increased wealth inequality. Which is exactly what we've observed for the last 40-years.
They happen to enter at the least-educated, often unskilled level. This necessarily pushes everyone else up. A CFO that strives to be CEO but couldn't cut it yesterday does today, a director becomes CFO, and so on. This is not rocket science, especially for HN.
When you deliberately fail to appreciate direct logical consequences like this, your unbridled disdain for them is showing through. The same is true when you dismiss the countless economic studies that have proven that the overall benefits of immigration exceed the costs to a narrow segment of the labor market.
There are very few natives interested in cleaning bathrooms and picking vegetables. They haven't given up on their dream bathroom-cleaning jobs - quite the contrary. They have been able to pursue better jobs because there were immigrants willing to clean bathrooms. Those immigrants created demand for all other products. The table becomes bigger, and everyone scoots over. Again, not rocket science.
Something visceral gets activated about this issue, which is why it's ripe for populist con-men to ride it, logic and reason be damned.
e.g. In real life, 1 blue collar worker does not get promoted to a white collar job for every 1000 blue collar workers that enter the labor pool after them.
I understand this is inconveniently at odds with your visceral disdain for immigrants, but that's how the law of large numbers shakes out.
>they cancel out in the medium run
If this were true we'd see wages keeping pace with productivity. We'd also see wealth inequality remain constant. The US is famous for neither of those things being true. Your toy model of US economic activity is flawed with respect to real life.
These are macroeconomic variables that are affected by many factors. The production function argument I made is strictly microeconomic and independent of these.
Ignoring xenophobia based justifications against immigration, the only reason why the right wing has a major push against immigration is because unskilled illegal immigrant labor is better for businesses than unskilled legal immigrant labor.
Illegal immigrants can be paid below minimum wage and without proper tax or benefits contributions (forcing the immigrant to bare the company's tax cost if they want to actually be squared away with the IRS). Illegal immigrants also don't know their rights and/or are afraid of reporting issues to the DOL or OSHA out of fear of deportation (despite deportation protections for whistleblower immigrants). Illegal immigrants are also less likely to unionize because if they "make trouble" the company can just threaten to report them to ICE.
All in all illegal immigration is an exploitative relationship that overwhelmingly benefits the people and companies that most aggressively rally against it.
If you eliminate this exploitative arrangement and provide an easy safe path for immigrants to engage with the labor market, most of this lowering of effective wealth that occurs for workers goes away.
> this is a minor effect compared to a housing policy that assumes no immigration
Given that unskilled immigrant labor is predominantly seasonal migrant labor, this really isn't as much of an issue as you'd assume. And the solution to this is again opening up the legal immigration path and adjusting policy decisions to reflect that.
Overwhelmingly the costs associated with immigration are costs associated with illegal immigration and they are predominantly self-inflicted in an attempt to optimize profits for the capital owning class.
https://www.cbc.ca/amp/1.7080376
I agree that illegal immigration is highly exploitative. I disagree that it most benefits the people who are most vocally against it. Since you just assert this without presenting your logic, I reject it on similar grounds.
You also conflate seasonal labor with housing. Seasonal laborers need a place to live all year around, not just when/where they're employed.
The rest is just word salad solutions "adjust policy decisions to reflect that..." and "optimizing for the capital owning class".
This is the one that is mind blowing. The military is fucking gigantically huge. And every single years a militray budget worth of stuff simple gets burned for 'nothing'.
The problem in the US is that most of the money is already commited. The future money is already promissed. And the rest is mostly military and debt service. And what is left over isnt enough to cut to be effective.
I really dont see a solution.
I'm happy that in my country we have strict limits in place and debt/gpd is only 40%. Not have the huge debt servicing ever year seems usuful to stabilze your budget long term.
I really am curious how someone gets to such specific claims without modelling and simulations.
The US has launched 84 of the 134 orbital flights this year, 2.5 times as many as China's 32.
It may not be as dominant going forward as it was in the second half of the 20th century but the idea that it’s going to be relegated to some kind of banana republic status is laughable given the problems of the competition.
These are basic facts that run counter to your base assertations. You may have a point to make, it's undercut by your own claims.
If I owe you 100 grand and I can't pay, I am in trouble.
If I owe you 100 trillion and I can't pay, you are in trouble.
As for taxes, the past few GOP admins lowed taxes for the ultra wealthy and corporations. If they had stayed at the same level, the debt would be much lower. Plus Bush's invasion of Iraq, for no reason, added quite a bit also.
By average 2-3% a year inflation or by above-average heightened inflation (which hurts people)?
https://www.google.com/search?q=inflation+tax
Additionally, the intergenerational transfer of wealth from Boomers to Millennials and Zoomers will occur over the next 20ish years as Boomers die off. This wealth transfer could be used to increase tax revenues.
One tax that could be raised would be the estate tax, which would be unpopular among the wealthy, but if lowered to 1MM-1.5MM (maybe 10% rate) and over 50MM (50% rate) would help to fill the deficit. The more likely scnario is the government allows higher inflation rates and we have a bag of cheetos costing $10 in <10 years.
The CEPR is an EU think tank supported by the French Government [0]
France and Germany have been lobbying against US stimulus packages like the IRA and IIJA, and economic protectionism that has become mainstream politically [1]. It is becoming a trade war [2]
Western European allies can tell the US what to do when they start carrying their weight like Poland, Romania, Czechia, etc.
[0] - https://cepr.org/about
[1] - https://www.politico.eu/article/macron-heads-to-washington-o...
[2] - https://www.institutmontaigne.org/en/expressions/real-reason...
It's absolutely a biased piece of advice because it has subsidized American industrial players at the expense of players across Europe - which is why the EU has been in the process of lobbying against American deficit spending that is primarily being used for subsidizing industrial policy.
Western European austerity has clearly hobbled France and Germany while the US was able to weather the GFC and COVID recsssion by using it's deficit.
> And France isnt in a position anyway to do that, since they have the exact same problem as the US.
Yet they are as Macron's lobbying blitz in 2022-23, the French Govt's Institue Montagaine has pointed out, and the French govt supported CEAP has been lobbying against.
If you want argue that deficit spending is fine and no problem, then just do that. You don't have to sell us on how CEPR is an evil arm of French propaganda.
I don’t think there’s a scenario where you can look at any country with this much debt, break the news, and then have it not sound like gloom and doom.
This just reminds me of the Mel Brooks Robin Hood Movie: “Maybe, if you break the bad news to me, but in a good way, then it won’t sound so bad!”
https://m.youtube.com/watch?v=Mi-YLIwkfJs
“That will probably happen here.”
Can you even conceive of how much inflation this would require, especially at the pace of the debt’s growth? People would be rioting.
I mean not ideal but the 50s and 60s were quite good in the UK.
The US would not have any of those advantages. There's not a more stable dollar alternative to look to, there's not an obvious ludicrous economic boom on the horizon, the export market's probably not growing that much, and US taxes don't have much headway to go up before being counterproductive and stalling growth (if they haven't already been doing so). Stalled growth results in less tax revenue, defeating the point of the tax increase.
In a nutshell, the UK was partially saved by the US and countries rebuilding themselves. The US has no savior.
Also, the US budget was balanced in 2000. It is possible.
I have no idea why so many people refuse to accept that there is a growing problem.
The scam part comes from how the tax cut was marketed to Americans
“Contrary to common perceptions, the CBO data indicate that: (1) income earned after taxes and transfers has increased over the past several decades for all income groups, (2) the federal tax system is progressive and has become more progressive over the past three decades, and (3) the federal system relies heavily on higher earners to raise revenue for government services and means-tested transfers.”
https://www.forbes.com/sites/timworstall/2015/01/08/the-us-t...
I can’t find data before 1980.
Reagan’s tax reform wasn’t a gimmick: it broadened the tax base (to encompass more kinds of income) and lowered rate to keep the effective tax rate basically the same.
The biggest problem is we simply doesn’t tax enough. We want to grow the scope of our government to be more like Europe, but we aren’t willing to tax the middle and upper middle class the way they do in Europe. We had an au pair from Germany. Our effective tax rate in a blue state as a dual income professional couple was the same as she paid at her entry level office job.
You're right that the 86 reform was pretty progressive but with all 3, the rich did great, poor did alright and middle class did poorly, IMO.
What was their effective rate in those years? What percentage of their income are they paying compared to the nonrich, and how did it trend?
Whether you think that's a good thing or a bad thing, it's hard to call it progressive.
Not saying I entirely disagree with it. I just don't think that data is that compelling since it's a pretty shallow analysis of taxation and income of high earners (which is fine, not every article needs to be that deep)
As they paid less everyone else could just be paying more as a total
This time span covers top marginal tax rates from as high as 90% to as low as 35%. The truth here is that we cannot significantly increase tax revenues by raising tax rates, as when taxes get too high, people are simply incentivized to earn less, or to spend more on finding, developing, or exploiting loopholes in the tax code to reduce their taxes. Accordingly, actual economists have understood for the last 50 years that simply raising taxes blindly can counterintuitively decrease overall tax revenue. This effect is part of what's referred to as the Laffer Curve. [2]
But to your first point, that there is no problem, I'd like to point out that interest spending has exceeded defense spending. [3]
But hey, don't take my word for that constituting a problem, take it from Jerome Powell, chair of the U.S. Federal Reserve:
"The U.S. federal government’s on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don’t think that’s at all controversial." [4]
In summary:
• No, everything is not perfectly fine. The United States is on a fiscally unsustainable path.
• No, the TCJA is not the big proximal contributor to the problem, routine deficit spending resulting in unsustainable debt is.
• No, we can't easily fix the problem by raising taxes on everyone, let alone by only raising them on the rich.
Citations:
[1] https://fred.stlouisfed.org/series/FYFRGDA188S
[2] https://www.investopedia.com/terms/l/laffercurve.asp
[3a] https://fred.stlouisfed.org/series/A091RC1Q027SBEA
[3b] https://fred.stlouisfed.org/series/FDEFX
[4] https://thehill.com/homenews/4447860-powell-the-us-is-on-an-...
None of this stuff is a priori true.
If this is incorrect, please feel free to correct me.
Also, what is your takeaway from this, after discounting the validity of the Laffer Curve, that the US as a whole ought to simply enact dramatic tax hikes, which will solve fiscal stability issues?
That's before we get into the (lack of?) empirical data. I'm finding it hard to come up with any citations that offer an existence proof of a Laffer curve for real, actual public finance systems. The Cato Institute and Brookings have things to say, but they're encumbered by policy goals. Ebrill, also encumbered by policy goals near as I can tell, urges caution. Espanhol's master's thesis concludes that a Laffer curve doesn't exist in its investigation of corporate tax rates across the Eurozone.
So, frankly, I'm keener just to throw out the academics here.
That's also before we get into what debt is and how it works. It isn't a call option: the persons, fictitious and natural, to whom the US government is indebted cannot exercise those debts on a whim in an effort to get paid. They have a maturity schedule. What matters to these creditors (and all creditors more broadly) is that there's faith that their debt instruments will eventually fully mature. For natural persons, that's likely decades from now. For fictitious persons like governments, that could very well be on the order of centuries.
It's for this reason why I also reject the appeal to Jerome Powell's authority: he doesn't express a concrete reason why he expects the faith that those persons, fictious and natural, have in the federal government to erode to the point where default is some notion of imminent. Does he expect the executive branch to stop payments suddenly? Does he expect that the tax base will collapse in the very near future? (Malthusians in particular are fond of crying the latter, predicting widespread famine.)
Furthermore, that's all before we get into taxation and how it works. It's a sticky subject academically, even after you peel away the conflicting policy goals. Is taxation revenue? Is it a constraint on the money supply? Is it economic dead weight? The answer to all of these is, "It really depends." One model says one thing, and another says something else, and there isn't a whole lot of real consensus on which one fits best where. (Economics, it turns out, is one of those social sciences, which means that most experimentation is thorny unless you abandon ethics. When all you have is models...)
The thing that matters at the end of the day is that someone (maybe you!) will cheerfully accept my greenbacks for what I reasonably feel like they're worth, and as long as that remains the case, I'll happily render unto Caesar until we finally find a way to kill him for good.
Gross federal tax revenue never declined, even in the year after the 2017 tax cuts took effect.
https://www.statista.com/statistics/200405/receipts-of-the-u...
It was balanced due to the Internet bubble providing unsustainable revenues coupled with age demographics. The large cohort of the population had hit peak earnings years. The govt revenue as a % of GDP hit all time highs, not because of careful planning and choices, but because of luck and unsustainable timing.
When that bubble popped, and as the cohort in peak earning years shrunk as people aged out of it, so did the revenue, and then the budget became un-balanced again. Certainly the unpaid for Bush Tax cuts have made it worse, but the fall began before Bush even took office, and certainly was well gone by the time Bush passed the tax cuts.
It was not balanced by some stroke of government genius.
I think because this implies change. And over the past couple decades it's become more and more acceptable to simply be against all change. It's political viable to be the guy who doesn't change things, and you can slam other people just by saying "look, he changes things!"
I mean, lately it feels like there's a lot of political will to take a "do nothing and hope it works" approach to everything. It's frustrating.
The SS trust fund is projected to be depleted by 2033, at which point benefits will be automatically reduced to just 79% of their current level, by laws that are already on the books. This information is freely available from the Social Security Administration themselves. [1]
Keep in mind, Social Security's and Medicare's unfunded future liabilities grossly exceed the current liabilities of these programs.
These defined benefit programs are mathematically reliant on a growing, rather than shrinking population, yet a shrinking population is what the entire industrialized world is currently on track for with our sub-2.1 TFRs.
[1] https://www.ssa.gov/oact/trsum/
I'm not stating your assertion is false, but I don't see the connection.
If they weren’t there, or this was 100 years earlier, or Gen Z was fundamentally different than they had been raised to be, then yeah TikTok likely would not exist, or at least not be a notable problem.
Post WW2 was an economic and population boom time. The boomers resulted from that boom, and the programs for them helped them, and that boom continued.
Booms continue to grow until the fundamentals fall apart and the leverage can’t keep it going anymore - and then you get a bust.
The longer and unhinged the boom, usually the longer and unhinged the bust.
And here we are.
Money is now, and will continue to do more so in the immediate future, flow out from the gov’t/taxes/money printer, and into retirees pockets through SS and other means. Up until recently, it had gone from major inflows to mostly neutral on that front.
For the reasons you’re mentioning.
So yeah, either we need to start producing more economic activity - or more likely - just print more money and hope it all works out.
We’re not in as bad a crisis as Japan, but it’s the same kind of problem.
Interestingly, with the US as the worlds reserve currency this is going to have a global effect.
When SS was formed in 1935, average life expectancy at birth was just 60, whereas the full retirement age was 65. In effect, this resulted in close to 150 people paying in for every 1 recipient.
These days, full retirement age is almost done being hiked to 67, while life expectancy at birth was up to 78 the last time I checked. This results in fewer than 3 people paying into the program for every 1 recipient.
If the full retirement age was simply indexed to (life expectancy at birth + 5), that would also solve the fiscal problems with Social Security, though it's a political impossibility.
I think people forget that the actual name of the "Social Security" program that people think of as "retirement" is OASI - Old Age Survivorship Insurance. I use Social Security in quotes because there are other components too, like DI - disability insurance, though that's negligible compared to OASI.
It was never meant be a retirement program, it was meant to be insurance in case you accidentally lived for a lot longer than you were expected to.
Extraordinary claim (less than 1% lived beyond 65)! Any citations?
Note that LEAB of 60 does not imply that fewer than 1% live beyond 65, nor does a payer:payee ratio above 100.
For most of human history, deaths followed a largely bimodal distribution - high infant mortality, lower morality in mid life, and then high mortality (approaching 100%) in old age. Put more simply: if you lived to, say, 3, you were much more likely than a newborn to make it to 70. A large enough portion didn't make it past infancy that it dragged down the entire average.
Much of the improvement in LEAB has been from improvements in infant mortality, not people living longer at the end of their lives (though that is increasingly a factor as medical care is improving).
Part of the discrepancy of the payer:payee ratio was due to more people having more kids, and a big part of that change is explained by our switch from a regular population distribution (many more young people than old people) to an inverted pyramid population distribution, like Japan's (a larger cohort of old people, increasingly smaller cohorts of younger people).
You are entitled to this belief, but I'd be remiss to not remind you that the Social Security Administration itself explicitly disagrees with your hypothesis, here:
"The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79 percent of scheduled benefits."
Source: Same link as the one in my original post, https://www.ssa.gov/oact/trsum/
> Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.
A mountain of unrealized goodwill. It's such a pity, because indeed much of infrastructure is barely maintained.
Doom is about the future, not the present. Why are you looking at present levels instead of where the trend is taking us in the future?
That's one problem with looking at charts that aren't indexed/real (inflation adjusted) and/or ratios.
On it's face, our debt looks scary.
https://fred.stlouisfed.org/series/GFDEBTN
Looking at it as a ratio, it's still not great, but we've been in similar places in the past.
Debt as a percentage of GDP.
https://fred.stlouisfed.org/series/GFDGDPA188S
Interest as a percentage of GDP.
https://fred.stlouisfed.org/series/FYOIGDA188S
In 1946 there was a lot of pent-up demand for housing and consumer durables and a young fast-growing population. Now, not so much.
It's also a stretch to call 1990 a similar place for similar reasons.
We really are in a never-before-seen place with our current population age structure (old age dependency ratio) and fertility rates.
Population growth has slowed, but there's a good chance it would increase if affordable housing was available.
We are in a unique place now, and I think we were in 1946 too. I'm not saying everything will be fine, but I don't think it benefits us to say that this is uncharted territory either.
It appears there is no further reasonable headroom for debt should a third world war break out -- the Americans will be up "shit creek without a paddle". In that scenario, roaring inflation would destroy whatever is left of the current economy as globalist trade routes collapse.
The recent wars and posturings of Western rivals (Iran, China, Russia) are no surprise. They are sharks circling what they perceive as a failing economic system in a winner-takes-all game.
I wouldn't characterize what Iran, North Korea, and Russia is doing as sharks circling a failed US economic system.
Russia making a play for control of Ukraine and control of FF/agricultural production/exports, is more about their economic reliance on on FF exports/etc and the West moving towards renewables. The fact that they're willing to throw away so much of their military and population on it shows how much of a threat they think it is.
It could also be because of a perceived threat from NATO, but if that was the case they would have backed off when other countries started taking about joining NATO. Instead they doubled down and NATO is more powerful than it was before.
Iran and North Korea and using their resources to support Russia in exchange for technology/etc.
China is making moves to strengthen their economy during all of this, but I think they're acting as opportunistic towards Russia as they are towards the West.
That's why they're being really heavy handed in negotiations with Russia. They know there isn't anywhere else for Russia to sell a lot of it's gas, and they see this as an opportunity to gain an advantage over Russia.
https://www.reuters.com/business/energy/russia-china-gas-pip...
Of course another level of nuance to that conversation is then asking "and what could happen to break that cycle and what would result"?
This is referring to current debt, not the idea of ending the debt cycle. The US doesn't have the option of letting current debt just sit for an arbitrary amount of time and get reduced by inflation, but has to pay according to the obligations of the outstanding debt securities. It also doesn't buy back the debt securities before they are due. The real value will be reduced due to inflation until the point where obligations are due, but there isn't a choice to arbitrarily let it sit.
Fascinating you're compare the US to other developing countries.. and saying it is basically middle of the road as far as developing countries go.
France and Germany have been lobbying against US stimulus packages like the IRA and IIJA, and economic protectionism that has become mainstream politically [1]. It is becoming a trade war [2]
Western European allies can tell the US what to do when they start carrying their weight like Poland, Romania, Czechia, etc.
[0] - https://cepr.org/about
[1] - https://www.politico.eu/article/macron-heads-to-washington-o...
[2] - https://www.institutmontaigne.org/en/expressions/real-reason...
EU scary hours will begin in something like 10-15 years when Poland will be asked to become a net contributor (after they converge and some W. Europe country will inevitable come up with the idea of plugging fiscal deficits by cutting EU contributions).
Doesn't mean Americans should undermine our Industrial Policy because French and German players are nowhere near as competitive.
At least Eastern European allies help cover and support American defense spending in Europe, while Western European players like France and Germany are opposed to Atlanticism unless SHTF
There are changes in international settlement that bypass the dollar. China and Russia and others have been advancing ways around needing to use the U.S. which is already having consequences as some of this would have found its way to funding the rising U.S. deficit.
Most likely through buying Government debt and there is a chance we will know when the debt party is over if there is ever a Treasury issuance that cant find a buyer.
Given that part of the problem is the system where there is always a buyer of last resort and so much of the debt is money we owe ourselves. Which reduces but does not eliminate the impact of the move away from the dollar.
It is clearly unsustainable and certain measures like the reverse repo market show a sort of short term liquidity and it is interesting to compare it to future issuance of debt.
The resulting effect then would have to be increased inflation until spending reaches and equilibrium again. Though with all of the potential threats around the world, anything can happen.
It just isn't sustainable and there seems to be a collective delusion that it is.
Even if the US manages to not get involved in yet another expensive overseas war, it's still going to have significant budget issues. Decades of prosperity have been squandered with zero long-term vision, let's hope the backlash from it in the near future won't be too bad.
The problem isn't the deficit - it's the spending. When the government spends money, it takes people away from whatever other economic activity that person would be doing, and consumes their labor in service of the government instead. This reduces economic productivity, and we all end up with less stuff as a result.
The key is to focus on productivity in terms of stuff (not money) - everything else takes care of itself.
This is important because focusing on money and the deficit often inspire solutions that attempt to solve those problems, but at the cost of hurting productivity. Higher taxes, for example. Raising taxes may (arguably) raise revenue and reduce the deficit - but may well also reduce productivity. That would be bad.
The alternative to working for government making a useful website that would be productively used by millions of their fellow citizens is working for yet another "startup" making Yet Another Pointless Social Media or AI scam with no revenue model beyond getting acquired by a bigger company.
The problem here, in my opinion, is that the US does not make enough stuff. We have a lot, and I mean a lot, of "fake" jobs. Jobs that move things, not produce things.
All the actual stuff we consume is made overseas. We've essentially given up our economy in exchange for making middle men of middle men of middle men. Our economy, I feel, is largely theoretical.
If we look historically at times of economic boon, there's a common thread. Huge increases in manufacturing and production of goods. The 50s weren't prosperous because of taxes, they were prosperous because of WWII. And, if you look, most of this increase stems from the government. Whether it be war or triple letter agencies making stuff.
It would be better to live in the U.S. with a 100x debt/gdp than live in Haiti, Niger, or South Sudan with a 0.1x debt/gdp.
Servicing the exisiting debt already cost the US a whole militaries worth of budget. And that is after decades of low interest rates. If interest rates go up even slightly, you have to refinance all the debt with a higher rate. And if the private market ever decide to lower the rating on US debt, or starts to expect higher inflation. The debt servicing alone could consume pretty much the whole discretionary budget.
And remember the are massive budget issue on town and state level in the US too. And they expect the federal government to fund all the massive infrastructure spending they need. Plus all the federal infrastructure.All that infrastructure from the 60-70 is falling apart.
The backlog is already huge and getting bigger, that from the discretionary budget.
So debt absolutly matters, it has mattered to every government for at least 5000 years.
A societ that is stable can be made unstable, and debt is usually involved. France just had massive demostrations because they wanted to increase retierment age. And that was a drop in the bucket compared to what France needs. That has lead to massive victory for outright nazi party in France, and the far left who want to ignore this problem has also won.
And this is in normal peacful times. What if another finacial crisis happen?
Lets see how stable everything is once taxes double or social services get cut massively. That how you get people elected with programs that are the opposite of a stable political envoirment.
And having your own currency isn't magic. All it allows you do, is use inflation to take money from your citizens without having to get something threw parliament.
The US has had a history of extremely fiscally conservative governments. After each major war they instantly reduced debt again. So Americans somehow think this isn't a problem, because in US history it has never been much of a problem. But for the last 40 the US political environment has changed and now the opposite is true, neither party is interested at all in reducing the debt.
The reality will catch up with the US as it has with 100s of other nations over the last couple 100 years of history.
> compared to other factors
The things you call 'other' aren't that 'other'. They are linked to money and money is linked to debt.
Getting educated people isn't free. You have to spend money, from pre-school all the way to university.
Companies need infrastructure. Infrastructure cost money. How much you can invest depends on debt.
And that political stability depends people getting basic needs met.
You act like debt was some separate problem that has little impact on anything else, but this historically just isn't the case.
> people are acting like its doomsday
No people are not acting like its 'doomsday', they are simply pointing out some basic realities about the topic and saying 'this is a problem we need to actually take seriously'.
It’s not about imperialism or hegemony, which are fashionable reasons used by the poor. It’s literally because there are no alternatives.
The US also is in the unique position of stabilizing the entire world financial system, something it does on an occasional basis. I’m not sure you understand what the price of financial chaos is, but it generally involves massive amounts of human suffering.
As an aside, imperialism is generally better than anarchy. Ask Libyans and Somalians how anarchy is working out for them.