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> either increase taxes or reduce spending I see this sentiment a lot, they are not equivalent. The US must reduce spending, if it wants to protect the dolla

> either increase taxes or reduce spending I see this sentiment a lot, they are not equivalent. The US must reduce spending, if it wants to protect the dollar. Tax increases may also help. The relationship between tax rates, GDP, government revenue, the market value of new US debt, and the value of the dollar, is complicated and depends on uncertain estimates and models of the economy. Increasing taxes can reduce GDP, which needs to increase to outgrow the debt, there is an optimal tax rate, more doesn't always help. Decreasing spending is a more straightforward relationship, no new debt, no new dollars.

whimsicalism 1y ago
If the US reduces the debt, it removes pressure to monetize and removes market expectation that we will monetize, which directly boosts the dollar. I also think that "rich people are scamming us" is a politically more advantageous message than "old people are scamming us".
- alphazard 1y ago
  The most important thing is eliminating the annual deficit. That sends more of a signal about the future of the country and it's currency than the total amount of debt. How it gets done is separate from that. Given that the only demographic that can comfortably weather a recession is also starting to collect social security, paid for by younger generations who would be meaningfully affected by a recession, "old people are scamming us" may actually be an effective message.
  - array_key_first 1y ago
    Social Security is not really relevant to the deficit, that's just a thing some politicians say because they want to dismantle the pie to take their piece. Every time someone points to SS as the source of our fiscal woes, we should be immediately skeptical.
    - cmurf 1y ago
      I assume they just want to redirect the required payroll taxes into the stock market via privatization. Currently it goes into the trust fund which buys U.S. treasuries. https://www.ssa.gov/OACT/ProgData/assets.html https://www.ssa.gov/OACT/ProgData/assets.html
    - nickff 1y ago
      Social Security is 22% of the budget, how is that not relevant to the deficit? It's the largest single category of spending, and spending more than the government takes in is the source of the deficit. https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ https://fiscaldata.treasury.gov/americas-finance-guide/feder...
      - array_key_first 1y ago
        Because it's not real spending, because the money was already put aside. We take more in SS taxes than we pay out - it's a net positive. It's sort of like looking at the IRS and saying "look how much it costs!"
        nickff 1y ago
        Payroll taxes are supposed to cover Medicare and Social Security (along with some other programs), but they cover less than 2/3 of those costs. It’s not true that “the money was already put aside”, because retirees these days are getting about triple what they put in, and the ‘pot of money’ saved up to cover Social Security ‘promises’ is forecast to run out. There is an infinite number of ways to juggle the numbers, but the government is spending a lot of money on 'non-discretionary' programs, and revenues are not high enough to support everything.
        whimsicalism 1y ago
        it's not worth arguing with someone who has bought into the SS budgeting fiction, imo. essentially all economists agree with you
        1y ago
gjsman-1000 1y ago
> Tax increases may also help. I don't live in a costal state, but when I do consulting work typically at charity rates alongside my standard full-time job, I have to pay 24% federal tax, 15.3% FICA, and 7.85% state tax. I am already taxed whenever I want to help anyone at 47.15%. That's before the required tax structures and consulting for doing all the invoicing legally. God himself only wanted 10%, so it seems a government playing God is awfully expensive. You can't raise taxes any further before I'm done, and I don't think I'm alone, businesses and consultants are already crushed in taxes. I have to bill $40K to hopefully take home $20K; at which point, is it even worth my time? But if I don't consult because it isn't worth it, are small businesses suddenly going to afford an agency or a dedicated software developer? Of course not, so their growth is handicapped, and I wonder what the effects of that tax-wise are.
- whimsicalism 1y ago
  You're talking about your marginal rate and we simply are far to the left on the laffer curve, raising taxes will raise revenue. I'm not unsympathetic, my marginal is close to the same - but generally I think people's claims that they will stop working are generally more bark than bite and the evidence largely backs that up. If you don't want a tax-based solution, I do hope you are agitating for SS and medicare cuts.
  - gjsman-1000 1y ago
    > we simply are far to the left on the laffer curve, raising taxes will raise revenue I don't believe this, actually. I think that we will raise more revenue, yes, by squeezing more from the Fortune 500; but you will absolutely crush small business and consultancy work further. It's kind of like how an 80% tax rate on everyone making over $100K would do a fantastic job of raising revenue, but it's fundamentally stupid and would kill all future golden geese. (On that note, I see this comment a lot about how we had huge tax rates, 91% in the 1950s; but this is misleading. The effective tax rate for those earners was only 41%, due to the sheer number of exemptions, according to modern analysis. We have never had an actual effective 91% tax rate, or anywhere close to it. Those rates were theater, never reality.)

whimsicalism 1y ago

If the US reduces the debt, it removes pressure to monetize and removes market expectation that we will monetize, which directly boosts the dollar. I also think that "rich people are scamming us" is a politically more advantageous message than "old people are scamming us".

alphazard 1y ago
The most important thing is eliminating the annual deficit. That sends more of a signal about the future of the country and it's currency than the total amount of debt. How it gets done is separate from that. Given that the only demographic that can comfortably weather a recession is also starting to collect social security, paid for by younger generations who would be meaningfully affected by a recession, "old people are scamming us" may actually be an effective message.
- array_key_first 1y ago
  Social Security is not really relevant to the deficit, that's just a thing some politicians say because they want to dismantle the pie to take their piece. Every time someone points to SS as the source of our fiscal woes, we should be immediately skeptical.
  - cmurf 1y ago
    I assume they just want to redirect the required payroll taxes into the stock market via privatization. Currently it goes into the trust fund which buys U.S. treasuries. https://www.ssa.gov/OACT/ProgData/assets.html https://www.ssa.gov/OACT/ProgData/assets.html
  - nickff 1y ago
    Social Security is 22% of the budget, how is that not relevant to the deficit? It's the largest single category of spending, and spending more than the government takes in is the source of the deficit. https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ https://fiscaldata.treasury.gov/americas-finance-guide/feder...
    - array_key_first 1y ago
      Because it's not real spending, because the money was already put aside. We take more in SS taxes than we pay out - it's a net positive. It's sort of like looking at the IRS and saying "look how much it costs!"
      - nickff 1y ago
        Payroll taxes are supposed to cover Medicare and Social Security (along with some other programs), but they cover less than 2/3 of those costs. It’s not true that “the money was already put aside”, because retirees these days are getting about triple what they put in, and the ‘pot of money’ saved up to cover Social Security ‘promises’ is forecast to run out. There is an infinite number of ways to juggle the numbers, but the government is spending a lot of money on 'non-discretionary' programs, and revenues are not high enough to support everything.
        whimsicalism 1y ago
        it's not worth arguing with someone who has bought into the SS budgeting fiction, imo. essentially all economists agree with you
        1y ago

gjsman-1000 1y ago

> Tax increases may also help. I don't live in a costal state, but when I do consulting work typically at charity rates alongside my standard full-time job, I have to pay 24% federal tax, 15.3% FICA, and 7.85% state tax. I am already taxed whenever I want to help anyone at 47.15%. That's before the required tax structures and consulting for doing all the invoicing legally. God himself only wanted 10%, so it seems a government playing God is awfully expensive. You can't raise taxes any further before I'm done, and I don't think I'm alone, businesses and consultants are already crushed in taxes. I have to bill $40K to hopefully take home $20K; at which point, is it even worth my time? But if I don't consult because it isn't worth it, are small businesses suddenly going to afford an agency or a dedicated software developer? Of course not, so their growth is handicapped, and I wonder what the effects of that tax-wise are.

whimsicalism 1y ago
You're talking about your marginal rate and we simply are far to the left on the laffer curve, raising taxes will raise revenue. I'm not unsympathetic, my marginal is close to the same - but generally I think people's claims that they will stop working are generally more bark than bite and the evidence largely backs that up. If you don't want a tax-based solution, I do hope you are agitating for SS and medicare cuts.
- gjsman-1000 1y ago
  > we simply are far to the left on the laffer curve, raising taxes will raise revenue I don't believe this, actually. I think that we will raise more revenue, yes, by squeezing more from the Fortune 500; but you will absolutely crush small business and consultancy work further. It's kind of like how an 80% tax rate on everyone making over $100K would do a fantastic job of raising revenue, but it's fundamentally stupid and would kill all future golden geese. (On that note, I see this comment a lot about how we had huge tax rates, 91% in the 1950s; but this is misleading. The effective tax rate for those earners was only 41%, due to the sheer number of exemptions, according to modern analysis. We have never had an actual effective 91% tax rate, or anywhere close to it. Those rates were theater, never reality.)