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Solution to US debt crisis is severe austerity triggered by a fiscal calamity
- dsr_ 10mo ago....former White House economic adviser says... and it's a bad thing, not a "solution". Bad headline. No biscuits.
- simonsarris 10mo ago> How severe? A sustainable U.S. debt trajectory would entail elimination of nearly all defense spending or almost all non-defense discretionary outlays, he estimated. Reminder that infrastructure is ~3% of the budget, the military is ~13%. Almost all of the rest are benefits, either health or money, for old people or various poverty reduction schemes. Or debt. Social Security was made when there were ~130:1 worker:retiree ratio, now its closer to 3:1 and getting worse. The budget is largely an exercise in transferring money from the younger to the older. Unlike when SS started and the older generations were the poorest, right now they are the richest, so its an exercise in making the richest generations a bit richer at the expense of the current working generations. Since debt is now a large part of the US budget, this represents the retiree generation (again, the richest generation!) borrowing from even farther in the future to give themselves more money. There is no solution that doesn't confront this. The old are eating the young at an accelerated pace. People will say things like "But seniors are on a fixed income" as if that didn't represent most people, more or less, or justify the sheer scale of the wealth transfer. The most realistic solution is that we would have to stop all kinds of benefits to already-rich people and make it solely and exclusively on poverty reduction for the retirees that are in fact poor.
- nobodyandproud 10mo agoGen-X here. I’ve grown up with the warning non-stop that Social Security will become insolvent. My question is this: If I can’t get some or most it, why can’t I steer the money to where I believe the money ought to go?
- phil21 10mo agoBecause social security tax is simply a tax like any other, and social security is a pay as you go means tested entitlement program like any other. Current workers pay for current retirees. There is no account anywhere with your name on it earmarked for your retirement. It was enacted with lawmakers well knowing this - it was simply marketed in such a way to make it politically possible to enact and keep around long-term. If it were pitched as an additional tax and spend welfare program it’d have never gotten off the ground to begin with. Without your dollars going in today, current retirees would not be receiving meaningful benefits - as their contributions largely went towards those retired while they were working. The whole idea is more of a social contract between generations than anything else.
- salawat 10mo agoIn other words: Ponzi scheme, rather than any sustainable retirement mechanism.
- lotsofpulp 10mo agoWithout sufficient automation, all forms of retirement are inherently a Ponzi scheme, unless there is a cap to the age or amount of benefits received in retirement.
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- setr 10mo agoIt’s a tax. You could describe any beneficiaries of a tax in the same manner; we’re paying taxes to at least partially cover group X - homeless, scientists, military, retirees, veterans, etc. There’s no debt being paid; money is simply taken from Peter, and money is simply given to Paul. It’s not a retirement program, it’s retirement subsidization.
- salawat 10mo agoI don't think I'm willing to grant you Social Security as a proper "tax" or "subsidy" unless you're going to pitch me that Social Security is really, in essence, an incentive program for unrestrained natalism to keep population above replacement with all the Manifest Destiny/imperialistic implications and aspirations that come with it, and further, a commitment by the people who started it to never under any circumstances inform descendants of it's true nature. If you are willing to concede the above, I'll reclassify it as a proper "subsidy" insomuch as it was a law that was passed, and it is a clear act by the government to incentivize activity "X". At which point my discussion will quickly turn to "Holy shit, why are we still trying to empire build in the year of our Lord 2025? Shouldn't we have changed this by now?" If not... Still seeing it as a Ponzi. A fundamentally degenerate and unstable financial model, intended only to benefit the people who have been in it the longest solely for the purpose of self-enrichment. Well branded, mind; who doesn't want Social Security? But a Ponzi in essence nevertheless.
- slillibri 10mo agoReminder that social security is funded entirely by a separate tax and not debt, so unless you are planning to cut benefits but continue the tax it would do nothing to reduce the deficit or debt.
- whimsicalism 10mo agoYes that is what is being proposed.
- Taikonerd 10mo agoIIUC, in the future, the SS tax isn't going to cover the benefits that SS will be obliged to pay out. So some analyses model the shortfall as coming out of the government's general budget. So, yeah, it's "separate" spending in a sense, but it's not totally in its own sandbox.
- Acrobatic_Road 10mo agoThis is already the case. Social Security has been running a deficit since 2010. It's only stayed solvent because of the trust fund, which is expected to run out in around seven years. So the government is currently keeping it afloat using general budget revenue.
- expedition32 10mo agoAny kind of benefits system the middle class does not qualify for will find itself quickly cancelled through elections.
- whimsicalism 10mo agowe also yeet a ton of money on low efficacy medicare/medicaid where large scale experimental trials and lotteries show limited impact on health outcomes at all.
- qeternity 10mo ago> Reminder that infrastructure is ~3% of the budget, the military is ~13%. Almost all of the rest are benefits, either health or money, for old people or various poverty reduction schemes. Or debt. The US Government is an enormous welfare program with a military on the side. Whenever people talk about the rich paying their fair share, they simply fail to grasp the enormity of the problem. There is no taxing your way out of this problem. Society's expectations have far outpaced our fiscal strength.
- jmclnx 10mo agoNo, solution is to go back to a tax structure we and in the 1950s, were the very rich and corporations paid real taxes. Starting with Reagan, taxes cuts corporations and the rich has been the main driver of the debt. And I will add to that, falling wages for the middle and lower classes based upon inflation.
- rayiner 10mo agoThe tax level is about as high as it ever has been: https://fred.stlouisfed.org/series/FYFRGDA188S https://fred.stlouisfed.org/series/FYFRGDA188S
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- s0sa 10mo agoI’d love to see a breakdown of where the tax revenue is coming from (e.g. demographics) over the same period of time.
- PopAlongKid 10mo agoAre you equating receipts with tax level? Tax is a rate applied to an income or wealth amount. Note that GDP includes government spending, which is not subject to tax but is based in part on debt. https://www.pgpf.org/article/six-charts-that-show-how-low-corporate-tax-revenues-are-in-the-united-states-right-now/ https://www.pgpf.org/article/six-charts-that-show-how-low-co...
- rayiner 10mo agoNo. The chart shows "Federal Receipts as Percent of Gross Domestic Product"
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- derelicta 10mo agoWhat the people crave for is MORE austerity. And by austerity, I mean higher taxes on those who work, and lower for those who dont.
- _DeadFred_ 10mo agoMore taxes for those whose income is via earned wages, less for those profiting from having excess capital.
- akamaka 10mo agoRather than reading this opinion piece, you can learn more about the “debt crisis” by just studying this chart which shows what percentage of the federal budget goes toward paying off the debt: https://fred.stlouisfed.org/series/FYOIGDA188S https://fred.stlouisfed.org/series/FYOIGDA188S The situation is similar to what it was in the late 1980s, and it can mostly likely be managed with the same level of spending restraints we saw in response to that.
- mapleoin 10mo ago> can mostly likely be managed with the same level of spending restraints we saw in response to that. so... austerity? Like the article suggests?
- Taikonerd 10mo agoIANA economist, but if there were a debt crisis, it would ultimately be about the psychology of the investors who would buy government debt. They want to be very, very confident that they will be paid back (which is why they're willing to accept a low interest rate). If those investors are satisfied with a return to a late-80s fiscal posture, then great. But if they're worried that spending would just creep up again once the pressure is off, they might "demand" further cuts.
- creer 10mo agoIn particular, investors often like to see the contrast of infrastructure development (investing in future GDP), as opposed to paying day to day operating costs, retirements, interest on debt (never mind larger debt as far as the eye can see), and other creative ways to prevent future GDP. And there is very, very little infrastructure development in US budgets.
- burnt-resistor 10mo agoAusterity for military pork and welfare for the rich first, because there is critical underinvestment in economic and social infrastructure. Cutting healthcare and welfare the poor isn't going to solve anything except increase net costs and drive regional rural hospitals into insolvency. To the former, curtailment in an un-DOGE, organized, and evidenced-based manner would be appropriate.
- Taikonerd 10mo agoI got interested enough in the national debt to do some research: is there a single-issue NGO that's working on the national debt? With a platform that you could imagine a Democrat or a Republican supporting? I found the Concord Coalition [0], and their sister organization Concord Action [1]. I haven't done enough research to endorse them, but I'm just saying: they exist and this is their issue. [0]: https://concordcoalition.org https://concordcoalition.org [1]: https://concordaction.org/ https://concordaction.org/
- Acrobatic_Road 10mo agoThere's the Peterson Foundation and the CFRB.
- Taikonerd 10mo agoThank you for these pointers!
- ratelimitsteve 10mo agolets do austerity for the wealthy first. we give them money hand over fist, in fact we've never met a problem we didn't try to solve by giving the rich more money. we currently fund R&D for three private space programs, from which we buy the technologies we paid the development costs for. Lets get down to 0 publicly-funded privately-owned space programs before we start picking which grandmothers we need to starve out
- Hammershaft 10mo agoThat R&D money to private space companies has lead to the biggest advances in space technology in our lifetimes.
- creer 10mo agoAnd for very small amounts too (compared to the whole mess). Fantastic return (on that little bit, out of the whole mess). Same for medical research.
- Hammershaft 10mo agoYeah, estimates of returns on public science generally are dramatic.
- ratelimitsteve 10mo agothat's great, but it's not an unqualified Good Thing(tm) when we're putting it up against meeting basic needs for people today. We managed to have amazing gains in technology and a functioning state that can care for its citizens in the 60s. Also, this doesn't imply that 3 publicly-funded privately-owned space programs are better than 1 publicly-funded, publicly-owned space program, only that research is good (which was never the issue at hand).
- Hammershaft 10mo agoWe had significantly less welfare in the 60s. We also had more poverty per capita in the 60s but living standards were rising as a result of technological improvements. Clearly a private space company (spaceX) has dramatically outperformed our public space company at advancing technology, despite being a scrappy startup with a fraction of the funding 20 years ago.
- charlescearl 10mo agoThe evisceration of the pension system in the united states has created a class of those nearing retirement who will live in poverty. https://www.ncoa.org/article/addressing-the-nations-retirement-crisis-the-80-percent-financially-struggling/ https://www.ncoa.org/article/addressing-the-nations-retireme... The result of “fiscal restraint” amounts to acceptance of premature death for millions. Likely acceptable to a country that has accepted excess COVID deaths and support for genocides in West Asia, East & Central Africa, and South America. I only hope that boomers turn to anarchist resistance and disruption.
- whimsicalism 10mo agothis is not at all a causal result. the elderly in America are the richest generational cohort to have ever existed in human history, meanwhile young families are struggling to afford a home to raise their children in.
- whimsicalism 10mo agoWe have a VAT or VAT resembling tax in our near future, I bet
- techgnosis 10mo agoThe healthcare portions of the debt seem unsolvable but I don't know why we think Social Security is that complicated to fix. 1. Define very clearly what SS is. We need to be clear that it's an agreement between the working class and the retired class that says "if you are too old to work and you can't afford to live, we will take care of you" 2. Get rid of the SS tax cap. You don't pay any SS tax above 180k ish, which seems silly. Get rid of the cap and let every earned dollar participate in the program. It doesn't feel like that hard of a sell. 3. You don't get SS payments if you already have enough income. See #1, the agreement. We are agreeing to take care of you if you need it. Many, many retired persons do not need their SS income. Even if you paid SS tax your entire life, see #1. It is not an agreement that you will receive the money you put in later in your life. Those aren't popular ideas but they are simple and easy to understand for everyone.
- Hammershaft 10mo agoThat isn't enough to solve the problem. https://www.crfb.org/socialsecurityreformer/ https://www.crfb.org/socialsecurityreformer/
- whimsicalism 10mo ago? the OP proposed raising the contribution limit & also hinted at some means testing "and you can't afford to live" -- which combined would absolutely be enough to close the gap depending on how aggressive you are with these changes.
- bdangubic 10mo agoI would let government decide “you cant afford to live” as much as I would let OJ Simpson date my daughter. but that would be a hoot as two parties controlling the government change. while one is in power, 99.99% of retirees would qualify, the other - 0.000065% :)
- whimsicalism 10mo agovacuous anti-government take that doesn’t really do anything to contribute to the discussion, imo. essentially “keep the government out of my social security!”
- Acrobatic_Road 10mo agoMaybe the solution to this mess is to tie benefits to the total fertility rate. Would create a lot of interesting incentives.
- MentatOnMelange 10mo agoIts amazing to me how many people find the thought of societal collapse more palatable than raising taxes on corporations and capital gains.
- 0xy 10mo agoBecause your proposal leads to layoffs and sell-offs, accelerating decline.
- MentatOnMelange 10mo agoThe alternative, letting the deficit grow while continuing to cut taxes, hasn't worked out either though
- rawgabbit 10mo agoBlah blah. Cut social programs while give tax breaks to the corporations. When will this Republican screed stop. How about reversing the Trump Tax cuts or clawing back the tax holiday for bringing back profits hidden overseas.