4 ms·

We developed chronic overspending habits when interest rates were historically low. This made servicing the debt cheap and deficit spending reasonable. Why woul

by pclowes 6mo ago

We developed chronic overspending habits when interest rates were historically low. This made servicing the debt cheap and deficit spending reasonable. Why wouldn’t the government borrow at 0.14% (!!!) with GDP growth at say 3-4%. Now the math doesn’t work with a federal fund rate of 4-5%. And now as our debt rolls over it gets refinanced at the higher rates. Debt servicing is roughly 20% of the government budget and will soon be 25-35% in ~10 years assuming we don’t further accelerate deficit spending (which seems unlikely). US govt needs to cut dramatically to avoid this and the otherwise likely “solution” otherwise is inflation to make the debt effectively less expensive which also raises interest rates. We can’t tax our way out of this. Only 60% of US households earn enough to pay federal income tax. The top 1% of earners already pay roughly half of all tax revenue, top 10% is roughly 75%. Furthermore, there is profligate waste in government, inefficiency, no matter where the taxes came from even if we could materialize them. The government needs to shrink dramatically. This type of change is best done gradually but immediately to avoid later shocks (eg: Medicare suddenly disappears)

cyanydeez 6mo ago
>We developed chronic overspending habits when interest rates were historically low Weird, they were historically low because the money printers went brr. So the "We" you're talking about is both Republicans and Democrats, and not much else. So basically, the interest rate is meaningless, so everything that follows is probably just as meanginless. >The government needs to shrink Just because the government makes bad choices doesnt mean whatever fills the vacuum with make good choices.
- pclowes 6mo ago
  Yes, both parties have objectively failed their mandate to look after the long-term interest of the American people and instead focused on short-term wasteful policies focused on their own party goals. Governments that consistently make bad choices eventually die one way or the other.
bryanlarsen 6mo ago
> The government needs to shrink dramatically Most (but not all) other developed countries have both a larger government and a smaller deficit per capita. A smaller government is not the only solution.
- pclowes 6mo ago
  They are almost all also going bankrupt. Also, those governments may be efficient but the US is not. You do not get a more efficient government by making it larger.
  - bryanlarsen 6mo ago
    They are almost all more solvent than the US.
    - pclowes 6mo ago
      I would need more data here. The US is highly solvent because of the global dollar as well as being a hegemonic military superpower.
      - bryanlarsen 6mo ago
        The US is in the process of throwing away both advantages, so you have to judge simply by debt/deficit levels.
  - tpm 6mo ago
    Debt-to-GDP of Germany is around 63%, that is notably less bankrupt than the US at 120% which is approaching Italy (that went from 154% in 2020 to around 135% now).
pclowes 6mo ago
Put another way if your tax rate is 33% and you had to pay the government first. Then every dollar you earn goes to the government until May 1. In this scenario if you have to pay govt interest expense first then almost every dollar earned in January would go to paying the debt. We are spending almost an entire month of everyone’s salary, not on providing anything of value but merely on paying for previous overspending.
- UncleMeat 6mo ago
  In order to pay an effective federal tax rate of 33% you'd need to be making like seven figures and do nothing to reduce your taxable income.
  - pclowes 6mo ago
    That’s not the point the point is to illustrate that right now for every tax payer 20% of every dollar collected is spent on interest. Not even on the principal just on the interest expense.
- jeffbee 6mo ago
  This is such a Boomer way of looking at this. First of all, hardly anyone pays that much. Secondly, the more correct way of viewing such a situation is that you make a shitload of money.
  - pclowes 6mo ago
    1. I am not a boomer. 2. Do you think an ageist ad hominem improves your argument? 3. What even is your argument? That in this contrived hypothetical the person in question is making a “shitload” and that somehow invalidates that 20% of EVERY tax dollar collected is used to just pay interest on debt (not even principal, just interest)
deleted 6mo ago
[deleted]
illiac786 6mo ago
> The top 1% of earners already pay roughly half of all tax revenue, top 10% is roughly 75%. Do you have sources for this? I was looking for reliable sources on this.
- deleted 6mo ago
  [deleted]
- pclowes 6mo ago
  Yes, IRS SOI tables. https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-tax-rate-and-income-percentile https://www.irs.gov/statistics/soi-tax-stats-individual-stat... You can find high-level summaries from various websites, but they might have a bias eg: taxfoundation
  - mikewarot 6mo ago
    According to the tables in that source, the top 0.001% pay about 25% income tax, which of course is income after they've had their accountants smooth over everything. The highest income tax percentage seems to be at the top 1% level. I assume this is due to higher income earners having better/more aggressive tax accountants. If the people with 90% of the income pay less than 90% of the total income taxes, something is wrong. Every lower income should be paying less, as a percentage of their income.
    - pclowes 6mo ago
      I think we can debate on how progressive (in terms of as you earn more you pay more) the US tax brackets should be. They are already fairly progressive relative to peer nations. However, I am skeptical that higher taxes or just taxing the rich or high earners more will solve the deficit or government efficiency issues. Also I disagree with 90% of income should pay 90% of taxes. People who are better capital allocators than the government should be incentivized to allocate over paying taxes.
      - atmavatar 6mo ago
nobody9999 6mo ago
>Only 60% of US households earn enough to pay federal income tax. That's the problem. It's not a spending problem per se, but the market's misallocation of resources. Too many resources are concentrated in too few hands. That's not to say we should abandon capitalism, but rather we should change the incentives to support higher incomes more broadly, as we did in the 1950s and 1960s. It's not a coincidence that deficit spending/public debt skyrocketed when we cut the top tax brackets. That changed the incentives from encouraging paying good wages and investing in business growth to hoarding capital and the financialization of everything. Feel free to disagree, but the historical numbers support that. tl;dr: change the incentives to broaden the distribution of resources across the economy, strengthening the economy (70% of which is consumer spending) and increasing, in a broad-based way, tax revenues.
- pclowes 6mo ago
  I am doubtful here (but eager to see data that says otherwise) - The US median per capita income is quite high (top 2 or 3 globally IIRC). In light of that and the stat that the bottom 40% don’t pay federal income tax makes me think the tax brackets are already fairly progressive vs thinking the lower 40% is especially low earning. - Additionally income inequality has been decreasing in recent years with lower percentile income earners increases outpacing even the relatively high inflation. - I agree we should revert back to some policies. - I don’t think there is much hoarding of capital, most high earners invest heavily.
pclowes 6mo ago
Just stumbled across this: https://www.latimes.com/opinion/story/2026-04-16/debunking-american-tax-myths https://www.latimes.com/opinion/story/2026-04-16/debunking-a...
- foltik 6mo ago
  > Myth No. 1: The rich don’t pay their fair share > The top 1% of earners take in 22% of total income and pay 40% of all federal income taxes. How misleading. Income here means AGI, i.e. taxable income as defined by the IRS. That excludes unrealized capital gains, loans against said unrealized capital gains, etc. For example, Elon Musk’s AGI was $0 in 2018 despite a massive increase in net worth. Wouldn’t call that his fair share. > Myth No. 2: We’ll fix the budget deficit by taxing the rich > We simply cannot. The collective net worth of every American billionaire is estimated at somewhere around $8 trillion. The projected federal deficit over the next decade alone approaches $25 trillion. Even a one-time total confiscation of every billionaire’s wealth wouldn’t come close, and you only get to do it once. Hilarious argument. Suddenly it’s billionaires instead of the previously mentioned top 1%. Their estimated net worth is more like 40 to 50 trillion. Not to mention how much that wealth is expected grow in the next 10 years. The entire article is similarly underhanded and clearly meant to mislead. Or perhaps to reinforce the views of readers who already agreed and weren’t going to think critically anyways. Doesn’t take a genius to guess who paid for it.
  - chriogenix 6mo ago
    unrealized capital gains ≠ income.
    - foltik 6mo ago
      Excellent observation, and this is the entire problem. They pledge their unrealized capital gains as collateral for billions in loans, spend the cash, and pay single-digit interest instead of income tax. Repeat until they die, then their heirs inherit the shares at a stepped-up cost basis, so the gains are in fact never taxed. Again, I’d ask you to engage with this: > I wouldn’t call that their fair share.

by pclowes 6mo ago

cyanydeez 6mo ago

>We developed chronic overspending habits when interest rates were historically low Weird, they were historically low because the money printers went brr. So the "We" you're talking about is both Republicans and Democrats, and not much else. So basically, the interest rate is meaningless, so everything that follows is probably just as meanginless. >The government needs to shrink Just because the government makes bad choices doesnt mean whatever fills the vacuum with make good choices.

pclowes 6mo ago
Yes, both parties have objectively failed their mandate to look after the long-term interest of the American people and instead focused on short-term wasteful policies focused on their own party goals. Governments that consistently make bad choices eventually die one way or the other.

bryanlarsen 6mo ago

> The government needs to shrink dramatically Most (but not all) other developed countries have both a larger government and a smaller deficit per capita. A smaller government is not the only solution.

pclowes 6mo ago
They are almost all also going bankrupt. Also, those governments may be efficient but the US is not. You do not get a more efficient government by making it larger.
- bryanlarsen 6mo ago
  They are almost all more solvent than the US.
  - pclowes 6mo ago
    I would need more data here. The US is highly solvent because of the global dollar as well as being a hegemonic military superpower.
    - bryanlarsen 6mo ago
      The US is in the process of throwing away both advantages, so you have to judge simply by debt/deficit levels.
- tpm 6mo ago
  Debt-to-GDP of Germany is around 63%, that is notably less bankrupt than the US at 120% which is approaching Italy (that went from 154% in 2020 to around 135% now).

pclowes 6mo ago

Put another way if your tax rate is 33% and you had to pay the government first. Then every dollar you earn goes to the government until May 1. In this scenario if you have to pay govt interest expense first then almost every dollar earned in January would go to paying the debt. We are spending almost an entire month of everyone’s salary, not on providing anything of value but merely on paying for previous overspending.

UncleMeat 6mo ago
In order to pay an effective federal tax rate of 33% you'd need to be making like seven figures and do nothing to reduce your taxable income.
- pclowes 6mo ago
  That’s not the point the point is to illustrate that right now for every tax payer 20% of every dollar collected is spent on interest. Not even on the principal just on the interest expense.
jeffbee 6mo ago
This is such a Boomer way of looking at this. First of all, hardly anyone pays that much. Secondly, the more correct way of viewing such a situation is that you make a shitload of money.
- pclowes 6mo ago
  1. I am not a boomer. 2. Do you think an ageist ad hominem improves your argument? 3. What even is your argument? That in this contrived hypothetical the person in question is making a “shitload” and that somehow invalidates that 20% of EVERY tax dollar collected is used to just pay interest on debt (not even principal, just interest)

deleted 6mo ago

[deleted]

illiac786 6mo ago

> The top 1% of earners already pay roughly half of all tax revenue, top 10% is roughly 75%. Do you have sources for this? I was looking for reliable sources on this.

deleted 6mo ago
[deleted]
pclowes 6mo ago
Yes, IRS SOI tables. https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-tax-rate-and-income-percentile https://www.irs.gov/statistics/soi-tax-stats-individual-stat... You can find high-level summaries from various websites, but they might have a bias eg: taxfoundation
- mikewarot 6mo ago
  According to the tables in that source, the top 0.001% pay about 25% income tax, which of course is income after they've had their accountants smooth over everything. The highest income tax percentage seems to be at the top 1% level. I assume this is due to higher income earners having better/more aggressive tax accountants. If the people with 90% of the income pay less than 90% of the total income taxes, something is wrong. Every lower income should be paying less, as a percentage of their income.
  - pclowes 6mo ago
    I think we can debate on how progressive (in terms of as you earn more you pay more) the US tax brackets should be. They are already fairly progressive relative to peer nations. However, I am skeptical that higher taxes or just taxing the rich or high earners more will solve the deficit or government efficiency issues. Also I disagree with 90% of income should pay 90% of taxes. People who are better capital allocators than the government should be incentivized to allocate over paying taxes.
    - atmavatar 6mo ago

nobody9999 6mo ago

>Only 60% of US households earn enough to pay federal income tax. That's the problem. It's not a spending problem per se, but the market's misallocation of resources. Too many resources are concentrated in too few hands. That's not to say we should abandon capitalism, but rather we should change the incentives to support higher incomes more broadly, as we did in the 1950s and 1960s. It's not a coincidence that deficit spending/public debt skyrocketed when we cut the top tax brackets. That changed the incentives from encouraging paying good wages and investing in business growth to hoarding capital and the financialization of everything. Feel free to disagree, but the historical numbers support that. tl;dr: change the incentives to broaden the distribution of resources across the economy, strengthening the economy (70% of which is consumer spending) and increasing, in a broad-based way, tax revenues.

pclowes 6mo ago
I am doubtful here (but eager to see data that says otherwise) - The US median per capita income is quite high (top 2 or 3 globally IIRC). In light of that and the stat that the bottom 40% don’t pay federal income tax makes me think the tax brackets are already fairly progressive vs thinking the lower 40% is especially low earning. - Additionally income inequality has been decreasing in recent years with lower percentile income earners increases outpacing even the relatively high inflation. - I agree we should revert back to some policies. - I don’t think there is much hoarding of capital, most high earners invest heavily.

pclowes 6mo ago

Just stumbled across this: https://www.latimes.com/opinion/story/2026-04-16/debunking-american-tax-myths https://www.latimes.com/opinion/story/2026-04-16/debunking-a...

foltik 6mo ago
> Myth No. 1: The rich don’t pay their fair share > The top 1% of earners take in 22% of total income and pay 40% of all federal income taxes. How misleading. Income here means AGI, i.e. taxable income as defined by the IRS. That excludes unrealized capital gains, loans against said unrealized capital gains, etc. For example, Elon Musk’s AGI was $0 in 2018 despite a massive increase in net worth. Wouldn’t call that his fair share. > Myth No. 2: We’ll fix the budget deficit by taxing the rich > We simply cannot. The collective net worth of every American billionaire is estimated at somewhere around $8 trillion. The projected federal deficit over the next decade alone approaches $25 trillion. Even a one-time total confiscation of every billionaire’s wealth wouldn’t come close, and you only get to do it once. Hilarious argument. Suddenly it’s billionaires instead of the previously mentioned top 1%. Their estimated net worth is more like 40 to 50 trillion. Not to mention how much that wealth is expected grow in the next 10 years. The entire article is similarly underhanded and clearly meant to mislead. Or perhaps to reinforce the views of readers who already agreed and weren’t going to think critically anyways. Doesn’t take a genius to guess who paid for it.
- chriogenix 6mo ago
  unrealized capital gains ≠ income.
  - foltik 6mo ago
    Excellent observation, and this is the entire problem. They pledge their unrealized capital gains as collateral for billions in loans, spend the cash, and pay single-digit interest instead of income tax. Repeat until they die, then their heirs inherit the shares at a stepped-up cost basis, so the gains are in fact never taxed. Again, I’d ask you to engage with this: > I wouldn’t call that their fair share.