Deep in their hearts, Republicans know that if voters are ever forced to chose between progressive tax increases or cutting old age entitlements, they will soak the rich. Insofar as Republicans have a rational position, they are flailing around to obfuscate that choice to neutralize a losing issue.
This is basically a search for silver bullets. Cuts to old age entitlements can never be hidden. Any Congressional majority that meaningfully cuts social security or medicare will be decimated in the next election.
In the short run, making this a fight over debt rather than spending makes sense, because spending is popular and debt sounds icky. In the long term, Republicans can’t possibly get what they want. The smart ones know this and have left the cult of low taxes.
I'll repeat this to cows come home; this is the real impetus behind McConnell's furious drive to confirm judges and this is the real impetus behind the Federalist society and the 6 Federalist society judges who sit on the court. Abortion was the bone to throw the base. The real goal is dismantling the welfare state and regulatory state. As you say, GOP elites know this is very unpopular. So why not pass it on to the courts and have them declare regulating pollution unconstitutional.
I think you’re right, Colin. Finding novel ways to hold various aspects of welfare and regulation unconstitutional will be a growth area for conservative tourists. 
Bigger possibility than people realize given what happened with Dobbs.
We forget the reason ACA survived is Roberts was convinced to switch his vote because of the implications of the opinion Kennedy was going to write. Go read Scalia's dissent. It was clearly written to be an opinion in support of the majority and had to changed. The original opinion was not just going to find ACA unconstitutional, but find large portions of what the Federal government did full stop unconstitutional. Roberts blanched because he was convinced that completely overhauling the entirety of the federal government was a recipe for chaos.
The other five justices clearly don't care one iota about the implications of their decisions. They've shown themselves to be zealots with Dobbs decision full stop.
Medicaid is politically vulnerable. Democrats have gotten little electoral reward for expanding Medicaid. Even after expansion, the eligibility threshold is stingy enough that medicaid recipients have low voting propensity. Black Medicaid recipients are basically captive to the Democratic party, and white ones have such sketchy information that there’s little correlation between policy changes and their voting behavior.
A sound political coalition is grounded in the 25th to 95th percentiles of the income distribution. Win 3/5 of that group and you’ll have a crushing majority.
Reading today’s comment section is a useful of why I made the call that the illiberal wokeists I was getting yelled at about yesterday are less of a threat than GOP batshittery.
Deficit hawkism is like crack, it just eats away at the ability to consider historical parallels and think through the math on the issue in favor of simplistic straight-line projections and sheer panic.
The US clawed back from a total debt load a good bit higher than today’s (relative to GDP) and debt service significantly higher on the backs of productivity growth, taxation, and inflation. *Must* we pretend that that mix of driving factors isn’t going to happen again in favor of “cut spending!$@!”?
To clarify lest my last comment be interpreted as glib and substanceless:
US productivity growth has continued to increase quite quickly in historical terms after the post-war boom period "ended". Without referencing anything, off the top of my head I believe the average for the 1945-75 period was around 3.5%, the average from 1975 to 2005 was 3%. Since 2008 the numbers have been terrible but they are now recovering alongside business investment.
The problem is twofold: first, the transition in the global economy which you rightly note had the effect of allowing capital to capture a much larger portion of the gains after 1975 than before, at the expense of labor.
At the same time, the tax code became vastly less progressive, ensuring that most of those gains were not within the grasp of the newly amputated reach of the IRS.
Looking at the global trade regime today and the ways in which it's changing, I suspect that the first shift above is going to go into reverse. The current "slightly elevated inflation driven by the prices of labor-intensive services" certainly suggests this is starting to happen, and labor's share of income is increasing.
That will, without any change to the tax code, increase the tax take as a proportion of GDP. It will also likely increase investment and productivity growth because the marginal propensity to consume is so much higher at working and middle-class levels than professional class and up. One of the reasons productivity growth slowed this past decade, the main one really, is that demand was so soft that firms felt the best way to respond to temporary increases was with cheap labor and not process improvement or capital investment, both of which help drive TFP growth.
In addition, a rebalancing of labor incomes that keeps inflation slightly elevated above trend will have a favorable effect on the real value of outstanding debts and debt service. That is likely to persist for some time as it's structural in nature, and the Fed is not going to raise rates endlessly to try to strangle persistent 3-3.5% inflation, sorry inflation ultrahawks.
It is also increasingly clear that at some point in the next 20-30 years, the tax code is going to become more progressive once again as the GOP's base turns against it on the issue.
Suffice it to say, I am not in and refuse to enter into a state of panic on the basis of the lack of historical grounding and sound reasoning of my opponents.
Regarding tax progressivity: Piketty and Saez have a paper looking at the progressivity of taxes over time. Because of who they are, they focus almost exclusively on the top .01% and conclude "less progressivity today." But they provide the data that refutes their conclusion.
Look at Table 2 and compare to Table 1 in their paper. Tax changes have dramatically decreased the tax burden on every quintile of the income distribution, sometimes even going negative (i.e., no tax and net income). The slope of the curve between lowest tax rates and highest is much steeper today, which is how I would define progressivity. And I would argue the higher rates of taxation on the top .01% back in the 1960's were likely overstated due to deferred, and therefore unrealized, capital gains.
I would highlight a few issues with the picture you paint:
1) During the post war period, there was a baby boom and immigration reform in the 60s that led to much larger % population increases than we are seeing now. Its less than half what it was in the 60s.
2) I think you could have a deficit that averaged what the average growth rate for the overall economy. But it has to be the average, so in years when the economy is doing well, the deficit should be small or non existent, leaving space in bad years (pandemics, recessions, wars, etc.) for the government to spend. Unfortunately, we've been way higher than that for 20 years and should probably enter a period of financial retrenchment where we bring our debt to gdp ratio back down below 100% and preferably closer to our historical 60% average.
3) Biden's budget plan expects deficits of 1.2 trillion in 2023 and is likely to be about that level for a while. That is about 4.8% of GDP. If we wanted to cut that in half and get us to 2.8% gdp which is a reasonable growth estimate, we need to raise ~700 billion in revenue per year. That's a 15% increase in revenues which I would guestimate to require at least a 20% tax increase. That can either be across the board, or we can focus it on higher incomes, but if we do the latter, the rate increases significantly.
All of which to say, Republican's are bonkers to think any of this can be done without tax increases. But if you think we can do it just with tax increases, I don't think that's feasible either. My big takeaway is that as a country, almost no one in our political environment is ready to actually discuss deficit reduction in a serious way. They either pretend like its completely unnecessary or create fantasies about what will solve it that don't involve goring their preferences.
I don't disagree with some of this but there is one fairly glaring flaw:
Real GDP growth of 2.8% is a reasonable target, and especially so if we get our house in order on the supply-centric reform side, and the current trend of above-average real wage growth at the bottom of the scale and stagnation at the top continues, driving corporate investment and TFP.
But I would propose that, to make that rebalancing of the share of income flowing to labor and capital happen, the inflation target should be centered on 3%, not 2%, and that brings NGDP growth to close to 6%. I think that a shift in this direction is all but inevitable; the Fed would likely have to push rates above 7-8% and generate a rather long recession to squeeze the last bit of labor-driven cost-push inflation in the services sector back below 4%, which would inflict vastly more pain than is warranted if inflation in goods, housing, and foodstuffs are all brought under control.
Against this backdrop, a 4.8% deficit becomes sustainable, especially if we can increase immigration flows to closer to 1.5-2 million legal, skilled immigrants each year instead of a bit under a million.
I am open to reforms for Social Security aimed at improving its rate of return and capital allocations, which should, if done well, increase both productivity growth (ensuring that there are goods and services to match retirees' spending capacity) and the fiscal sustainability of the program (ensuring that politics don't get in the way of the boring business of helping 20-somethings insure their 70-something selves). I am equally open to tax reforms to increase revenue in a proportional-to-progressive manner, in moderation. I am also open to *specific* proposals to improve performance and value for money in the (especially) DoD, DOT, and NAS/NAM that would allow us to push growth in their budgets below inflation for a long while.
But the persistent "sky is falling, must slash everything to the bone" crap gets old, because it's not true.
There's a lot out there that points to us being on the brink of a new 50's/60's "golden era" for the masses, and repeating the mistakes of the post-2008 "recovery" will scupper that while it's still coalescing.
Biden just needs to cling to life in '24 and the autopilot set by the public investments and reforms we've recently made, as well as the general global macroeconomic climate, will be bearing fruit in time to prevent the GOP from trying to roll everything back after they sweep into power in 2028.
If we can get some serious permitting reforms, a considered/rational look at NEPA and OSHA, transform the SSTF into a sovereign wealth fund, ram through some occupational licensing deregulation, and actually enforce anti-trust law in a rigorous-to-brutal manner as well... all the better.
Compared to the tea party days, though, there hasn’t even been much anti-deficit rhetoric on the right in recent months.  It’s more a general vibe that we have to stop evil establishment CRT and pedophiles by any means necessary 
For clarification, David, what is your play here? Raise taxes on the top 5% while cutting Medicaid? That doesn’t seem like good policy.
To the extent that lowering the deficit is actually necessary, don’t we have to raise taxes on the top 30%? And to the extent that we want a more humane and safe society, we really need decent medical care for the poor 
I don’t want massive cuts to Medicaid, though I might support a lifetime cap on benefits, as long as it were a generous figure like $2million. I feel great sympathy for a healthy 35 year old who gets cancer, can’t keep a job, and needs public assistance to get better. I’m leery of paying for expensive treatments for unproductive people with chronic conditions. Decency means providing vaccines, blood pressure pills, antibiotics, etc. to people, but I don’t want to pay $170k year after year to keep a morbidly obese shut in alive.
I agree. It makes more sense to calculate QALYs and cost benefit trade-offs. But politically, calculations like that begin to sound like “death panels“
Given how poorly McCarthy’s speaker election went, I cannot see how he rallies House Republicans around any spending cutting plan. He’s always going to be facing several attention-seeking maniacs who will vote against any potential bill while screeching to their supporters about how McCarthy is a sellout RINO who is compromising with Biden. In the unlikely event that these extremists actually propose cuts, they’ll certainly be too politically unpopular to garner support from moderate Republicans.
So I imagine we’ll keep walking to the abyss of a financial crisis, and eventually moderate Republicans will feel compelled to work with the Democrats to avoid the financial armageddon of a US Treasury default. McCarthy will either get on board with this bipartisan coalition or he’ll be replaced. Even the WSJ is considering this to be a likely scenario given the lack of any plan of what House Republicans actually want. [1]
> All of which means Republicans will have to pick their spending targets carefully, explain their goals in reasonable terms so they don’t look like they want a default, and then sell this to the public as a united team. The worst result would be for Republicans to talk tough for months, only to splinter in a rout at the end, and be forced to turn the House floor over to Democrats to raise the debt limit with nothing to show for it. Opportunists on the right would then cry “sellout,” even if they had insisted on demands that were unachievable.
> This is what Democrats expect to happen, which is why they don’t think they need to negotiate. If Republicans want to use the debt limit as leverage, they need a strategy for how this showdown ends, not merely how it begins.
Enough with the discussion of gimmicks and tricks! the platinum coins, the super-high interest bonds, all of it! All that talk does nothing more than confuse the issue and feed the idea that the Republicans have some kind of leverage here, that some kind of magic trick is needed to defeat it. Treat this debt ceiling in grown-up fashion as the rather boring statutory interpretation problem that it is. Congress has passed conflicting laws, a general debt ceiling statute, and a bunch of more specific appropriations statutes that require the president to spend more money on specific things than the general debt ceiling statute would allow. To the extent it's not possible to comply with both statutes, the more specific statutes control under long-accepted canons of statutory interpretation. End of story. If Republicans in Congress don't like that interpretation of the law, they can either sue, or, better, actually *do their job* and pass a new law that reconciles the conflict.
You should have ended the article here, while you were ahead: "I think it’s important for Biden to maintain the posture that there’s no genuine financial crisis here, and one way or another he will see to it that the bills get paid."
The administration should begin any statement or answer with “of course the United States will not default on its debts, that’s prohibited by the constitution.“
But is that what the 14th amendment says? It says the US will honor its debts (including pensions incurred for services in suppressing insurrection (i.e., the Civil War)). Are things like Social Security, Medicare, military salaries etc. "debts" or "legal obligations"? If the latter, are they also covered by the 14th amendment?
By the traditional definition, I don't think these things are "debts." I'm not so sure the constitutional argument is as rock solid as people may think.
It’s immaterial. The G has taken out debt in the form of bonds in order to finance operations. It doesn’t matter if the operations count as “debts of the
United States.” The promise to pay on the bonds certainly does.
But that says we have to pay interest and principle on currently-issued bonds. But the question is whether we can issue *new* bonds to finance recurring obligations, like paying military salaries next month. Is that guaranteed by the 14th amendment?
I think this is the White House's basic strategy. Yellen criticized the idea of the coin last week. This doesn't mean they won't do it if they think it's their best option. They did that with student loan forgiveness.
However, I don't think they want or have to give this any more oxygen than what it takes to make the GOP look stupid.
I agree with this on the merits, but I'm slowly acquiescing to the idea that doing it that way may cause more trouble than the gimmicks. Inevitably, there will be claims that Biden is breaking the law, it must go to the Supreme Court, etc. and there's no guarantees about how they would rule if they took it up (even though they probably shouldn't). All of this uncertainty could roil the markets, especially if we end up right back where we started.
That's a reasonable concern, but settling this through a legal process (either the Supreme Court takes it up and sides with the administration, or they decline to take it up which forces the legislature's hand while Biden continues to pay the bills) seems like it will leave things on a more solid footing than something gimmicky like the coin, or even super-high-interest bonds. My guess is there will be some market turmoil, but nothing crazy, and when things settle down the whole issue will be revealed as empty posturing and we'll all be able to - finally - move on. The coin or the super-high-interest bonds might avoid some disruptions, but feel shakier in the long run.
Serious question: what makes you say that? My impression is that right now they're just hanging back and evaluating all of their options (which is a reasonable thing to do at this stage).
I guess I assumed that if they were going to take that route, it would have been stated matter of factly. But you're right that there's no reason for them to do so until necessary.
>>>they decline to take it up which forces the legislature's hand while Biden continues to pay the bills<<<
How does this work absent the platinum coin? Anybody know? I mentioned the possibility last week of a "just pay the damn bills" strategy based on the fact that, as I understand, Treasury has de facto money creation authority (it has open-ended overdraft protection via the Fed, I think).
Is "just paying the damn bills" absent a platinum coin or the super-bonds something that can work?
A Josh Barro piece from last week claimed that Treasury does not have de facto money creation authority, and explicitly cannot just print money to pay outstanding bills. I'm very far from being a SME and am not taking a position on the matter, but that's what he said
Where? I just visited his Substack, and didn't see what you describe. He's definitely not a fan of the trillion dollar coin, per my (just now) reading, as he points out it requires the Fed to accept the coin for deposit, and it's not 100% clear they'd do so. He seems to be of the opinion negative bonds are the way to go.
Caveat: I am basing this idea on a comment here the last time there was a debt ceiling thread. Maybe someone with more expertise can chime in.
I think the idea is that, in the event of a refusal to raise the debt ceiling, Congress has given the executive conflicting legal instructions. It had directed the executive to appropriate a certain amount of funds, but denied it the capacity to raise those funds. Then there’s the Constitution, which says the US must honor its debts.
So the theory was that Biden could say “as I cannot comply with the letter of the laws as passed by Congress, I will interpret this in the way which causes least harm.” Which is probably something like a government shutdown, but we don’t default on the debt.
I don’t know enough about the specifics of this idea to say how it would go precisely. But it seems like it does make sense, and it’s true that if the debt ceiling were reached the executive is going be forced to violate the law one way or the other. So doing it in the least-harmful way seems like it would pass muster, and also seems like it would neutralize the threat going forward.
>>> If bond holders get paid, but there's tons of other painful shit going down, it's not good.
It's not good, but it's not disastrous. We've had government shutdowns before, it's not the end of the world.
FWIW, I think this is better in the long run because of what the US' status as the center of the global financial system *means.* It's basically an expression of faith in the American system. If we reach the debt limit and it's basically just replay of the Gingrich-Clinton showdown in 1995 and nothing much happens, then markets are rattled for a bit but the system looks solid in the long-term. If we mint a platinum coin, that might satisfy markets temporarily, but it's not hard for me to imagine a scenario where this keeps happening, and we keep having to mint platinum coins, which eventually undermines faith in the system, because it all just seems rather silly. Better than defaulting on debt, sure, but still.
Good question. I think probably because it shows a good-faith effort on the part of Biden to comply with the law? Not doing anything seems like more of a flagrant violation.
Again, though: I am not an expert on the technical legal aspects of all of this.
The Supreme Court can take up the issue if they like but there’s no reason to believe their ruling would be binding over the Executive Branch. They can’t stop the checks from going out; indeed the Judiciary has no power of enforcement at all.
I think Matt's discussion of gimmicks and tricks is important precisely because the availability of gimmicks and tricks means that it *is* possible to comply with both statutes, meaning that the long-accepted canons of statutory interpretation wouldn't apply.
If the House Republicans want to sue Biden on the ground that he cannot continue to pay the bills and issue Treasury notes and bonds as necessary, but instead he must mint a platinum coin or use a gimmicky high-interest bond in order to comply with both statutes, let them.
>>To the extent it's not possible to comply with both statutes, the more specific statutes control under long-accepted canons of statutory interpretation.<<
Plus, going this route (by which I assume you mean paying the bills) has the advantage of not $&@^ing the country.
If SCOTUS was composed of 9 sane individuals I'd agree with you but unfortunately it's composed of 2 nutjobs, 4 conservatices, and only 3 liberals. Its not a slam dunk that they'd agree with your interpretation and just the doubt would be enough to crash markets. The gimmicks are arguably on safer legal ground.
Short of cutting a deal with the hostage-takers, which encourages further hostage taking, there's no path available to Biden when he will not face potential legal challenge and counterarguments, that will be resolved in court if a negotiated settlement can't be reached. At the end of the day, the Supreme Court either has a majority of Justices who are sober, judicious people rather than arsonists, or it does not. I think it does. But regardless, it's better to go into Court asking the Justices to approve a prudent course that protects the good credit and solvency of the United States, than to ask them to approve tricks and gimmicks.
I think the platinum coin thing counts as a stupid gimmick, but I don't think that's true at all of the high-interest bond idea. The interest rate on a treasury bond is literally set by the government, and there's nothing weird or improper about selling a low-value bond at a high interest rate compared to selling a high-value bond at a low interest rate. That's why this is a brilliant idea and is probably the best solution anyone has or will come up with. It doesn't do anything all that strange or illegal, it just takes advantage of the wording of the debt limit having to do with the face value of bonds, and just sells bonds at a lower face value but a higher interest rate, knowing that people will pay higher than face value in exchange for more interest. I love it and I hope it happens.
I think the platinum coin thing counts as a stupid gimmick, but I don't think that's true at all of the high-interest bond idea. The interest rate on a treasury bond is literally set by the government, and there's nothing weird or improper about selling a low-value bond at a high interest rate compared to selling a high-value bond at a low interest rate. That's why this is a brilliant idea and is probably the best solution anyone has or will come up with. It doesn't do anything all that strange or illegal, it just takes advantage of the wording of the debt limit having to do with the face value of bonds, and just sells bonds at a lower face value but a higher interest rate, knowing that people will pay higher than face value in exchange for more interest. I love it and I hope it happens.
I think the platinum coin thing counts as a stupid gimmick, but I don't think that's true at all of the high-interest bond idea. The interest rate on a treasury bond is literally set by the government, and there's nothing weird or improper about selling a low-value bond at a high interest rate compared to selling a high-value bond at a low interest rate. That's why this is a brilliant idea and is probably the best solution anyone has or will come up with. It doesn't do anything all that strange or illegal, it just takes advantage of the wording of the debt limit having to do with the face value of bonds, and just sells bonds at a lower face value but a higher interest rate, knowing that people will pay higher than face value in exchange for more interest. I love it and I hope it happens.
Sooner or later something is gonna have to give on this. Either funding entitlements is going to require broad based tax increases, or we're going to have to get serious about spending cuts. The problem here, unfortunately, is democracy. Deficit financed government fundamentally breaks the democratic process. The people in the future who are on the hook for the spending reps are voting for are not the voters those reps are accountable to in the present. It's real easy to rob some other guy's future constituents to buy votes from your constituents today.
The problem with the deficit is way less about the economics and way more about the political incentives. I struggle to see how those incentives will ever align with a needed set of reforms without some sort of materially catastrophic crisis occuring first.
The US has among the most slack in the developed world to raise taxes. Plenty of people would bitch, but as the post above yours gets dead right, the electorate will choose to keep popular programs and pay for them when it comes to crunch time.
That, but also as Matt pointed out, voters don't actually care about tax increases, they care about the rhetoric around them.
These things are impossible for me to Google because any search term that includes the word 'tax' leads to a firehouse of nonsense, but my recollection is that Reagan, Bush I, Clinton Obama and Biden all raised taxes. Bush II and Trump cut taxes. And despite the fact that Bush I and Trump both lost re-election, it is still canon that cutting taxes loses elections and raising them wins them.
I think that, because of the slack the US has, tax increases just don't translate into anything noticeable by the electorate. Nor do tax cuts, really, since most people aren't rich enough to notice changes in federal tax rates. (Hence the nonsense about 'fitting your taxes on an index card', which is the only change most people noticed.) Republicans like to pound on the table and yell about tax-and-spend liberals, but the taxes they want to cut are capital gains and income, which are only a big deal if you're rich enough to pay them. To wit, the SALT deduction cap in the Trump tax cuts got more coverage than I have ever seen for a change in tax rates because it mostly impacted rich Democrats (i.e., the NY Times readership).
It's the spending side that piques interest from voters; cut Medicare and kiss re-election goodbye. I bet that a President of either party could pass a comprehensive tax increase to balance the budget and that, if they got buy-in from right-wing media (which would never happen, of course), voters wouldn't notice.
Most of the Boomers have retired already. Healthcare spending growth rates, including for Medicare, have moderated. I agree with Just some guy: this is a slow burn, and a very manageable one, not a crisis. Just increasing the cap on Social Security wages would do wonders.
I'm not sure that's accurate. I can't immediately find a stat on what the average age of a Baby Boomer in 2023 is, but from the bar chart of "Births underlying each generation" here: https://www.pewresearch.org/fact-tank/2020/04/28/millennials-overtake-baby-boomers-as-americas-largest-generation/ , it looks to me like the average age would probably be something only around 67 or maybe 68 because of the later years of the boom having larger birth cohorts, so they've literally just started to become eligible for full Social Security benefits in the past year or two and plenty of people will hold on to age 70 to get the full bonus payment for delayed retirement.
Or died. I can't find more recent numbers, but as of 2012, 11 million of the 76 million boomers born 1946-64 had already died. I suspect those numbers have doubled since then.
Many boomers retired at 62; relatively few wait until they're 70.
I'm sure hard numbers are out there with some research but life is short (I'm a boomer).
Sure, it will be a tough political fight. Like raising the gas tax five cents. People *really* don't like increased taxes or reduced benefits, even if the numbers are small.
Won't their kids be retiring right around that time?
Our entitlements were designed for a growing population, so that the recipients of the entitlement spending are supported by an ever-larger workforce. A stagnant or shrinking population has disastrous implications for entitlement spending.
I accept the case that it might help living standards and economic strength over the long term to reduce federal borrowing. But the way to do that is to wait until insane people are no longer controlling the House of Representatives.
I do not believe we are on the verge of an imminent fiscal crisis. I'm fundamentally making 2 arguments:
1. The political incentives are aligned towards a persistently deteriorating long term fiscal situation.
2. Those political incentives are not well calibrated towards interventions to preempt even highly foreseeable crises that may arise along that long term trajectory.
Regarding (2), I suspect crises may be the only way some of these things get fixed because that's the only time the incentives of enough people will be sufficiently aligned. For example, we may see a bargain between democrats and a few republicans to raise the debt ceiling. Similarly, "fixing" (whatever that means) SS now doesn't really win anyone electoral points, but it might if the checks are at risk of not coming.
Yes, debt isn't a problem as long as it can be serviced - this is a truism. The trick is that when the debt becomes difficult to service, then things tend to cascade in bad ways.
I wonder if there’s a formula like the Sahm rule that one could write into a budget balance amendment. Instead of saying the budget must always be balanced, say that the ratio of deficit spending to GDP must be no more than twice the unemployment rate minus the GDP growth rate, or some better chosen formula to allow deficit spending during downturns and require a surplus during booms.
Right, I don't want to be out here implying that the dumb version of a balanced budget amendment makes any kind of sense, I'm imagining a type of mechanical stabilizer solution.
The European Union tried outlawing Keynesian economics. Spain, Italy and Portugal suffered a lost decade and Greece saw living standards decline. Then they gave up that silliness and got through the pandemic with less economic damage than German stinginess caused in 2007-13.
I feel like there's a middle ground between "no deficits ever" and our current policy of running perpetual deficits in all times - good and bad - expansion and contraction - not as some carefully tuned Keynesian stimulus.
The middle ground is Keynesianism: run deficits during downturns and surpluses during boom periods. I think we've nailed the first part, so good on us. Second part needs a bit of work.
The problems with Greece, Spain, etc. were mainly about the Euro (ie - those countries not being able to control their own currency). The reason the US can deficit spend the way we do is because we control our own currency.
In the 1820s, the UK carried debt equal to 225% of GDP. It did this with a very primitive economy that yielded a per capita GDP of under $4000 at current prices. Why can the US carry less debt that a proto-industrial monarchy?
I mean when the British Empire says, "We're good for it. We'll just go take some gold from India or wherever." It's probably true. I'm not sure, "We'll mint a trillion dollar coin" is such a confidence inspiring answer.
I think most of the people on the hook for paying most of the debt are alive and voting today.
As for those future people who are not alive today, history teaches us that they will likely inherit an economy more prosperous than the ones we live in today. We owe the future less than *some* people believe.
You're definitely underestimating how many people will be born, and over estimating how much of the "debt" needs to be paid off.
The "debt" will never be paid off, and because the public deficit is private sector wealth, thr economy will probably be more prosperous than it is today.
Now if you go about trying to constrict the money supply in inequitable ways, you're very likely to see the exchange of goods and services dwindle, and some real problems arise.
Some Scottish philosopher wrote about that very same idea, I believe some time around the American Revolution. Two hundred years later and so far he's been proven wrong. We shall see.
You know you're literally arguing "If the casino puts too many chips on the floor, how will future players ever afford to pay the casinos bills."
There's a problem with putting too many chips on the floor, because then the whales will bid up the cost of doing business too high for the new players, not that future players are going to struggle to make sure the casino can zero their books out at the end of the night. But taking too many chips off the floor will also really slow down how many bets are being placed and how much activity there is. If the Feds need to provision goods and services, then they will simply buy those goods and services. If they need people to accept the chips they are paying for goods and services, they will simply start producing it themself, or tell people they better start earning more chips, because anyone who doesn't produce the right stuff, and earning more chips from the market, is going to jail. Even better, they never even have to put anyone in jail, they just have to provide producers enough incentive to keep paying their taxes, so that they themself can be benefit from paying other people to produce for them.
Deep in their hearts, Republicans know that if voters are ever forced to chose between progressive tax increases or cutting old age entitlements, they will soak the rich. Insofar as Republicans have a rational position, they are flailing around to obfuscate that choice to neutralize a losing issue.
This is basically a search for silver bullets. Cuts to old age entitlements can never be hidden. Any Congressional majority that meaningfully cuts social security or medicare will be decimated in the next election.
In the short run, making this a fight over debt rather than spending makes sense, because spending is popular and debt sounds icky. In the long term, Republicans can’t possibly get what they want. The smart ones know this and have left the cult of low taxes.
I'll repeat this to cows come home; this is the real impetus behind McConnell's furious drive to confirm judges and this is the real impetus behind the Federalist society and the 6 Federalist society judges who sit on the court. Abortion was the bone to throw the base. The real goal is dismantling the welfare state and regulatory state. As you say, GOP elites know this is very unpopular. So why not pass it on to the courts and have them declare regulating pollution unconstitutional.
I think you’re right, Colin. Finding novel ways to hold various aspects of welfare and regulation unconstitutional will be a growth area for conservative tourists. 
Or they might bite the bullet and go full Lochner all at once 
Bigger possibility than people realize given what happened with Dobbs.
We forget the reason ACA survived is Roberts was convinced to switch his vote because of the implications of the opinion Kennedy was going to write. Go read Scalia's dissent. It was clearly written to be an opinion in support of the majority and had to changed. The original opinion was not just going to find ACA unconstitutional, but find large portions of what the Federal government did full stop unconstitutional. Roberts blanched because he was convinced that completely overhauling the entirety of the federal government was a recipe for chaos.
The other five justices clearly don't care one iota about the implications of their decisions. They've shown themselves to be zealots with Dobbs decision full stop.
Medicaid is politically vulnerable. Democrats have gotten little electoral reward for expanding Medicaid. Even after expansion, the eligibility threshold is stingy enough that medicaid recipients have low voting propensity. Black Medicaid recipients are basically captive to the Democratic party, and white ones have such sketchy information that there’s little correlation between policy changes and their voting behavior.
A sound political coalition is grounded in the 25th to 95th percentiles of the income distribution. Win 3/5 of that group and you’ll have a crushing majority.
Reading today’s comment section is a useful of why I made the call that the illiberal wokeists I was getting yelled at about yesterday are less of a threat than GOP batshittery.
Deficit hawkism is like crack, it just eats away at the ability to consider historical parallels and think through the math on the issue in favor of simplistic straight-line projections and sheer panic.
The US clawed back from a total debt load a good bit higher than today’s (relative to GDP) and debt service significantly higher on the backs of productivity growth, taxation, and inflation. *Must* we pretend that that mix of driving factors isn’t going to happen again in favor of “cut spending!$@!”?
We definitely can't pretend that our economy is the only one kept standing after an extremely destructive world war.
To clarify lest my last comment be interpreted as glib and substanceless:
US productivity growth has continued to increase quite quickly in historical terms after the post-war boom period "ended". Without referencing anything, off the top of my head I believe the average for the 1945-75 period was around 3.5%, the average from 1975 to 2005 was 3%. Since 2008 the numbers have been terrible but they are now recovering alongside business investment.
The problem is twofold: first, the transition in the global economy which you rightly note had the effect of allowing capital to capture a much larger portion of the gains after 1975 than before, at the expense of labor.
At the same time, the tax code became vastly less progressive, ensuring that most of those gains were not within the grasp of the newly amputated reach of the IRS.
Looking at the global trade regime today and the ways in which it's changing, I suspect that the first shift above is going to go into reverse. The current "slightly elevated inflation driven by the prices of labor-intensive services" certainly suggests this is starting to happen, and labor's share of income is increasing.
That will, without any change to the tax code, increase the tax take as a proportion of GDP. It will also likely increase investment and productivity growth because the marginal propensity to consume is so much higher at working and middle-class levels than professional class and up. One of the reasons productivity growth slowed this past decade, the main one really, is that demand was so soft that firms felt the best way to respond to temporary increases was with cheap labor and not process improvement or capital investment, both of which help drive TFP growth.
In addition, a rebalancing of labor incomes that keeps inflation slightly elevated above trend will have a favorable effect on the real value of outstanding debts and debt service. That is likely to persist for some time as it's structural in nature, and the Fed is not going to raise rates endlessly to try to strangle persistent 3-3.5% inflation, sorry inflation ultrahawks.
It is also increasingly clear that at some point in the next 20-30 years, the tax code is going to become more progressive once again as the GOP's base turns against it on the issue.
Suffice it to say, I am not in and refuse to enter into a state of panic on the basis of the lack of historical grounding and sound reasoning of my opponents.
Regarding tax progressivity: Piketty and Saez have a paper looking at the progressivity of taxes over time. Because of who they are, they focus almost exclusively on the top .01% and conclude "less progressivity today." But they provide the data that refutes their conclusion.
Look at Table 2 and compare to Table 1 in their paper. Tax changes have dramatically decreased the tax burden on every quintile of the income distribution, sometimes even going negative (i.e., no tax and net income). The slope of the curve between lowest tax rates and highest is much steeper today, which is how I would define progressivity. And I would argue the higher rates of taxation on the top .01% back in the 1960's were likely overstated due to deferred, and therefore unrealized, capital gains.
https://eml.berkeley.edu/~saez/piketty-saezJEP07taxprog.pdf
We are much more progressive than parliaments that defended the gold standard and corn laws. Woot!!
I would highlight a few issues with the picture you paint:
1) During the post war period, there was a baby boom and immigration reform in the 60s that led to much larger % population increases than we are seeing now. Its less than half what it was in the 60s.
2) I think you could have a deficit that averaged what the average growth rate for the overall economy. But it has to be the average, so in years when the economy is doing well, the deficit should be small or non existent, leaving space in bad years (pandemics, recessions, wars, etc.) for the government to spend. Unfortunately, we've been way higher than that for 20 years and should probably enter a period of financial retrenchment where we bring our debt to gdp ratio back down below 100% and preferably closer to our historical 60% average.
3) Biden's budget plan expects deficits of 1.2 trillion in 2023 and is likely to be about that level for a while. That is about 4.8% of GDP. If we wanted to cut that in half and get us to 2.8% gdp which is a reasonable growth estimate, we need to raise ~700 billion in revenue per year. That's a 15% increase in revenues which I would guestimate to require at least a 20% tax increase. That can either be across the board, or we can focus it on higher incomes, but if we do the latter, the rate increases significantly.
All of which to say, Republican's are bonkers to think any of this can be done without tax increases. But if you think we can do it just with tax increases, I don't think that's feasible either. My big takeaway is that as a country, almost no one in our political environment is ready to actually discuss deficit reduction in a serious way. They either pretend like its completely unnecessary or create fantasies about what will solve it that don't involve goring their preferences.
I don't disagree with some of this but there is one fairly glaring flaw:
Real GDP growth of 2.8% is a reasonable target, and especially so if we get our house in order on the supply-centric reform side, and the current trend of above-average real wage growth at the bottom of the scale and stagnation at the top continues, driving corporate investment and TFP.
But I would propose that, to make that rebalancing of the share of income flowing to labor and capital happen, the inflation target should be centered on 3%, not 2%, and that brings NGDP growth to close to 6%. I think that a shift in this direction is all but inevitable; the Fed would likely have to push rates above 7-8% and generate a rather long recession to squeeze the last bit of labor-driven cost-push inflation in the services sector back below 4%, which would inflict vastly more pain than is warranted if inflation in goods, housing, and foodstuffs are all brought under control.
Against this backdrop, a 4.8% deficit becomes sustainable, especially if we can increase immigration flows to closer to 1.5-2 million legal, skilled immigrants each year instead of a bit under a million.
I am open to reforms for Social Security aimed at improving its rate of return and capital allocations, which should, if done well, increase both productivity growth (ensuring that there are goods and services to match retirees' spending capacity) and the fiscal sustainability of the program (ensuring that politics don't get in the way of the boring business of helping 20-somethings insure their 70-something selves). I am equally open to tax reforms to increase revenue in a proportional-to-progressive manner, in moderation. I am also open to *specific* proposals to improve performance and value for money in the (especially) DoD, DOT, and NAS/NAM that would allow us to push growth in their budgets below inflation for a long while.
But the persistent "sky is falling, must slash everything to the bone" crap gets old, because it's not true.
There's a lot out there that points to us being on the brink of a new 50's/60's "golden era" for the masses, and repeating the mistakes of the post-2008 "recovery" will scupper that while it's still coalescing.
Biden just needs to cling to life in '24 and the autopilot set by the public investments and reforms we've recently made, as well as the general global macroeconomic climate, will be bearing fruit in time to prevent the GOP from trying to roll everything back after they sweep into power in 2028.
If we can get some serious permitting reforms, a considered/rational look at NEPA and OSHA, transform the SSTF into a sovereign wealth fund, ram through some occupational licensing deregulation, and actually enforce anti-trust law in a rigorous-to-brutal manner as well... all the better.
There is a big opening for soak the rich candidates to run as Republicans.
Which has… precisely fuck-all to do with productivity growth and total tax take?
And, more importantly, go read Pettis and Klein and repeat after me: the global trade regime is not “free”, the global trade regime is not “free”…
:p
Broken windows fallacy alert!
Compared to the tea party days, though, there hasn’t even been much anti-deficit rhetoric on the right in recent months.  It’s more a general vibe that we have to stop evil establishment CRT and pedophiles by any means necessary 
For clarification, David, what is your play here? Raise taxes on the top 5% while cutting Medicaid? That doesn’t seem like good policy.
To the extent that lowering the deficit is actually necessary, don’t we have to raise taxes on the top 30%? And to the extent that we want a more humane and safe society, we really need decent medical care for the poor 
I don’t want massive cuts to Medicaid, though I might support a lifetime cap on benefits, as long as it were a generous figure like $2million. I feel great sympathy for a healthy 35 year old who gets cancer, can’t keep a job, and needs public assistance to get better. I’m leery of paying for expensive treatments for unproductive people with chronic conditions. Decency means providing vaccines, blood pressure pills, antibiotics, etc. to people, but I don’t want to pay $170k year after year to keep a morbidly obese shut in alive.
I agree. It makes more sense to calculate QALYs and cost benefit trade-offs. But politically, calculations like that begin to sound like “death panels“
I’m ok with death panels as long as they are reasonably chill
"Sound like"?
And how did that work out when the GOP had all three branches just 6 years ago?
Given how poorly McCarthy’s speaker election went, I cannot see how he rallies House Republicans around any spending cutting plan. He’s always going to be facing several attention-seeking maniacs who will vote against any potential bill while screeching to their supporters about how McCarthy is a sellout RINO who is compromising with Biden. In the unlikely event that these extremists actually propose cuts, they’ll certainly be too politically unpopular to garner support from moderate Republicans.
So I imagine we’ll keep walking to the abyss of a financial crisis, and eventually moderate Republicans will feel compelled to work with the Democrats to avoid the financial armageddon of a US Treasury default. McCarthy will either get on board with this bipartisan coalition or he’ll be replaced. Even the WSJ is considering this to be a likely scenario given the lack of any plan of what House Republicans actually want. [1]
> All of which means Republicans will have to pick their spending targets carefully, explain their goals in reasonable terms so they don’t look like they want a default, and then sell this to the public as a united team. The worst result would be for Republicans to talk tough for months, only to splinter in a rout at the end, and be forced to turn the House floor over to Democrats to raise the debt limit with nothing to show for it. Opportunists on the right would then cry “sellout,” even if they had insisted on demands that were unachievable.
> This is what Democrats expect to happen, which is why they don’t think they need to negotiate. If Republicans want to use the debt limit as leverage, they need a strategy for how this showdown ends, not merely how it begins.
[1] https://www.wsj.com/articles/the-hard-reality-of-a-debt-ceiling-showdown-house-republicans-congress-gop-11673904239
Enough with the discussion of gimmicks and tricks! the platinum coins, the super-high interest bonds, all of it! All that talk does nothing more than confuse the issue and feed the idea that the Republicans have some kind of leverage here, that some kind of magic trick is needed to defeat it. Treat this debt ceiling in grown-up fashion as the rather boring statutory interpretation problem that it is. Congress has passed conflicting laws, a general debt ceiling statute, and a bunch of more specific appropriations statutes that require the president to spend more money on specific things than the general debt ceiling statute would allow. To the extent it's not possible to comply with both statutes, the more specific statutes control under long-accepted canons of statutory interpretation. End of story. If Republicans in Congress don't like that interpretation of the law, they can either sue, or, better, actually *do their job* and pass a new law that reconciles the conflict.
You should have ended the article here, while you were ahead: "I think it’s important for Biden to maintain the posture that there’s no genuine financial crisis here, and one way or another he will see to it that the bills get paid."
The administration should begin any statement or answer with “of course the United States will not default on its debts, that’s prohibited by the constitution.“
But is that what the 14th amendment says? It says the US will honor its debts (including pensions incurred for services in suppressing insurrection (i.e., the Civil War)). Are things like Social Security, Medicare, military salaries etc. "debts" or "legal obligations"? If the latter, are they also covered by the 14th amendment?
By the traditional definition, I don't think these things are "debts." I'm not so sure the constitutional argument is as rock solid as people may think.
It’s immaterial. The G has taken out debt in the form of bonds in order to finance operations. It doesn’t matter if the operations count as “debts of the
United States.” The promise to pay on the bonds certainly does.
But that says we have to pay interest and principle on currently-issued bonds. But the question is whether we can issue *new* bonds to finance recurring obligations, like paying military salaries next month. Is that guaranteed by the 14th amendment?
I think this is the White House's basic strategy. Yellen criticized the idea of the coin last week. This doesn't mean they won't do it if they think it's their best option. They did that with student loan forgiveness.
However, I don't think they want or have to give this any more oxygen than what it takes to make the GOP look stupid.
I agree with this on the merits, but I'm slowly acquiescing to the idea that doing it that way may cause more trouble than the gimmicks. Inevitably, there will be claims that Biden is breaking the law, it must go to the Supreme Court, etc. and there's no guarantees about how they would rule if they took it up (even though they probably shouldn't). All of this uncertainty could roil the markets, especially if we end up right back where we started.
That's a reasonable concern, but settling this through a legal process (either the Supreme Court takes it up and sides with the administration, or they decline to take it up which forces the legislature's hand while Biden continues to pay the bills) seems like it will leave things on a more solid footing than something gimmicky like the coin, or even super-high-interest bonds. My guess is there will be some market turmoil, but nothing crazy, and when things settle down the whole issue will be revealed as empty posturing and we'll all be able to - finally - move on. The coin or the super-high-interest bonds might avoid some disruptions, but feel shakier in the long run.
Fair, but it doesn't seem to be a gamble Biden is interested in taking (short-term pain for a *possible* long-term fix).
Serious question: what makes you say that? My impression is that right now they're just hanging back and evaluating all of their options (which is a reasonable thing to do at this stage).
I guess I assumed that if they were going to take that route, it would have been stated matter of factly. But you're right that there's no reason for them to do so until necessary.
>>>they decline to take it up which forces the legislature's hand while Biden continues to pay the bills<<<
How does this work absent the platinum coin? Anybody know? I mentioned the possibility last week of a "just pay the damn bills" strategy based on the fact that, as I understand, Treasury has de facto money creation authority (it has open-ended overdraft protection via the Fed, I think).
Is "just paying the damn bills" absent a platinum coin or the super-bonds something that can work?
A Josh Barro piece from last week claimed that Treasury does not have de facto money creation authority, and explicitly cannot just print money to pay outstanding bills. I'm very far from being a SME and am not taking a position on the matter, but that's what he said
Where? I just visited his Substack, and didn't see what you describe. He's definitely not a fan of the trillion dollar coin, per my (just now) reading, as he points out it requires the Fed to accept the coin for deposit, and it's not 100% clear they'd do so. He seems to be of the opinion negative bonds are the way to go.
Caveat: I am basing this idea on a comment here the last time there was a debt ceiling thread. Maybe someone with more expertise can chime in.
I think the idea is that, in the event of a refusal to raise the debt ceiling, Congress has given the executive conflicting legal instructions. It had directed the executive to appropriate a certain amount of funds, but denied it the capacity to raise those funds. Then there’s the Constitution, which says the US must honor its debts.
So the theory was that Biden could say “as I cannot comply with the letter of the laws as passed by Congress, I will interpret this in the way which causes least harm.” Which is probably something like a government shutdown, but we don’t default on the debt.
I don’t know enough about the specifics of this idea to say how it would go precisely. But it seems like it does make sense, and it’s true that if the debt ceiling were reached the executive is going be forced to violate the law one way or the other. So doing it in the least-harmful way seems like it would pass muster, and also seems like it would neutralize the threat going forward.
Then again, I could be wrong about all of this.
>>Which is probably something like a government shutdown, but we don’t default on the debt.<<
I think the threat is neutralized for the long term if the government does *not* have to shut down.
If bond holders get paid, but there's tons of other painful shit going down, it's not good.
>>> If bond holders get paid, but there's tons of other painful shit going down, it's not good.
It's not good, but it's not disastrous. We've had government shutdowns before, it's not the end of the world.
FWIW, I think this is better in the long run because of what the US' status as the center of the global financial system *means.* It's basically an expression of faith in the American system. If we reach the debt limit and it's basically just replay of the Gingrich-Clinton showdown in 1995 and nothing much happens, then markets are rattled for a bit but the system looks solid in the long-term. If we mint a platinum coin, that might satisfy markets temporarily, but it's not hard for me to imagine a scenario where this keeps happening, and we keep having to mint platinum coins, which eventually undermines faith in the system, because it all just seems rather silly. Better than defaulting on debt, sure, but still.
This is all rather speculative, of course.
Why would the government have to shutdown?
Good question. I think probably because it shows a good-faith effort on the part of Biden to comply with the law? Not doing anything seems like more of a flagrant violation.
Again, though: I am not an expert on the technical legal aspects of all of this.
The Supreme Court can take up the issue if they like but there’s no reason to believe their ruling would be binding over the Executive Branch. They can’t stop the checks from going out; indeed the Judiciary has no power of enforcement at all.
I think Matt's discussion of gimmicks and tricks is important precisely because the availability of gimmicks and tricks means that it *is* possible to comply with both statutes, meaning that the long-accepted canons of statutory interpretation wouldn't apply.
If the House Republicans want to sue Biden on the ground that he cannot continue to pay the bills and issue Treasury notes and bonds as necessary, but instead he must mint a platinum coin or use a gimmicky high-interest bond in order to comply with both statutes, let them.
>>To the extent it's not possible to comply with both statutes, the more specific statutes control under long-accepted canons of statutory interpretation.<<
Plus, going this route (by which I assume you mean paying the bills) has the advantage of not $&@^ing the country.
If SCOTUS was composed of 9 sane individuals I'd agree with you but unfortunately it's composed of 2 nutjobs, 4 conservatices, and only 3 liberals. Its not a slam dunk that they'd agree with your interpretation and just the doubt would be enough to crash markets. The gimmicks are arguably on safer legal ground.
Short of cutting a deal with the hostage-takers, which encourages further hostage taking, there's no path available to Biden when he will not face potential legal challenge and counterarguments, that will be resolved in court if a negotiated settlement can't be reached. At the end of the day, the Supreme Court either has a majority of Justices who are sober, judicious people rather than arsonists, or it does not. I think it does. But regardless, it's better to go into Court asking the Justices to approve a prudent course that protects the good credit and solvency of the United States, than to ask them to approve tricks and gimmicks.
I think the platinum coin thing counts as a stupid gimmick, but I don't think that's true at all of the high-interest bond idea. The interest rate on a treasury bond is literally set by the government, and there's nothing weird or improper about selling a low-value bond at a high interest rate compared to selling a high-value bond at a low interest rate. That's why this is a brilliant idea and is probably the best solution anyone has or will come up with. It doesn't do anything all that strange or illegal, it just takes advantage of the wording of the debt limit having to do with the face value of bonds, and just sells bonds at a lower face value but a higher interest rate, knowing that people will pay higher than face value in exchange for more interest. I love it and I hope it happens.
I think the platinum coin thing counts as a stupid gimmick, but I don't think that's true at all of the high-interest bond idea. The interest rate on a treasury bond is literally set by the government, and there's nothing weird or improper about selling a low-value bond at a high interest rate compared to selling a high-value bond at a low interest rate. That's why this is a brilliant idea and is probably the best solution anyone has or will come up with. It doesn't do anything all that strange or illegal, it just takes advantage of the wording of the debt limit having to do with the face value of bonds, and just sells bonds at a lower face value but a higher interest rate, knowing that people will pay higher than face value in exchange for more interest. I love it and I hope it happens.
I think the platinum coin thing counts as a stupid gimmick, but I don't think that's true at all of the high-interest bond idea. The interest rate on a treasury bond is literally set by the government, and there's nothing weird or improper about selling a low-value bond at a high interest rate compared to selling a high-value bond at a low interest rate. That's why this is a brilliant idea and is probably the best solution anyone has or will come up with. It doesn't do anything all that strange or illegal, it just takes advantage of the wording of the debt limit having to do with the face value of bonds, and just sells bonds at a lower face value but a higher interest rate, knowing that people will pay higher than face value in exchange for more interest. I love it and I hope it happens.
Sooner or later something is gonna have to give on this. Either funding entitlements is going to require broad based tax increases, or we're going to have to get serious about spending cuts. The problem here, unfortunately, is democracy. Deficit financed government fundamentally breaks the democratic process. The people in the future who are on the hook for the spending reps are voting for are not the voters those reps are accountable to in the present. It's real easy to rob some other guy's future constituents to buy votes from your constituents today.
The problem with the deficit is way less about the economics and way more about the political incentives. I struggle to see how those incentives will ever align with a needed set of reforms without some sort of materially catastrophic crisis occuring first.
The US has among the most slack in the developed world to raise taxes. Plenty of people would bitch, but as the post above yours gets dead right, the electorate will choose to keep popular programs and pay for them when it comes to crunch time.
That, but also as Matt pointed out, voters don't actually care about tax increases, they care about the rhetoric around them.
These things are impossible for me to Google because any search term that includes the word 'tax' leads to a firehouse of nonsense, but my recollection is that Reagan, Bush I, Clinton Obama and Biden all raised taxes. Bush II and Trump cut taxes. And despite the fact that Bush I and Trump both lost re-election, it is still canon that cutting taxes loses elections and raising them wins them.
I think that, because of the slack the US has, tax increases just don't translate into anything noticeable by the electorate. Nor do tax cuts, really, since most people aren't rich enough to notice changes in federal tax rates. (Hence the nonsense about 'fitting your taxes on an index card', which is the only change most people noticed.) Republicans like to pound on the table and yell about tax-and-spend liberals, but the taxes they want to cut are capital gains and income, which are only a big deal if you're rich enough to pay them. To wit, the SALT deduction cap in the Trump tax cuts got more coverage than I have ever seen for a change in tax rates because it mostly impacted rich Democrats (i.e., the NY Times readership).
It's the spending side that piques interest from voters; cut Medicare and kiss re-election goodbye. I bet that a President of either party could pass a comprehensive tax increase to balance the budget and that, if they got buy-in from right-wing media (which would never happen, of course), voters wouldn't notice.
The longer we wait to fund entitlements the more difficult the political incentives become to do it before the crisis hits.
Most of the Boomers have retired already. Healthcare spending growth rates, including for Medicare, have moderated. I agree with Just some guy: this is a slow burn, and a very manageable one, not a crisis. Just increasing the cap on Social Security wages would do wonders.
"Most of the Boomers have retired already."
I'm not sure that's accurate. I can't immediately find a stat on what the average age of a Baby Boomer in 2023 is, but from the bar chart of "Births underlying each generation" here: https://www.pewresearch.org/fact-tank/2020/04/28/millennials-overtake-baby-boomers-as-americas-largest-generation/ , it looks to me like the average age would probably be something only around 67 or maybe 68 because of the later years of the boom having larger birth cohorts, so they've literally just started to become eligible for full Social Security benefits in the past year or two and plenty of people will hold on to age 70 to get the full bonus payment for delayed retirement.
Or died. I can't find more recent numbers, but as of 2012, 11 million of the 76 million boomers born 1946-64 had already died. I suspect those numbers have doubled since then.
Many boomers retired at 62; relatively few wait until they're 70.
I'm sure hard numbers are out there with some research but life is short (I'm a boomer).
Sure, it will be a tough political fight. Like raising the gas tax five cents. People *really* don't like increased taxes or reduced benefits, even if the numbers are small.
I guess the silver lining of low birth rates and low immigration will be falling entitlement spending after the boomers die 
Won't their kids be retiring right around that time?
Our entitlements were designed for a growing population, so that the recipients of the entitlement spending are supported by an ever-larger workforce. A stagnant or shrinking population has disastrous implications for entitlement spending.
Yes I agree
I mean, I'm all for boomers dying.
Not any of the boomers *I* know, of course. But all those *other* boomers. The ones that caused all of the problems. /s
*Edited to add the "/s", which I think is how we're marking sarcasm on the internet now? I can't keep up.
Evidence is far from overwhelming we have too much debt. Relatedly, the evidence is overwhelming there's no crisis around the corner.
https://www.nytimes.com/2023/01/24/opinion/us-debt-deficit-economy.html
I accept the case that it might help living standards and economic strength over the long term to reduce federal borrowing. But the way to do that is to wait until insane people are no longer controlling the House of Representatives.
I do not believe we are on the verge of an imminent fiscal crisis. I'm fundamentally making 2 arguments:
1. The political incentives are aligned towards a persistently deteriorating long term fiscal situation.
2. Those political incentives are not well calibrated towards interventions to preempt even highly foreseeable crises that may arise along that long term trajectory.
Regarding (2), I suspect crises may be the only way some of these things get fixed because that's the only time the incentives of enough people will be sufficiently aligned. For example, we may see a bargain between democrats and a few republicans to raise the debt ceiling. Similarly, "fixing" (whatever that means) SS now doesn't really win anyone electoral points, but it might if the checks are at risk of not coming.
Yes, debt isn't a problem as long as it can be serviced - this is a truism. The trick is that when the debt becomes difficult to service, then things tend to cascade in bad ways.
>Deficit financed government fundamentally breaks the democratic process.
So are you a balanced budget amendment guy?
I wonder if there’s a formula like the Sahm rule that one could write into a budget balance amendment. Instead of saying the budget must always be balanced, say that the ratio of deficit spending to GDP must be no more than twice the unemployment rate minus the GDP growth rate, or some better chosen formula to allow deficit spending during downturns and require a surplus during booms.
Right, I don't want to be out here implying that the dumb version of a balanced budget amendment makes any kind of sense, I'm imagining a type of mechanical stabilizer solution.
This sounds reasonable, but is there any overlap in the Venn diagram of wonkish macroeconomists and budget hawks?
Absolutely.
The European Union tried outlawing Keynesian economics. Spain, Italy and Portugal suffered a lost decade and Greece saw living standards decline. Then they gave up that silliness and got through the pandemic with less economic damage than German stinginess caused in 2007-13.
I feel like there's a middle ground between "no deficits ever" and our current policy of running perpetual deficits in all times - good and bad - expansion and contraction - not as some carefully tuned Keynesian stimulus.
The middle ground is Keynesianism: run deficits during downturns and surpluses during boom periods. I think we've nailed the first part, so good on us. Second part needs a bit of work.
Have we had a real boom since 1999?
The problems with Greece, Spain, etc. were mainly about the Euro (ie - those countries not being able to control their own currency). The reason the US can deficit spend the way we do is because we control our own currency.
In the 1820s, the UK carried debt equal to 225% of GDP. It did this with a very primitive economy that yielded a per capita GDP of under $4000 at current prices. Why can the US carry less debt that a proto-industrial monarchy?
I mean when the British Empire says, "We're good for it. We'll just go take some gold from India or wherever." It's probably true. I'm not sure, "We'll mint a trillion dollar coin" is such a confidence inspiring answer.
If people don't believe America's good for the money, why are they buying so many treasuries?
I’m pretty sure that at the level of the fiscal state,  the empire was a net loss for Britain 
I mean ... didn't the UK ~ run out of gold in 1825 requiring the Bank of England to be "rescued" by the Rothschilds'?
I think most of the people on the hook for paying most of the debt are alive and voting today.
As for those future people who are not alive today, history teaches us that they will likely inherit an economy more prosperous than the ones we live in today. We owe the future less than *some* people believe.
You're definitely underestimating how many people will be born, and over estimating how much of the "debt" needs to be paid off.
The "debt" will never be paid off, and because the public deficit is private sector wealth, thr economy will probably be more prosperous than it is today.
Now if you go about trying to constrict the money supply in inequitable ways, you're very likely to see the exchange of goods and services dwindle, and some real problems arise.
If I'm following you, I'm not sure we're disagreeing.
Some Scottish philosopher wrote about that very same idea, I believe some time around the American Revolution. Two hundred years later and so far he's been proven wrong. We shall see.
I don't understand what you're arguing. What exactly has to give?
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You know you're literally arguing "If the casino puts too many chips on the floor, how will future players ever afford to pay the casinos bills."
There's a problem with putting too many chips on the floor, because then the whales will bid up the cost of doing business too high for the new players, not that future players are going to struggle to make sure the casino can zero their books out at the end of the night. But taking too many chips off the floor will also really slow down how many bets are being placed and how much activity there is. If the Feds need to provision goods and services, then they will simply buy those goods and services. If they need people to accept the chips they are paying for goods and services, they will simply start producing it themself, or tell people they better start earning more chips, because anyone who doesn't produce the right stuff, and earning more chips from the market, is going to jail. Even better, they never even have to put anyone in jail, they just have to provide producers enough incentive to keep paying their taxes, so that they themself can be benefit from paying other people to produce for them.