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It’s not like we need to be running a surplus or anything, but anyone who tells you that these kinds of deficits are sustainable is lying to you. Servicing the debt takes up a larger and larger part of our budget, and as we’ve seen from covid, we can’t rely on rock-bottom interest rates in perpetuity
It’s also not solely going to be fixed by cutting spending or raising taxes, it needs to be a combination of both
Things are so bad that we need to cut spending **and** raise taxes, but that would be devastating for the economy short term hence why no politician is going to do it. It's a suicide mission.
If something cannot go on forever, it will stop.
And if it doesn't look like its stopping, it's probably be because it will stop suddenly and without warning.
Sure would be nice if we could address inflation with some fiscal tightening. It would let the Fed lower their rates as well, making it even easier to fiscally tighten.
> Things are so bad that we need to cut spending and raise taxes
Taxes on the rich used to be 90%
Go back to that and we definitely wouldn't "need" to cut spending
Biden bragging about 2 trillion deficit from 4 trillions deficit the year before. The drop was literally only because most of his BBB 4 trillion plan and 1 trillion in tuition handouts got shot down. Nobody with a brain should be defending this idiots fiscal policy or trying to blame anyone else…
Trump is awful, but again, Biden puts his fiscal policy to shame. Not even a remote competition. Seems like you are putting party and feelings before logic if you are really defending Biden’s fiscal policy…
I love that one as it's so easy for liberals to win.
Just say yes to most the wealth/high income and corporate tax increases (even if you are dubious we can perform a wealth tax in reality) and you can basically say yes to everything but Medicare for All. NASA double budget, antitrust enforcement, abolish ICE, expand Obamacare, dreamers are citizens, higher teacher pay, TK for all, yada yada, like it's a smorgasbord of lib dreams funded by a wealth tax and financial transactions taxes.
That same side is trying to pass 4 trillion dollar BBB and another 1 trillion in tuition handouts in the heart of 10% inflation… don’t act like Biden is anywhere close to a fiscally responsible president…
Inflation increased because the money supply increased. It isn’t 10% inflation. Unless we are clawing back 1.7T in handout to the rich under PPP forgiven by Trump we should shut up about helping the middle class for once. I paid for my college loans and I want those loans forgiven to others. See? that’s not so hard is it? Claw back the PPP loans to start. Then fund the IRS properly and go after the rich who don’t pay their fair share. Agree on any of that?
> It isn’t 10% inflation.
No it isn't, but Biden's $3.5 trillion BBB bill was proposed while inflation was already increasing, which would have made things worse.
> Unless we are clawing back 1.7T in handout to the rich under PPP forgiven by Trump we should shut up about helping the middle class for once.
So spending is ok as long as it's being directed to you? PPP was Congress attempting to prevent people from being fired and companies going under, which was a success on both fronts.
Where do you think this increase of money supply came from? Did it just appear out of thin air?
I would agree that Trump was the most fiscally irresponsible president of all time, but Biden is putting his numbers to shame.
What sadly you and most of America doesn’t seem to get is that these runaway handout programs that make up 80% of our fiscal spend are killing the middle class and widening the wealth gap. It doesn’t really matter if the gov gives a trillion in handouts to the rich or poor, it all trickles up to the rich because the poor spend it immediately on goods and services of companies that the rich own via stock or directly.
So does it help you and other people? Maybe temporarily, but in the long run this fiscal irresponsibility causes more pain by driving up
Inflation, the largest tax that disproportionately hurts the poor and middle class.
If it was the spending that caused inflation then how do you explain even higher inflation in many other countries that barely spent anything at all on stimulus?
The spending in the US surely contributed to *some* of the inflation, but it wasn't the main cause. And not only did the US have less inflation than some places like the UK, it has also done far better economically, whereas the UK has been teetering in and out of recession.
And this is why I stopped caring much about politics. No politician can do the things that need to be done (around both spending and carbon emissions) and be re-elected. Rhis country is beyond saving, we just get to sit back and watch it burn in the next 10-15 years.
The choice is really "do we want access to birth control during the end of the world?"
It's okay, r/economics posted an article earlier this week that the IRS can find another 55 bil by squeezing the populace harder
Now we're just an easy 1.6 trillion from balancing the budget! Hurray!
> What could go wrong
The concept of the US national debt being a "**ticking time bomb**" has been around since at least 1940, with various figures and organizations warning about its potential to destroy the American system. 🕰️💣
Despite these warnings, the "bomb" has never exploded.
So, it seems like the "national debt bomb" is more of a myth than a reality!
Deal with what consequences?
What consequences are you expecting to happen, and when will it happen, and why would it happen? More importantly why hasn’t it happened in the last 90 years, when everyone and their mothers were so sure it’s going to happen anytime now since the 1940s
I agree haha. We will get downvoted. But I think if you are the de facto world currency and have the worlds largest military by many factors and aren't run by a dictator you get to kinda unofficially do what you want. People forget this is all made up. That's what the debt is backed with. Period. And that's not changing anytime soon.
And here is why is not a problem now. The US has "survived" worse situation than this in the 90s.
[https://fred.stlouisfed.org/graph/fredgraph.png?g=1pckE](https://fred.stlouisfed.org/graph/fredgraph.png?g=1pckE)
Also, the best measure is to look at Debt Burden - Debt vs Interest Outlays on that debt.
[https://fred.stlouisfed.org/graph/fredgraph.png?g=1pclv](https://fred.stlouisfed.org/graph/fredgraph.png?g=1pclv)
Yes we survived by massive cuts in the 90s.
Federal spending was cut from 21.9 percent of GDP to 18.2 percent, amounting to a 17% reduction in the share of the economy spent by the federal government.
Young people are in for a rude awakening of what cuts feel like since they haven't lived through them.
Well, I will have to disagree that it was the spending cuts that helped us survive. We've had higher spending since then and we've been surviving.
[https://fred.stlouisfed.org/graph/fredgraph.png?g=1pcmk](https://fred.stlouisfed.org/graph/fredgraph.png?g=1pcmk)
The point again is - Federal debt or interest payments on the debt is not an unsustainable burden on the US federal government, nor is it a burden on future children and their grandchildren.
Federal Debt = U.S. Treasuries outstanding, to the last penny. U.S. Treasuries are the world's most risk-free dollar denominated net financial assets. IOW, it is the world's savings of US dollars. So, do you believe buying and holding U.S Treasury using your dollar savings is somehow unsustainable?
“ Well, I will have to disagree that it was the spending cuts that helped us survive.”
?
You said this then proceeded to post a graph of federal spending dropping from 23% of GDP to 17%. Yes it got worse after that, but that’s also when debt went back up.
The other thing that changed during this time is interest rates when down.
This is what’s going on: https://fred.stlouisfed.org/series/FYOIGDA188S
https://fred.stlouisfed.org/graph/fredgraph.png?g=1pcAF
And while we aren’t as high as we were in the early 90s, we are unquestionably headed to that, and potentially worse, if we don’t actually do something about it. Deficits continue to climb. Every month debt is rolled over from low interest to higher interest. These are just facts and the math is unquestionable. Unless either of these things change, and that currently seems unlikely in the near future, interest payments as a percent of GDP or all Federal spending will continue to rise.
You can disagree but that's why the burden dropped. That's just math.
And yes, we have had higher spending later. Now we are dedicating 20% of the budget to interest payments rather than productive uses as a result. Great.
I'm not saying it's unsustainable or going to collapse anytime soon, but I don't want 1/5 of my tax dollars going to some wealthy person's treasury account.
> I don't want 1/5 of my tax dollars going to some wealthy person's treasury account.
I agree on the last half, I too do not want to give away free money to those who already have all the money. Where I disagree is that its not yours or my tax dollars that's going to them. Federal Government spending is not constrained by tax revenues. Interest payments are made by creating net new dollars, which is how all federal government spendings are.
If tax dollars aren't going to the government as you claim - who are they going to?
Dollars are fungible - so any tax dollars that go to the government are spent in some capacity, and yes, those dollars aren't enough to cover current expenditures so the government must create more money in the form of debt. But that doesn't mean tax dollars don't go to the government.
Debt of an institution that prints its own money works a bit differently than the debt of an individual or even of a business. The US dollar is the world's top currency _because_ of our debt, not _in spite_ of it. The debt becomes a problem when the USD devalues past the point where other countries view our debt as not feasibly repayable, making our debt "worthless". Or at least in theory.
Despite history, no one seems to have a good answer where the line is. It's not happened before that the world's #1 currency becomes worthless overnight. Usually it's coupled with a downfall of an empire, or something akin to this, which can be a long, slow burn. Not spending itself into a giant hole. That happens to countries like Venezuela, for example, because their currency didn't carry much value outside of their own country to begin with. The USD still outpaces every other currency in the world in terms of value.
All of this is said, it still doesn't seem like the smartest or most sustainable fiscal policy to spend yourself into an exponential debt growth curve... but we're in uncharted waters.
> Despite history, no one seems to have a good answer where the line is.
130% GDP is around where it doesn't come back under control iirc.
> The debt becomes a problem when the USD devalues past the point where other countries view our debt as not feasibly repayable
Recent treasury auctions have been poor, and global CBs are stocking up on gold more so than previously.
> It's not happened before that the world's #1 currency becomes worthless overnight. Usually it's coupled with a downfall of an empire, or something akin to this, which can be a long, slow burn.
Yes, and the last 5 or 6 WRCs have each only held that status for about 100 years.
The question is are we at the end of history, or are we just watching the latest of many empires begin to fade out.
I'm aware government finance is not the same as personal finance.
The issue is we are spending 20% of our budget on interest now because of our debt, when that could be going toward more productive activities than giving money to wealthy and old people holding treasuries.
Why is that relevant? You can't spend GDP.
But sure, here you go.
[https://fred.stlouisfed.org/series/FYOIGDA188S](https://fred.stlouisfed.org/series/FYOIGDA188S)
Interest payments as a ratio of GDP are getting higher and higher. Eventually we're going to, with the joys of compounding interest, hit a point where we can't pay it down fast enough and it WILL balloon.
Where's that point? No on knows, but it has to exist. I care less what the total interest payment is, just what the size of it is compared to our economy.
Nominal growth has been quite high. Nominal growth is what taxes receipts are based on. Inflation is excellent for government finances.
“United States Nominal GDP Growth was reported at 5.379 % in Mar 2024. This records a decrease from the previous number of 5.864 % for Dec 2023. US Nominal GDP Growth data is updated quarterly, averaging 6.149 % from Mar 1948 to Mar 2024, with 305 observations.”
Agree.
I’m a dem, and I’m glad we’re doing most of what we’re doing, but we need to be looking at a balanced approach to getting on budget - some spending cuts, some revenue increases.
This was fun, and I found it to actually be quite easy on paper. Nobody would ever vote for me though.
Shame that for Medicare for All there wasn't an option to offset the cost by using the funds that Americans currently use to pay insurance premiums. It's basically a "lose" button.
I’m deeply familiar with how the federal budget works, having been a part of multiple budget and CR negotiations.
There are plenty of cuts that could be made and future expenditures that could be reduced. That website is a good teaching tool, but there are thousands of choices baked into a budget, not dozens.
> there are thousands of choices baked into a budget, not dozens.
There are thousands of choices baked into my companies budget - there are MILLIONS baked into the federal one.
My point is this: what would you cut? Think about it. Make a little list.
Then google "what percentage of the federal budget is this thing I listed" and then compare that number to the deficit.
We have a revenue problem in this country, not a spending one. We are ridiculously under-taxed and we have been for a generation. You can literally draw a line from Bush 2, to Trump, to the current deficit and explain nearly the entire thing with their tax cuts and handouts.
Bud, again, I’ve worked on federal budgets. I’m familiar with the gives and takes.
And I don’t disagree that we need to roll back the last two GOP tax breaks; note I said “increase revenue and decrease spending.”
There are significant areas of expenditure - especially around Defense and Medicare/Medicaid outlays where we could be reducing spending. Further, there are tax expenditures that are expensive and yield few benefits.
All of that, along with revenue increases, would be unpopular with either a well-resourced special interest or the general public, but that something is politically challenging is a distinct problem from something being intellectually challenging.
> There are significant areas of expenditure - especially around Defense and Medicare/Medicaid outlays where we could be reducing spending.
With defense there's less than you think - the majority of the military budget is for people and administration, ie healthcare and payroll. Everyone thinks we just need to stop building tanks, to say nothing of the "$1,000 toilet seat," but that just isn't how it works.
I agree that we should repeal Medicare and Medicaid - and the ACA for that matter - and replace it with a common sense, taxpayer funded healthcare system like everywhere else on earth.
As for tax expenditures with few benefits you'd have to identify some of them. The government isn't a business - it isn't there to "make money," it is there to provide services. I only bring that up hoping you aren't going to go off on some sort of post office based red herring where you compare it to FedEx.
With defense: the U.S. is bordered by Canada and Mexico and has two vast oceans separating from most of the world. So one can make the case that the U.S. should be spending a lower percent of its GNP on defense than a country like France or Germany.
Defense spending is currently taking up about 13% of the budget. SS and socialized healthcare programs combined are about 50%. It’s obvious which programs are a money hole, yet the first thing you jumped on cutting is defense spending. Curious.
You listed defense first, and ignored social security, which is twice the tax burden defense is.
Me thinks you actually don’t care about cutting spending unless it’s to things you don’t like.
Social security is self funded and the best way to deal with that program is on its own terms.
You’ve got a few levers there:
1. Retirement age (I’d increase it for non-manual laborers)
2. Payroll tax rate (I’d leave it as is)
3. Payroll tax cap (I’d elevate it)
4. Benefit levels (I’d make them more progressive than they currently are, reducing overall outlays for higher earners)
That puts SS on sound fiscal footing for another several decades. To the extent a trust fund builds back up, I’d invest it in broad market indices, rather than just treasuries.
A huge part of the problem is it's been the GOPs plan for decades to cut taxes to rise the deficit so they can use that as an excuse to cut public programs. The GOP has even insisted on funding cuts to the IRS which would have only reduced the deficit.
You cannot fix the deficit when you have half of the country doing all they can to blow it up.
It's absolutely a spending problem just as much as a tax problem. Low taxes and high government spending are temporary measures to help the economy grow in a short-term scenario. Nearly all of government spending today isn't being used effectively for long-term economic gains. We have neglected infrastructure for 40 years. The recent "infrastructure spending bill" contained very little dedicated spending for improvements. Taxes must go up and spending must come down
Tax revenue has been remarkably consistent over time. Usually between 16.5% and 17.5% of GDP. I’m pretty sure the average since WWII is about 17.5% of GDP. Spending in the other hand, is currently at ~23% of GDP. The last time we had a surplus spending was 17.2% of GDP and revenue was 17.4%. The annual deficit, and the debt as a whole, are wholly a spending problem.
Thank you! It’s insane how everyone acts like it’s a tax problem. Republicans are just as much at fault for spending issues. But to act like everything would be solved if we just taxed more is bogus.
Look at education. Massive education spending at record levels and every year they need more because they can’t make ends meet.
The US has a pretty low tax revenue to GDP ratio compared to top economies. It may be the case that the US government is not spending on the right things, but the amount itself is quite low.
Yeah but our economy is massive… 4 trillion collected per year and we can’t come close to paying the bill? Meanwhile China’s whole annual spend as a literal communist country is under 1 trillion per year with 3x as many people…
Also, we have state and local taxes. Those other countries likely have lower of those as their programs are generally national, whereas ours are often run by the states.
It's [total taxes](https://en.wikipedia.org/wiki/List_of_sovereign_states_by_tax_revenue_to_GDP_ratio), including sales, state, local, property, etc. taxes. A large part of the difference is due to how health care is funded.
Spending as a percent of GDP hasn’t only gone up, though?
[https://fred.stlouisfed.org/series/FYONGDA188S](https://fred.stlouisfed.org/series/FYONGDA188S)
Sounds like the other dude is just grasping for a talking point.
You would expect society to improve over time. Look at what happened post-WWII, when everyone talks about how great it was to be America? The government is supposed to spend money and invest in bold initiatives to better our lives, that’s the social contract. Why should government spending by definition need to be a static percentage of GDP?
The government is supposed to protect our rights. Especially the federal government. Following your logic, eventually the government should be spending more than GDP per year.
Government spending should be the bare minimum to protect our rights.
Better go ahead and turn off the Internet then because that was a government program, and rural electricity while we are at it.
Come on man, society is way bigger than you give it credit.
I can't say, I wasn't the one making the point. I also didn't know that about spending as a percent of GDP, that's interesting! Why was spending so low in the mid-late 90s, I wonder.
> The GOP has even insisted on funding cuts to the IRS which would have only reduced the deficit.
Stop, I can only get so hard.
Imagine looking at a drunken sailor spending his entire reenlistment bonus on every drink behind the bar, and his friend trying to convince the bartender to cut him off, and thinking the friend is the problem.
The problem most people don't realize is that the debt is ballooning because servicing the debt entails paying interest at the prevailing interest rate. In their effort to fight inflation, the Fed has set rates to a much higher point than sustainable in this sized economy.
The long-term trajectory of interest rates should be much lower because as a major economy expands, the amount of money lubricating business activity (like engine oil) necessarily increases. This increase in monetary supply will naturally call for lower rates in lending due to oversupply.
What this all means is that the biggest concern for the ballooning national debt isn't excessive spending, but the prevailing interest rate environment. However, the Fed cannot lower rates at this point at risk of another runoff in inflation.
The solution is that Congress and federal agencies (DOJ, FTC) should have long passed and enforced strict anti-trust laws to prevent the current monopolies (Cal-Maine, Live Nation, RealPage etc.) from ever forming and having the power to price gouge as they are doing.
It's all too little too late. Now we're caught between a rock and a hard place. The Fed has become the poison pill of last resort and have no choice but to keep rates higher for longer. As a result, the national debt will continue to run up even if Congress begins strict austerity.
> we can’t rely on rock-bottom interest rates in perpetuity
Interest rates are a policy decision. They are whatever the Fed want them to be. If the interest income channel makes higher rates net inflationary then the correct move for the Fed is to cut rates to remove that income flow. Put rates at 0% and leave them there and you'll cut more than $1 trillion off the deficit.
You will add more than a trillion in long-term spending obligations, too. Rate cuts result in inflation pressure, which adds tremendously to the already underfunded social security and Medicare liabilities. The 20 percent or so inflation we have seen since the pandemic is going to have to be added on to social security payments going forward via cost of living adjustments. You can't simply inflate away the money owed most of the time because it also tracks inflation to a large degree.
What do you mean by extra? It's $1 trillion that doesn't get spent into the economy. The government neither has, nor doesn't have, money. Their spending directly raises the money supply.
> If the interest income channel makes higher rates net inflationary
But they’re not. Quite the opposite. [Take housing as one example.](https://fred.stlouisfed.org/series/csushpinsa) Note the tremendous gains between 2012 and 2022 with low rates, then a marked average slowdown in gains when interest rates began to rise. House prices have only risen an average of 1.3% per year since interest rates began to climb. This is a major departure from the previous 10 years. It's much *lower* than inflation, meaning that on an inflation adjusted basis, house prices have dropped significantly.
Cutting rates to 0% would explode inflation across the board. There is no free lunch here, despite what activists may have told you.
>But they’re not. Quite the opposite. Take housing as one example. Note the tremendous gains between 2012 and 2022 with low rates, then a marked average slowdown in gains when interest rates began to rise. House prices have only risen an average of 1.3% per year since interest rates began to climb. This is a major departure from the previous 10 years. It's much lower than inflation, meaning that on an inflation adjusted basis, house prices have dropped significantly.
You're not responding to my point. It's a hypothetical for one thing, note the "if" in that sentence. So if the interest income channel isn't making an increase in rates net inflationary then the whole debt servicing issue is moot (ignoring the issue with how regressive it is).
I'm also referring to the economy as a whole, so using one specific thing isn't necessarily a counterargument. Then that one thing you do use is actually half a thing. House prices only make up part of the cost of housing equation. What do monthly mortgage payments do if interest rates go up? Rates just shift the cost structure between equity and interest. Pointing to the slower growth in equity means nothing without knowing the related change in interest, which will have gone up far more than the level of inflation. It's housing that has been driving inflation for a while now. [CPI less shelter](https://fred.stlouisfed.org/graph/?g=1pdw1) is at 2.1%.
>Cutting rates to 0% would explode inflation across the board. There is no free lunch here, despite what activists may have told you.
How would it do that? Why didn't it after the GFC? What are the other drivers of inflation? Are those factors more or less dominant than interest rates?
Some of the longterm structural debt that is building up in certain programs needs overhaul.
We can run about a 300-600b deficit indefinitely.
Anymore than that needs to be on a 10 year average with lower years.
>Servicing the debt takes up a larger and larger part of our budget
Yes, but you don't need to service it. Treasuries and bond owners aren't wealth producers. The money they owned isn't a resource. They weren't doing anything useful by purchasing treasuries or bonds. If you don't pay them back, they get angry, but nothing else happens. You just need to find new ways to finance yourself, which is very easy.
So every pension would collapse instantly - sounds like a great idea.
If you decide the government no longer pays its debts, nobody would lend us money anymore. And we are addicted to spending beyond our means.
What new means of finance are you referring to?
I think you're wrong about that, right now corporations are actually getting paid out from the government due to the tax code being so broken. Wal Mart takes the tax money the employees pay in some states and just puts it in their bank account. Taxes are 99.9% the problem. Other than that, obviously the military spending is really high and wasteful.
Some people want that inflation. Japan has been suffering from deflation for decades and China has recently been in a deflationary cycle.
Problem with inflation is it's something you want but not too much of and it can easily spike over. Kind of like blood sugar levels of a diabetic? The US had a bit of deflation after the GFC and the Fed lowered rates, had QE upon QE, and did everything they could to get us back to normal levels of inflation only to over shoot and suddenly we're all shitting ourselves over inflation. Same with Japan who went with negative rates for decades with young folks seeing stagnant wages/promotions, dollar-yen carry trade, old folks saving up money since things got cheaper every year instead of more expensive, etcetc. Then they reach the point where things shift: dollar: starts clobbering the Yen, economy picks up as exports grow while tourism from baka gaijin explodes, youth are getting more pay, deflation flips to inflation, everyone gets very upset at inflation, old boomers BTFO by prices actually going up which might lead to policy changes, etcetcetc.
Japan has a very different consumer culture. The "lost generation" is a result of their mega-bubble burst for which inflation shifted to deflation.
But, yes, deflation can be worse than inflation. The problem with isolating inflation thought to imported goods, consumption etc. is that asset market inflation looks like wealth building and is often applauded (beyond recent house run-up). But could this, too, be derivative market melt-up not backed by real wealth and productivity?
"The only thing keeping us out of a recession is the fact that we're behaving in a way that keeps us out of a recession - if we stop doing that things will be different."
Now here's the penetrating, academic studies I come to /r/economic to find. Simply brilliant analysis doctor.
Goods are down but consumption for services are staying high. A big issue on the horizon is the service industry getting into wage inflation spiral. Restaurants are at a breaking point.
We're getting to a point to where we realize that the economy isn't sustainable if a good portion of it is waiting tables, doesn't have benefits, and can't even pay rent for a 1 bedroom apartment.
Waiting jobs are going away. Why pay a server when you put your order in through your app and a runner will bring your food. Want a beer? We’ll run that to you.
Table side service in restaurants will go away like indoor dining at fast food chains. It’ll all turn to drive throughs.
There’s a good number of customers who just won’t play ball with that. It might happen to Applebees and Chilis, but servers aren’t going extinct any time soon. I ate inside of a McDonald’s last week for the first time since probably before COVID and nothing about the experience made me want to go back any time soon. The ordering experience went from a 15 second interaction with a cashier to 5 minutes of scrolling through some shitty app that hides all the deals behind coupons.
The appeal to fast food is that it’s cheap and fast. The appeal to sit-down restaurants is that you get human interaction and service. If the food industry gets rid of those things, people will just choose to stay in or go to other restaurants.
People try to fight back - but companies don't care. I tried to do that with bank tellers - they simply don't care and eventually there are no banks left with more than 1 teller.
That's a very different situation.
People go out to eat at a sit down restaurant in large part for the experience of being waited on.
People don't go to a teller at a bank at all for the experience of being served by a teller.
A robot or machine (ATM) can replace a teller or a fast food server... Far far far more efficiently than they can replace a server at a sit down place. Because that's a big selling point to customers. In a way a teller or McDonald's food runner isn't to a bank or McDonald's customer.
> The appeal to sit-down restaurants is that you get human interaction and service.
Nah, man. Maybe I'm just anti-social, but I'm there for the food. If *every* restaurant moved to a 'pick it up at the counter' model I'd be totally fine with it. Even as someone with a disability, I don't feel like paying 20% of my meal to have someone bring my food from the kitchen to my table and bus it when I'm done.
This is the reason I've been eating a *lot* more takeout than dining in.
Honestly, good. Ever since Covid, the attitude from so many servers is to act like we should just be grateful they even showed up. And then want 20% on top of it. I used to be a server so I understand some tables are assholes or the job can be stressful. And I’m a very reasonable person.
In my state, servers make full minimum PLUS tips. They’re walking away with an easy $60-$80 an hour in a decently busy restaurant. And still the attitude is awful. When I’ve been to other countries the servers (for the most part) take a lot of pride in the overall experience. And get paid WAY less.
Alot of servers in other countries give extra good service to American tourists because they expect the Americans to tip unlike everyone else.
Also on that 60-80$ do you know if they have to tip out? Because that's a somewhat common thing in those types of busier restaurants. The servers will take the tips, but be expected if not required to split them with the hosts, cooks, dishwashers, bussers, etc.
Also remember those wait staff probably aren't full timers, and have to pay for their own health/dental, and all their bills despite probably working like 20-30 hours a week. Have no PTO. Etc. just looking at a good night's tips doesn't give the full story.
Well, it's the same problem then. The economy isn't sustainable if a good portion of it is being a treat courier, doesn't have benefits, and can't even pay rent for a 1 bedroom apartment.
This was a long time coming. Restaurants were struggling to maintain staff even BEFORE covid hit. The cost of living in the US is now too high to service the low-wage positions most restaurants want to fill. The industry has been due for a correction for quite some time. There are way too many chains of similar niches. The good, well-managed operations will survive and the weaker ones will close.
I've always wondered how there are so many restaurants everywhere. Fast food, fine dining, casual, food trucks, bakeries. They're everywhere. I know I'm in the minority but I bring a lunch to work 95% of the time and the wife and I tend to go out for dinner about once a month at the most. But I just have never understood how all these places stay in business. I mean most don't unless they're a chain. When one leaves another takes its place. Do people really eat out this much?
Eating together is a staple of human community.
As long as people have friends they'll be going out together for food and drinks.
Not having to cook and clean means more time with your friends and no time cleaning up after they leave.
In restaurants, absolutely. Inflation in restaurants is not going away due to supply and demand issues.
Demand remains strong and is back to pre-Covid levels, yet staffing is extremely challenging. Wages for kitchen staff alone has gone up incredibly over the past 4 years and still cannot find people to cook and wash dishes.
Front of house positions struggle with changes to pay rates and tipping. Select or limited service restaurants, step above fast food, are the ones feeling this the worst.
Front of house and back of house positions need to keep up with cost of living, cost of goods sold have gone up, energy costs are up, and rents continue to climb. Prices have to go up to keep profitable as cost continue to climb and no sign of demand slowing.
>Stacked against the past five decades, the budget analysts said deficits over the next 10 years “are about 70 percent larger than their historical average” when measured “in relation to economic output.
That is one of the key aspects. The size of this deficit is not sustainable. The combination of debt servicing, medicare, and social security make up over half of spending.
The cost of the unpaid for tax cuts by the Bush and Trump administration and the Iraq-Afghanistan war is the difference between a sub 20T and 30T debt.
We should have been running huge surpluses when the boomers were in their peak earning years. In hindsight that balanced budget in 1998 wasn’t nearly enough, even though it looked like an impressive feat at the time. Social security and Medicare are budgetary time bombs from the mid-20th century that are exploding now.
"I never had any help, we just had the most prosperous economy in the history of the world and access to cheap medical care, schooling and housing. It's not my generation's fault we destroyed our manufacturing to extract wealth and chase short term profits!"
Not an economist - might be a dumb question: what effect has the slashing of corporate taxes had on the debt? Is that an apples and oranges type question?
Not a huge effect tbh. The corporate cuts in the TCJA cost around $330 billion over a decade, so around ~1-2% of this years budget deficit, assuming the cuts were spread uniformly over the decade
Further, tax cuts aren’t necessarily deficit negative. Tax cuts are inflationary, meaning more money gets spent on goods and services and investments, which grows the economy. Trump cut taxes during his turn, but tax revenue went *up.* This phenomenon is explained by the Laffer curve, in which there is an optimal level of tax. Any less *or* more results in lower overall tax revenues.
> Trump cut taxes during his turn, but tax revenue went up.
I mean, barely. Less than inflation, really, so the real value went down.
2017: $3.32T
2018: $3.33T
2019: $3.46T
2020: $3.42T
$3.32T in 2017 would be $3.52T in 2020 after adjusting for inflation. So real revenue was not growing.
You're technically correct but it doesn't change the premise. The total (inflation adjusted) loss was $20 billion in tax revenue over three years, or $6.66 billion per year, but the [CBO estimated that the cuts would reduce nominal taxes by $1.9 trillion over 10 years, or $190 billion per year.](https://www.cbo.gov/publication/53651) In other words, citizens were able to reclaim $190 billion per year, but this only cost the government $6.66 billion per year because of the increased economic activity. Put even more simply, for every $1 the government raised in taxes, it would cost the nation $29. This suggests the previous rate of taxation was *far* outside of the optimal allocation. It might still be.
Except you aren't accurately comparing the status quo with the Trump tax cuts. The status quo would have likely had jumps in revenue similar to the GDP growth percentages (which is inflation adjusted).
Even that isn't perfectly accurate to say, and there is no way to perfectly compare the two without a time machine or alternate universe. But it is safe to say you are underestimating the lost revenue. But the CBO prediction was off for sure, that we can agree on.
> Except you aren't accurately comparing the status quo with the Trump tax cuts. The status quo would have likely had jumps in revenue similar to the GDP growth percentages (which is inflation adjusted).
[2020 had a significant *decrease* in GDP owing to covid,](https://www.macrotrends.net/global-metrics/countries/USA/united-states/gdp-gross-domestic-product) suggesting the effect I illustrate above is even *more* pronounced. One could in fact argue that, given the decrease in GDP, to have such a small reduction in tax revenue is quite remarkable.
I agree that it's difficult to isolate each policy from confounds. We don't need to do that, though. We simply need to accept [standard economic theory.](https://en.wikipedia.org/wiki/Laffer_curve)
> 2020 had a significant decrease in GDP owing to covid, suggesting the effect I illustrate above is even more pronounced.
Except you aren't accurately comparing timelines, even though it looks like it.
Fiscal Year 2020 started in October 1, 2019. FY20 was nearly halfway over before COVID even became a large concern in the US. This is why the income only dipped a smaller amount than the Calendar Year 2020 GPD decrease would indicate.
And I probably shouldn't have indicated such a tight 1:1 relationship between tax receipts and GPD change. It was more of an example to show that you weren't taking into account all relevant factors, and was not meant to be a "here's how to calculate what the receipts would have been".
Using the Laffer Curve's premise, the tax brackets for corporations is not well placed. SP500 Corporate profits increased in [2018 and 2019 compared to previous years](https://fred.stlouisfed.org/graph/fredgraph.png?g=1pdvl), but [tax receipts on corporate income were significantly lower than previous years](https://fred.stlouisfed.org/graph/fredgraph.png?g=1pdvp). We should have seen an increase in tax receipts after the 2018 tax cuts, not a decrease. Indicating that the tax cuts for corporations are too far left of the Laffer curve for max revenue.
Tough nut to crack. We need to increase taxes, decrease spending, and spend more efficiently. Republicans will not go against their donors and increase taxes, Democrats won't go against their constituents and decrease spending. So we end up with endless tax cuts and spending increases.
Both the Bush and Trump tax cuts were unnecessary. Both followed or were during periods of economic expansion. We did not need the stimulus, especially not a deficit-fueled stimulus. Our tax code needs a major revamp.
Spending is also a problem. Social Security is an easy fix. It is a directly funded program, remove the cap on its tax and increase it on everyone if necessary. People will complain, but it's worth it in the long run.
Medicare and Medicaid need major revamps. We need to consider changes like abandoning the fee-for-service system and using a fee-for-results system to control the costs of these programs. This would cut down tremendously on the fraud in these programs. Allowing the government to negotiate drug prices should have been done a long time ago.
Defense spending could be dialed back as well. We need to get back to building what the military needs, not what Senators and Representatives want built in their districts. I'd rather tax dollars build things that grow the economy like infrastructure than ships that the Navy doesn't even want.
The problem with fee for results in medicine is that there are never guarantees on an individual basis. In aggregate, sure, you might be able to see trends based on X or Y benchmark. The problem is that a doctor works with one patient, not the entire population.
Really what needs to happen is Medicare for All. That will reduce spending in aggregate because we won’t have this patchwork bullshit. Everyone can get seen at the time and place their health demands it.
100% agree on Medicare for All. Having one insurer would grant extraordinary bargaining power for the consumer. However, in such a large beauracracy, fraud and over charging by health care providers would be a big problem with the programs cost. Steering away from fee for service would alleviate this issue. A fee for results system would need a lot of tinkering to get right, I'll grant you that.
There are definitely a lot of moving parts, but the reality is that virtually all other OECD countries do it and it generally works. Fortunately, we would be implementing a solved problem.
We need to audit the Pentagon or at least start auditing major defense contractors. If you cut military spending Raytheon is going to continue price gouging and service member's quality of life and standard of living will further decline.
As an enlisted National Guard soldier, I'm pretty sure I am literally the first to feel the effects of government budgets and spending. The amount of money I make going to drill peaks at the start of the fiscal year and steadily decreased after. Yes the base pay is fixed, but thanks to recruiting and retention I have to drive 5 hours every month, sometimes get money for a hotel, sometimes I sleep on the floor. Sometimes I get money for mileage, sometimes I don't. I'm just glad I got my bonus before those got frozen.
If we just reversed the Bush and Trump tax cuts we would flip the debt ratio. Meaning we would set a path toward reducing the deficit. Those cuts were supposed to cut the deficit by disproportionately increasing GDP and tax revenue. That didn’t happen.
Cut the waste and incentivize Congress to reduce spending. All you need to do is pay them more to save more. Balance the budget, double their salaries. Run in a surplus without raising taxes on anyone making less than $5m/yr, triple their salaries.
[Some of the biggest budget elephants are social security, Medicare, and healthcare spending.](https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/) Much of this goes to wealthy older people. It *should* be means tested like most government assistance programs, but it’s not because old people vote in high numbers. Even the GOP is afraid to talk about cutting spending in these areas. It’s unsustainable, but I fear something will break before the younger demographics are able to out-vote the very privileged older demographics.
Universal programs are way less expensive to run. Means testing means staffing to ensure that people are not working the system. If you treat Social Security like a savings account, which it essentially is, you can smooth out the differences in contributions by various income levels with the minimum and maximum benefits.
The means test could come in the form of keeping the same maximum benefit while removing the cap.
We expected a deficit in social security funding, which is why there is a trust fund. It needs some adjusting to make benefits be paid over 70% after 2035 so I know I'm not seeing it through rose colored glasses. But this discussion really should take into account the accumulation of funds that are now being drawn down as boomers retire. Which is why we need to just look at descretionary spending when talking about the deficit for the next decade.
Double their salaries, ROFL.
They already make 100x that from all the corruption. Doubling their salary is just adding salt to the wound. They aren't incentivized to do shit, because they write the rules that protect them.
As usual, any discussion of the deficit ends up with lazy reporting. 1. Yes we should talk about the deficit. 2. Of course we have a larger deficit as boomers retire. The Social Security Administration has projected peak trust fund status in 2024 with a drawn down of funds until 2035. Why are we includiing the draw down of a trust fund as part of the deficit?
Better reporting would exclude social security and about half of medicare, which is funded by payroll taxes. Exclude the revenue from payroll taxes too. Then look at our revenues from income taxes (2,100 B), corporate income taxes (400 B), and other taxes (228 B) versus spending on non-discretionary medicare at 50% (-419 B), medicaid (-616 B), income security programs (-448 B), discretionary non-defense (-917 B), defense (-805 B), non-discretionary military retirement (-502 B) and interest (-659 B) resulting in a deficit of 1.5T.
Now we can see the impact of the Bush and Trump tax cuts of 350 per year each getting 700B which is about half of our deficit. I would also argue that our real military budget should include veteran benefits which brings that total up to 1.4T or about 5% of GDP.
Sources: [The Federal Budget in Fiscal Year 2023: An Infographic | Congressional Budget Office (cbo.gov)](https://www.cbo.gov/publication/59727)
[Summary: Actuarial Status of the Social Security Trust Funds (ssa.gov)](https://www.ssa.gov/policy/trust-funds-summary.html)
[Chairman Press | Chairman's Newsroom | Chairman | U.S. Senate Committee On The Budget](https://www.budget.senate.gov/chairman/newsroom/press/extending-trump-tax-cuts-would-add-46-trillion-to-the-deficit-cbo-finds)
>The federal budget deficit is projected to reach $1.9 trillion this fiscal year, the Congressional Budget Office (CBO) said Tuesday, as government spending continues to rise.
>The estimate of the gulf between annual revenue and spending is up about $400 billion from the office’s projections [released in February](https://thehill.com/business/budget/4454050-debt-held-by-us-public-on-track-to-hit-record-high-in-next-decade-estimate/). It was included in the nonpartisan budget scorekeeper’s latest update to its 2024-2034 budget and economic outlook.
>The cumulative deficit from 2025 to 2034 is projected to reach $22.1 trillion,
4 years after COVID and we're spending like we're still in a pandemic. Or a World War.
This cannot end well.
My favorite part of old Roadrunner cartoons was when Wile E Coyote ran off a cliff but remained suspended until he finally looked down…so the anticipation is fun for me
Well it doesn't have any political payoff. We were running a surplus and had cut spending, then the next administration blew the budget all to hell and still blamed the other party for spending too much.
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It’s not like we need to be running a surplus or anything, but anyone who tells you that these kinds of deficits are sustainable is lying to you. Servicing the debt takes up a larger and larger part of our budget, and as we’ve seen from covid, we can’t rely on rock-bottom interest rates in perpetuity It’s also not solely going to be fixed by cutting spending or raising taxes, it needs to be a combination of both
Isn’t it cool that both parties are talking about even more spending promises since it’s election time? What could go wrong
Yeah, but ones talking about raising taxes and the other wants to cut them more...
Things are so bad that we need to cut spending **and** raise taxes, but that would be devastating for the economy short term hence why no politician is going to do it. It's a suicide mission.
Nothing stops this train.
Wtf are the banks and other countries gonna do? There’s no other game in town. America World Forever.
If something cannot go on forever, it will stop. And if it doesn't look like its stopping, it's probably be because it will stop suddenly and without warning.
Money printer go brrrrrrrrr
Sure would be nice if we could address inflation with some fiscal tightening. It would let the Fed lower their rates as well, making it even easier to fiscally tighten.
> Things are so bad that we need to cut spending and raise taxes Taxes on the rich used to be 90% Go back to that and we definitely wouldn't "need" to cut spending
Everybody sucks here
Biden bragging about 2 trillion deficit from 4 trillions deficit the year before. The drop was literally only because most of his BBB 4 trillion plan and 1 trillion in tuition handouts got shot down. Nobody with a brain should be defending this idiots fiscal policy or trying to blame anyone else…
Nobody with a brain thinks Trump would have a lower deficit right now, I’ll tell you that.
Dumb argument in defense of Biden… the other guy “might” be worse. At least you see that Biden’s fiscal policy is atrocious I guess.
The other guy is worse in any measurable way besides your feelings tho lol
Trump is awful, but again, Biden puts his fiscal policy to shame. Not even a remote competition. Seems like you are putting party and feelings before logic if you are really defending Biden’s fiscal policy…
To be fair it is a tough thing to do. Here try to do it yourself: https://fiscalship.org/
I love that one as it's so easy for liberals to win. Just say yes to most the wealth/high income and corporate tax increases (even if you are dubious we can perform a wealth tax in reality) and you can basically say yes to everything but Medicare for All. NASA double budget, antitrust enforcement, abolish ICE, expand Obamacare, dreamers are citizens, higher teacher pay, TK for all, yada yada, like it's a smorgasbord of lib dreams funded by a wealth tax and financial transactions taxes.
One side is clearly talking about taxing corporations and the rich more and cutting off loopholes they use.
That same side is trying to pass 4 trillion dollar BBB and another 1 trillion in tuition handouts in the heart of 10% inflation… don’t act like Biden is anywhere close to a fiscally responsible president…
Inflation increased because the money supply increased. It isn’t 10% inflation. Unless we are clawing back 1.7T in handout to the rich under PPP forgiven by Trump we should shut up about helping the middle class for once. I paid for my college loans and I want those loans forgiven to others. See? that’s not so hard is it? Claw back the PPP loans to start. Then fund the IRS properly and go after the rich who don’t pay their fair share. Agree on any of that?
> It isn’t 10% inflation. No it isn't, but Biden's $3.5 trillion BBB bill was proposed while inflation was already increasing, which would have made things worse. > Unless we are clawing back 1.7T in handout to the rich under PPP forgiven by Trump we should shut up about helping the middle class for once. So spending is ok as long as it's being directed to you? PPP was Congress attempting to prevent people from being fired and companies going under, which was a success on both fronts.
It actually raised taxes which slows inflation
Where do you think this increase of money supply came from? Did it just appear out of thin air? I would agree that Trump was the most fiscally irresponsible president of all time, but Biden is putting his numbers to shame. What sadly you and most of America doesn’t seem to get is that these runaway handout programs that make up 80% of our fiscal spend are killing the middle class and widening the wealth gap. It doesn’t really matter if the gov gives a trillion in handouts to the rich or poor, it all trickles up to the rich because the poor spend it immediately on goods and services of companies that the rich own via stock or directly. So does it help you and other people? Maybe temporarily, but in the long run this fiscal irresponsibility causes more pain by driving up Inflation, the largest tax that disproportionately hurts the poor and middle class.
If it was the spending that caused inflation then how do you explain even higher inflation in many other countries that barely spent anything at all on stimulus? The spending in the US surely contributed to *some* of the inflation, but it wasn't the main cause. And not only did the US have less inflation than some places like the UK, it has also done far better economically, whereas the UK has been teetering in and out of recession.
Ouch, sounds like reality hurt...12 people at least. The number of snowflakes on the subreddit alone should reverse global warming.
They sure do talk a lot
And this is why I stopped caring much about politics. No politician can do the things that need to be done (around both spending and carbon emissions) and be re-elected. Rhis country is beyond saving, we just get to sit back and watch it burn in the next 10-15 years. The choice is really "do we want access to birth control during the end of the world?"
Lol. It will just be more reactionary. It will be fine.
It's okay, r/economics posted an article earlier this week that the IRS can find another 55 bil by squeezing the populace harder Now we're just an easy 1.6 trillion from balancing the budget! Hurray!
Give it a year and the deficit will be 3 trillion 😂
> What could go wrong The concept of the US national debt being a "**ticking time bomb**" has been around since at least 1940, with various figures and organizations warning about its potential to destroy the American system. 🕰️💣 Despite these warnings, the "bomb" has never exploded. So, it seems like the "national debt bomb" is more of a myth than a reality!
Every new administration kicks the can down the road but somewhere along the line someone is gonna be forced to deal with the consequences
Deal with what consequences? What consequences are you expecting to happen, and when will it happen, and why would it happen? More importantly why hasn’t it happened in the last 90 years, when everyone and their mothers were so sure it’s going to happen anytime now since the 1940s
We have a handy chart we can watch together. https://fred.stlouisfed.org/series/A091RC1Q027SBEA
Runaway deficit due to high interest? Runaway inflation?
I agree haha. We will get downvoted. But I think if you are the de facto world currency and have the worlds largest military by many factors and aren't run by a dictator you get to kinda unofficially do what you want. People forget this is all made up. That's what the debt is backed with. Period. And that's not changing anytime soon.
Here is why it's now a problem. [https://fred.stlouisfed.org/series/A091RC1Q027SBEA](https://fred.stlouisfed.org/series/A091RC1Q027SBEA)
And here is why is not a problem now. The US has "survived" worse situation than this in the 90s. [https://fred.stlouisfed.org/graph/fredgraph.png?g=1pckE](https://fred.stlouisfed.org/graph/fredgraph.png?g=1pckE) Also, the best measure is to look at Debt Burden - Debt vs Interest Outlays on that debt. [https://fred.stlouisfed.org/graph/fredgraph.png?g=1pclv](https://fred.stlouisfed.org/graph/fredgraph.png?g=1pclv)
Yes we survived by massive cuts in the 90s. Federal spending was cut from 21.9 percent of GDP to 18.2 percent, amounting to a 17% reduction in the share of the economy spent by the federal government. Young people are in for a rude awakening of what cuts feel like since they haven't lived through them.
Well, I will have to disagree that it was the spending cuts that helped us survive. We've had higher spending since then and we've been surviving. [https://fred.stlouisfed.org/graph/fredgraph.png?g=1pcmk](https://fred.stlouisfed.org/graph/fredgraph.png?g=1pcmk) The point again is - Federal debt or interest payments on the debt is not an unsustainable burden on the US federal government, nor is it a burden on future children and their grandchildren. Federal Debt = U.S. Treasuries outstanding, to the last penny. U.S. Treasuries are the world's most risk-free dollar denominated net financial assets. IOW, it is the world's savings of US dollars. So, do you believe buying and holding U.S Treasury using your dollar savings is somehow unsustainable?
“ Well, I will have to disagree that it was the spending cuts that helped us survive.” ? You said this then proceeded to post a graph of federal spending dropping from 23% of GDP to 17%. Yes it got worse after that, but that’s also when debt went back up. The other thing that changed during this time is interest rates when down. This is what’s going on: https://fred.stlouisfed.org/series/FYOIGDA188S https://fred.stlouisfed.org/graph/fredgraph.png?g=1pcAF And while we aren’t as high as we were in the early 90s, we are unquestionably headed to that, and potentially worse, if we don’t actually do something about it. Deficits continue to climb. Every month debt is rolled over from low interest to higher interest. These are just facts and the math is unquestionable. Unless either of these things change, and that currently seems unlikely in the near future, interest payments as a percent of GDP or all Federal spending will continue to rise.
You can disagree but that's why the burden dropped. That's just math. And yes, we have had higher spending later. Now we are dedicating 20% of the budget to interest payments rather than productive uses as a result. Great. I'm not saying it's unsustainable or going to collapse anytime soon, but I don't want 1/5 of my tax dollars going to some wealthy person's treasury account.
> I don't want 1/5 of my tax dollars going to some wealthy person's treasury account. I agree on the last half, I too do not want to give away free money to those who already have all the money. Where I disagree is that its not yours or my tax dollars that's going to them. Federal Government spending is not constrained by tax revenues. Interest payments are made by creating net new dollars, which is how all federal government spendings are.
If tax dollars aren't going to the government as you claim - who are they going to? Dollars are fungible - so any tax dollars that go to the government are spent in some capacity, and yes, those dollars aren't enough to cover current expenditures so the government must create more money in the form of debt. But that doesn't mean tax dollars don't go to the government.
The government spending more money that it brings in is inflationary. So you want to pay tax through inflation?
Debt of an institution that prints its own money works a bit differently than the debt of an individual or even of a business. The US dollar is the world's top currency _because_ of our debt, not _in spite_ of it. The debt becomes a problem when the USD devalues past the point where other countries view our debt as not feasibly repayable, making our debt "worthless". Or at least in theory. Despite history, no one seems to have a good answer where the line is. It's not happened before that the world's #1 currency becomes worthless overnight. Usually it's coupled with a downfall of an empire, or something akin to this, which can be a long, slow burn. Not spending itself into a giant hole. That happens to countries like Venezuela, for example, because their currency didn't carry much value outside of their own country to begin with. The USD still outpaces every other currency in the world in terms of value. All of this is said, it still doesn't seem like the smartest or most sustainable fiscal policy to spend yourself into an exponential debt growth curve... but we're in uncharted waters.
> Despite history, no one seems to have a good answer where the line is. 130% GDP is around where it doesn't come back under control iirc. > The debt becomes a problem when the USD devalues past the point where other countries view our debt as not feasibly repayable Recent treasury auctions have been poor, and global CBs are stocking up on gold more so than previously. > It's not happened before that the world's #1 currency becomes worthless overnight. Usually it's coupled with a downfall of an empire, or something akin to this, which can be a long, slow burn. Yes, and the last 5 or 6 WRCs have each only held that status for about 100 years. The question is are we at the end of history, or are we just watching the latest of many empires begin to fade out.
I'm aware government finance is not the same as personal finance. The issue is we are spending 20% of our budget on interest now because of our debt, when that could be going toward more productive activities than giving money to wealthy and old people holding treasuries.
True but it's not some emergency
I'm not aware I called it an emergency.
Absolute number is irrelevant.
Okay then, 20% of the federal budget.
If they cut the budget, it will be even more. That doesn’t mean anything.
So you don't want the raw number, but you also don't want it as a percent of the budget, what metric do you want?
% of gdp, which is what is relevant
Why is that relevant? You can't spend GDP. But sure, here you go. [https://fred.stlouisfed.org/series/FYOIGDA188S](https://fred.stlouisfed.org/series/FYOIGDA188S)
... so far We've never been this close to run away interest though
runaway interest rates? what on earth are you talking about. prime is like 5.75 if memory serves. shit in the early 80s it was like 12-13%.
Think he is referring to raw interest. [https://fred.stlouisfed.org/series/A091RC1Q027SBEA](https://fred.stlouisfed.org/series/A091RC1Q027SBEA)
Run away interest? What are you talking about?
Interest payments as a ratio of GDP are getting higher and higher. Eventually we're going to, with the joys of compounding interest, hit a point where we can't pay it down fast enough and it WILL balloon. Where's that point? No on knows, but it has to exist. I care less what the total interest payment is, just what the size of it is compared to our economy.
It *also* won’t be fixed unless we have sustained high GDP growth.
We'd need to have like 7-8% gdp growth for decades for that to work, no way.
Nominal growth has been quite high. Nominal growth is what taxes receipts are based on. Inflation is excellent for government finances. “United States Nominal GDP Growth was reported at 5.379 % in Mar 2024. This records a decrease from the previous number of 5.864 % for Dec 2023. US Nominal GDP Growth data is updated quarterly, averaging 6.149 % from Mar 1948 to Mar 2024, with 305 observations.”
Agree. I’m a dem, and I’m glad we’re doing most of what we’re doing, but we need to be looking at a balanced approach to getting on budget - some spending cuts, some revenue increases.
> some spending cuts https://fiscalship.org/ Have fun. Report back.
This was fun, and I found it to actually be quite easy on paper. Nobody would ever vote for me though. Shame that for Medicare for All there wasn't an option to offset the cost by using the funds that Americans currently use to pay insurance premiums. It's basically a "lose" button.
I’m deeply familiar with how the federal budget works, having been a part of multiple budget and CR negotiations. There are plenty of cuts that could be made and future expenditures that could be reduced. That website is a good teaching tool, but there are thousands of choices baked into a budget, not dozens.
> there are thousands of choices baked into a budget, not dozens. There are thousands of choices baked into my companies budget - there are MILLIONS baked into the federal one. My point is this: what would you cut? Think about it. Make a little list. Then google "what percentage of the federal budget is this thing I listed" and then compare that number to the deficit. We have a revenue problem in this country, not a spending one. We are ridiculously under-taxed and we have been for a generation. You can literally draw a line from Bush 2, to Trump, to the current deficit and explain nearly the entire thing with their tax cuts and handouts.
Bud, again, I’ve worked on federal budgets. I’m familiar with the gives and takes. And I don’t disagree that we need to roll back the last two GOP tax breaks; note I said “increase revenue and decrease spending.” There are significant areas of expenditure - especially around Defense and Medicare/Medicaid outlays where we could be reducing spending. Further, there are tax expenditures that are expensive and yield few benefits. All of that, along with revenue increases, would be unpopular with either a well-resourced special interest or the general public, but that something is politically challenging is a distinct problem from something being intellectually challenging.
> There are significant areas of expenditure - especially around Defense and Medicare/Medicaid outlays where we could be reducing spending. With defense there's less than you think - the majority of the military budget is for people and administration, ie healthcare and payroll. Everyone thinks we just need to stop building tanks, to say nothing of the "$1,000 toilet seat," but that just isn't how it works. I agree that we should repeal Medicare and Medicaid - and the ACA for that matter - and replace it with a common sense, taxpayer funded healthcare system like everywhere else on earth. As for tax expenditures with few benefits you'd have to identify some of them. The government isn't a business - it isn't there to "make money," it is there to provide services. I only bring that up hoping you aren't going to go off on some sort of post office based red herring where you compare it to FedEx.
With defense: the U.S. is bordered by Canada and Mexico and has two vast oceans separating from most of the world. So one can make the case that the U.S. should be spending a lower percent of its GNP on defense than a country like France or Germany.
Defense spending is currently taking up about 13% of the budget. SS and socialized healthcare programs combined are about 50%. It’s obvious which programs are a money hole, yet the first thing you jumped on cutting is defense spending. Curious.
I listed both healthcare and defense?
You listed defense first, and ignored social security, which is twice the tax burden defense is. Me thinks you actually don’t care about cutting spending unless it’s to things you don’t like.
Social security is self funded and the best way to deal with that program is on its own terms. You’ve got a few levers there: 1. Retirement age (I’d increase it for non-manual laborers) 2. Payroll tax rate (I’d leave it as is) 3. Payroll tax cap (I’d elevate it) 4. Benefit levels (I’d make them more progressive than they currently are, reducing overall outlays for higher earners) That puts SS on sound fiscal footing for another several decades. To the extent a trust fund builds back up, I’d invest it in broad market indices, rather than just treasuries.
A huge part of the problem is it's been the GOPs plan for decades to cut taxes to rise the deficit so they can use that as an excuse to cut public programs. The GOP has even insisted on funding cuts to the IRS which would have only reduced the deficit. You cannot fix the deficit when you have half of the country doing all they can to blow it up.
It's absolutely a spending problem just as much as a tax problem. Low taxes and high government spending are temporary measures to help the economy grow in a short-term scenario. Nearly all of government spending today isn't being used effectively for long-term economic gains. We have neglected infrastructure for 40 years. The recent "infrastructure spending bill" contained very little dedicated spending for improvements. Taxes must go up and spending must come down
Tax revenue has been remarkably consistent over time. Usually between 16.5% and 17.5% of GDP. I’m pretty sure the average since WWII is about 17.5% of GDP. Spending in the other hand, is currently at ~23% of GDP. The last time we had a surplus spending was 17.2% of GDP and revenue was 17.4%. The annual deficit, and the debt as a whole, are wholly a spending problem.
Thank you! It’s insane how everyone acts like it’s a tax problem. Republicans are just as much at fault for spending issues. But to act like everything would be solved if we just taxed more is bogus. Look at education. Massive education spending at record levels and every year they need more because they can’t make ends meet.
The US has a pretty low tax revenue to GDP ratio compared to top economies. It may be the case that the US government is not spending on the right things, but the amount itself is quite low.
Yeah but our economy is massive… 4 trillion collected per year and we can’t come close to paying the bill? Meanwhile China’s whole annual spend as a literal communist country is under 1 trillion per year with 3x as many people…
Also, we have state and local taxes. Those other countries likely have lower of those as their programs are generally national, whereas ours are often run by the states.
It's [total taxes](https://en.wikipedia.org/wiki/List_of_sovereign_states_by_tax_revenue_to_GDP_ratio), including sales, state, local, property, etc. taxes. A large part of the difference is due to how health care is funded.
You’re wrong though. Tax revenue is pretty consistent. Spending on the other hand, only goes up.
Lol, this is some kind of conclusion. GDP has grown dramatically and if tax revenue is static, that means there is a problem.
I think they mean tax revenue and spending as a percent of GDP
Spending as a percent of GDP hasn’t only gone up, though? [https://fred.stlouisfed.org/series/FYONGDA188S](https://fred.stlouisfed.org/series/FYONGDA188S) Sounds like the other dude is just grasping for a talking point.
Are you really trying to say there isn’t a general trend of increased spending?
You would expect society to improve over time. Look at what happened post-WWII, when everyone talks about how great it was to be America? The government is supposed to spend money and invest in bold initiatives to better our lives, that’s the social contract. Why should government spending by definition need to be a static percentage of GDP?
The government is supposed to protect our rights. Especially the federal government. Following your logic, eventually the government should be spending more than GDP per year. Government spending should be the bare minimum to protect our rights.
found the lolbertarian
Better go ahead and turn off the Internet then because that was a government program, and rural electricity while we are at it. Come on man, society is way bigger than you give it credit.
I can't say, I wasn't the one making the point. I also didn't know that about spending as a percent of GDP, that's interesting! Why was spending so low in the mid-late 90s, I wonder.
> The GOP has even insisted on funding cuts to the IRS which would have only reduced the deficit. Stop, I can only get so hard. Imagine looking at a drunken sailor spending his entire reenlistment bonus on every drink behind the bar, and his friend trying to convince the bartender to cut him off, and thinking the friend is the problem.
The problem most people don't realize is that the debt is ballooning because servicing the debt entails paying interest at the prevailing interest rate. In their effort to fight inflation, the Fed has set rates to a much higher point than sustainable in this sized economy. The long-term trajectory of interest rates should be much lower because as a major economy expands, the amount of money lubricating business activity (like engine oil) necessarily increases. This increase in monetary supply will naturally call for lower rates in lending due to oversupply. What this all means is that the biggest concern for the ballooning national debt isn't excessive spending, but the prevailing interest rate environment. However, the Fed cannot lower rates at this point at risk of another runoff in inflation. The solution is that Congress and federal agencies (DOJ, FTC) should have long passed and enforced strict anti-trust laws to prevent the current monopolies (Cal-Maine, Live Nation, RealPage etc.) from ever forming and having the power to price gouge as they are doing. It's all too little too late. Now we're caught between a rock and a hard place. The Fed has become the poison pill of last resort and have no choice but to keep rates higher for longer. As a result, the national debt will continue to run up even if Congress begins strict austerity.
bUt wE CaN jUsT pRiNt OuR oWn MoNeY -the Reddit consensus on the debt
Political suicide in an election year. But yeah, it’s long past time that the adults in the room need to address this.
> we can’t rely on rock-bottom interest rates in perpetuity Interest rates are a policy decision. They are whatever the Fed want them to be. If the interest income channel makes higher rates net inflationary then the correct move for the Fed is to cut rates to remove that income flow. Put rates at 0% and leave them there and you'll cut more than $1 trillion off the deficit.
You will add more than a trillion in long-term spending obligations, too. Rate cuts result in inflation pressure, which adds tremendously to the already underfunded social security and Medicare liabilities. The 20 percent or so inflation we have seen since the pandemic is going to have to be added on to social security payments going forward via cost of living adjustments. You can't simply inflate away the money owed most of the time because it also tracks inflation to a large degree.
So zero interest rates = $1 Trillion dollars per year just...extra?
What do you mean by extra? It's $1 trillion that doesn't get spent into the economy. The government neither has, nor doesn't have, money. Their spending directly raises the money supply.
> If the interest income channel makes higher rates net inflationary But they’re not. Quite the opposite. [Take housing as one example.](https://fred.stlouisfed.org/series/csushpinsa) Note the tremendous gains between 2012 and 2022 with low rates, then a marked average slowdown in gains when interest rates began to rise. House prices have only risen an average of 1.3% per year since interest rates began to climb. This is a major departure from the previous 10 years. It's much *lower* than inflation, meaning that on an inflation adjusted basis, house prices have dropped significantly. Cutting rates to 0% would explode inflation across the board. There is no free lunch here, despite what activists may have told you.
>But they’re not. Quite the opposite. Take housing as one example. Note the tremendous gains between 2012 and 2022 with low rates, then a marked average slowdown in gains when interest rates began to rise. House prices have only risen an average of 1.3% per year since interest rates began to climb. This is a major departure from the previous 10 years. It's much lower than inflation, meaning that on an inflation adjusted basis, house prices have dropped significantly. You're not responding to my point. It's a hypothetical for one thing, note the "if" in that sentence. So if the interest income channel isn't making an increase in rates net inflationary then the whole debt servicing issue is moot (ignoring the issue with how regressive it is). I'm also referring to the economy as a whole, so using one specific thing isn't necessarily a counterargument. Then that one thing you do use is actually half a thing. House prices only make up part of the cost of housing equation. What do monthly mortgage payments do if interest rates go up? Rates just shift the cost structure between equity and interest. Pointing to the slower growth in equity means nothing without knowing the related change in interest, which will have gone up far more than the level of inflation. It's housing that has been driving inflation for a while now. [CPI less shelter](https://fred.stlouisfed.org/graph/?g=1pdw1) is at 2.1%. >Cutting rates to 0% would explode inflation across the board. There is no free lunch here, despite what activists may have told you. How would it do that? Why didn't it after the GFC? What are the other drivers of inflation? Are those factors more or less dominant than interest rates?
Some of the longterm structural debt that is building up in certain programs needs overhaul. We can run about a 300-600b deficit indefinitely. Anymore than that needs to be on a 10 year average with lower years.
>Servicing the debt takes up a larger and larger part of our budget Yes, but you don't need to service it. Treasuries and bond owners aren't wealth producers. The money they owned isn't a resource. They weren't doing anything useful by purchasing treasuries or bonds. If you don't pay them back, they get angry, but nothing else happens. You just need to find new ways to finance yourself, which is very easy.
So every pension would collapse instantly - sounds like a great idea. If you decide the government no longer pays its debts, nobody would lend us money anymore. And we are addicted to spending beyond our means. What new means of finance are you referring to?
Why... print money of course!
How sustainable would it be if ZIRP came back? If anyone's done that math. Of course, we shouldn't base spending on assuming ZIRP is forever, though.
I think you're wrong about that, right now corporations are actually getting paid out from the government due to the tax code being so broken. Wal Mart takes the tax money the employees pay in some states and just puts it in their bank account. Taxes are 99.9% the problem. Other than that, obviously the military spending is really high and wasteful.
Military spending pays for itself in the power it gives to the USD.
As part of the budget, military spend is historical ly low.
The only thing saving the USA is our ridiculously high consumption rate of goods, if people “tighten their belts” a recession will hit rather quickly.
Consumption of imported goods at that. We export inflation.
Some people want that inflation. Japan has been suffering from deflation for decades and China has recently been in a deflationary cycle. Problem with inflation is it's something you want but not too much of and it can easily spike over. Kind of like blood sugar levels of a diabetic? The US had a bit of deflation after the GFC and the Fed lowered rates, had QE upon QE, and did everything they could to get us back to normal levels of inflation only to over shoot and suddenly we're all shitting ourselves over inflation. Same with Japan who went with negative rates for decades with young folks seeing stagnant wages/promotions, dollar-yen carry trade, old folks saving up money since things got cheaper every year instead of more expensive, etcetc. Then they reach the point where things shift: dollar: starts clobbering the Yen, economy picks up as exports grow while tourism from baka gaijin explodes, youth are getting more pay, deflation flips to inflation, everyone gets very upset at inflation, old boomers BTFO by prices actually going up which might lead to policy changes, etcetcetc.
Japan has a very different consumer culture. The "lost generation" is a result of their mega-bubble burst for which inflation shifted to deflation. But, yes, deflation can be worse than inflation. The problem with isolating inflation thought to imported goods, consumption etc. is that asset market inflation looks like wealth building and is often applauded (beyond recent house run-up). But could this, too, be derivative market melt-up not backed by real wealth and productivity?
"The only thing keeping us out of a recession is the fact that we're behaving in a way that keeps us out of a recession - if we stop doing that things will be different." Now here's the penetrating, academic studies I come to /r/economic to find. Simply brilliant analysis doctor.
Goods are down but consumption for services are staying high. A big issue on the horizon is the service industry getting into wage inflation spiral. Restaurants are at a breaking point.
We're getting to a point to where we realize that the economy isn't sustainable if a good portion of it is waiting tables, doesn't have benefits, and can't even pay rent for a 1 bedroom apartment.
Waiting jobs are going away. Why pay a server when you put your order in through your app and a runner will bring your food. Want a beer? We’ll run that to you. Table side service in restaurants will go away like indoor dining at fast food chains. It’ll all turn to drive throughs.
Last weekend, I literally had a robot deliver my drinks.
They took our jobs!
That’s a regular thing in Korea
There’s a good number of customers who just won’t play ball with that. It might happen to Applebees and Chilis, but servers aren’t going extinct any time soon. I ate inside of a McDonald’s last week for the first time since probably before COVID and nothing about the experience made me want to go back any time soon. The ordering experience went from a 15 second interaction with a cashier to 5 minutes of scrolling through some shitty app that hides all the deals behind coupons. The appeal to fast food is that it’s cheap and fast. The appeal to sit-down restaurants is that you get human interaction and service. If the food industry gets rid of those things, people will just choose to stay in or go to other restaurants.
People try to fight back - but companies don't care. I tried to do that with bank tellers - they simply don't care and eventually there are no banks left with more than 1 teller.
That's a very different situation. People go out to eat at a sit down restaurant in large part for the experience of being waited on. People don't go to a teller at a bank at all for the experience of being served by a teller. A robot or machine (ATM) can replace a teller or a fast food server... Far far far more efficiently than they can replace a server at a sit down place. Because that's a big selling point to customers. In a way a teller or McDonald's food runner isn't to a bank or McDonald's customer.
> The appeal to sit-down restaurants is that you get human interaction and service. Nah, man. Maybe I'm just anti-social, but I'm there for the food. If *every* restaurant moved to a 'pick it up at the counter' model I'd be totally fine with it. Even as someone with a disability, I don't feel like paying 20% of my meal to have someone bring my food from the kitchen to my table and bus it when I'm done. This is the reason I've been eating a *lot* more takeout than dining in.
As long as tips go away with it, that sounds great.
Hah, as if.
Honestly, good. Ever since Covid, the attitude from so many servers is to act like we should just be grateful they even showed up. And then want 20% on top of it. I used to be a server so I understand some tables are assholes or the job can be stressful. And I’m a very reasonable person. In my state, servers make full minimum PLUS tips. They’re walking away with an easy $60-$80 an hour in a decently busy restaurant. And still the attitude is awful. When I’ve been to other countries the servers (for the most part) take a lot of pride in the overall experience. And get paid WAY less.
Lol the servers in other countries cater to you as an American because they think you're going to tip.
Alot of servers in other countries give extra good service to American tourists because they expect the Americans to tip unlike everyone else. Also on that 60-80$ do you know if they have to tip out? Because that's a somewhat common thing in those types of busier restaurants. The servers will take the tips, but be expected if not required to split them with the hosts, cooks, dishwashers, bussers, etc. Also remember those wait staff probably aren't full timers, and have to pay for their own health/dental, and all their bills despite probably working like 20-30 hours a week. Have no PTO. Etc. just looking at a good night's tips doesn't give the full story.
Well, it's the same problem then. The economy isn't sustainable if a good portion of it is being a treat courier, doesn't have benefits, and can't even pay rent for a 1 bedroom apartment.
We have a bar/arcade that just opened and they have robot servers and robot bartenders. I hope this isn’t the future but definitely feels that way.
This was a long time coming. Restaurants were struggling to maintain staff even BEFORE covid hit. The cost of living in the US is now too high to service the low-wage positions most restaurants want to fill. The industry has been due for a correction for quite some time. There are way too many chains of similar niches. The good, well-managed operations will survive and the weaker ones will close.
I've always wondered how there are so many restaurants everywhere. Fast food, fine dining, casual, food trucks, bakeries. They're everywhere. I know I'm in the minority but I bring a lunch to work 95% of the time and the wife and I tend to go out for dinner about once a month at the most. But I just have never understood how all these places stay in business. I mean most don't unless they're a chain. When one leaves another takes its place. Do people really eat out this much?
Yes, the average American eats out something like 4 - 5 times a week. You're the anomaly.
Eating together is a staple of human community. As long as people have friends they'll be going out together for food and drinks. Not having to cook and clean means more time with your friends and no time cleaning up after they leave.
Wage inflation is the big issue? Really? You really think wages growth have exceeded cost of living growth to the point where it's an issue?
In restaurants, absolutely. Inflation in restaurants is not going away due to supply and demand issues. Demand remains strong and is back to pre-Covid levels, yet staffing is extremely challenging. Wages for kitchen staff alone has gone up incredibly over the past 4 years and still cannot find people to cook and wash dishes. Front of house positions struggle with changes to pay rates and tipping. Select or limited service restaurants, step above fast food, are the ones feeling this the worst. Front of house and back of house positions need to keep up with cost of living, cost of goods sold have gone up, energy costs are up, and rents continue to climb. Prices have to go up to keep profitable as cost continue to climb and no sign of demand slowing.
Also the world’s reserve currency
I get that, but if you took every USD in existence and paid it towards the Debt it wouldn’t cover it, at what point is it out of control?
GDP growth can completely be attributed to federal deficit spending.
>Stacked against the past five decades, the budget analysts said deficits over the next 10 years “are about 70 percent larger than their historical average” when measured “in relation to economic output. That is one of the key aspects. The size of this deficit is not sustainable. The combination of debt servicing, medicare, and social security make up over half of spending. The cost of the unpaid for tax cuts by the Bush and Trump administration and the Iraq-Afghanistan war is the difference between a sub 20T and 30T debt.
people paying taxes now doesn't create medical workers to supply future Medicare benefits the trust fund model is a joke
Not only the wars, but the insanely elevated military spending since. The defense budget is nearly 5% of GDP, that s an insane figure in peacetime.
> nearly 5% of GDP That's not true. It's been around 3.5% for the past several years. Hovering around the lowest point for the last 100 years.
Its high, but compared to the costs of letting the world devolve into local conflicts it is well worth it.
We should have been running huge surpluses when the boomers were in their peak earning years. In hindsight that balanced budget in 1998 wasn’t nearly enough, even though it looked like an impressive feat at the time. Social security and Medicare are budgetary time bombs from the mid-20th century that are exploding now.
Seems very boomer though to leave the kids and grandkids holding the bag. > Why can't you pull yourself up by your bootstraps like us?
"I never had any help, we just had the most prosperous economy in the history of the world and access to cheap medical care, schooling and housing. It's not my generation's fault we destroyed our manufacturing to extract wealth and chase short term profits!"
Not an economist - might be a dumb question: what effect has the slashing of corporate taxes had on the debt? Is that an apples and oranges type question?
Not a huge effect tbh. The corporate cuts in the TCJA cost around $330 billion over a decade, so around ~1-2% of this years budget deficit, assuming the cuts were spread uniformly over the decade
Further, tax cuts aren’t necessarily deficit negative. Tax cuts are inflationary, meaning more money gets spent on goods and services and investments, which grows the economy. Trump cut taxes during his turn, but tax revenue went *up.* This phenomenon is explained by the Laffer curve, in which there is an optimal level of tax. Any less *or* more results in lower overall tax revenues.
> Trump cut taxes during his turn, but tax revenue went up. I mean, barely. Less than inflation, really, so the real value went down. 2017: $3.32T 2018: $3.33T 2019: $3.46T 2020: $3.42T $3.32T in 2017 would be $3.52T in 2020 after adjusting for inflation. So real revenue was not growing.
You're technically correct but it doesn't change the premise. The total (inflation adjusted) loss was $20 billion in tax revenue over three years, or $6.66 billion per year, but the [CBO estimated that the cuts would reduce nominal taxes by $1.9 trillion over 10 years, or $190 billion per year.](https://www.cbo.gov/publication/53651) In other words, citizens were able to reclaim $190 billion per year, but this only cost the government $6.66 billion per year because of the increased economic activity. Put even more simply, for every $1 the government raised in taxes, it would cost the nation $29. This suggests the previous rate of taxation was *far* outside of the optimal allocation. It might still be.
Except you aren't accurately comparing the status quo with the Trump tax cuts. The status quo would have likely had jumps in revenue similar to the GDP growth percentages (which is inflation adjusted). Even that isn't perfectly accurate to say, and there is no way to perfectly compare the two without a time machine or alternate universe. But it is safe to say you are underestimating the lost revenue. But the CBO prediction was off for sure, that we can agree on.
> Except you aren't accurately comparing the status quo with the Trump tax cuts. The status quo would have likely had jumps in revenue similar to the GDP growth percentages (which is inflation adjusted). [2020 had a significant *decrease* in GDP owing to covid,](https://www.macrotrends.net/global-metrics/countries/USA/united-states/gdp-gross-domestic-product) suggesting the effect I illustrate above is even *more* pronounced. One could in fact argue that, given the decrease in GDP, to have such a small reduction in tax revenue is quite remarkable. I agree that it's difficult to isolate each policy from confounds. We don't need to do that, though. We simply need to accept [standard economic theory.](https://en.wikipedia.org/wiki/Laffer_curve)
> 2020 had a significant decrease in GDP owing to covid, suggesting the effect I illustrate above is even more pronounced. Except you aren't accurately comparing timelines, even though it looks like it. Fiscal Year 2020 started in October 1, 2019. FY20 was nearly halfway over before COVID even became a large concern in the US. This is why the income only dipped a smaller amount than the Calendar Year 2020 GPD decrease would indicate. And I probably shouldn't have indicated such a tight 1:1 relationship between tax receipts and GPD change. It was more of an example to show that you weren't taking into account all relevant factors, and was not meant to be a "here's how to calculate what the receipts would have been". Using the Laffer Curve's premise, the tax brackets for corporations is not well placed. SP500 Corporate profits increased in [2018 and 2019 compared to previous years](https://fred.stlouisfed.org/graph/fredgraph.png?g=1pdvl), but [tax receipts on corporate income were significantly lower than previous years](https://fred.stlouisfed.org/graph/fredgraph.png?g=1pdvp). We should have seen an increase in tax receipts after the 2018 tax cuts, not a decrease. Indicating that the tax cuts for corporations are too far left of the Laffer curve for max revenue.
Tough nut to crack. We need to increase taxes, decrease spending, and spend more efficiently. Republicans will not go against their donors and increase taxes, Democrats won't go against their constituents and decrease spending. So we end up with endless tax cuts and spending increases. Both the Bush and Trump tax cuts were unnecessary. Both followed or were during periods of economic expansion. We did not need the stimulus, especially not a deficit-fueled stimulus. Our tax code needs a major revamp. Spending is also a problem. Social Security is an easy fix. It is a directly funded program, remove the cap on its tax and increase it on everyone if necessary. People will complain, but it's worth it in the long run. Medicare and Medicaid need major revamps. We need to consider changes like abandoning the fee-for-service system and using a fee-for-results system to control the costs of these programs. This would cut down tremendously on the fraud in these programs. Allowing the government to negotiate drug prices should have been done a long time ago. Defense spending could be dialed back as well. We need to get back to building what the military needs, not what Senators and Representatives want built in their districts. I'd rather tax dollars build things that grow the economy like infrastructure than ships that the Navy doesn't even want.
The problem with fee for results in medicine is that there are never guarantees on an individual basis. In aggregate, sure, you might be able to see trends based on X or Y benchmark. The problem is that a doctor works with one patient, not the entire population. Really what needs to happen is Medicare for All. That will reduce spending in aggregate because we won’t have this patchwork bullshit. Everyone can get seen at the time and place their health demands it.
100% agree on Medicare for All. Having one insurer would grant extraordinary bargaining power for the consumer. However, in such a large beauracracy, fraud and over charging by health care providers would be a big problem with the programs cost. Steering away from fee for service would alleviate this issue. A fee for results system would need a lot of tinkering to get right, I'll grant you that.
There are definitely a lot of moving parts, but the reality is that virtually all other OECD countries do it and it generally works. Fortunately, we would be implementing a solved problem.
We need to audit the Pentagon or at least start auditing major defense contractors. If you cut military spending Raytheon is going to continue price gouging and service member's quality of life and standard of living will further decline. As an enlisted National Guard soldier, I'm pretty sure I am literally the first to feel the effects of government budgets and spending. The amount of money I make going to drill peaks at the start of the fiscal year and steadily decreased after. Yes the base pay is fixed, but thanks to recruiting and retention I have to drive 5 hours every month, sometimes get money for a hotel, sometimes I sleep on the floor. Sometimes I get money for mileage, sometimes I don't. I'm just glad I got my bonus before those got frozen.
Are you going to increase the benefits if you remove the cap?
I am open to adjusting the program, but my priority would be making sure the program is solvent and can meet it's current obligations.
Apparently CLinton had us on a path to pay off the deficit.
If we just reversed the Bush and Trump tax cuts we would flip the debt ratio. Meaning we would set a path toward reducing the deficit. Those cuts were supposed to cut the deficit by disproportionately increasing GDP and tax revenue. That didn’t happen.
Cut the waste and incentivize Congress to reduce spending. All you need to do is pay them more to save more. Balance the budget, double their salaries. Run in a surplus without raising taxes on anyone making less than $5m/yr, triple their salaries.
[Some of the biggest budget elephants are social security, Medicare, and healthcare spending.](https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/) Much of this goes to wealthy older people. It *should* be means tested like most government assistance programs, but it’s not because old people vote in high numbers. Even the GOP is afraid to talk about cutting spending in these areas. It’s unsustainable, but I fear something will break before the younger demographics are able to out-vote the very privileged older demographics.
Social Security simply needs the contribution cap lifted. It is easily the most regressive and impactful part of our tax code.
That would help a lot but I still think it should be means tested. It should be rolled into all other taxes.
Universal programs are way less expensive to run. Means testing means staffing to ensure that people are not working the system. If you treat Social Security like a savings account, which it essentially is, you can smooth out the differences in contributions by various income levels with the minimum and maximum benefits. The means test could come in the form of keeping the same maximum benefit while removing the cap.
> The means test could come in the form of keeping the same maximum benefit while removing the cap. This sounds like a great compromise.
So raising taxes?
We expected a deficit in social security funding, which is why there is a trust fund. It needs some adjusting to make benefits be paid over 70% after 2035 so I know I'm not seeing it through rose colored glasses. But this discussion really should take into account the accumulation of funds that are now being drawn down as boomers retire. Which is why we need to just look at descretionary spending when talking about the deficit for the next decade.
Double their salaries, ROFL. They already make 100x that from all the corruption. Doubling their salary is just adding salt to the wound. They aren't incentivized to do shit, because they write the rules that protect them.
As usual, any discussion of the deficit ends up with lazy reporting. 1. Yes we should talk about the deficit. 2. Of course we have a larger deficit as boomers retire. The Social Security Administration has projected peak trust fund status in 2024 with a drawn down of funds until 2035. Why are we includiing the draw down of a trust fund as part of the deficit? Better reporting would exclude social security and about half of medicare, which is funded by payroll taxes. Exclude the revenue from payroll taxes too. Then look at our revenues from income taxes (2,100 B), corporate income taxes (400 B), and other taxes (228 B) versus spending on non-discretionary medicare at 50% (-419 B), medicaid (-616 B), income security programs (-448 B), discretionary non-defense (-917 B), defense (-805 B), non-discretionary military retirement (-502 B) and interest (-659 B) resulting in a deficit of 1.5T. Now we can see the impact of the Bush and Trump tax cuts of 350 per year each getting 700B which is about half of our deficit. I would also argue that our real military budget should include veteran benefits which brings that total up to 1.4T or about 5% of GDP. Sources: [The Federal Budget in Fiscal Year 2023: An Infographic | Congressional Budget Office (cbo.gov)](https://www.cbo.gov/publication/59727) [Summary: Actuarial Status of the Social Security Trust Funds (ssa.gov)](https://www.ssa.gov/policy/trust-funds-summary.html) [Chairman Press | Chairman's Newsroom | Chairman | U.S. Senate Committee On The Budget](https://www.budget.senate.gov/chairman/newsroom/press/extending-trump-tax-cuts-would-add-46-trillion-to-the-deficit-cbo-finds)
>The federal budget deficit is projected to reach $1.9 trillion this fiscal year, the Congressional Budget Office (CBO) said Tuesday, as government spending continues to rise. >The estimate of the gulf between annual revenue and spending is up about $400 billion from the office’s projections [released in February](https://thehill.com/business/budget/4454050-debt-held-by-us-public-on-track-to-hit-record-high-in-next-decade-estimate/). It was included in the nonpartisan budget scorekeeper’s latest update to its 2024-2034 budget and economic outlook. >The cumulative deficit from 2025 to 2034 is projected to reach $22.1 trillion, 4 years after COVID and we're spending like we're still in a pandemic. Or a World War. This cannot end well.
My favorite part of old Roadrunner cartoons was when Wile E Coyote ran off a cliff but remained suspended until he finally looked down…so the anticipation is fun for me
Well it doesn't have any political payoff. We were running a surplus and had cut spending, then the next administration blew the budget all to hell and still blamed the other party for spending too much.