Timothy Taylor on mainstream economics vs. the candidates; Michael Cannon condemns Harris' long-term care proposal; Ed Pinto on her first-time homebuyer subsidy proposal;
If a politician came out and said “We are not going to cut Medicare or social security, but we are going to pay out all future checks in a new currency called the mini-dollar.”, that politician would have no chance of getting elected.
Most voters would assume the new mini-dollar would have far less value than the current dollar. It would be seen as an immoral bait and switch.
However - this is exactly what they are all saying right now. Future dollars will actually be figurative mini-dollars as they will be able purchase much less due to the amount of dollars that will be printed to meet those claims. It is an immoral bait and switch.
It seems likely to me that Trump is competitive right now specifically because the attempt to inflate away debts the last few years was extremely unpopular. Inflation is very politically toxic.
BTW, SS is linked to the CPI and Medicare obviously rises as medical prices rise, so good luck inflating those away.
It's not a perfect match though and in general weighted not for the benefit of the recipient. My Federal annuity is also tied to the CPI but in real terms my purchasing power degrades, not increases, year after year which shouldn't be possible given the CPI linkage.
How exactly does your purchasing power in real terms degrade year after year?
You are claiming that the CPI meaningfully understates inflation? Or just that your basket of goods consistently goes up more than the market basket, and that you have minimal ability to substitute to keep your real living standard up?
Both are possibly true but at least anecdotally it's the latter from talking to others and examining my own situation as well. 80% of my income goes to rent and utilities and both of those rose, and consistently do, much higher than the inflation rate and have for years (used to be 45% my income); and that shouldn't be possible given the CPI linkage. And I know I'm not the only person in that body when I talk to other fixed income people.
That said I'll concede the problem could be locality issues as in CPI is tied to the national economy.
The government has little or no ability to inflate the debt away. They are paying interest based on inflation expectations. They came out ahead a few years when it was high and they will come out behind for a few years if it stays low.
"Inflation does lower the burden of existing debt."
Increasing inflation might but when inflation goes back down, as recently happened, the burden increases by a similar amount.
The burden of debt is set by expectations of inflation by the bond purchasers. It only gets lower when inflation rises more than bond purchases expect. And when inflation drops, the money borrowed when inflation was higher adds to government costs.
“ Increasing inflation might but when inflation goes back down, as recently happened, the burden increases by a similar amount.”
Yeah, sorry, that’s just incorrect.
Disinflation does not cause the “burden” to increase “by a similar amount”
Unless you are talking about actual *deflation*. Then you would be technically correct re: the debt
But as “Helicopter Ben” and all other Federal Reserve Board members know, sustained deflation is very bad for the economy, in addition to being bad for government revenues and the value of the debt government owes. Government bondholders win under deflation, but almost everyone else loses. Hence “Helicopter Ben”.
But all inflation does indeed lower the burden to government/the taxpayers of *existing* debt (other than things like TIPS, of course). Whether said inflation was expected or not. You are conflating different ideas (related to the price/yields of subsequently issued bonds) when you suggest otherwise.
Sorry I wasn't clearer. When inflation goes up, the government gets a bit of a free ride on debt financed at lower rates. When inflation goes back down, they still have the debt financed at a higher rate. None of this involves deflation.
We can disagree on whether inflation estimates are high or low but as long as SS and Medicare include adjustments for CPI, I don't see your concern as a an issue. Plenty of other concerns but not that one.
I would like to point out that the blatant vote-buying nature of this campaign (and total disregard for fiscal probity) is downstream of the changing nature of the median voter. Median voter used to be a white worker or small businessman; now it's a white pensioner or Mexican, neither of which is especially interested in cutting entitlements or particularly open to market-based arguments. This is directly downstream of population aging (which neither candidate or party will affect much) and immigration (on which Trump is overwhelmingly superior to Harris). If you don't want every subsequent election to make this one look honest and intellectual (see: Latin America), you need mass deportations.
Exactly. Romney/Ryan ran on "fiscal responsibility" in 2012 and indeed won a % of the white vote equal to Ronald Reagan. It was a loser. Hispanics said they wanted the ACA subsidies more than Joe the Plumber.
It's probably an advance for the GOP to realize that a median voter of 55 years and increasingly non-white just is not going to be moved by that agenda. It's a lot of wasted political capital.
I think we should just accept that entitlement reform is an inevitable train wreck and focus on getting ourselves in the best position to recover from that wreck.
I disagree with your characterization of median voter. No doubt it has shifted in the direction you state but they are not the median. Now, maybe the groups you state are the ones being pandered to but that is a somewhat different assertion.
* what I find so intriguing among these well-worn "original" economist-oriented writers, is that they are STILL relevant in their basic premises and principles (the Sumner essay dates from 1883.)
Today's awarding of the Economics quasi-Nobel to Daron Acemoglu, Simon Johnson and James Robinson fits right in to this problem. In his post at Marginal Revolution, Tyler Cowen quotes Acdmoglu:
"So, if I am really afraid of losing political power to you, that really brings me to the politics of institutions, where the logic is not so much the economic consequences, but the political consequences. This means that, say, when considering some reform, what most politicians and powerful elites in society really care about is not whether this reform will make the population at large better off, but whether it will make it easier or harder for them to cling to power."
from wikipedia: "Nobel Prizes are five separate prizes awarded to those who, during the preceding year, have conferred the greatest benefit to humankind, as established by the 1895 will of Swedish chemist, engineer, and industrialist Alfred Nobel, in the year before he died. Prizes were first awarded in 1901 by the Nobel Foundation. Nobel's will indicated that the awards should be granted in the fields of Physics, Chemistry, Physiology or Medicine, Literature, and Peace.
"A sixth prize for Economic Sciences, endowed by Sweden's central bank, Sveriges Riksbank, and first presented in 1969, is also frequently included, as it is also administered by the Nobel Foundation."
So some people don't think of the Economic Sciences Prize as a real Nobel Prize.
“So some people don't think of the Economic Sciences Prize as a real Nobel Prize.”
Fair enough. But ever since they gave Arafat the Peace prize, let alone gave it to Obama before he had done *anything* other than win an election, it’s pretty hard to argue that the Economics prize is less legit than the Peace prize.
He is far too explicitly leftist in his argumentation for my taste.
So I suppose it shouldn’t be surprising that he won a Nobel prize, I guess. For at least ten years now, the economics Nobel has gone to left-of center, or occasionally centrist economists. You have to go back to 2013 to find a single economist (Fama) who might be characterized as right of center.
I’ll put it this way: of the two of them, Cowen is considered the “thoughtful” moderate on immigration. Cowen thinks it should be slowed just enough that the populace doesn’t notice quite as much, and thus rebel and misbehave (Trump). That’s because he doesn’t want to see the goal of borderlessness threatened.
I'm pretty sure he would say that some immigration has more benefits than costs and some doesn't. He would also probably say that he generally looks on immigration more favorably than the median voter.
I don’t mind that. Indeed, I’ll take it happily. Something about him is his totalizing tendency. If he says immigration is an unfettered good, which he essentially does because he sees culture as malleable, he’s uninterested in the idea of a “native place”, and more importantly, he’s wholly uninterested in nature - a defect he rather jokingly remedies by adopting puffins as a mascot, a stand-in for a world it is too late for him to care about, given his other commitments and his inexperience there - then to him the border is meaningless beyond whether it is messy or not at any given moment.
Anyway, don’t Strauss out about it. He definitely isn’t 😀.
“It would be nice to vote for someone who recognizes that Social Security and Medicare are facing real and severe solvency problems in the not-too-distant future, and offers some proposals to address them.” This, from Timothy Taylor, is unserious. He is free to write in a sensible person’s name, or vote Libertarian. He can also vote for a major-party candidate, and hope that that person covertly understands the situation. But no major-party candidate can address the issue openly: s/he would be demagogued by the other candidate. What we need is a better electorate.
> Only a partisan hack could claim that either candidate is good on the economy.
Conventional wisdom is that you develop some rubric to evaluate candidates, you advocate the best, or equivalently the least bad candidate of the viable options, and you establish incentives to move in the right direction. If anything, you want to exaggerate the differences between viable candidates and build incentives to encourage all candidates to move in the right direction.
Kling is doing the opposite. Kling is blurring the difference between the candidates: neither is good, and neither is less bad than the other. And no matter how they change, for the better or worse, Kling is committed to the judgement that both sides are equally bad, no matter what. In that case, there is no incentive to improve or to not get worse.
> It would be nice to vote for someone who recognizes that Social Security and Medicare are facing real and severe solvency problems in the not-too-distant future.
I agree. But you have to acknowledge these are unpopular issues with voters and the political incentives work against this. We expect politicians to act in their own political self-interest. Pundits and activists are supposed to work to shift political incentives so that the wrong politician is motivated to do the right thing. When the political incentives are in the wrong direction, then even the right politician will be pressured to do the wrong thing.
Perhaps Kling is simply responding to the great uncertainty that one has when comparing candidates. For there are three very different ways you can go about it. The simplest is to compare what they say. But what they say now or what they said in the past (a big problem with Kamala Harris)? And how much do you believe what they say? How much are they just saying what people want to hear? The detailed plans that advisors write and put on their website often are very different from what actually happens.
Or you could compare on the basis of what the candidates *really* believe. If you could know it, that would be better. And lots of people think they do know it. But there are obvious problems reading people's minds. Not to mention, "I have deeply held beliefs, and once I see the polls, I'll tell you what they are"
The third is "what will actually happen" if one is elected instead of the other. This is obviously the best, and also the hardest to actually know. It will depend on so many things. Who has majorities in Congress and by how much. What do the latest economic reports say? Etc. Etc. Easy to throw up your hands and think, "They both say crappy things. I hate them both."
In any given election I would conclude the following:
1) On the margin, the supporting demographics of the winning party will benefit relative to the losing demographics.
2) On the margin, the federal government can subsidize and/or penalize the red or blue state models, which at this point I think we can agree have substantial differences in policy and outcomes.
3) Nobody is going to touch the third rail of SS/Medicare, deal with it.
4) Trump does seem better for avoiding foreign wars, but foreign policy is the most unpredictable of party issues.
5) On the margin, the GOP is the "default to freedom" party and the Dems the "default to bureaucrat control" party. Whatever the next crisis happens to be, I think the GOP is more likely to leave me alone.
So I'm a married white guy with kids looking to move to a red state. It's obvious which candidate is going to be better for me.
On net I think the public blames the left for 2020 more than Trump. Once you accept this the current situation makes sense. People are asking themselves if 2019 was better, not 2020.
"5) On the margin, the GOP is the "default to freedom" party and the Dems the "default to bureaucrat control" party. Whatever the next crisis happens to be, I think the GOP is more likely to leave me alone."
I no longer believe this and haven't since the mid oughts. Both parties are extremely anti liberty with 2002 cementing that. They each have their own pet "what they would criminalize if they had their druthers" items but the list is extensively as long for both.
It took me a long time but starting a couple years ago when pollsters ask after you check the independent box "do you lean more Democrat or Republican" I now just choose "neither" as opposed to lean Republican as I did for decades.
Until his extra $5T in spending and tariffs come along to percolate throughout the economy, making Harris look nearly fiscally responsible in comparison.
No good options, otherwise I might be inclined to agree with the “instincts” of the parties. I don’t think you can look at the past 24 years and say that the GOP has any track record to write home about though on issues of spending.
In comparing the deficits during the Trump years to the Harris years, Harris is incomparably worse. It's not even a contest.
It's difficult to process just how bad the things were from 2021 to 2024 (I will even give a pass for 2020, though I blame the Dems more for COVID spending because they were the lockdown party).
There were three HUGE party line spending bills during the Biden/Harris admin that were unprecedented in scale and added trillions to the deficit. It was so bad inflation spiked to double digits. Larry Summers called it the worst economic policy he had seen in 40 years.
By contrast Trump gave us some tax breaks. You can go look at the deficit record and see it wasn't anywhere close to as bad.
I’m talking about future spending which Trump is projected to have even more than Harris, never mind the idiocy dream of unlimited tariffs.
Neither will be good, estimates of the budgets put Trumps spending even higher than Harris and he’s every bit as much of “what can I promise people to buy them off” as any Democrat is.
No good options. Basically the election bet is purely who you think will be less able to get their agenda passed. That’s probably the primary argument in favor of Trump that I can think of given his levels of opposition.
Minus the hit to everyone’s sanity. This election should have been a layup for the GOP but the primary process is a disaster (though I guess at least they had one at all)
I assume that most of what the two of them say at this point in the campaign is a "bunch of crazy promises". Do you really think they are going to have no tax on tips (something they have opposed in the past)? That Trump is going to bring back the SALT deduction (which he got rid of) just because he used it as a throwaway line at a Long Island fundraiser? Etc Etc.
I can only look at what they have done while in power to get my best impression of how things are likely to go.
"In comparing the deficits during the Trump years to the Harris years, Harris is incomparably worse. It's not even a contest."
It definitely is a contest. The biggest deficit was 2020. Next was 2021, which should be under the outgoing President but might not have been entirely. You have to add big caveats to argue it's not a contest.
I'm willing to call 2020 a "tie" since both parties voted for the COVID spending bills, but that is as generous as I'll get. We all know the DEMS were the ones responsible for the COVID lockdowns and deserve most of the blame.
From the moment Biden came into office all of the new spending bills were passed on party line votes with no bi-partisan support. The DEMS own them completely.
I agree with you about the huge spending bills under Biden. But Trump is not blameless. The national debt went up $8 trillion during Trump's administration. $5 trillion of that was in 2020. Yeah, the circumstances were unusual, and yeah, the Democrats definitely share the blame, but so does Trump.
Yes it is sad that we have to vote for Harris becasue she is less bad on deficits, less bad on immigration, less bad on trade restrictions, less bad on climate change and just SOP correct on transfer of power to the winner of elections and Ukraine.
We need to put SS, Medicare, Medicaid unemployment insurance and whatever other inter-situational transfers (child allowance?) we have on a VAT that fully funds them. These programs are not intended to transfer income from "rich" to "poor." Income redistribution n should be done with a progressive personal income tax with business incomes imputed to personal incomes of owners. The tax on net emissions of CO2 with rebate would be a wash redistributionally.
“Yes it is sad that we have to vote for Harris becasue she is less bad on deficits”
Dude, you are welcome to your opinions on all the other issues - most of which I don’t agree with you on - but claiming Harris-Biden is less bad on deficits is just absurd.
Whether a good thing or not, I've never understood how VAT would solve anything other than providing a backdoor to increased taxation and further growth of government spending.
As for CO2 tax, I have no doubt that wealthier people use more CO2-producing energy, even with them being more likely to drive electric cars and have home solar. A redistributed CO2 tax would surely transfer wealth from rich to poor.
America will only get entitlement reform when Democrats accept it.
Trump and future Reps should focus on freezing entitlements, decreasing taxes & regulations, increasing opt-outs for small & medium businesses, and setting an absolute level of “poverty” that all workers can achieve.
They should explicitly reduce govt cash to Dem dominated NGOs and edu orgs, like transferring student loan debts to colleges. If the Ivy- plus top 100 endowed colleges had to pay for student debt forgiveness, there would be a lot less Dem support for it.
Using taxes on rich city areas that don’t build new housing (a stick) while providing subsidies to house builders (carrots) who do build, wherever they can, would be a big winner.
Republicans should be the worker’s party especially rewarding workers in the 60-40-20 quintiles.
Replacing govt middle managers with AI report writers would also help reduce the cost of govt.
A $50,000 subsidy to all house builders would be more helpful at reducing prices paid for housing.
The absolute number would be a bigger % of lower cost housing, but the new buyer desire for bigger new houses would mean a market push for bigger. Note that a huge new $900,000 house mostly means a buyer who sells their $750k house to someone selling their $650k to one selling $550k to one selling $450k to one selling $350k to one selling a $250k, which today is what an “affordable “ house means. This example of one new bigger house built & sold results in 7 “new” houses available to be bought.
Were each bought with $25,000 govt cash, that would be $175k, spent, but only one actually new house.
“Only a partisan hack could claim that either candidate is good on the economy.”
Well then perhaps you and others will call me a partisan hack. But I consider myself a classical liberal, a conservative-leaning libertarian (or a libertarian-leaning American conservative, idk)
Change the word “good” to “great”, and I would agree with the comment 100%
But we have Trump’s track record for 2016-2019, and on the economy it decidedly was *good*. He governed on the economy like a mainstream conservative Republican.
His economic policies (other than entitlements, where I agree 10,000% that he is as bad as the Dems, and on spending, where he was almost as bad as the Dems) were inarguably the best since Reagan. He actually delivered some deregulation. His policies were pro-growth.
The business and capital gains tax cuts were a good thing. deregulation was a great thing. His renegotiation of NAFTA was a good thing (a small good thing, perhaps, but a good thing).
IMO this comment is allowing the perfect to be the enemy of the good.
And implicitly lumping in all the other bad stuff about Trump with his record on economic policies, by implying that his policies are in the same league of “bad” as Kamala Harris’-Biden’s.
I, too, wish we could elect Javier Milei.
But we can’t.
IMO you do the country - and your stature as an economist - a disservice when you claim that Trump’s economic policies were not “good”, and strongly imply they are in the same league with the Biden-Harris policies.
"It would be nice to vote for someone who recognizes that Social Security and Medicare are facing real and severe solvency problems in the not-too-distant future, and offers some proposals to address them"
More of a tangential question that came to my mind recently as I was watching some YouTube video on grocery delivery services for the elderly in a small Japanese village but for all the US angst about social security (I'm ignoring Medicare here), how do other developed nations handle that given they have to have the equivalent and in many cases also a lower GDP, lower savings rates, and lower birthrates hence the problem would appear steeper there; and NOT the UK as that is the perennial US whipping boy on comparisons.
Like how are pensioners being handled in South Korea? Austria? France?
I'm just unconvinced it's a problem as it's a "problem " every nation has if so, like poverty, hence I'm assume it's fixed by getting rid of unnecessary expenses like, I'm assuming here, other nations and not running dozens of carrier strike groups and giving annual billions in aid to foreigners to bomb their own citizens.
These might be the most important words in Pinto's five page PDF. Frankly, I'm a little disappointed AK presented this without comment about how speculative these numbers are. I'd say the standard deviation is huge.
Don't mistake my concerns as defending the FTB subsidy but there are a lot of reasons to suspect this study is biased.
1 It comes from AEI, known to be against expanded govt.
2 It says the home prices are expected to rise 4%/yr. Ok but it doesn't say this is entirely due to the subsidy. How much of this increase would have happened without the subsidy?
3 The map shows expected price increases as a percentage. I want to know how much prices in a locale increase relative to the $25k. I don't trust their assumptions and I want to know that places with a lot of construction restrictions see a big increase and places without many restrictions (and land to build) don't.
4 Increases in price should increase supply. This can't happen in places with lots of building restrictions, no land, no construction workers, etc. but I don't see where they factor in ANY increase in supply. Given the price increases they predict, is that at all realistic?
We are probably fortunate indeed that Harris and Trump are the nominees as it is difficult to think of any other potential candidates who provide a better blend of talent, competence, intelligence, and empathy. Whoever wins, I am sure it will all be for the best. Nevertheless, the US presidential system is inferior in every respect to parliamentary systems. In general It seems that the obvious reform would be to jettison it altogether, reform the House of Representatives by increasing its size to 20 members per state plus 1 additional per 50,000 population. In addition, some provision is absolutely necessary to protect the rural minority in this country from the out-of-control overreach of urbanite voters. This more appropriately sized House of Representatives would then be responsible for selecting and dismissing the executive and subordinate officers.
It is quite easy to pick out a specific policy in isolation and critique it and offer superior alternatives but it is another thing altogether to assemble a prioritized agenda the items of which reinforce each other in attempting to reach broader outcomes. Controlling the national debt and interest payments would seem to be a high priority outcome. Unfortunately, the idea that because Social Security and Medicare are big dollar programs the only possible solution to debt is to abolish them. However, anyone who takes 30 seconds to glance at the most recent actuarial reports knows that the three major trust funds all have reserves and that the difference between receipts and outlays were small compared to the overall $2 trillion deficit in 2023. For Medicare, “Total expenditures in 2023 were $1,037.0 billion, and total income was $1,024.6 billion, which consisted of $1,014.6 billion in non-interest income and $10.0 billion in interest earnings. Assets held in special issue U.S. Treasury securities decreased by $12.4 billion to $396.7 billion.” For Social Security, outlays “A 2023 annual deficit of $41.4 billion decreased the asset reserves of the combined OASDI trust funds to $2,788 billion at the end of the year.” And revenues: “During 2023, an estimated 183 million workers had earnings covered by Social Security and paid $1,233 billion in payroll taxes. Employees pay a 6.2 percent contribution from earnings up to a maximum of $168,600 in 2024, which their employers match. Self-employed workers pay both shares of the contribution, or 12.4 percent. In 2022, an estimated 48 percent of beneficiaries paid income taxes on part of their benefits. Receipts from these taxes go to the OASDI Trust Funds and Medicare's Hospital Insurance Trust Fund. In 2023, income to the combined OASDI trust funds from the taxation of benefits amounted to $51 billion. The trust funds also earned $67 billion in interest payments on their accumulated reserves.” At any rate, exhaustion of the reserves can be managed with marginal adjustments and in no way are the major trust funds the reason for the current fiscal crisis. Perhaps if discretionary spending were similarly funded with dedicated revenue streams required for each program and revenues versus outlays similarly tracked, program by program, we might have a better managed budget.
But if I had to offer whomever winds up being installed as the next president in January advice, it would be to cut spending starting with eliminated the defined benefit retirement programs for the military and civil serve and go to an all defined contribution system, raise the minimum civil service retirement age from 56 or 57 or whatever it is now to 65 and eliminate all non-Medicare retiree health benefits, cap discretionary spending at 2017 levels, transfer VA and DOD hospitals to the states in which they are located to be operated as the states see fit, and eliminate the standing military and transfer national defense responsibilities to the state militias under the control of state governors. Sensible, incremental changes such as these, picking the low hanging fruit and most common sense alternatives, might still be enough to USA from completely disintegrating in the Venezuelan-style despotism it increasingly resembles.
Thank You for mentioning that our SS benefit is taxed, a point I never see mentioned when this topic is discussed. It's hard to believe that 52% of SS recipients are so poor that they don't get taxed, the threshold of taxation is quite low: $25k single, $32k joint. In my case the IRS claws back 10% of my benefit.
Yeah it always blown my mind we tax government benefits and payouts. It's not just social security either, veteran disability payments, non-SS disability payments, etc.
The "trust funds" are like a lock box. You agree to put in $10,000 every year toward your retirement. But during the first year, you really have a better use for those $10,000 so you take them out, spend them, and put back an IOU for $10,000. Next year you put in another $10,000 and again have better uses for them, so take them out and put back various IOUs. And so on.
At the end of 40 years, you open your secure lock box and find--$400,000 worth of IOUs that you solemnly owe to yourself.
Yes, it is interesting that the federal civilian and military retirement funds added 401(k) type options giving beneficiaries the ability to invest in assets other than treasury bonds. If instead of putting reserves into treasury bonds, we had an investment plan like the Norwegian sovereign wealth fund that buys a diversified portfolio of foreign assets to avoid domestic inflation, the returns would likely be greater and the long term funding issues somewhat ameliorated.
We didn't "put reserves into treasury bonds". We spent the money before it could become reserves. Or to be more precise, the Internal Revenue Service of the Treasury Department collected FICA and Medicare taxes. That money was then sent to another part of the Treasure Department which disbursed it to the various government departments which spent it. At the same time, the Treasury Department gave special solemn IOUs in the amount of the spent money to the SS and Medicare "trust funds". The trust funds never had any reserves, any more than I had a reserve from the $10,000 dollars I put in every year and quickly took out and spent.
well yes. maybe its just semantics since the outflow is greater than the tax receipts anyway, but this is the way I understand the “treasury bond” nomenclature issue:
“The Treasury Trust Fund (TTF) is a unique entity that manages the Social Security Trust Funds, which hold non-marketable U.S. Treasury bonds. These bonds are issued by the U.S. Department of the Treasury and are backed by the “full faith and credit” of the U.S. government.
Key Characteristics
Investments: The TTF primarily invests in non-marketable Treasury debt, such as Treasury bills, notes, and bonds with maturities of 397 days or less. The portfolio has a dollar-weighted average maturity of 60 days or less and a dollar-weighted average life of 120 days or less.
Liquidity: The TTF’s investments are highly liquid, as they are comprised of short-term Treasury securities.
No Market Value: As non-marketable securities, these bonds do not have a market value and cannot be traded on public markets.
Guaranteed by the U.S. Government: The TTF’s investments are backed by the full faith and credit of the U.S. government, providing a high level of credit quality.”
Whatever it is that you want to call the special IOU accounting entry labeled “reserves” it does act as a type of “investment” which generates interest revenue accounting entries that are credited to the balance of the trust fund.
I don't think it's at all semantics. If there were actual money in the "trust funds", benefits could be paid with that money. Lots of benefits. But because there isn't, benefits have to come from other taxes or by borrowing. That's a big, big, big difference in the governments fiscal status.
If there's $400,000 in cash in my retirement "lock box", I can finance a lot of my retirement. If there is $400,000 of I O myself, I can't. I have to get another job or bum from friends or ...
It's easier to smaller countries to have sovereign wealth funds invested in foreign assets. We are the big cheese.
The fundamental issue is that future resources can only be produced by sound current investments. A spreadsheet entry isn't an investment in and of itself, it has to be linked to something real. Had our government invested in things that paid off, the treasury bonds would have real value backing them, but I'm pretty skeptical myself looking at what the government spends money on.
There is no "trust fund" for entitlements. There are some accounting entires in a spreadsheet where the government lent money to itself. When the programs have to start drawing on those "funds" they will need to sell treasuries, and the general fund will go from getting a subsidy from them to having to subsidize them.
When the trust fund runs out it won't have any impact on the programs. They will just raise taxes to keep benefits constant rather then lose elections.
The problem with the entitlements isn't current expenditure, but what happens when the dependency ratio gets worse as the baby boomers retire and the fact that medical cost trend > economic growth.
Yes, indeed, the long term outlook for Social Security and Medicare presents thorny problems. They are pay-as-you-go programs that benefitted from having some initial revenue surplus. But nothing one does to them today is going to do anything about the 2 trillion dollar deficit we are already running. If we slash benefits today, the savings will only be used to offset even more unsustainable spending. Although nothing is set in stone given our open border situation, the US does appear to be headed in the direction of an aged population and policies will have to adjust to reflect demographic challenges. However, will it really be great for young people entering the workforce if older workers are compelled to work to age 75? There are any variety of potential new revenue streams besides payroll taxes that could be used to shore up these programs' funding. For example, BLM is just giving away hundreds of thousands of acres to be covered with solar panels. That land could be instead to be put to socially useful revenue generating use.
Yeah, I don't support cuts* to the programs under the current situation. As you note, the most likely way for those funds to be re-directed is worse than my mom getting an SS check every month. I could end up funding BLM and having to support my mother even more.
So while I would support cuts to entitlements if it were directly linked to things I think are better (say, child tax credits), I don't see that proposal on the table right now. My big idea is that I think parents with multiple kids ought to be excluded from having to pay FICA taxes (say, the employee half with two kids and both employer and employee if 3+). The one thing we shouldn't do is tax parents to pay for these things, that's a death spiral. Let rich childless people and empty nesters near their own retirement carry the burden.
While one could implement a VAT or whatever to cover them, do we really want to increase the overall tax as a % of GDP so that people can lie around in nursing homes in a stupor getting their butts wiped?
I say we just leave things as is. When it blows up it blows up and then we will have a reset. In the meantime I would try to funnel what money I could to things likely to have value after the reset (for instance, more children).
*I think some innovative things could be done with Medicare/Medicaid, but don't expect congress to do them. Probably the exact opposite.
"When the trust fund runs out it won't have any impact on the programs. They will just raise taxes to keep benefits constant rather then lose elections."
That is far from certain. Current federal law prohibits SS paying out more than its available funds. It's harder to get Congress to vote on cuts but if future Congresses are like the current one, it won't be easy to get them to vote for an increase either.
Maybe, but I’ve seen an almost infinite number of “expiring” benefits get extended indefinitely when it came time. It’s not like the electorate is going to be any younger in a decade or two.
As long as we're talking economic issues related to this specific election, let's not forget how "great" tariffs are going to be. See Jason Miller's post on LinkedIn. (https://www.linkedin.com/feed/update/urn:li:activity:7251334048281722880/). Harris hasn't gone as far as Trump on this but that's mostly because she's been hazy on her policies across the board.
Wouldn’t Chase Oliver still be closer to you for a protest vote? Or Justin Amash?
No true Scotsman aside. I’ll be supporting him in the hope of any signal of reform to the recent toxic implosion of the LP, which only a few years ago fielded the most qualified ticket around.
It's a real shame that the LP has been going through a bizarre factional war between left-libertarians, ancaps, and Ron Paul-style paleolibertarians over the ideological purity of the party instead of nominating serious candidates like in 2016. We might never get a better third-party ticket in the 21st century than Johnson/Weld 2016. Chase Oliver has good positions, but he's not a real politician; he's never held elected office and has no qualifications to be president.
I mean I would take Milei given the option too, but he's not going to show up in the stats on election night if trying to show your disaffection. Chase is kind of all you have.
"recent toxic implosion" ..sure if you mean 2012 when the LP gave up on libertarianism in a bid to get the Republican Johnson elected and then never looked back.
Gary was a great governor and, perhaps most importantly relative to the current edge lord asshats at LPNH, McArdle and the vileness of Rectenwald, a profoundly good human being.
The party would be so lucky to have people like him and Amash as the torch bearers. But sure, if you prefer the people who destroyed decades of work in a year by all means.
The party doesn't need LINOs. It's why the LP never got anywhere, nobody is interested in GOP rejects. I'm not knocking on Johnson as a politician but he's no libertarian either. Nor am I interested in a LP with Trump/Ventura in 2028 as the nominee.
You can hate the modern LP all you want but at least their agenda isn't "more regulation, more wars, more weed, and less freedom", the Johnson platform. Sure it makes them likely to get less votes but as a token party, it's irrelevant. They exist solely as a marketing platform and to steal votes.
If a politician came out and said “We are not going to cut Medicare or social security, but we are going to pay out all future checks in a new currency called the mini-dollar.”, that politician would have no chance of getting elected.
Most voters would assume the new mini-dollar would have far less value than the current dollar. It would be seen as an immoral bait and switch.
However - this is exactly what they are all saying right now. Future dollars will actually be figurative mini-dollars as they will be able purchase much less due to the amount of dollars that will be printed to meet those claims. It is an immoral bait and switch.
Study Bitcoin.
It seems likely to me that Trump is competitive right now specifically because the attempt to inflate away debts the last few years was extremely unpopular. Inflation is very politically toxic.
BTW, SS is linked to the CPI and Medicare obviously rises as medical prices rise, so good luck inflating those away.
It's not a perfect match though and in general weighted not for the benefit of the recipient. My Federal annuity is also tied to the CPI but in real terms my purchasing power degrades, not increases, year after year which shouldn't be possible given the CPI linkage.
How exactly does your purchasing power in real terms degrade year after year?
You are claiming that the CPI meaningfully understates inflation? Or just that your basket of goods consistently goes up more than the market basket, and that you have minimal ability to substitute to keep your real living standard up?
Both are possibly true but at least anecdotally it's the latter from talking to others and examining my own situation as well. 80% of my income goes to rent and utilities and both of those rose, and consistently do, much higher than the inflation rate and have for years (used to be 45% my income); and that shouldn't be possible given the CPI linkage. And I know I'm not the only person in that body when I talk to other fixed income people.
That said I'll concede the problem could be locality issues as in CPI is tied to the national economy.
The government has little or no ability to inflate the debt away. They are paying interest based on inflation expectations. They came out ahead a few years when it was high and they will come out behind for a few years if it stays low.
This is mostly but not entirely correct. Inflation does lower the burden of existing debt.
At least when the debt is comprised of long-term bonds. If it is QEed to be all short term, then you are completely correct.
But cap gains taxes aren’t indexed for inflation, so those revenues at least go up in the long run when there is inflation.
To the extent we continue to borrow even more to continue to spend more, then you are correct that “they” can’t benefit by inflating.
"Inflation does lower the burden of existing debt."
Increasing inflation might but when inflation goes back down, as recently happened, the burden increases by a similar amount.
The burden of debt is set by expectations of inflation by the bond purchasers. It only gets lower when inflation rises more than bond purchases expect. And when inflation drops, the money borrowed when inflation was higher adds to government costs.
“ Increasing inflation might but when inflation goes back down, as recently happened, the burden increases by a similar amount.”
Yeah, sorry, that’s just incorrect.
Disinflation does not cause the “burden” to increase “by a similar amount”
Unless you are talking about actual *deflation*. Then you would be technically correct re: the debt
But as “Helicopter Ben” and all other Federal Reserve Board members know, sustained deflation is very bad for the economy, in addition to being bad for government revenues and the value of the debt government owes. Government bondholders win under deflation, but almost everyone else loses. Hence “Helicopter Ben”.
But all inflation does indeed lower the burden to government/the taxpayers of *existing* debt (other than things like TIPS, of course). Whether said inflation was expected or not. You are conflating different ideas (related to the price/yields of subsequently issued bonds) when you suggest otherwise.
Sorry I wasn't clearer. When inflation goes up, the government gets a bit of a free ride on debt financed at lower rates. When inflation goes back down, they still have the debt financed at a higher rate. None of this involves deflation.
If you index these programs to the growth of the money supply instead of CPI, I might get onboard. CPI is an extremely flawed metric.
Which money supply? There are so many. And they aren't all proportional to each other.
That makes zero sense to me. Money supply has been growing far faster than CPI. You want the indexed programs to grow even faster?
We can disagree on whether inflation estimates are high or low but as long as SS and Medicare include adjustments for CPI, I don't see your concern as a an issue. Plenty of other concerns but not that one.
I would like to point out that the blatant vote-buying nature of this campaign (and total disregard for fiscal probity) is downstream of the changing nature of the median voter. Median voter used to be a white worker or small businessman; now it's a white pensioner or Mexican, neither of which is especially interested in cutting entitlements or particularly open to market-based arguments. This is directly downstream of population aging (which neither candidate or party will affect much) and immigration (on which Trump is overwhelmingly superior to Harris). If you don't want every subsequent election to make this one look honest and intellectual (see: Latin America), you need mass deportations.
Exactly. Romney/Ryan ran on "fiscal responsibility" in 2012 and indeed won a % of the white vote equal to Ronald Reagan. It was a loser. Hispanics said they wanted the ACA subsidies more than Joe the Plumber.
It's probably an advance for the GOP to realize that a median voter of 55 years and increasingly non-white just is not going to be moved by that agenda. It's a lot of wasted political capital.
I think we should just accept that entitlement reform is an inevitable train wreck and focus on getting ourselves in the best position to recover from that wreck.
I disagree with your characterization of median voter. No doubt it has shifted in the direction you state but they are not the median. Now, maybe the groups you state are the ones being pandered to but that is a somewhat different assertion.
The state is that great fiction by which everyone tries to live at the expense of everyone else.
.......Frederic Bastiat
Fred was onto something.
I'll see your Bastiat, and raise you a W.G. Sumner*:
https://mises.org/mises-daily/forgotten-man
* what I find so intriguing among these well-worn "original" economist-oriented writers, is that they are STILL relevant in their basic premises and principles (the Sumner essay dates from 1883.)
Today's awarding of the Economics quasi-Nobel to Daron Acemoglu, Simon Johnson and James Robinson fits right in to this problem. In his post at Marginal Revolution, Tyler Cowen quotes Acdmoglu:
"So, if I am really afraid of losing political power to you, that really brings me to the politics of institutions, where the logic is not so much the economic consequences, but the political consequences. This means that, say, when considering some reform, what most politicians and powerful elites in society really care about is not whether this reform will make the population at large better off, but whether it will make it easier or harder for them to cling to power."
WTF is a quasi-Nobel?
from wikipedia: "Nobel Prizes are five separate prizes awarded to those who, during the preceding year, have conferred the greatest benefit to humankind, as established by the 1895 will of Swedish chemist, engineer, and industrialist Alfred Nobel, in the year before he died. Prizes were first awarded in 1901 by the Nobel Foundation. Nobel's will indicated that the awards should be granted in the fields of Physics, Chemistry, Physiology or Medicine, Literature, and Peace.
"A sixth prize for Economic Sciences, endowed by Sweden's central bank, Sveriges Riksbank, and first presented in 1969, is also frequently included, as it is also administered by the Nobel Foundation."
So some people don't think of the Economic Sciences Prize as a real Nobel Prize.
“So some people don't think of the Economic Sciences Prize as a real Nobel Prize.”
Fair enough. But ever since they gave Arafat the Peace prize, let alone gave it to Obama before he had done *anything* other than win an election, it’s pretty hard to argue that the Economics prize is less legit than the Peace prize.
Ty.
I was unaware that Acemoglu had won a Nobel.
He is far too explicitly leftist in his argumentation for my taste.
So I suppose it shouldn’t be surprising that he won a Nobel prize, I guess. For at least ten years now, the economics Nobel has gone to left-of center, or occasionally centrist economists. You have to go back to 2013 to find a single economist (Fama) who might be characterized as right of center.
My bad. It's actually Alex Tabarrok's post at MR.
Which Tabarrok would solve, I guess, by having no political map of the globe.
Why do you say that?
I’ll put it this way: of the two of them, Cowen is considered the “thoughtful” moderate on immigration. Cowen thinks it should be slowed just enough that the populace doesn’t notice quite as much, and thus rebel and misbehave (Trump). That’s because he doesn’t want to see the goal of borderlessness threatened.
I'm pretty sure Cowen would disagree with your last sentence. He would surely say that immigration has more benefits than costs.
Saying you know his goal better than he does makes you look bad.
I'm pretty sure he would say that some immigration has more benefits than costs and some doesn't. He would also probably say that he generally looks on immigration more favorably than the median voter.
I don’t mind that. Indeed, I’ll take it happily. Something about him is his totalizing tendency. If he says immigration is an unfettered good, which he essentially does because he sees culture as malleable, he’s uninterested in the idea of a “native place”, and more importantly, he’s wholly uninterested in nature - a defect he rather jokingly remedies by adopting puffins as a mascot, a stand-in for a world it is too late for him to care about, given his other commitments and his inexperience there - then to him the border is meaningless beyond whether it is messy or not at any given moment.
Anyway, don’t Strauss out about it. He definitely isn’t 😀.
“It would be nice to vote for someone who recognizes that Social Security and Medicare are facing real and severe solvency problems in the not-too-distant future, and offers some proposals to address them.” This, from Timothy Taylor, is unserious. He is free to write in a sensible person’s name, or vote Libertarian. He can also vote for a major-party candidate, and hope that that person covertly understands the situation. But no major-party candidate can address the issue openly: s/he would be demagogued by the other candidate. What we need is a better electorate.
> Only a partisan hack could claim that either candidate is good on the economy.
Conventional wisdom is that you develop some rubric to evaluate candidates, you advocate the best, or equivalently the least bad candidate of the viable options, and you establish incentives to move in the right direction. If anything, you want to exaggerate the differences between viable candidates and build incentives to encourage all candidates to move in the right direction.
Kling is doing the opposite. Kling is blurring the difference between the candidates: neither is good, and neither is less bad than the other. And no matter how they change, for the better or worse, Kling is committed to the judgement that both sides are equally bad, no matter what. In that case, there is no incentive to improve or to not get worse.
> It would be nice to vote for someone who recognizes that Social Security and Medicare are facing real and severe solvency problems in the not-too-distant future.
I agree. But you have to acknowledge these are unpopular issues with voters and the political incentives work against this. We expect politicians to act in their own political self-interest. Pundits and activists are supposed to work to shift political incentives so that the wrong politician is motivated to do the right thing. When the political incentives are in the wrong direction, then even the right politician will be pressured to do the wrong thing.
Perhaps Kling is simply responding to the great uncertainty that one has when comparing candidates. For there are three very different ways you can go about it. The simplest is to compare what they say. But what they say now or what they said in the past (a big problem with Kamala Harris)? And how much do you believe what they say? How much are they just saying what people want to hear? The detailed plans that advisors write and put on their website often are very different from what actually happens.
Or you could compare on the basis of what the candidates *really* believe. If you could know it, that would be better. And lots of people think they do know it. But there are obvious problems reading people's minds. Not to mention, "I have deeply held beliefs, and once I see the polls, I'll tell you what they are"
The third is "what will actually happen" if one is elected instead of the other. This is obviously the best, and also the hardest to actually know. It will depend on so many things. Who has majorities in Congress and by how much. What do the latest economic reports say? Etc. Etc. Easy to throw up your hands and think, "They both say crappy things. I hate them both."
In any given election I would conclude the following:
1) On the margin, the supporting demographics of the winning party will benefit relative to the losing demographics.
2) On the margin, the federal government can subsidize and/or penalize the red or blue state models, which at this point I think we can agree have substantial differences in policy and outcomes.
3) Nobody is going to touch the third rail of SS/Medicare, deal with it.
4) Trump does seem better for avoiding foreign wars, but foreign policy is the most unpredictable of party issues.
5) On the margin, the GOP is the "default to freedom" party and the Dems the "default to bureaucrat control" party. Whatever the next crisis happens to be, I think the GOP is more likely to leave me alone.
So I'm a married white guy with kids looking to move to a red state. It's obvious which candidate is going to be better for me.
On net I think the public blames the left for 2020 more than Trump. Once you accept this the current situation makes sense. People are asking themselves if 2019 was better, not 2020.
"5) On the margin, the GOP is the "default to freedom" party and the Dems the "default to bureaucrat control" party. Whatever the next crisis happens to be, I think the GOP is more likely to leave me alone."
I no longer believe this and haven't since the mid oughts. Both parties are extremely anti liberty with 2002 cementing that. They each have their own pet "what they would criminalize if they had their druthers" items but the list is extensively as long for both.
It took me a long time but starting a couple years ago when pollsters ask after you check the independent box "do you lean more Democrat or Republican" I now just choose "neither" as opposed to lean Republican as I did for decades.
"2002"
Dude Dick Cheney and GWB both endorsed Harris. The War on Terror GOP is on the left now.
More recently, one party wanted to leave me alone and the other wanted to lock me in my home and muzzle me.
“Dick Cheney and GWB both endorsed Harris”
Sorry, this is fake news.
Cheney disgustingly did endorse Harris.
W has not.
Until his extra $5T in spending and tariffs come along to percolate throughout the economy, making Harris look nearly fiscally responsible in comparison.
No good options, otherwise I might be inclined to agree with the “instincts” of the parties. I don’t think you can look at the past 24 years and say that the GOP has any track record to write home about though on issues of spending.
In comparing the deficits during the Trump years to the Harris years, Harris is incomparably worse. It's not even a contest.
It's difficult to process just how bad the things were from 2021 to 2024 (I will even give a pass for 2020, though I blame the Dems more for COVID spending because they were the lockdown party).
There were three HUGE party line spending bills during the Biden/Harris admin that were unprecedented in scale and added trillions to the deficit. It was so bad inflation spiked to double digits. Larry Summers called it the worst economic policy he had seen in 40 years.
By contrast Trump gave us some tax breaks. You can go look at the deficit record and see it wasn't anywhere close to as bad.
I’m talking about future spending which Trump is projected to have even more than Harris, never mind the idiocy dream of unlimited tariffs.
Neither will be good, estimates of the budgets put Trumps spending even higher than Harris and he’s every bit as much of “what can I promise people to buy them off” as any Democrat is.
No good options. Basically the election bet is purely who you think will be less able to get their agenda passed. That’s probably the primary argument in favor of Trump that I can think of given his levels of opposition.
Minus the hit to everyone’s sanity. This election should have been a layup for the GOP but the primary process is a disaster (though I guess at least they had one at all)
I assume that most of what the two of them say at this point in the campaign is a "bunch of crazy promises". Do you really think they are going to have no tax on tips (something they have opposed in the past)? That Trump is going to bring back the SALT deduction (which he got rid of) just because he used it as a throwaway line at a Long Island fundraiser? Etc Etc.
I can only look at what they have done while in power to get my best impression of how things are likely to go.
"In comparing the deficits during the Trump years to the Harris years, Harris is incomparably worse. It's not even a contest."
It definitely is a contest. The biggest deficit was 2020. Next was 2021, which should be under the outgoing President but might not have been entirely. You have to add big caveats to argue it's not a contest.
I'm willing to call 2020 a "tie" since both parties voted for the COVID spending bills, but that is as generous as I'll get. We all know the DEMS were the ones responsible for the COVID lockdowns and deserve most of the blame.
From the moment Biden came into office all of the new spending bills were passed on party line votes with no bi-partisan support. The DEMS own them completely.
I agree with you about the huge spending bills under Biden. But Trump is not blameless. The national debt went up $8 trillion during Trump's administration. $5 trillion of that was in 2020. Yeah, the circumstances were unusual, and yeah, the Democrats definitely share the blame, but so does Trump.
We agree completely. Trump was really bad on spending and debt.
About equally bad as Obama.
But Biden-Harris was far worse.
…even if you gave *both* a pass for both 2020 *and* 2021.
The quoted sentence is about Harris, or Harris years vs Trump years, not DEMS.
Yes it is sad that we have to vote for Harris becasue she is less bad on deficits, less bad on immigration, less bad on trade restrictions, less bad on climate change and just SOP correct on transfer of power to the winner of elections and Ukraine.
We need to put SS, Medicare, Medicaid unemployment insurance and whatever other inter-situational transfers (child allowance?) we have on a VAT that fully funds them. These programs are not intended to transfer income from "rich" to "poor." Income redistribution n should be done with a progressive personal income tax with business incomes imputed to personal incomes of owners. The tax on net emissions of CO2 with rebate would be a wash redistributionally.
https://thomaslhutcheson.substack.com/p/fairness-for-harris
https://thomaslhutcheson.substack.com/p/an-unfair-evaluation-of-bidens-economic
“Yes it is sad that we have to vote for Harris becasue she is less bad on deficits”
Dude, you are welcome to your opinions on all the other issues - most of which I don’t agree with you on - but claiming Harris-Biden is less bad on deficits is just absurd.
Whether a good thing or not, I've never understood how VAT would solve anything other than providing a backdoor to increased taxation and further growth of government spending.
As for CO2 tax, I have no doubt that wealthier people use more CO2-producing energy, even with them being more likely to drive electric cars and have home solar. A redistributed CO2 tax would surely transfer wealth from rich to poor.
America will only get entitlement reform when Democrats accept it.
Trump and future Reps should focus on freezing entitlements, decreasing taxes & regulations, increasing opt-outs for small & medium businesses, and setting an absolute level of “poverty” that all workers can achieve.
They should explicitly reduce govt cash to Dem dominated NGOs and edu orgs, like transferring student loan debts to colleges. If the Ivy- plus top 100 endowed colleges had to pay for student debt forgiveness, there would be a lot less Dem support for it.
Using taxes on rich city areas that don’t build new housing (a stick) while providing subsidies to house builders (carrots) who do build, wherever they can, would be a big winner.
Republicans should be the worker’s party especially rewarding workers in the 60-40-20 quintiles.
Replacing govt middle managers with AI report writers would also help reduce the cost of govt.
The only good way to reduce housing prices is
To Increase The Number Of Houses.
A $50,000 subsidy to all house builders would be more helpful at reducing prices paid for housing.
The absolute number would be a bigger % of lower cost housing, but the new buyer desire for bigger new houses would mean a market push for bigger. Note that a huge new $900,000 house mostly means a buyer who sells their $750k house to someone selling their $650k to one selling $550k to one selling $450k to one selling $350k to one selling a $250k, which today is what an “affordable “ house means. This example of one new bigger house built & sold results in 7 “new” houses available to be bought.
Were each bought with $25,000 govt cash, that would be $175k, spent, but only one actually new house.
Govt needs to subsidize supply, not demand.
“Only a partisan hack could claim that either candidate is good on the economy.”
Well then perhaps you and others will call me a partisan hack. But I consider myself a classical liberal, a conservative-leaning libertarian (or a libertarian-leaning American conservative, idk)
Change the word “good” to “great”, and I would agree with the comment 100%
But we have Trump’s track record for 2016-2019, and on the economy it decidedly was *good*. He governed on the economy like a mainstream conservative Republican.
His economic policies (other than entitlements, where I agree 10,000% that he is as bad as the Dems, and on spending, where he was almost as bad as the Dems) were inarguably the best since Reagan. He actually delivered some deregulation. His policies were pro-growth.
The business and capital gains tax cuts were a good thing. deregulation was a great thing. His renegotiation of NAFTA was a good thing (a small good thing, perhaps, but a good thing).
IMO this comment is allowing the perfect to be the enemy of the good.
And implicitly lumping in all the other bad stuff about Trump with his record on economic policies, by implying that his policies are in the same league of “bad” as Kamala Harris’-Biden’s.
I, too, wish we could elect Javier Milei.
But we can’t.
IMO you do the country - and your stature as an economist - a disservice when you claim that Trump’s economic policies were not “good”, and strongly imply they are in the same league with the Biden-Harris policies.
"It would be nice to vote for someone who recognizes that Social Security and Medicare are facing real and severe solvency problems in the not-too-distant future, and offers some proposals to address them"
More of a tangential question that came to my mind recently as I was watching some YouTube video on grocery delivery services for the elderly in a small Japanese village but for all the US angst about social security (I'm ignoring Medicare here), how do other developed nations handle that given they have to have the equivalent and in many cases also a lower GDP, lower savings rates, and lower birthrates hence the problem would appear steeper there; and NOT the UK as that is the perennial US whipping boy on comparisons.
Like how are pensioners being handled in South Korea? Austria? France?
I'm just unconvinced it's a problem as it's a "problem " every nation has if so, like poverty, hence I'm assume it's fixed by getting rid of unnecessary expenses like, I'm assuming here, other nations and not running dozens of carrier strike groups and giving annual billions in aid to foreigners to bomb their own citizens.
"Based on our assumptions,"
These might be the most important words in Pinto's five page PDF. Frankly, I'm a little disappointed AK presented this without comment about how speculative these numbers are. I'd say the standard deviation is huge.
Don't mistake my concerns as defending the FTB subsidy but there are a lot of reasons to suspect this study is biased.
1 It comes from AEI, known to be against expanded govt.
2 It says the home prices are expected to rise 4%/yr. Ok but it doesn't say this is entirely due to the subsidy. How much of this increase would have happened without the subsidy?
3 The map shows expected price increases as a percentage. I want to know how much prices in a locale increase relative to the $25k. I don't trust their assumptions and I want to know that places with a lot of construction restrictions see a big increase and places without many restrictions (and land to build) don't.
4 Increases in price should increase supply. This can't happen in places with lots of building restrictions, no land, no construction workers, etc. but I don't see where they factor in ANY increase in supply. Given the price increases they predict, is that at all realistic?
We are probably fortunate indeed that Harris and Trump are the nominees as it is difficult to think of any other potential candidates who provide a better blend of talent, competence, intelligence, and empathy. Whoever wins, I am sure it will all be for the best. Nevertheless, the US presidential system is inferior in every respect to parliamentary systems. In general It seems that the obvious reform would be to jettison it altogether, reform the House of Representatives by increasing its size to 20 members per state plus 1 additional per 50,000 population. In addition, some provision is absolutely necessary to protect the rural minority in this country from the out-of-control overreach of urbanite voters. This more appropriately sized House of Representatives would then be responsible for selecting and dismissing the executive and subordinate officers.
It is quite easy to pick out a specific policy in isolation and critique it and offer superior alternatives but it is another thing altogether to assemble a prioritized agenda the items of which reinforce each other in attempting to reach broader outcomes. Controlling the national debt and interest payments would seem to be a high priority outcome. Unfortunately, the idea that because Social Security and Medicare are big dollar programs the only possible solution to debt is to abolish them. However, anyone who takes 30 seconds to glance at the most recent actuarial reports knows that the three major trust funds all have reserves and that the difference between receipts and outlays were small compared to the overall $2 trillion deficit in 2023. For Medicare, “Total expenditures in 2023 were $1,037.0 billion, and total income was $1,024.6 billion, which consisted of $1,014.6 billion in non-interest income and $10.0 billion in interest earnings. Assets held in special issue U.S. Treasury securities decreased by $12.4 billion to $396.7 billion.” For Social Security, outlays “A 2023 annual deficit of $41.4 billion decreased the asset reserves of the combined OASDI trust funds to $2,788 billion at the end of the year.” And revenues: “During 2023, an estimated 183 million workers had earnings covered by Social Security and paid $1,233 billion in payroll taxes. Employees pay a 6.2 percent contribution from earnings up to a maximum of $168,600 in 2024, which their employers match. Self-employed workers pay both shares of the contribution, or 12.4 percent. In 2022, an estimated 48 percent of beneficiaries paid income taxes on part of their benefits. Receipts from these taxes go to the OASDI Trust Funds and Medicare's Hospital Insurance Trust Fund. In 2023, income to the combined OASDI trust funds from the taxation of benefits amounted to $51 billion. The trust funds also earned $67 billion in interest payments on their accumulated reserves.” At any rate, exhaustion of the reserves can be managed with marginal adjustments and in no way are the major trust funds the reason for the current fiscal crisis. Perhaps if discretionary spending were similarly funded with dedicated revenue streams required for each program and revenues versus outlays similarly tracked, program by program, we might have a better managed budget.
But if I had to offer whomever winds up being installed as the next president in January advice, it would be to cut spending starting with eliminated the defined benefit retirement programs for the military and civil serve and go to an all defined contribution system, raise the minimum civil service retirement age from 56 or 57 or whatever it is now to 65 and eliminate all non-Medicare retiree health benefits, cap discretionary spending at 2017 levels, transfer VA and DOD hospitals to the states in which they are located to be operated as the states see fit, and eliminate the standing military and transfer national defense responsibilities to the state militias under the control of state governors. Sensible, incremental changes such as these, picking the low hanging fruit and most common sense alternatives, might still be enough to USA from completely disintegrating in the Venezuelan-style despotism it increasingly resembles.
Thank You for mentioning that our SS benefit is taxed, a point I never see mentioned when this topic is discussed. It's hard to believe that 52% of SS recipients are so poor that they don't get taxed, the threshold of taxation is quite low: $25k single, $32k joint. In my case the IRS claws back 10% of my benefit.
Yeah it always blown my mind we tax government benefits and payouts. It's not just social security either, veteran disability payments, non-SS disability payments, etc.
The "trust funds" are like a lock box. You agree to put in $10,000 every year toward your retirement. But during the first year, you really have a better use for those $10,000 so you take them out, spend them, and put back an IOU for $10,000. Next year you put in another $10,000 and again have better uses for them, so take them out and put back various IOUs. And so on.
At the end of 40 years, you open your secure lock box and find--$400,000 worth of IOUs that you solemnly owe to yourself.
Yes, it is interesting that the federal civilian and military retirement funds added 401(k) type options giving beneficiaries the ability to invest in assets other than treasury bonds. If instead of putting reserves into treasury bonds, we had an investment plan like the Norwegian sovereign wealth fund that buys a diversified portfolio of foreign assets to avoid domestic inflation, the returns would likely be greater and the long term funding issues somewhat ameliorated.
We didn't "put reserves into treasury bonds". We spent the money before it could become reserves. Or to be more precise, the Internal Revenue Service of the Treasury Department collected FICA and Medicare taxes. That money was then sent to another part of the Treasure Department which disbursed it to the various government departments which spent it. At the same time, the Treasury Department gave special solemn IOUs in the amount of the spent money to the SS and Medicare "trust funds". The trust funds never had any reserves, any more than I had a reserve from the $10,000 dollars I put in every year and quickly took out and spent.
well yes. maybe its just semantics since the outflow is greater than the tax receipts anyway, but this is the way I understand the “treasury bond” nomenclature issue:
“The Treasury Trust Fund (TTF) is a unique entity that manages the Social Security Trust Funds, which hold non-marketable U.S. Treasury bonds. These bonds are issued by the U.S. Department of the Treasury and are backed by the “full faith and credit” of the U.S. government.
Key Characteristics
Investments: The TTF primarily invests in non-marketable Treasury debt, such as Treasury bills, notes, and bonds with maturities of 397 days or less. The portfolio has a dollar-weighted average maturity of 60 days or less and a dollar-weighted average life of 120 days or less.
Liquidity: The TTF’s investments are highly liquid, as they are comprised of short-term Treasury securities.
No Market Value: As non-marketable securities, these bonds do not have a market value and cannot be traded on public markets.
Guaranteed by the U.S. Government: The TTF’s investments are backed by the full faith and credit of the U.S. government, providing a high level of credit quality.”
Whatever it is that you want to call the special IOU accounting entry labeled “reserves” it does act as a type of “investment” which generates interest revenue accounting entries that are credited to the balance of the trust fund.
I don't think it's at all semantics. If there were actual money in the "trust funds", benefits could be paid with that money. Lots of benefits. But because there isn't, benefits have to come from other taxes or by borrowing. That's a big, big, big difference in the governments fiscal status.
If there's $400,000 in cash in my retirement "lock box", I can finance a lot of my retirement. If there is $400,000 of I O myself, I can't. I have to get another job or bum from friends or ...
It's easier to smaller countries to have sovereign wealth funds invested in foreign assets. We are the big cheese.
The fundamental issue is that future resources can only be produced by sound current investments. A spreadsheet entry isn't an investment in and of itself, it has to be linked to something real. Had our government invested in things that paid off, the treasury bonds would have real value backing them, but I'm pretty skeptical myself looking at what the government spends money on.
There is no "trust fund" for entitlements. There are some accounting entires in a spreadsheet where the government lent money to itself. When the programs have to start drawing on those "funds" they will need to sell treasuries, and the general fund will go from getting a subsidy from them to having to subsidize them.
When the trust fund runs out it won't have any impact on the programs. They will just raise taxes to keep benefits constant rather then lose elections.
The problem with the entitlements isn't current expenditure, but what happens when the dependency ratio gets worse as the baby boomers retire and the fact that medical cost trend > economic growth.
Yes, indeed, the long term outlook for Social Security and Medicare presents thorny problems. They are pay-as-you-go programs that benefitted from having some initial revenue surplus. But nothing one does to them today is going to do anything about the 2 trillion dollar deficit we are already running. If we slash benefits today, the savings will only be used to offset even more unsustainable spending. Although nothing is set in stone given our open border situation, the US does appear to be headed in the direction of an aged population and policies will have to adjust to reflect demographic challenges. However, will it really be great for young people entering the workforce if older workers are compelled to work to age 75? There are any variety of potential new revenue streams besides payroll taxes that could be used to shore up these programs' funding. For example, BLM is just giving away hundreds of thousands of acres to be covered with solar panels. That land could be instead to be put to socially useful revenue generating use.
Yeah, I don't support cuts* to the programs under the current situation. As you note, the most likely way for those funds to be re-directed is worse than my mom getting an SS check every month. I could end up funding BLM and having to support my mother even more.
So while I would support cuts to entitlements if it were directly linked to things I think are better (say, child tax credits), I don't see that proposal on the table right now. My big idea is that I think parents with multiple kids ought to be excluded from having to pay FICA taxes (say, the employee half with two kids and both employer and employee if 3+). The one thing we shouldn't do is tax parents to pay for these things, that's a death spiral. Let rich childless people and empty nesters near their own retirement carry the burden.
While one could implement a VAT or whatever to cover them, do we really want to increase the overall tax as a % of GDP so that people can lie around in nursing homes in a stupor getting their butts wiped?
I say we just leave things as is. When it blows up it blows up and then we will have a reset. In the meantime I would try to funnel what money I could to things likely to have value after the reset (for instance, more children).
*I think some innovative things could be done with Medicare/Medicaid, but don't expect congress to do them. Probably the exact opposite.
"When the trust fund runs out it won't have any impact on the programs. They will just raise taxes to keep benefits constant rather then lose elections."
That is far from certain. Current federal law prohibits SS paying out more than its available funds. It's harder to get Congress to vote on cuts but if future Congresses are like the current one, it won't be easy to get them to vote for an increase either.
Maybe, but I’ve seen an almost infinite number of “expiring” benefits get extended indefinitely when it came time. It’s not like the electorate is going to be any younger in a decade or two.
As long as we're talking economic issues related to this specific election, let's not forget how "great" tariffs are going to be. See Jason Miller's post on LinkedIn. (https://www.linkedin.com/feed/update/urn:li:activity:7251334048281722880/). Harris hasn't gone as far as Trump on this but that's mostly because she's been hazy on her policies across the board.
“So this will be my only post in October about the election.” This is it?! Who are you voting for?
Milei. Even though he is not eligible.
Wouldn’t Chase Oliver still be closer to you for a protest vote? Or Justin Amash?
No true Scotsman aside. I’ll be supporting him in the hope of any signal of reform to the recent toxic implosion of the LP, which only a few years ago fielded the most qualified ticket around.
It's a real shame that the LP has been going through a bizarre factional war between left-libertarians, ancaps, and Ron Paul-style paleolibertarians over the ideological purity of the party instead of nominating serious candidates like in 2016. We might never get a better third-party ticket in the 21st century than Johnson/Weld 2016. Chase Oliver has good positions, but he's not a real politician; he's never held elected office and has no qualifications to be president.
I mean I would take Milei given the option too, but he's not going to show up in the stats on election night if trying to show your disaffection. Chase is kind of all you have.
"recent toxic implosion" ..sure if you mean 2012 when the LP gave up on libertarianism in a bid to get the Republican Johnson elected and then never looked back.
Gary was a great governor and, perhaps most importantly relative to the current edge lord asshats at LPNH, McArdle and the vileness of Rectenwald, a profoundly good human being.
The party would be so lucky to have people like him and Amash as the torch bearers. But sure, if you prefer the people who destroyed decades of work in a year by all means.
The party doesn't need LINOs. It's why the LP never got anywhere, nobody is interested in GOP rejects. I'm not knocking on Johnson as a politician but he's no libertarian either. Nor am I interested in a LP with Trump/Ventura in 2028 as the nominee.
You can hate the modern LP all you want but at least their agenda isn't "more regulation, more wars, more weed, and less freedom", the Johnson platform. Sure it makes them likely to get less votes but as a token party, it's irrelevant. They exist solely as a marketing platform and to steal votes.
Hey, not fair! :)