28 Comments

1) there is a 0% chance of old age entitlements getting cut. I think this is self evident and won’t list the reasons

2) republicans should stop wasting political capital on #1

3) if #1 means bankruptcy, then the goal of the republican administration should be to determine who it’s friends are and who it’s enemies are and transfer as much money from enemies to friends before bankruptcy. Believe me, the other side is doing the same.

I mean friends in the broad sense (middle class normie families) and not the narrow sense (defense contractors or whatever)

4) when I say transfer I mean transfer. The least damaging form of government spending is writing people checks, the most damaging letting leftist beuracrats spend money. I would plow everything into a gigantic child subsidies, especially those that favor married middle class families with lots of kids. I would try to find students instead of systems in k-12

After all, those kids are the ones that have to dig out post bankruptcy

5) since 2000 it seems to me that “one off” spending of “crisises” vastly outstrips whatever changes to the run rate you could squeeze out of legislation. It matters who is in power when the next “crisis” comes

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founding

Deregulation, austerity, and non-interventionism -- "Stop doing something!" -- are the keys, but insiders, stakeholders, and hawks are entrenched. All other reform ideas are at the 3rd decimal.

"There is a great deal of ruin in a nation." - Adam Smith

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Dec 28, 2022·edited Dec 28, 2022

Republicans who want fiscal austerity should try to target spending growth that is lower that nominal GDP growth but higher than zero. Nominal growth in government spending that is a shrinking share of the economy achieves many (all?) the same goals: shrinking role of government, lowering debt service costs, protects borrowing capacity for emergencies, and probably reduces inflation. But spending growth below NGDP growth does so without the painful short term adjustment that could disrupt the economy and would make for a brutal political fight.

They did this in Canada and we could do it here too.

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Biggest semi-realistic reform of Big Gov't Deep State problem:

10 year maximum service. Then out of government for as long as was served.

Fold Fed Retirement into Social Security, making leaving gov't service more retirement neutral.

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Nothing will be done, and everyone of those people know it. The only way to true reform is through collapse of the present systems. The best outcome might be the systems collapsing one by one and being rebuilt smarter and more efficient, but it isn't what I expect to actually happen. We will run it all into the ground. My only real hope at this point is that it limps along beyond the horizon of my own life.

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Leadership: Let’s simply start with a competent pragmatic president and leadership in Congress regardless of which team they come from. Then we can implement first principle programs (simply copy the playbook from Singapore).

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Keeping inflation at zero is impossible--one has to control both the supply of money and the demand. The latter is impossible to control. Some inflation is better than some deflation, so I can go along with a 2% target. 1% might be better. But in any case greater than zero.

Apart from that, I agree with all of Mr. DeMuth's proposals.

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Let's just dissolve GOP. What's the point of having a party that can't even propose what it wants to do when it has power? My memory of the only achievement when Republicans were in power in 2016-18 was tax act. Does GOP even stand on that or is it time to put SALT deduction back in?

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The statement by DeMuth: " initiatives to mobilize science and enterprise to dominate China in advanced computation, communication and weaponry and to repatriate production of national essentials such as pharmaceuticals" contains the implicit assumption that he knows enough to mobilize science and innovation to achieve his goals.

My observations are that once government money starts flowing into technological area the ability to innovate/$ goes down. A good example is NASA who has funded a new space ship just using an extension of the old model of non-reusable boosters or add-on boosters, while rejecting the reuse concept of Space X. Nobody had tried to do what Space X tried. Launch and land the booster for reuse, which could potentially cut the cost by a large multiple factor. In rejecting the obvious reuse concept they could maintain the high costs and tax payer funding and not take the risk of failure.

Once the government money flows getting more of that flow becomes the priority (rent seeking) rather than cutting costs to increase the bottom line.

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The way my generation turns away and ignores the destroyed lives and deaths from opioids as we focus on other distractions is going to be seen as inexplicable and shameful by future generations.

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Yes, changes in inflation are more difficult than an undesired but static rate.

Yes, a -1% quarter doesn't seem bad in a mostly positive low inflation environment.

I don't know what else to say about why many economists I agree with think 0% is a poor choice for a target rate.

Given what I previously said, maybe you could further explain what you mean by stealing.

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On money - why is there so LITTLE inflation, if printing money/ increasing national debt is so bad? Previously, the result would be a weaker dollar vs other currencies, or vs. gold. But Warsh notes the even worse than US other currencies:

>>Year-to-date (as of September 13, 2022), the dollar is 12 percent stronger against the euro, 20 percent stronger against the Japanese yen, 15 percent stronger against the British pound sterling, and 8 percent stronger against the Chinese yuan.<<

If inflation is the market/ monetarist punishment for excess gov't spending, the lack of it means gov't spending is not yet in excess. From 2009 thru 2020, 2021. But in 2022, it WAS too much. And "too much" depends on all other stuff, including regulations that strangle US oil & gas production, and supply side messups, and even wars, especially in Europe.

Too much money chasing too few goods remains the two reasons for inflation, but both are complex.

On the problem of "the decay of higher education,", Congress needs to defund (end Fed loans, end Fed research, end tax-exempt status) to those colleges which have been discriminating against Republicans. 30% of their professors should have been Trump supporters, or at least both Romney & McCain supporters: 2 of the last 3 Pres. candidates.

The acceptance by Republicans of college discrimination against Reps is the main reason such discrimination has continued and grown into demonization and the social polarization. The idea that "the Right does it too" is total BS (almost, 99%?). How many of the top 100 endowment colleges discriminate against Dems? I think none, nada, 0. How many have 30% or more Reps, I guess also none.

College discrimination against hiring Reps is the biggest cultural problem in America. And the culture war will continue to get worse until that problem is solved.

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I think there could be support for linking either minimum or full social security retirement age, or both, to income.

People who earn higher incomes tend to live longer. It might look more fair than increasing minimum or full retirement age based on birth year.

We also need to beat the notion that SS is anything other than a transfer from working people to retirees. It was tolerable when the ratio was 30/1. Now it’s less than 3/1. SS went negative in the early aughts.

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Inflation is a disincentive to hold and and some other kinds or financial instruments and is a real cost. In setting an inflation target a central bank would weigh this against the benefits of making other relative prices more flexible and able to respond to economic shocks. If it does its estimates in good faith, there is nothing immoral about imposing this cost on cash holders.

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DeMuth: Zero illegal immigration would be too costly to enforce, but it should be much lower. The calibration of legal immigration would entail a large increase. Freeing the energy sector should include freeing zero-CO2 emitting activities from obstacles in the context of a tax on net CO2 emissions.

A balanced structural, full employment budget is a better fiscal rule, but I would retain, indeed increases some income transfer programs which implies significant increases in taxation, away from business and toward personal incomes. Shift SS, ACA, Medicare, Medicaid, more generous unemployment insurance, child tax credit to a VAT.

Zero is a poor inflation target, 3% is probably better, it’s a technical matter, depending on the size and magnitudes of expected shocks and the flexibility of individual prices and wages to adjust downward to permit relative prices to adjust.

Total negative to his industrial policy initiatives, but agreement on incremental increase in school choice.

I think these would be good as either a Republican or Democratic party platform.

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