I’ll listen to tax raise proposals if they come with material spending cuts and 100% of new money collected reduced the debt. I’m not holding my breath.
1. Increase retirement age to 70. 2. Means test social security and Medicare. 3. 10% reduction in defense spending per year for the next 5 years. 4. All government pensions (excluding military enlisted personnel) are reduced by the % that the govt is over budget in any single year.
Tax hikes
1. Eliminate all government subsidies to businesses of any kind. 2. Minimum tax of 20% on income of any kind. 3. Eliminate the mortgage tax credit. 4. Complete elimination of state and local tax credit.
I haven’t done any math on this, but feels like a start.
Great idea. Ethanol subsidies, all farm price supports, subsidized climate hazard insurance, all funding to FDA/CDC until they hire chief economists :), investments that do not pass NPV>0 tests. Do "tax expenditure" like substituting partial tax credits for deductions in the tax code count if the partial rate is set to generate more revenue, count? Please feel free to add others to reduce the structural deficit to near zero.
Raise the retirement age to 70. Raise Medicare eligibility to 67+. Cut defense spending by 25%. Eliminate the Department of Education, Homeland Security, and Energy. You know the things that would actually put a dent into government spending, Thomas. The only thing you listed above that actually saves any significant government spending was ag subsidies. Most of what you listed is basically peanuts in the federal budget, and counting things as "tax expenditures" is just raising taxes by other language. The only true tax expenditures are the fully refundable tax credits where it doesn't let the tax payer keep more of their earnings, but just gives them a credit against no taxes paid.
Raising the retirement age, yes. I don't know about defense. I think there is a lot of excess cost in procurement. Homeland security is another good place to cut, although sometimes cutting fiscal costs means higher cost to the economy; it probably costs more to deport a few of the worst immigrants that it would be to indiscriminately deport a lot. But sure everything is on the table, but I just doubt that very much will in fact get cut,
Then, no- no VAT, no carbon tax. Without a firm commitment to vastly reducing spending, no one of my political stripe will ever support new taxes like VATs and carbon taxes to make up the difference.
I get extremely annoyed when I see people say this can be fixed with just a little bit of spending restraint (or they offer up what they pretend are some serious spending cuts that when you look at them detailed they add up peanuts- making it appear to be a bait and switch operation) and a whole lot of tax increases. As I pointed out- Europe (and Japan) have all of these taxes you advocated for in your top comment as a solution, and yet they all have debts equal to or greater than the US which doesn't have these tax regimes. So increasing taxes isn't a solution, nor should anyone be selling at such without being equally committed to cutting spending.
Sigh...... you missed the point- Europe has all of those, and higher, and still in the same boat. Proof that raising taxes won't really help with the deficit if spending isn't attacked first.
However, the US doesn't have a VAT of any kind, so it isn't a case of raising a VAT, nor does the US have a carbon tax at the individual level, and not much of one at all at any level. So, no, I did not miss your point at all.
Staying on subject, I think that the US needs to raise tax collections to reduce the deficit. I gave three ways to do so although to be more precise, I'd like the VAT to replace the capped wage tax, so that not a total net gain. But I'm also open to reducing distorting subsidies as mentioned in another post. What sores of expenditure reductions do you have in mind.
So increase the price of gas and electricity even more! And impose even more regulations on economic activity. How does that saying go? If you want less of something you tax it. You want a worse economy. Keep adding taxes.
Did I say anything about regulations? Note that my tax increases target consumption. The point of reducing the deficit is to divert more resources to private investment.
It was circulated last night and I read it early this morning. Just after reading it, I read Arnold's post and since then I've been wondering how the basic idea "it's never about the issue, but about control" is closely related to R. Higgs' ratchet effect. The Fed has never been about unemployment and inflation (two symptoms of malfunction but no measures of macro performance) when it was just Arnold's monetary authority but a means to control the systems of payments; and it has not been about last-resort insurance but a means to control banks first as lenders when rescuing "insolvent" banks and then as intermediary when executing government's indemnity programs.
Yeah, the big question seems to be how the Fed gets back to its historic methods of control.
Run the economy hot while running down the balance sheet seems fine given the prior QT attempts. Only worry is if the Fed is forced off that (cue ratchet).
Run-down seems to depend on loan growth (TOTLLNSA is +850 B y-o-y) countering QT effects. With reserve ratio disabled, the only limit to lending now are the leverage ratios and bank willingness. Theoretically the Fed can SLR plus or minus if needed to manage the run-down back to something closer to 2 T.
If that doesn't work, then what? Wait for gov't fiscal situation to help out?
The Fed balance sheet, like interest rates, should not be a target of monetary policy. The Fed's job is to keep the PL on a steady trajectory (and get it back when is has gone off) and keep the economy's resources fully employed.
Add "Permanent Emergency" to the lexicon of great American oxymorons. Brought to you by the great American morons otherwise known as politicians and government bureaucracy.
Higgs’ Ratchet is a way underrated driver of human behavior in groups.
I don't know that I follow, although I might be stuck thinking too much about the issue of eternal crisis mode.
Its called QE Infinity, aka soft default. How else do you avoid the reckoning from a $33 trillion govt debt?
QE Infinity! And beyond!
Raise taxes, preferably with a combination of progressive consumption tax, a VAT, and a tax on net CO2 emissions.
I’ll listen to tax raise proposals if they come with material spending cuts and 100% of new money collected reduced the debt. I’m not holding my breath.
Instead of just listening, propose the cuts and tax increases you favor.
Spending cuts
1. Increase retirement age to 70. 2. Means test social security and Medicare. 3. 10% reduction in defense spending per year for the next 5 years. 4. All government pensions (excluding military enlisted personnel) are reduced by the % that the govt is over budget in any single year.
Tax hikes
1. Eliminate all government subsidies to businesses of any kind. 2. Minimum tax of 20% on income of any kind. 3. Eliminate the mortgage tax credit. 4. Complete elimination of state and local tax credit.
I haven’t done any math on this, but feels like a start.
How about for every dollar of new taxes, a dollar of existing government spending is cut?
So, how about cutting some government spending? You agree with that- I note the omission.
Great idea. Ethanol subsidies, all farm price supports, subsidized climate hazard insurance, all funding to FDA/CDC until they hire chief economists :), investments that do not pass NPV>0 tests. Do "tax expenditure" like substituting partial tax credits for deductions in the tax code count if the partial rate is set to generate more revenue, count? Please feel free to add others to reduce the structural deficit to near zero.
Raise the retirement age to 70. Raise Medicare eligibility to 67+. Cut defense spending by 25%. Eliminate the Department of Education, Homeland Security, and Energy. You know the things that would actually put a dent into government spending, Thomas. The only thing you listed above that actually saves any significant government spending was ag subsidies. Most of what you listed is basically peanuts in the federal budget, and counting things as "tax expenditures" is just raising taxes by other language. The only true tax expenditures are the fully refundable tax credits where it doesn't let the tax payer keep more of their earnings, but just gives them a credit against no taxes paid.
You still on board?
Raising the retirement age, yes. I don't know about defense. I think there is a lot of excess cost in procurement. Homeland security is another good place to cut, although sometimes cutting fiscal costs means higher cost to the economy; it probably costs more to deport a few of the worst immigrants that it would be to indiscriminately deport a lot. But sure everything is on the table, but I just doubt that very much will in fact get cut,
Then, no- no VAT, no carbon tax. Without a firm commitment to vastly reducing spending, no one of my political stripe will ever support new taxes like VATs and carbon taxes to make up the difference.
I get extremely annoyed when I see people say this can be fixed with just a little bit of spending restraint (or they offer up what they pretend are some serious spending cuts that when you look at them detailed they add up peanuts- making it appear to be a bait and switch operation) and a whole lot of tax increases. As I pointed out- Europe (and Japan) have all of these taxes you advocated for in your top comment as a solution, and yet they all have debts equal to or greater than the US which doesn't have these tax regimes. So increasing taxes isn't a solution, nor should anyone be selling at such without being equally committed to cutting spending.
Europe has all of these, Thomas, and are still in the same boat as us.
You missed the verb. "raise."
Sigh...... you missed the point- Europe has all of those, and higher, and still in the same boat. Proof that raising taxes won't really help with the deficit if spending isn't attacked first.
However, the US doesn't have a VAT of any kind, so it isn't a case of raising a VAT, nor does the US have a carbon tax at the individual level, and not much of one at all at any level. So, no, I did not miss your point at all.
Staying on subject, I think that the US needs to raise tax collections to reduce the deficit. I gave three ways to do so although to be more precise, I'd like the VAT to replace the capped wage tax, so that not a total net gain. But I'm also open to reducing distorting subsidies as mentioned in another post. What sores of expenditure reductions do you have in mind.
So increase the price of gas and electricity even more! And impose even more regulations on economic activity. How does that saying go? If you want less of something you tax it. You want a worse economy. Keep adding taxes.
Did I say anything about regulations? Note that my tax increases target consumption. The point of reducing the deficit is to divert more resources to private investment.
I suggest to read this post
https://tomknighton.substack.com/p/its-never-about-the-issue-but-about?s=w
It was circulated last night and I read it early this morning. Just after reading it, I read Arnold's post and since then I've been wondering how the basic idea "it's never about the issue, but about control" is closely related to R. Higgs' ratchet effect. The Fed has never been about unemployment and inflation (two symptoms of malfunction but no measures of macro performance) when it was just Arnold's monetary authority but a means to control the systems of payments; and it has not been about last-resort insurance but a means to control banks first as lenders when rescuing "insolvent" banks and then as intermediary when executing government's indemnity programs.
Yeah, the big question seems to be how the Fed gets back to its historic methods of control.
Run the economy hot while running down the balance sheet seems fine given the prior QT attempts. Only worry is if the Fed is forced off that (cue ratchet).
Run-down seems to depend on loan growth (TOTLLNSA is +850 B y-o-y) countering QT effects. With reserve ratio disabled, the only limit to lending now are the leverage ratios and bank willingness. Theoretically the Fed can SLR plus or minus if needed to manage the run-down back to something closer to 2 T.
If that doesn't work, then what? Wait for gov't fiscal situation to help out?
EB is completely correct- we are heading to Argentina in a slow boat.
The Fed balance sheet, like interest rates, should not be a target of monetary policy. The Fed's job is to keep the PL on a steady trajectory (and get it back when is has gone off) and keep the economy's resources fully employed.
Add "Permanent Emergency" to the lexicon of great American oxymorons. Brought to you by the great American morons otherwise known as politicians and government bureaucracy.
.