Grow or die. It’s that stark. 😳😳 Well that’s a kick in the butt, Peter, and well deserved for sure! 👍 The real choice should be grow or cut spending, but no politician has the balls to cut spending, so our only choice is to grow our way out of this mess. The underlying issue is that we’ve become Santa Claus nation, where every day is Christmas and everyone eagerly anticipates getting more free stuff! This cannot continue without ultimately meeting a calamitous ending (think Thelma and Louise!).
The odd thing about this deficit spending is that most parents would never ask their children to give them money (or guarantee a loan) with no intent of paying that money back. But that is exactly what deficit spending does - it borrows from our children, saddling them with debt while the older generation enjoys stuff that is free to them, but a burden on future generations. Let’s hope growth is a viable solution, otherwise that light at the end of the tunnel is an oncoming train 🚆.
Spot on (mostly) we are facing a world supply chain that leaves us very vulnerable imho. You can’t really have a free market in an unbalanced environment like China and other ultra low wage economies in Asia. We can re-shore the key heavy industries because we have an enormous advantage with low cost natural gas. I’m definitely aligned with you about the debt and people being apathetic to it. The debt is the primary source of inflation, and the future promises are not sustainable, even under the rosiest economic conditions. Social security needs to be scrapped and Medicare needs a major revamp too.
I disagree, in part, about "unbalanced." Apart from a rather small number of defense-critical industries, forced on-shoring is economic drag. If other nations want to impoverish themselves by underwriting exports to America, why not help them along by buying their cheap goods?
Now, IP theft is a different matter, and that's a tough nut that should be cracked, but buying cheap foreign goods is not a bad thing in and of itself.
Spending as we do has a certain "momentum", if you think about it. That momentum is what we're fighting right now. Psychologically, it's far easier for Congress to go with the momentum than to try to resist. But that can - and will - change. I'm hopeful that the massive blatant fraud (my estimate is around one trillion per year) provides the "permission structure" to cut. Congresspersons like to think of themselves as "working" or "serving" us - yeah, they do! - and the visibility of widespread fraud pisses them off. This may just be the signal they need to realize "things got a little out of hand..." And yes, growth.
Baseline budgeting is the devil in the details. Planned increases are never talked about, and merely curtailing those planned increases is deemed "cutting."
As for fraud? Yeah - they only care when we get outraged.
The Laffer Curve is a qualitatively valid concept, but not a precision budgeting tool. Pre- Trump “traditional” Republicans lost their “fiscal responsibility” credibility by saying that we could cut taxes while increasing spending and we’d then grow into a balanced budget
Income tax revenue will be just under 20% of GDP, even if rates are cut. That's the steady-state long-term average since WWII. Rate cuts won't change that.
The goal should be a tax code that leads to maximum GDP growth.
As for the overall? The problem is always spending. Barring a VAT or other consumption tax laid on top of the income tax code (see: Europe), we cannot tax our way out of debt.
And a VAT on top of an income tax would be economically disastrous. It would stagnate the economy.
But will lower tax rates necessarily give us a larger “denominator” - GDP - if massive deficits crowd out productive investment and force the Fed into the thankless task of balancing inflation vs. interest rates?
Not sure what your point is. Tax rates do not correlate to tax revenue. That's what Hauser's Law observes. Lower tax rates are economically stimulating, up to a point. That's where Laffer comes in.
I'd say it's impossible to predetermine what's optimal. But, since the broad urge is always to add taxes, I go for the Milton Friedman approach. Favor any and all tax cuts, at any time. If we get to a point where we actually go below Hauser's 19.5% for a substantial period of time, then we can have a conversation about upping them.
My point is that in the face of already huge deficits, tax cuts may not lead to much growth. Growth requires businesses investment and consumer credit, but financing the deficit takes a couple trillion away from investment and credit, bidding up interest rates. In the short term the Fed can compensate by printing more money, but in the long term that will drive up inflation, which in turn drives up interest rates. The only way out is the politically impossible task of cutting spending. Absent that, I don’t think we can grow out of debt.
Grow or die. It’s that stark. 😳😳 Well that’s a kick in the butt, Peter, and well deserved for sure! 👍 The real choice should be grow or cut spending, but no politician has the balls to cut spending, so our only choice is to grow our way out of this mess. The underlying issue is that we’ve become Santa Claus nation, where every day is Christmas and everyone eagerly anticipates getting more free stuff! This cannot continue without ultimately meeting a calamitous ending (think Thelma and Louise!).
The odd thing about this deficit spending is that most parents would never ask their children to give them money (or guarantee a loan) with no intent of paying that money back. But that is exactly what deficit spending does - it borrows from our children, saddling them with debt while the older generation enjoys stuff that is free to them, but a burden on future generations. Let’s hope growth is a viable solution, otherwise that light at the end of the tunnel is an oncoming train 🚆.
Spot on (mostly) we are facing a world supply chain that leaves us very vulnerable imho. You can’t really have a free market in an unbalanced environment like China and other ultra low wage economies in Asia. We can re-shore the key heavy industries because we have an enormous advantage with low cost natural gas. I’m definitely aligned with you about the debt and people being apathetic to it. The debt is the primary source of inflation, and the future promises are not sustainable, even under the rosiest economic conditions. Social security needs to be scrapped and Medicare needs a major revamp too.
I disagree, in part, about "unbalanced." Apart from a rather small number of defense-critical industries, forced on-shoring is economic drag. If other nations want to impoverish themselves by underwriting exports to America, why not help them along by buying their cheap goods?
Now, IP theft is a different matter, and that's a tough nut that should be cracked, but buying cheap foreign goods is not a bad thing in and of itself.
Spending as we do has a certain "momentum", if you think about it. That momentum is what we're fighting right now. Psychologically, it's far easier for Congress to go with the momentum than to try to resist. But that can - and will - change. I'm hopeful that the massive blatant fraud (my estimate is around one trillion per year) provides the "permission structure" to cut. Congresspersons like to think of themselves as "working" or "serving" us - yeah, they do! - and the visibility of widespread fraud pisses them off. This may just be the signal they need to realize "things got a little out of hand..." And yes, growth.
Baseline budgeting is the devil in the details. Planned increases are never talked about, and merely curtailing those planned increases is deemed "cutting."
As for fraud? Yeah - they only care when we get outraged.
The fraud makes them look bad. Who else are we to blame? And personally I'd settle for cutting the growth - preferably to zero. For at least 20 years.
The Laffer Curve is a qualitatively valid concept, but not a precision budgeting tool. Pre- Trump “traditional” Republicans lost their “fiscal responsibility” credibility by saying that we could cut taxes while increasing spending and we’d then grow into a balanced budget
Income tax revenue will be just under 20% of GDP, even if rates are cut. That's the steady-state long-term average since WWII. Rate cuts won't change that.
The goal should be a tax code that leads to maximum GDP growth.
As for the overall? The problem is always spending. Barring a VAT or other consumption tax laid on top of the income tax code (see: Europe), we cannot tax our way out of debt.
And a VAT on top of an income tax would be economically disastrous. It would stagnate the economy.
But will lower tax rates necessarily give us a larger “denominator” - GDP - if massive deficits crowd out productive investment and force the Fed into the thankless task of balancing inflation vs. interest rates?
Not sure what your point is. Tax rates do not correlate to tax revenue. That's what Hauser's Law observes. Lower tax rates are economically stimulating, up to a point. That's where Laffer comes in.
I'd say it's impossible to predetermine what's optimal. But, since the broad urge is always to add taxes, I go for the Milton Friedman approach. Favor any and all tax cuts, at any time. If we get to a point where we actually go below Hauser's 19.5% for a substantial period of time, then we can have a conversation about upping them.
My point is that in the face of already huge deficits, tax cuts may not lead to much growth. Growth requires businesses investment and consumer credit, but financing the deficit takes a couple trillion away from investment and credit, bidding up interest rates. In the short term the Fed can compensate by printing more money, but in the long term that will drive up inflation, which in turn drives up interest rates. The only way out is the politically impossible task of cutting spending. Absent that, I don’t think we can grow out of debt.
The only way to know is to try them. There's no down side, in my book.