Deficit Hawks of Wall Street Oasis, how would you lower the deficit?
The US national debt is at 22.1 Trillion and under every president since Reagan the deficit has gotten worse. Both Bush and Trump have increased the deficit when they were supposed to decrease it. Earlier this week I saw the media shit on Trump because he didn't believe the government should fund the Special Olympics. Not special needs care, the special OLYMPICS. I can't be the only one who is concerned about the financial future of this country. Since this site deals with finance, thus I would assume you guys are finance, economics, and accounting majors, how would you lower the national debt?
This conversation really needs to start with the most politically infeasible portion of the budget: entitlements.
Entitlement spending makes up over 60% of the total government budget before we even begin taking into account the fact that Social Security is severely underfunded as baby boomers begin retiring.
All entitlements, Medicare, SS, Unemployment, welfare need to be reformed and cut down to size. That combined with (everyone will hate me for this) increasing taxes will allow us to meet interest payments and bring down debt to GDP to a reasonable level.
Unless of course, you believe in MMT, in which case borrow away!
I hate you.
Agree entirely.
When Social Security was created 4/5 of Americans didn't live to retirement age (life expectancy was under 65). Now more than 4/5 of Americans get social security, and life expectancy is almost 80. Also the program is often advertised as "insurance" but that's extremely misleading. An insurance company would have to put aside capital and invest it to meet eventual expected payments. Our government, however, taxes working age people today to pay for current retires. If for example no one new entered the system (or a lot less did given our falling birth rate), the system would stop being sustainable. In that sense it's more like a ponzi scheme than an insurance program. Thanks 1930s politicians.
Social Security is the definition of a Ponzi scheme. It became an unrestricted slush fund for our corrupt and/or idiot politicians to raid with no repercussion. Effectively its just another tax - I crack up when anyone under the age of 75 or so starts talking about receiving social security...
A deficit hawk could be a member of either party and of any political persuasion. A deficit hawk could support large tax increases or large spending cuts or both. The reason there are so few Left deficit hawks is because they know we cannot tax our way out of the deficit spending--our entitlement (SS and Medicare) spending is completely out of control, and cutting military spending is a non-starter because members of both parties seek out military pork for their districts. The reason you see more Right deficit hawks is because the spending that is out of control--entitlement spending--also happens to be something we ideologically oppose, so it's easier for us intellectually to call for deep spending cuts.
The only way we ever come close to balancing our budget is to institute a VAT, raise the retirement age, cut SS and Medicare benefits, and raise the income limit (or remove the cap entirely) for FICA, and also reduce military spending. The solutions are so politically unpopular that you'd have to have members of both parties shake hands, set aside the partisanship for 10 minutes, and agree to incur mutual political damage. The only way this happens is if we come close to financial apocalypse, at which point it will probably be too late.
Another thing I'd suggest to deal with our overall debt is to sell off enough U.S. gov't assets to pay the debt down to 60% of GDP. The U.S. has something like $120 trillion in assets.
I will add that there is a slight flaw in my reasoning about selling assets. So the number is about $150 trillion in recoverable coal, oil, and natural gas rights. Problem is, we are moving to a cleaner economy, so the value of U.S. assets going forward would be substantially less than $150 trillion, and may come in only a fraction of that if we don't consider the value of these "dirty" sources of energy. I can't at all see how the political parties would agree to sell U.S. mineral rights for dirty energy to be recovered. It would never fly in 2019.
https://www.instituteforenergyresearch.org/fossil-fuels/coal/federal-as…
Wow, I am floored that another person has enough common sense to understand we must simultaneously cut annual Federal spending 30%+ AND raise taxes to have any chance at paying down the deficit. I have zero faith this will occur - my prediction is continued rapid stratification of right versus left leading to political gridlock which disallows any serious reform. We will end up at $30T by the time the next Presidential election concludes at this pace...
If a few MDs combine their carry, we'll be back in a surplus.
Can you explain what you mean by " cutting military spending is a non-starter because members of both parties seek out military pork for their districts."? Don't we overspend on our military relative to all other countries?
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Tax the carbon, the land, and the consumption (progressively with top marginal rates near the peak of the Laffer curve)
The more important thing is cutting unfunded liabilities. But my ideas on social security reform would probably increase the deficit. But that's only because the deficit isn't a meaningful indicator of the government's fiscal position. We should be looking at the fiscal gap as a percentage of GDP for long term fiscal analysis and for shorter term stuff use net interest payments as a percentage of GDP.
These two indicators tell you different things though. Fiscal gap tells you how much of today's prosperity is being borrowed from future generations. But net interest payments tells you how much it costs to hold the current stock of debt
You can't tax any of this stuff progressively. The only thing you could do is have exemptions and deductions, which is complicated because normal consumption taxes happen at POS and you'd need to prove income by having people file at the end of the year. I'm also skeptical that wealthy people even "consume" anything, lest not much more than non-wealthy people. Not to mention, older people were saving their entire lives to have their income exempt, just to find out a tax will be applied now on every dollar that is supposed to be for spending.
Here is a fun, relevant game: http://www.crfb.org/debtfixer/
I can't cut everything I want to cut on here, but it's an eye opening start.
The problem is, in real life we can't even cut small things. The Special Olympics, for example, has plenty of private funding and does not need federal money. When the Trump admin (foolishly from a political perspective) sought to cut funding all hell broke loose.
I don't want to make this partisan because all parties are at fault for our debt, but during the Obama/Reid (Senate) administration, we had a gov't shutdown over $1 billion in spending cuts. We couldn't even agree to a $1 billion cut, which is a rounding error in our budget. I'm not a doomsdayer, but the attitude in Washington will inevitably lead this nation to ruin. Maybe not today, and maybe not tomorrow, but eventually.
I agree with you that we can't cut anything (small or big) and all of the new tentpole ideas from all of the recent presidents (Bush Jr wars and tax cuts, Obama wars and ACA, Trump wars, tax cuts and wall) all are things that cost more money. No big or small ideas to save us money in return.
I don't care about federal funding for the Special Olympics. I also don't understand the wall. I don't only want to cut something if we're going to use the money to pay for something else that costs even more, no matter what that is.
We need to really think about what we're spending money on and why. Should we bankrupt our children's future in order to pay for Grandma's prescription pain killers at $1,000 a pop? That seems to be a very poor use of government money. Life span is much longer than before, tie SS to lifespan increases. At the same time, young people should not be getting blindly subsidized either - get rid of federal loan subsidies and no way should anyone get federal free college. No Green New Deal. No farming subsidies. Military spending is out of control and needs to be more efficient. No more defined benefit pensions for any federal worker. VAT / simplified and flattened tax code. Etc.
This is great, thanks for sharing- I was slashing like Michael Myers and still couldn't get within their guided range.
The fun part is you start out by cutting everything you don't like. Then you cut things you are ambivalent about. Then you realize you have lots of room to go, so you have to make huge cuts to things you do care about.
i got to -41% % of GDP by 2050. Was slashing costs and increasing taxes. would probably get voted out / assassinated.
Savings relative to current law (billions) $14400
Your Savings Defense550 Investments750 Social Security1970 Health Care3580 Domestic1140 Income Tax2890 Other Taxes3520
was going to post this, thanks brah.
I'd also argue that you need to make legal immigration easier because our labor force growth rate is headed towards Japan's, and that's no bueno for the economy. just spitballing here, but more taxpaying families, spending money, making babies, etc., that's how developed economies grow. the growth is either happening at home or abroad, I'd rather have it here
You and I definitely agree on that but it's a bold move to express out loud. USA is huge! Tons of space for people, it's outdated regulation and development restrictions holding us back.
I'll just leave this here: Brookings: Almost half of Fortune 500 companies were founded by American immigrants or their children
I don't think immigration is the issue, but control over who immigrates is.
When low income people illegally immigrate to the US, they compete with working class Americans for jobs (not with anyone on this forum). It's a big part of why working class incomes have actually fallen in real terms over the last few decades (the other being increased international competition).
Conceptually I also think it's not right to let people who illegally immigrate off the hook for breaking the law. Yes there are a lot of needy people looking for a better life out there, but allowing the ones who so happen to live in a country that borders or is geographically near the US to in-effect get to cut in front of people from Africa, Asia, and Europe seems extremely unfair.
I think a points-based immigration system like in Australia, which prioritizes people with professional, STEM, or entrepreneurial backgrounds would be the most logical approach. In a country with a strong and expensive entitlement system we really need to prioritize immigrants who will be a net benefit to the country. Ironically, in the absence of our huge entitlement state we could allow a lot more immigration and it would just be net positive economically.
Yeah I don't get the hate for this comment, this is perfectly reasonable.
We can shuffle all the paper around, who owes what to whom, etc., but I want a country with more productive people, not fewer, because regardless of policy that's what we'll need to dig out of this mess.
There's a hidden tax to deficit spending which involves higher interest rates (FED buying Treasuries) or devalued currency (FED printing money). Negative government spending (i.e. debt reduction) would put downward pressure on GDP as tax revenues would exceed government spending.
I'm a huge deficit hawk, but I just don't think there's an argument to reduce it. We should stabilize it (i.e. no increase to debt ceiling) and grow our GDP such that it is an ever decreasing proportion. This way, we do not put downward pressure on GDP and we can grow/inflate our way out of this pain.
How will we possibly grow/inflate our way out of this pain? Inflation is currently causing a great deal of pain through unaffordable housing prices as a multiple of HHI, out of control medical cost escalation, and ridiculous education and daycare costs...
end the wars.
The Special Olympics cut was dumb not only due to the political angle, but because it would have cut $20m total from the federal budget (so negligible its half of what the military spends every year on Viagra).
The only way to restore fiscal sense has to be a combination of ideas from both parties. Dems have to accept raising SS age limits, cut some benefits, etc. GOP has to accept cutting military spending, raising taxes slightly, and stop fighting stupid wars. Moreover, both sides have to accept shutting down all tax loopholes from mortgage deductions to child credits. Let tax rates be what they are, stop instituting a 1000 different deductions and credits based on personal agendas.
In other words, cut stupid spending and intelligently raise revenue. This is politically untenable for both sides so lets see how the future plays out.
I skimmed through all responses. This is a convoluted topic which touches virtually every aspect of American life. Interesting stuff, but clearly will get the blood to boil. That's cool.
I thought it interesting that a common theme from respondents was "x, y & z will need to happen but will not with status quo in Washington".
I tend to agree with this thought.
The answer to OP's question is not practical but more philosophical. The issue cannot be addressed before a host of other issues are addressed. It's kind of like the old adage, "you shouldn't subject someone to dating you if you wouldn't date yourself."
See what I did there? I answered without actually saying anything. Perhaps I'm cut out for politics. Who wants to fund me?
Regardless, some really smart people posted some fascinating thoughts on this thread.
I thought it was Dick Cheney who famously said that Reagan proved that deficits don't matter.....
Well, this should be a quick fix, based on the level of discussion above between self-selecting bright, successful, financially literate people (with a racist or two thrown in). I expect Illinois to fix its debt problems before the entire US, which is to say I don’t expect it.
You are racist.
If you aren't talking about entitlements and/or defense, you're not having a serious conversation
InVinoVeritas Scott Irish jackdonaghy26 itsanumbersgame Synergy_or_Syzygy https://web.archive.org/web/20160208021055/http://www.defenderlapatria…
I just take comfort in the fact that Japan will explode before the US does, so they can serve as the canary in the ‘modern monetary theory’ goldmine.
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