We're already living in the left wing dystopia. Trump is trying to fix the damage.
The damage to our energy infrastructure alone, by the Dems trying to follow Germany into energy oblivion has cost us trillions and will cost more before it is fixed. Not to mention hundreds who have frozen to death or who can no longer afford heating and/or cooling.
Fix some, break some, I suppose that's better than Joe "Break Everything" Biden. I'd really like a President who didn't think he needed to break anything.
I put the national debt problem first, because neither party has shown any interest in countering it. Whatever happens, whether one of the other two scenarios or something else, that debt problem will overshadow everything.
Perhaps, of the potential dystopian futures you articulated, "The Debt Bomb" is the lesser evil. It seems unlikely that America would truly default on its debt because, as you noted, it just has to spin up its real and virtual printing presses. Yes, it would temporarily set the country back—likely causing a period of hyperinflation and a massive redistribution of wealth—but, also as you noted, it would force more conservative fiscal policy as America’s unlimited credit account would be closed for some time. And, in modern times, with the intervention of central banks, periods of hyperinflation tend to last only two to four years (Yugoslavia 1992-1994, Zimbabwe 2007-2009, Venezuela 2016-2020). We may emerge from this dystopia with a relatively stronger (qualified because social unrest may overwhelm the benefits and we may morph into your other cited dystopias), more fiscally sound America.
I think that if things blow up in the USA, some other currently pleasant places might become unpleasant as well. For example, military adventures might drag in governments formally allied to the US. If you are looking forward to a comfortable retirement in a reasonably rich English-speaking country with opportunities to travel and lecture, Ireland and Dubai are ticking most boxes while having a good track record of neutrality in recent conflicts. Both have somewhat unpleasant climates (though in very different ways) and Dubai's neighborhood is getting a bit scary lately.
Another thing maybe worth considering is keeping one's wealth out of harm's way; a financially troubled US government could get a lot greedier than it currently is on one hand, and the international banking system is too dependent on both American financial services and US government debt on the other hand. Perhaps, shifting a considerable part of savings into cryptocurrencies with some track record of safety and resilience (Bitcoin being the most conservative choice) might be worth considering. Dubai is amazingly crypto-friendly, I was able to live there for many months without a bank account, entirely on crypto: both long term rent or outright purchase of housing and vehicles is doable directly in crypto, and there is a very liquid and convenient market for exchanging cryptocurrencies into cash or online purchase certificates for anything from groceries to clothing, home decor and entertainment. There is a large class of wealthy un-banked people living there (upper middle-class Russians) providing the necessary economies of scale for businesses to serve them.
Full disclosure: We have moved to Dubai mostly for tax reasons, spending the hottest months in Europe (legally) as tourists. In practice, we kept our home in Hungary, just don't spend most of the year here anymore. But TBH, right now I am happy not to be in Dubai, not only because of the scorching heat.
I have only been living in Dubai a little over one year, so I haven't been to many neighborhoods. Dubai Marina seems to have the largest concentration of Russian-speakers and businesses serving them. Libertarian events (meetups and guest lectures, mostly) also seem to be concentrating there. Ibn Battuta seems to be a budget neighborhood with cheap housing and good connectivity, incl. public transport, but a bit far from the shoreline. Downtown is hideously expensive and loud, but the views are stunning. Deira seems to be mostly inhabited by men (very few women) from the Indian Subcontinent, and some really cheap businesses (mostly services and restaurants). Dubai Creek area has an unusually high concentration of local emiratis living in villas. Dubai Canal has low-rise condos surrounded by walking paths and cycle lanes, and a big park, popular with Western European expats.
I am amused that Ibn Battuta, a North African world traveler whose account of his travels I have read, has a neighborhood named after him. Interesting book.
Moreover: within that neighborhood, there is a huge shopping mall not only named after him, but composed of "courts" themed after his travels (Andalusia court, Tunisia court, Egypt court, Persia court, India court, China court). https://www.ibnbattutamall.com/en
Unlike most other big shopping malls in Dubai, its main emphasis is not luxury shopping, but practical, affordable everyday shopping, services and entertainment. I think, it is a place you would enjoy visiting. Perhaps even more than most of Dubai's signature tourist attractions.
Actually I'm pretty well convinced the country is already long gone to hell and a wrecking ball in D.C., President Trump, may well be the only way to save it and civilization as well. Not that I think (Though I do hope.) such will happen.
Right wing-populist takeover of the political system? I don't see chance of such happening but as I see the present situation not as right versus left but right against wrong I don't see a downside to such.
A left-wing, possibly progressive,dystopia; my opinion we've been there, doing that,having that for decades.
National debt? Why yes I'm old enough to remember nickle Cokes, eleven cent a gallon gasoline, fifteen cent pulp mags, and forty cents a dozen eggs. The dozen hasn't gotten any bigger, the Coke bottle has gotten smaller but the prices sure have risen. Government, on the other hand, has gotten a lot bigger and far more expensive, while what I see as valid government services; arbitrating between you and me while protecting us from them seem almost nonexistent.
Our one party system, democrats and loyal RINOs, is a massive juggernaut, their wheels greased by media and academia, is almost impossible to stop.
"I don’t know what happens at that point and would prefer to observe the process from a safe distance." Me, I'm sitting up here atop the world, Russia to the west, socialist Canada to the east but Alaska's population being around one person per square mile, me and mine have a bit of wiggle room no matter what.
& why yes, I am sure we can agree to disagree. Grin.
Inflation and national debt are separate issues. You can have inflation even if nobody is lending you money and you can have a large national debt and stable prices.
Out of curiosity, I found gasoline prices back to 1929. The lowest was 17 cents in 1931.
Gas wars, Miami, Florida, mid-fifties. Gas stations and brands dropping prices to, hopefully, in the long run grab a bigger share of the market.
Yes I've paid as low as 11 cents a gallon but you'll have to take my word for it, I've no receipt . I did, in just a few seconds, find this reference on line to 15 cents a gallon though; https://fineartamerica.com/featured/gas-war-thirdiphoto.html
It seems that a few people here believe that we have been living in a leftist dystopia or that Biden is 'evil.' From an economic perspective, at least, I don't see this. The total value of all US companies is on the same order of magnitude as the total value of all other companies in the world combined. The Bay Area of California, with a population of about 0.1 percent of the world's population, is host to five of the ten most valuable companies in the world. The standard of living in the US has significantly increased over the past 40 years. Seemingly forever, the US has led the world in technology development and the economic benefits that flow from it. This does not sound or feel dystopian to me. Do you feel these times are dystopian from a cultural or political perspective?
Biden may have suffered significant cognitive decline--a houseplant as President may have instilled more confidence, but what is it that he has done that has either destroyed America or could possibly be classified as evil?
I don't think we are living in a dystopia, left or right, although that could change. I think Biden was a pretty poor president but I am on record saying that he might be a decent man.
"The less obvious dystopia is a left-wing, possibly progressive, one." This seems at least as obvious to me (although delayed while the Dems lack the presidency). BTW, recent and excellent projections of nightmarish "progressive" dystopias appear in Cancelled: The Shape of Things to Come, Danny King, and Mania, Lionel Shriver (both Prometheus Award finalists for this year).
As for the debt, we do have a toddler problem in the Republican Party. Santa Claus is not going to bail us out. We need to increase federal taxes. Trump has made some strides in that direction by levying revenue tariffs. But his baseline is too low. It should be 30%, not 10%. https://conntects.net/blogPosts/HolisticPolitics/157/A-More-Stable-Trade-Regime
As for the debt, we do have a toddler problem in the Republican Party. Santa Claus is not going to bail us out. We need to increase federal taxes. Trump has made some strides in that direction by levying revenue tariffs. But his baseline is too low. It should be 30%, not 10%. https://conntects.net/blogPosts/HolisticPolitics/157/A-More-Stable-Trade-Regime
I don't think reaching that debt threshold directly and deterministically causes a formal default; MMT is a basically true description of macroeconomics - that inflation is affected by demand for currency, not just supply - though the expansion into "Modern Monetary Theory" assigns a very different set of connotative loadings and implied preferences than the expansion into "Market Monetary Theory."
Rather, I'd expect the debt threshold you describe to be on the order of the US's 1971 exit from Bretton Woods; removing another veil obscuring the (widely acknowledged!) fact that the state controls the currency. There's no obvious reason that monetizing 12% of GDP per year would constitute a default event or trigger runaway hyperinflation, vs 10% or 2% or 1%, except that the vague incoherent sense that the government has to "pay back" its debts would be challenged more directly if new debts are routinely 100% monetized, than if they're customarily only partly diluted. This might make the Fed or foreign investors more reluctant to buy US bonds, but more because of superstition than any naively rational mathematical constraint.
A government in control of its own fiat currency faces the same basic cybernetic problems at any debt level.
I should say, having been hyper critical of Trump here, I am no longer that pessimistic. This is anathema for libertarians, but I think his proactivity, and I could add, his impulsiveness, in the Iranian affair has been a breath of fresh air for me. I believe he was tricked by the Israelis, and that he had to follow them because they are one of the few political allies he still has, but the Democrats' passiveness, even collaboration, with certain dictatorships were very worrying.
The fact that he dismissed Tulsi Gabbard's comments and attacked Tucker Carlson is uplifting. The man can still confront his manipulators, he is not senile after all. He can pursue a policy consistently, perhaps there is hope for settling down on tariffs, stop the uncertainty, appease his base, and the dynamic American economy will adapt.
The debt might explode one day, and that is worrying. But maybe that's what it takes to actually cut spending meaningfully... The youth have better access than ever to economics knowledge, and free speech seems to be flourishing again, so not all trends are bad.
I was sold on the idea that the secret behind the USA's success is its freedom. I think that's a big factor, but its equally important that it isnstable. It is capable of enduring chaos, and coming out the other side with something that works. As an investor, I think that's all you'd ask for.
Trump is less evil than Biden, in my eyes, but consistency has never been his middle name. His utter ignorance on trade isn't helping either.
How can someone make any rational decisions based on increasing foreign investment while lowering the trade deficit, when they are the same thing with opposite signs?
How can tariffs raise prices enough to block imports and protect domestic industry, while also raising enough revenue to replace the income tax, while using them as negotiating leverage which allows lowering them?
These are not policy inconsistencies. They are reality inconsistencies. He may as well start a basketball league for the tallest midgets.
Revenue tariffs by themselves don't raise much money, since you can insource to avoid the tax. Revenue tariffs that are in the same ballpark as income taxes can raise money.
That misses the point. The point is that his claims and goals are contradictory. If he blocks imports to "protect" domestic industry, no imports means no revenue. And if he treats high tariffs as bargaining chips, then he has to allow them to drop, which means they won't block imports and they won't raise enough revenue.
The value of imports and income tax collected are known quantities. Last time I ran the dead simple calculation, it would have taken a 71% across-the-board tariff to match the income tax.
No one in their right mind thinks a 71% tariff will be shrugged off. It will cut imports drastically, and there goes that income tax replacement. It's also a regressive tax. Imagine anyone trying to introduce a 71% sales tax, even if it were only on foreign goods.
I don't care if Santa Claus and the Easter bunny suggested high tariffs. If that was Johnson and Weld, it just shows that naming someone libertarian doesn't make them libertarian, and without seeing the context of that 30%, it is a useless data point.
My comment is about Trump being an economic ignoramus whose tariff "goals" are contradictory nonsense.
One of Trump’s stated goals is replacing the income tax with tariffs.
We do not subsidize outsourcing, and outsourcing is not destroying the country.
I don’t know if you are like others who take outsourcing as destroying domestic manufacturing jobs. That is a false concept. The country right now has its highest manufacturing output in dollars, and the highest manufacturing capacity. Using tariffs to onshore manufacturing punishes efficient manufacturers and rewards inefficient ones.
Using that same logic, we should ban ATMs and bring back tellers. Ditto for elevator operators and telephone switchboard operators. And most important of all, lets bring back all those farming jobs which have disappeared due to productivity gains. Productivity is destroying this country.
Or the government could just butt out and let individuals and markets work it out, and have some liberty back in this country. This lack of liberty is what’s really destroying the country.
The article I linked to disagrees with Trump's negotiation by country approach. But it shows that "free trade" mixed with income/labor taxation is an unstable arrangement.
And no, we cannot replace the income tax with tariffs. We need the tariffs on top of existing income taxes. Those deficits need to come town.
I'm not trying to defend his policies, I'm trying to cast a more positive light on him. My initial diagnosis of his presidency was that he is suffering from some cognitive decline, and that, with his loss of prestige from Jan 6, had led to his admin being captured by incompetent and/or bad people. Some of this is undeniably true, but what I saw during the past week was him being coherent and assertive in the face of disruptions from within his camp. Some of that might be due to the nature of the task: as the stakes are higher, he appears to be handling things himself, and he is probably accompanied by competent foreign policy specialists, not the bums he brought in.
But I won't deny it, I say this also because I like how he is handling this policy in specific. It's a break from his previous inflexible isolationism. A break in a good direction: Iran falling would be historical, and would benefit the world in many ways. And it's in the direction of containing Russia, in a roundabout way.
It's an improvement, as they say, "on the margin". If my opinion of his presidency was a stocks chart, it would have had an uptick. The actual stock market did practically recover, so maybe it saw the same thing, but much earlier. Maybe there is a chance to reshuffle his cabinet and get back to normalcy, somewhat. If he pulls through with some trade deals at manageable rates, like 10-20%, then cuts taxes somewhere else, that about breaks even, I'd guess. 2026 might be more evenly matched than we thought.
Well, the fact that no one since Romney has been willing to openly name the source of most of the debt, namely entitlements, is not a promising sign in addressing it.
The debt bomb and especially its consequences were also discussed by Ray Dalio and with (to me) surprisingly similar implications. Are you aware of his writing? I assume no, and if so, both of you coming to similar conclusions make them even more scary.
A February 5, 2013 Time magazine article by Christopher Matthews entitled “The Federal Government's $128 Trillion Stockpile: The Answer to Our Debt Problems?” states that, according to an Institute for Energy Research (IER) report, the federal government owns over 900,000 real assets, mineral rights, underutilized buildings, and oil and gas resources worth a total of $128 trillion in 2013. The article states that, since the IER is a think tank that advocates energy deregulation, it may have overestimated the value of the assets, but even if the total value is half the estimate, it greatly exceeds the national debt. Besides, the government owns gold bullion and student loan debt estimated to total more than $1 trillion.
I'll add that, if these assets were sold, they'd be put to productive use in the private sector. Consequently, the taxpayers would save the costs of administering them and would be better able to afford what government remains.
Do you have a better proposal to deal with the national debt?
I think selling off large amounts of assets isn't a terrible idea, although I would need to see the full breakdown of the portfolio, and spend a longer time figuring out the value points than I would want to spend, to really know. I think you are correct that selling the mineral rights in particular, or even just leasing them at a reasonable rate, would be a huge help.
My largest fear is that as soon as the debt and interest goes down we will see the congress say "Hey, debt is really cheap! It would be irresponsible not to borrow more now!" Until we fix the budgeting process, or even have one, this will keep rearing its head.
Too many loopholes, and how can it be enforced? Every proposed amendment I've seen always has an override clause, and it doesn't take much imagination to guess how often that would be used.
The only solution I can see is limiting revenue and not allowing borrowing in any form. I have had many ideas. Here are two; note I do not claim these to be the best or even possible. They are just ideas.
1. Every budget bill has to name its own unique revenue source, such as a 1% tariff on steel or a 1% VAT on electronics. If the revenue runs out before the fiscal year, shut the expenditures down. Fire people, sell assets, or go on unpaid holiday, but no more revenue until the next fiscal year.
2. Everything as now, but Congressional budgets are maximums, and when people pay their taxes, they allocate the full sum owed among those budgets as they wish. Any budget shortfalls are too bad; fire employees, sell assets, or go on an unpaid holiday until the next fiscal year. Any budget excess is returned to voters; no inter-budget transfers, no carry over into the next fiscal year.
I assume your initial question refers to a balanced budget amendment. The Constitution requires an amendment to be proposed either by Congress with a two-thirds majority vote in both houses or by a constitutional convention demanded by the legislatures of two-thirds of the states. To my knowledge, no balanced budget amendment has ever been proposed by a constitutional convention. I would expect loopholes in such an amendment proposed by Congress for self-interested reasons. But state legislatures would have different incentives. Since I'm not an attorney, I can't explain how an effective amendment can be enforced, but I'd guess that a skilled constitutional attorney could find a way. There is a danger of a runaway convention, but we're already facing bankruptcy and possible economic collapse due to profligate government. I can't describe all the ideas I have in a short reply, but they include abolishing departments and agencies, limiting revenues and spending, and returning to the gold standard. If there must be a tax, I'd prefer a Georgist tax on land as the least destructive tax. It would also give government officials the incentive to sell public lands to private taxpayers. I'd be happy to consider anything that would work.
We're already living in the left wing dystopia. Trump is trying to fix the damage.
The damage to our energy infrastructure alone, by the Dems trying to follow Germany into energy oblivion has cost us trillions and will cost more before it is fixed. Not to mention hundreds who have frozen to death or who can no longer afford heating and/or cooling.
Fix some, break some, I suppose that's better than Joe "Break Everything" Biden. I'd really like a President who didn't think he needed to break anything.
I put the national debt problem first, because neither party has shown any interest in countering it. Whatever happens, whether one of the other two scenarios or something else, that debt problem will overshadow everything.
Perhaps, of the potential dystopian futures you articulated, "The Debt Bomb" is the lesser evil. It seems unlikely that America would truly default on its debt because, as you noted, it just has to spin up its real and virtual printing presses. Yes, it would temporarily set the country back—likely causing a period of hyperinflation and a massive redistribution of wealth—but, also as you noted, it would force more conservative fiscal policy as America’s unlimited credit account would be closed for some time. And, in modern times, with the intervention of central banks, periods of hyperinflation tend to last only two to four years (Yugoslavia 1992-1994, Zimbabwe 2007-2009, Venezuela 2016-2020). We may emerge from this dystopia with a relatively stronger (qualified because social unrest may overwhelm the benefits and we may morph into your other cited dystopias), more fiscally sound America.
I think that if things blow up in the USA, some other currently pleasant places might become unpleasant as well. For example, military adventures might drag in governments formally allied to the US. If you are looking forward to a comfortable retirement in a reasonably rich English-speaking country with opportunities to travel and lecture, Ireland and Dubai are ticking most boxes while having a good track record of neutrality in recent conflicts. Both have somewhat unpleasant climates (though in very different ways) and Dubai's neighborhood is getting a bit scary lately.
Another thing maybe worth considering is keeping one's wealth out of harm's way; a financially troubled US government could get a lot greedier than it currently is on one hand, and the international banking system is too dependent on both American financial services and US government debt on the other hand. Perhaps, shifting a considerable part of savings into cryptocurrencies with some track record of safety and resilience (Bitcoin being the most conservative choice) might be worth considering. Dubai is amazingly crypto-friendly, I was able to live there for many months without a bank account, entirely on crypto: both long term rent or outright purchase of housing and vehicles is doable directly in crypto, and there is a very liquid and convenient market for exchanging cryptocurrencies into cash or online purchase certificates for anything from groceries to clothing, home decor and entertainment. There is a large class of wealthy un-banked people living there (upper middle-class Russians) providing the necessary economies of scale for businesses to serve them.
Full disclosure: We have moved to Dubai mostly for tax reasons, spending the hottest months in Europe (legally) as tourists. In practice, we kept our home in Hungary, just don't spend most of the year here anymore. But TBH, right now I am happy not to be in Dubai, not only because of the scorching heat.
Out of curiosity - can you share about Dubai neighborhoods and why it is happy to not be there right now? Google didn't turn up anything relevant.
I am happy not to be there right now because of the air war going on across the Gulf.
I have only been living in Dubai a little over one year, so I haven't been to many neighborhoods. Dubai Marina seems to have the largest concentration of Russian-speakers and businesses serving them. Libertarian events (meetups and guest lectures, mostly) also seem to be concentrating there. Ibn Battuta seems to be a budget neighborhood with cheap housing and good connectivity, incl. public transport, but a bit far from the shoreline. Downtown is hideously expensive and loud, but the views are stunning. Deira seems to be mostly inhabited by men (very few women) from the Indian Subcontinent, and some really cheap businesses (mostly services and restaurants). Dubai Creek area has an unusually high concentration of local emiratis living in villas. Dubai Canal has low-rise condos surrounded by walking paths and cycle lanes, and a big park, popular with Western European expats.
I am amused that Ibn Battuta, a North African world traveler whose account of his travels I have read, has a neighborhood named after him. Interesting book.
Moreover: within that neighborhood, there is a huge shopping mall not only named after him, but composed of "courts" themed after his travels (Andalusia court, Tunisia court, Egypt court, Persia court, India court, China court). https://www.ibnbattutamall.com/en
Unlike most other big shopping malls in Dubai, its main emphasis is not luxury shopping, but practical, affordable everyday shopping, services and entertainment. I think, it is a place you would enjoy visiting. Perhaps even more than most of Dubai's signature tourist attractions.
Possibly its closeness to other countries which are having a difficult time and known to throw temper tantrums.
Actually I'm pretty well convinced the country is already long gone to hell and a wrecking ball in D.C., President Trump, may well be the only way to save it and civilization as well. Not that I think (Though I do hope.) such will happen.
Right wing-populist takeover of the political system? I don't see chance of such happening but as I see the present situation not as right versus left but right against wrong I don't see a downside to such.
A left-wing, possibly progressive,dystopia; my opinion we've been there, doing that,having that for decades.
National debt? Why yes I'm old enough to remember nickle Cokes, eleven cent a gallon gasoline, fifteen cent pulp mags, and forty cents a dozen eggs. The dozen hasn't gotten any bigger, the Coke bottle has gotten smaller but the prices sure have risen. Government, on the other hand, has gotten a lot bigger and far more expensive, while what I see as valid government services; arbitrating between you and me while protecting us from them seem almost nonexistent.
Our one party system, democrats and loyal RINOs, is a massive juggernaut, their wheels greased by media and academia, is almost impossible to stop.
"I don’t know what happens at that point and would prefer to observe the process from a safe distance." Me, I'm sitting up here atop the world, Russia to the west, socialist Canada to the east but Alaska's population being around one person per square mile, me and mine have a bit of wiggle room no matter what.
& why yes, I am sure we can agree to disagree. Grin.
Inflation and national debt are separate issues. You can have inflation even if nobody is lending you money and you can have a large national debt and stable prices.
Out of curiosity, I found gasoline prices back to 1929. The lowest was 17 cents in 1931.
Gas wars, Miami, Florida, mid-fifties. Gas stations and brands dropping prices to, hopefully, in the long run grab a bigger share of the market.
Yes I've paid as low as 11 cents a gallon but you'll have to take my word for it, I've no receipt . I did, in just a few seconds, find this reference on line to 15 cents a gallon though; https://fineartamerica.com/featured/gas-war-thirdiphoto.html
It seems that a few people here believe that we have been living in a leftist dystopia or that Biden is 'evil.' From an economic perspective, at least, I don't see this. The total value of all US companies is on the same order of magnitude as the total value of all other companies in the world combined. The Bay Area of California, with a population of about 0.1 percent of the world's population, is host to five of the ten most valuable companies in the world. The standard of living in the US has significantly increased over the past 40 years. Seemingly forever, the US has led the world in technology development and the economic benefits that flow from it. This does not sound or feel dystopian to me. Do you feel these times are dystopian from a cultural or political perspective?
Biden may have suffered significant cognitive decline--a houseplant as President may have instilled more confidence, but what is it that he has done that has either destroyed America or could possibly be classified as evil?
I don't think we are living in a dystopia, left or right, although that could change. I think Biden was a pretty poor president but I am on record saying that he might be a decent man.
See the second part of https://daviddfriedman.substack.com/p/two-stories
You neglected the way things will ACTUALLY play out in the former republic:
***DEFAULT ON THE NATIONAL DEBT***.
But possibly because Murray Rothbard responsibly detailed it, here...
https://chroniclesmagazine.org/view/repudiating-the-debt/
...you may have ignored it out of a personal animus against him.
"The less obvious dystopia is a left-wing, possibly progressive, one." This seems at least as obvious to me (although delayed while the Dems lack the presidency). BTW, recent and excellent projections of nightmarish "progressive" dystopias appear in Cancelled: The Shape of Things to Come, Danny King, and Mania, Lionel Shriver (both Prometheus Award finalists for this year).
fast forward 20 years and you have the exact situation of Brazil
We just had the left wing dystopia.
As for the debt, we do have a toddler problem in the Republican Party. Santa Claus is not going to bail us out. We need to increase federal taxes. Trump has made some strides in that direction by levying revenue tariffs. But his baseline is too low. It should be 30%, not 10%. https://conntects.net/blogPosts/HolisticPolitics/157/A-More-Stable-Trade-Regime
We just had the left wing dystopia.
As for the debt, we do have a toddler problem in the Republican Party. Santa Claus is not going to bail us out. We need to increase federal taxes. Trump has made some strides in that direction by levying revenue tariffs. But his baseline is too low. It should be 30%, not 10%. https://conntects.net/blogPosts/HolisticPolitics/157/A-More-Stable-Trade-Regime
I don't think reaching that debt threshold directly and deterministically causes a formal default; MMT is a basically true description of macroeconomics - that inflation is affected by demand for currency, not just supply - though the expansion into "Modern Monetary Theory" assigns a very different set of connotative loadings and implied preferences than the expansion into "Market Monetary Theory."
Rather, I'd expect the debt threshold you describe to be on the order of the US's 1971 exit from Bretton Woods; removing another veil obscuring the (widely acknowledged!) fact that the state controls the currency. There's no obvious reason that monetizing 12% of GDP per year would constitute a default event or trigger runaway hyperinflation, vs 10% or 2% or 1%, except that the vague incoherent sense that the government has to "pay back" its debts would be challenged more directly if new debts are routinely 100% monetized, than if they're customarily only partly diluted. This might make the Fed or foreign investors more reluctant to buy US bonds, but more because of superstition than any naively rational mathematical constraint.
A government in control of its own fiat currency faces the same basic cybernetic problems at any debt level.
I should say, having been hyper critical of Trump here, I am no longer that pessimistic. This is anathema for libertarians, but I think his proactivity, and I could add, his impulsiveness, in the Iranian affair has been a breath of fresh air for me. I believe he was tricked by the Israelis, and that he had to follow them because they are one of the few political allies he still has, but the Democrats' passiveness, even collaboration, with certain dictatorships were very worrying.
The fact that he dismissed Tulsi Gabbard's comments and attacked Tucker Carlson is uplifting. The man can still confront his manipulators, he is not senile after all. He can pursue a policy consistently, perhaps there is hope for settling down on tariffs, stop the uncertainty, appease his base, and the dynamic American economy will adapt.
The debt might explode one day, and that is worrying. But maybe that's what it takes to actually cut spending meaningfully... The youth have better access than ever to economics knowledge, and free speech seems to be flourishing again, so not all trends are bad.
I was sold on the idea that the secret behind the USA's success is its freedom. I think that's a big factor, but its equally important that it isnstable. It is capable of enduring chaos, and coming out the other side with something that works. As an investor, I think that's all you'd ask for.
Trump is less evil than Biden, in my eyes, but consistency has never been his middle name. His utter ignorance on trade isn't helping either.
How can someone make any rational decisions based on increasing foreign investment while lowering the trade deficit, when they are the same thing with opposite signs?
How can tariffs raise prices enough to block imports and protect domestic industry, while also raising enough revenue to replace the income tax, while using them as negotiating leverage which allows lowering them?
These are not policy inconsistencies. They are reality inconsistencies. He may as well start a basketball league for the tallest midgets.
Revenue tariffs by themselves don't raise much money, since you can insource to avoid the tax. Revenue tariffs that are in the same ballpark as income taxes can raise money.
I ran the numbers here: https://conntects.net/blogPosts/HolisticPolitics/157/A-More-Stable-Trade-Regime
And, by the way, in 2016, it was the Libertarian candidate who was calling for taxing imported consumer goods at 30%.
That misses the point. The point is that his claims and goals are contradictory. If he blocks imports to "protect" domestic industry, no imports means no revenue. And if he treats high tariffs as bargaining chips, then he has to allow them to drop, which means they won't block imports and they won't raise enough revenue.
The value of imports and income tax collected are known quantities. Last time I ran the dead simple calculation, it would have taken a 71% across-the-board tariff to match the income tax.
No one in their right mind thinks a 71% tariff will be shrugged off. It will cut imports drastically, and there goes that income tax replacement. It's also a regressive tax. Imagine anyone trying to introduce a 71% sales tax, even if it were only on foreign goods.
I don't care if Santa Claus and the Easter bunny suggested high tariffs. If that was Johnson and Weld, it just shows that naming someone libertarian doesn't make them libertarian, and without seeing the context of that 30%, it is a useless data point.
My comment is about Trump being an economic ignoramus whose tariff "goals" are contradictory nonsense.
Replacing the income tax with tariffs would not work. A 30% baseline tariff would tax imports at roughly the same rate we tax domestic merch.
Currently, we have a system of subsidized outsourcing and it is destroying the country.
One of Trump’s stated goals is replacing the income tax with tariffs.
We do not subsidize outsourcing, and outsourcing is not destroying the country.
I don’t know if you are like others who take outsourcing as destroying domestic manufacturing jobs. That is a false concept. The country right now has its highest manufacturing output in dollars, and the highest manufacturing capacity. Using tariffs to onshore manufacturing punishes efficient manufacturers and rewards inefficient ones.
Using that same logic, we should ban ATMs and bring back tellers. Ditto for elevator operators and telephone switchboard operators. And most important of all, lets bring back all those farming jobs which have disappeared due to productivity gains. Productivity is destroying this country.
Or the government could just butt out and let individuals and markets work it out, and have some liberty back in this country. This lack of liberty is what’s really destroying the country.
The article I linked to disagrees with Trump's negotiation by country approach. But it shows that "free trade" mixed with income/labor taxation is an unstable arrangement.
And no, we cannot replace the income tax with tariffs. We need the tariffs on top of existing income taxes. Those deficits need to come town.
I'm not trying to defend his policies, I'm trying to cast a more positive light on him. My initial diagnosis of his presidency was that he is suffering from some cognitive decline, and that, with his loss of prestige from Jan 6, had led to his admin being captured by incompetent and/or bad people. Some of this is undeniably true, but what I saw during the past week was him being coherent and assertive in the face of disruptions from within his camp. Some of that might be due to the nature of the task: as the stakes are higher, he appears to be handling things himself, and he is probably accompanied by competent foreign policy specialists, not the bums he brought in.
But I won't deny it, I say this also because I like how he is handling this policy in specific. It's a break from his previous inflexible isolationism. A break in a good direction: Iran falling would be historical, and would benefit the world in many ways. And it's in the direction of containing Russia, in a roundabout way.
It's an improvement, as they say, "on the margin". If my opinion of his presidency was a stocks chart, it would have had an uptick. The actual stock market did practically recover, so maybe it saw the same thing, but much earlier. Maybe there is a chance to reshuffle his cabinet and get back to normalcy, somewhat. If he pulls through with some trade deals at manageable rates, like 10-20%, then cuts taxes somewhere else, that about breaks even, I'd guess. 2026 might be more evenly matched than we thought.
Well, the fact that no one since Romney has been willing to openly name the source of most of the debt, namely entitlements, is not a promising sign in addressing it.
The debt bomb and especially its consequences were also discussed by Ray Dalio and with (to me) surprisingly similar implications. Are you aware of his writing? I assume no, and if so, both of you coming to similar conclusions make them even more scary.
What is your opinion about selling federal assets to pay down the national debt? More than 85% of the land in my state (Nevada) is federally owned.
My guess is that most of the federal land is not very valuable, that selling all of it would not reduce the debt by much, but I could easily be wrong.
A February 5, 2013 Time magazine article by Christopher Matthews entitled “The Federal Government's $128 Trillion Stockpile: The Answer to Our Debt Problems?” states that, according to an Institute for Energy Research (IER) report, the federal government owns over 900,000 real assets, mineral rights, underutilized buildings, and oil and gas resources worth a total of $128 trillion in 2013. The article states that, since the IER is a think tank that advocates energy deregulation, it may have overestimated the value of the assets, but even if the total value is half the estimate, it greatly exceeds the national debt. Besides, the government owns gold bullion and student loan debt estimated to total more than $1 trillion.
I'll add that, if these assets were sold, they'd be put to productive use in the private sector. Consequently, the taxpayers would save the costs of administering them and would be better able to afford what government remains.
Do you have a better proposal to deal with the national debt?
No. But I would like to see a detailed estimate of the market value of the assets.
You're probably better able to find that estimate than I am.
I think selling off large amounts of assets isn't a terrible idea, although I would need to see the full breakdown of the portfolio, and spend a longer time figuring out the value points than I would want to spend, to really know. I think you are correct that selling the mineral rights in particular, or even just leasing them at a reasonable rate, would be a huge help.
My largest fear is that as soon as the debt and interest goes down we will see the congress say "Hey, debt is really cheap! It would be irresponsible not to borrow more now!" Until we fix the budgeting process, or even have one, this will keep rearing its head.
I have many more ideas than selling the assets, one of which is passing a balanced budget amendment.
Too many loopholes, and how can it be enforced? Every proposed amendment I've seen always has an override clause, and it doesn't take much imagination to guess how often that would be used.
The only solution I can see is limiting revenue and not allowing borrowing in any form. I have had many ideas. Here are two; note I do not claim these to be the best or even possible. They are just ideas.
1. Every budget bill has to name its own unique revenue source, such as a 1% tariff on steel or a 1% VAT on electronics. If the revenue runs out before the fiscal year, shut the expenditures down. Fire people, sell assets, or go on unpaid holiday, but no more revenue until the next fiscal year.
2. Everything as now, but Congressional budgets are maximums, and when people pay their taxes, they allocate the full sum owed among those budgets as they wish. Any budget shortfalls are too bad; fire employees, sell assets, or go on an unpaid holiday until the next fiscal year. Any budget excess is returned to voters; no inter-budget transfers, no carry over into the next fiscal year.
I assume your initial question refers to a balanced budget amendment. The Constitution requires an amendment to be proposed either by Congress with a two-thirds majority vote in both houses or by a constitutional convention demanded by the legislatures of two-thirds of the states. To my knowledge, no balanced budget amendment has ever been proposed by a constitutional convention. I would expect loopholes in such an amendment proposed by Congress for self-interested reasons. But state legislatures would have different incentives. Since I'm not an attorney, I can't explain how an effective amendment can be enforced, but I'd guess that a skilled constitutional attorney could find a way. There is a danger of a runaway convention, but we're already facing bankruptcy and possible economic collapse due to profligate government. I can't describe all the ideas I have in a short reply, but they include abolishing departments and agencies, limiting revenues and spending, and returning to the gold standard. If there must be a tax, I'd prefer a Georgist tax on land as the least destructive tax. It would also give government officials the incentive to sell public lands to private taxpayers. I'd be happy to consider anything that would work.