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PaperclipPerfector  2mo ago (text post)   25168 thread views

Culture War Roundup for the week of February 26, 2024

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Our treasured colleague Kulak is at it again with another post on his Substack.

I know that a slow-moving budget crisis is not the spiciest meatball, but the fiscal situation in the United States is looking bad. Debt to GDP is now above the previous high set at the peak of WWII. But whereas the post-wars years saw demographic and technological tailwinds, the current epoch is characterized by low fertility and productivity growth.

It gets worse:

The real crisis is the Unfunded liabilities, all the promises the US has made to Boomers (who dominate the vote) and others about money they’re GOING to spend.

As of now total Unfunded liabilities stand at 213 trillion dollars, $633,000 per US Citizen (Man woman, and newborn babe)… These are all dollars the US has promised to pay to someone somewhere at some point: Social Security, Medicare, Medicaid, Federal pensions, VA Benefits, etc. And cannot in any politically feasible way restructure or get out of.

While it might be possible to split a shrinking pie and remain friends, it is definitely IMPOSSIBLE to split a pie when more than 100% of the pie has already been promised to one person or another. Give a person a dollar, they are mildly happy. Take a dollar away and they are FURIOUS.

At this point, I'd encourage you to find a nearby senior citizen. Please explain to them that they don't deserve their social security check. You see, the money that was supposedly SAVED was in fact already SPENT. Far from saving money, their generation actually left a sizeable DEBT to future generations. So not only would seniors have to give up their government checks, they would have to pay hundreds of thousands of dollars in additional taxes just to get to even.

I'll wait.

Just how irrational are the expectations of our Boomer rulers? Slobodan Milošević understood.

Milosevich promised, and other politicians promised, their followers the old communists pensions would be honored and paid… And even at the height of the wars they won every election because of that base of aging pensioners…

The last politician to even contemplate reforming Social Security was George W. Bush, who claimed to have earned "political capital" shortly after his re-election in 2004. By March of 2006, his approval rating had fallen from the high 50s to just 31. Nowadays, politicians in either party don't even mention Social Security except to praise it effusively and promise to defend it at all costs.

We are well and truly fucked. The Federal government will be forced to default or inflate away its debts within the next 10-20 years. And this is BEFORE the numerous suggestions to somehow EXPAND the welfare state, whether they be student loan forgiveness, payments to favored racial groups, or universal basic income. After all, ours is a great laboratory of democracy. So while the Federal government enters a slow fiscal doom loop, some states like Illinois, California, and New York seem to be attempting a speed run.

How do we get out of this? Kulak has a few ideas, but I'm a little less dramatic.

  1. AI. Maybe we will somehow thread the needle between doom and nothingburger. 🤷

  2. Immigration. The U.S. could escape this problem by cherry picking the best citizens from other countries and telling everyone else to GTFO. We are still, after all, the best country (>10 million population subdivision). This would work, but it would never happen and it's probably a bad thing for the world at large.

  3. Inflation. Many liabilities are indexed to inflation such as Social Security and Medicare. But we could inflate away all the existing debt. Debt to GDP actually decreased in 2022 because of 9% inflation. That level of inflation for a decade or two could make the problem less bad. It would also be helpful if the official inflation numbers were even more fake.

  4. Things are just shittier in the future. Brazil is still a country. This is your future.

As of now total Unfunded liabilities stand at 213 trillion dollars

I just googled a bit and can't come close to this number. Not that 80 trillion makes me feel great, but 213 trillion isn't easy to get to after a few minutes of googling.

I wish when someone dropped a series of numbers that they would include citations and calculations. I'm either daft and simehow missed that or Kulak is dropping figures they didn't justify and I can't independently verify.

Edit: Someone in this thread linked to a Forbes article that claims 210 trillion, but the link justifying that claim is broken. But they say it is page 63 of the FY2016 Treasury annual report, so I found that.

https://home.treasury.gov/system/files/261/FSOC-2016-Annual-Report.pdf

I don't see that chart on page 63 or any of the pages around page 63. What a comedy of errors.

Please everyone, cite your claims in published articles. I shouldn't be clicking dead links on old (wrong?) Forbes articles to get this.

EditEdit: @MadMonzer's googling skills are stronger than mine. Accepting their explanation this number is fictional.

https://www.themotte.org/post/882/culture-war-roundup-for-the-week/189531?context=8#context

Surely the obvious answer is to raise taxes. According to some projections from CBO data if we had the same tax rates we did under Clinton debt to GDP would be 60% and falling. Were tax rates in the 90's really so awful?

According to the CBO itself we could also raise payroll taxes by 4.9 percentage points, which would keep Social Security paying 100% through 2096. Even if we take no action Social Security will be able to pay out around 77% of benefits through 2096 and ~65% of benefits indefinitely.

As of now total Unfunded liabilities stand at 213 trillion dollars, $633,000 per US Citizen (Man woman, and newborn babe)… These are all dollars the US has promised to pay to someone somewhere at some point: Social Security, Medicare, Medicaid, Federal pensions, VA Benefits, etc. And cannot in any politically feasible way restructure or get out of.

I feel like the "at some point" is pretty key here. Is this money we have to spend in the next year? 10 years? 100 years? Because the feasibility of doing so is very different depending on the relevant time horizon. Obviously the US couldn't pay that over the next year, but it almost certainly could over the next 100. Comparing it to the present number of citizens only makes sense if those are the total pool of citizens who are going to have to pay for it, but they obviously aren't if the relevant time horizon is a century or more.

Scaremongering about the US national debt or unfunded liabilities or whatever basically requires you to conceptualize the issue as Big Scary Number That Must Be Paid Off Soon. When you actually look at analysis of the fixes required to resolve these issues, and the time horizon relevant for their calculation, they become much less scary. Of course, "everyone pays five percentage points more in payroll tax" sounds a lot less scary than "AMERICAN ECONOMIC COLLAPSE IS IMMINENT."

I think it would be helpful to clarify by what you mean by paying "5 more percentage points". The current Social Security tax is 12.4%, half paid by the employer and half by the employee. Are you proposing increasing the tax to 13.02%, to 17.4%, or to 22.4%? Certainly this matters.

But as messed up as Social Security is, Medicare is worse. It's tough to find good recent stats, but here's what Wikipedia says: "Households that retired in 2013 paid only 13 to 41 percent of the benefit dollars they are expected to receive". So I guess we'll have to raise Medicare taxes by 150-670% to cover that too. (This assumes that each person pays only for their own benefits. In reality, they will have to pay more as each generation is smaller than the last).

But even if we fixed those problems, we still have to deal with the fact that the rest of the budget is not balanced either. There's another tax raise. Not to mention the myriad local and state taxes that will have to be increased as well.

Endlessly raising taxes on productive members of society to pay for unproductive members of society might "solve" the problem for some definition of solve. But it leads to a country that is much poorer and more miserable. As the demands on the productive members of society grow, the temptation to drop out will grow apace, leaving even fewer workers taxed much more highly. As tax rates increase above 50%, as is now possible in New York City and California, future increases will lead to less revenue, not more.

We are already seeing this. The number of people on disability as a percentage of the workforce has grown from 0.5% in 1960 to 5% today. The labor participation rate is still well below the peak from 2000, despite record low unemployment. .

As the rewards for work shrink, the temptation to shirk will grow.

So, no, it's not a matter of just raise taxes by 5%. That won't get us anywhere close to a solution.

"Percentage points" means the actual percentage. 10 percentage points more than 10% is 10%+10%=20%, not 10%×(1.1)=11%. That second one is a 10 percent increase rather than 10 percentage points increase.

No it really doesn’t. That’s why you need to specify. “We’re only raising your taxes 1%”. Proceeds to double taxes.

But it really does and that is the defining feature of percentage points changes unlike percentage change.

I think it would be helpful to clarify by what you mean by paying "5 more percentage points". The current Social Security tax is 12.4%, half paid by the employer and half by the employee. Are you proposing increasing the tax to 13.02%, to 17.4%, or to 22.4%? Certainly this matters.

My understanding is the 5 percentage points refers to the total rate, so it would be the 17.4% number.

But as messed up as Social Security is, Medicare is worse. It's tough to find good recent stats, but here's what Wikipedia says: "Households that retired in 2013 paid only 13 to 41 percent of the benefit dollars they are expected to receive". So I guess we'll have to raise Medicare taxes by 150-670% to cover that too. (This assumes that each person pays only for their own benefits. In reality, they will have to pay more as each generation is smaller than the last).

Sure, but there are other ways to tame Medicare spending than "double taxes" or "abolish it." A big reason why Medicare spending grows so rapidly is because US healthcare spending in general is growing rapidly and Medicare covers a population (old people) that tend to be much sicker than average. We could tweak the retirement age, or Medicare coverage, or allow Medicare to negotiate drug prices (as they now can), or raise taxes, or some combination of all these things.

But even if we fixed those problems, we still have to deal with the fact that the rest of the budget is not balanced either. There's another tax raise. Not to mention the myriad local and state taxes that will have to be increased as well.

Endlessly raising taxes on productive members of society to pay for unproductive members of society might "solve" the problem for some definition of solve. But it leads to a country that is much poorer and more miserable. As the demands on the productive members of society grow, the temptation to drop out will grow apace, leaving even fewer workers taxed much more highly. As tax rates increase above 50%, as is now possible in New York City and California, future increases will lead to less revenue, not more.

I feel like I addressed this somewhat (on the federal level) with my point about Clinton-era tax rates. Were those really so horrible? Were the 90's so much more poorer and more miserable than today due to taxes? You cite the labor force participation rate as of 2000, but federal tax rates were much higher then than they are now! Apparently it didn't have that much of a depressing effect!

My general point is there are a zillion things we could do and almost certainly would do if the alternative was economic collapse.

A big reason why Medicare spending grows so rapidly is because US healthcare spending in general is growing rapidly and Medicare covers a population (old people) that tend to be much sicker than average.

This one is pretty shocking, and I didn't realize until my mother got cancer right around her retirement age. It pushed her retirement date a little earlier than she had originally planned, which was a little annoying to her, but probably for the best. In any event, she asks me to help her look through some financial stuff, because even though she's normally pretty good with that sorta stuff, "chemo brain" is a bitch, as is just aging in general. When she was able to get on to Medicare was my first real exposure to how the system works, what it costs (I'm not even sure if I really had much of a grasp on which parts were truly free and which parts you had to pay extra for), what all the options are, etc. I shouldn't have been surprised that it had similar terms to normal health insurance, with things like premiums, out-of-pocket maximums, etc. What I was definitely surprised about was just how shockingly cheap it was, with incredibly low maxes. Like, simply insane. Like, better than the best monetary value I've seen out of even the top tier, most expensive insurance I've ever been offered by an employer, with premiums significantly lower than I've see out of even the bottom tier, most cut rate insurance I've ever been offered by an employer. That was when I realized just how massive of a wealth transfer the program is from young to old. It was also when I realized how the incentives worked. Out-of-pocket maxes so low that if you have literally anything happen to you in a year, then you simply do not even have to consider the price of any other medical service that you might think about consuming.

That's when it sort of clicked, why the large conglomerate that is managing her care has bundled in everything imaginable into what seems to be their "cancer package". If you can squint your eyes and think that it might be helpful for the cancer, for managing or recovering from the chemo, whatever, it's part of their package. They'll pay for Ubers to your appointments, every therapy under the sun (physical, occupational, mental, etc.), even your gym membership (at their extra fancy, extra expensive gym that just so happens to be a part of the conglomerate). Feel like you're not sleeping the best? We'll send you to some sleep specialists, do the full workup. Not fully happy with a rapid recovery of mental faculties from chemo? We'll give you some brain scans, a variety of tests, and surely, more weekly therapy of various sorts. The list goes on. It's a good thing that she's retired now, because she has basically a full-time job just managing and going to all of the myriad of possible appointments and offerings they provide in their neatly-packaged conglomerate, and all of the expenses can be justified in some way or another with respect to the cancer or side effects from the treatment, or something.

On the one hand, cool that she can get so much attention to get every month of vitality possible; I really do value the additional time spent with her, especially with her still being able to be as clear-minded and engaging as she is. Moreover, cool that she doesn't have to constantly worry about money. She hadn't really saved as much for retirement as she would have liked, and pre-retirement, I really got the sense that she was kinda constantly worried about it and how things were going to work out. Now that all the paperwork has been done and the numbers are on the table, she can see how it's going to work, that it's going to be okay, and that she no longer has to worry about it. On the other hand, hot damn, that means that she (and we, by extension) literally do not even have to think for a millisecond about a cost-benefit ratio for literally any possible option within their menu. From her perspective, it is all literally completely and totally free. There is not a single moment where she has to think, "How much tangible benefit do I think this is going to provide for me, and how much do I really value that benefit, to the point of being willing to give up some amount of my own resources for it?" If anything, the only thing that she trades off is just the time of going to the thing and doing it, but of course, she's retired now and has a lot of time in the week. So if she assesses that the tangible benefit has any decent probability of being literally any value more than epsilon>0, why not? How much does it 'cost'? Who knows? Who cares? It doesn't come out of my pocket. I personally benefit from this, because 100% guaranteed that if there was any real expense, she'd be leaning on me to help figure out what's worth it and how to make the finances work. A nice burden off my shoulders, too. I can see the 'cost' now, but damn if the incentives don't do their best at making me apathetic, just because then I don't have to think about that stuff.

A couple final scattered thoughts. First, there was a moment where I thought, "Damn, I don't always sleep the best, and I've had some recurring sleep problems before. It would be nice if I could get a full workup and see if we could fix it. But that would be suuuuuper expensive, and I don't know that I can justify it, given the solid probability that they're not actually going to be able to help me in the end even after I wrack up huge bills." And even some jealousy that she can just go do that for free. I also sort of wonder, society-wide, if we'd be serving our population's health and productivity better if we did stuff like figure out people's sleep problems and fix them when they're young and have many years for those benefits to accrue, rather than make it prohibitively expensive for most of your life and then free right near the end.

Second, I almost wanted to make an analogy to the public school system. People often joke that the school system is mostly a daycare, with incidental ability to help educate children, primarily for the purpose of freeing up parents from having to take care of them. It almost is like getting hooked into one of these big health programs while on medicare is like that. "We'll take your elderly parents, give them constant care, keep them busy coming to appointments and such, and make sure they're at least doing alright," and it's not that genuine medical care isn't there (like how genuine education is not absent from public schools), but that it's more minor or incidental. "We make it so that you don't have to worry about your parent most of the time," just like, "We make it so that you don't have to worry about your child most of the time." A useful service, yes, with some amount of real value, for sure. Like I said, I realized that I genuinely benefit from it in that way. But how effective is it? How costly is it? How efficient compared to possible alternatives? Who knows? Who cares? The bureaucrats and the unions and the conglomerates control all that and don't really want you to know the answers even if you did want to know. All the incentives are just about perfect, so long as the whole thing doesn't blow up spectacularly at some point, and so long as the schools aren't so ineffective that China eats our technological lunch and conquers us via warfare.

everything imaginable

When my father got cancer was the first time I discovered a very imaginable gap: long-term care. This turned out to be only a hypothetical problem in his case (there wasn't such a long interval between "brain damage sufficient to prevent living at home" and "brain damage sufficient to prevent living" after all...) but it's something to think about supplementary insurance for, despite how complete Medicare coverage is for so many other costs.

That's not to detract from the rest of your excellent point, though. His last several months of treatment had a price (at printed value; who knows what fraction of that was real cost vs weird provider-vs-insurer negotiation ploys) that would have bankrupted him out-of-pocket, but that was nearly free with Medicare plus a little supplementary insurance. Of course he still fought for every month, when it just took willpower rather than a life's savings otherwise aimed at his grandkids' college tuition, but if he'd had to weigh price vs benefits himself I wonder if he'd have turned it all down. (if he'd seen the future I'm sure he'd have just picked out cheap in-home hospice care instead, but the trouble with those "most medical care expense is in the last year of life" statistics is that you don't know it's going to be the last year without seeing the future)

I think this is actually worse than even kulak points out, for a couple of reasons:

  1. Is that I don’t think he’s accounting for mass quantities of state and municipal debt. Like yes, obviously some of these cities can be told ‘austerity or default’, but New York and DC can’t be allowed to degenerate into a 3rd world country, and anyways, the large holders of municipal debt(I think this is mostly insurance companies) need to get bailed out when Chicago and LA default. It is bad when State Farm starts passing out IOUs, after all. Besides, major cities almost definitionally have major political clout- the federal government will eventually pass out a large bailout for fiscal irresponsibility in municipal government. This will almost certainly skyrocket debt even more than he expects.

  2. Is declining work ethic. Hours worked and labor force participation are anywhere from anemic to declining, and that’s while being propped up by migrants who have lower human capital to begin with, leading to lower productivity. We can expect the economy to continue to not grow fast enough to keep up with spending because human capital inputs aren’t hitting the necessary levels.

  3. Interest rates, federal debt is mostly in short term bonds that get renewed every 5 or ten years. This raises the debt much faster than projected when interest rates are high, and I have no faith in interest rates to come down anytime soon.

The prime age LFPR is near all time highs.

https://fred.stlouisfed.org/series/LNS11300060

I don't know about working hours, I could only find this chart back to 2008 where the hours are a bit low but are coming down from an all time high.

https://fred.stlouisfed.org/series/AWHAETP

The MMT (which I don’t believe in) people come closer to the truth that debt is fake in America than the old GOP Austrian types always worried about it as a sign of future collapse.

That which matters is the ability of a society to be productive and then matching supply to demand. Debt and taxes drain current demand.

The big area that at one point made debt potential real in America was our dependence on foreign energy and needing faith in the dollar to purchase our energy needs. Since shale this is no longer an issue. America is different as an economy because we are basically self-sufficient and a diversified economy with productive capacity in all areas. We miss a few areas like cheap consumer goods but giving up Chinese goods from Temu and stocking our homes with gadgets isn’t going to collapse the nation.

Even things that seem strategic like rare earth metals we only use foreign suppliers because of our environmental regs. If a dollar crisis hits we could in short time ramp up our own rare earth materials.

The big risks to having a lot of debt is the ability to support the dollar on markets but the US economy has already restructured where dollar value is less of a concern.

We could have internal political disputes. The way you control inflation is by doing things that hurt demand. If future benefits create too much demand causing inflation we would have some political disputes. Do young people get hit with taxes killing their consumer demand or do we cut SS benefits and hurt older peoples demands? I do not know if that day ever comes but it’s not an extinction level event.

The American collapse will come when we are no longer capable of creating high GDP per capita which fundamental comes from endowed natural resources and citizens productivity. Debt doesn’t scare me but the culture wars do scare me on these issues if we forget the culture that generates economic productivity.

Debt is much more real for small countries without diversified industry. You are too small to have economies of scale in all industries. If your primary industry faces a decline then your fiscal capacity matters a lot more in global trade.

Nowhere from reputable sources can I find an estimate of unfunded liabilities even close to half that number (let me know if you have one), and it seems like the alarmism is based on completely failing to describe what that number actually means.

That money is everything any government agency expects to spend on anything at all, ever.... like, in the next 50 years, or 75 years, or two hundred years. Any time someone has said 'the program will last for X years and we estimate it will pay something like $Y per year', X*Y gets added to that number, even if X=200.

So saying that 'each current citizen owes $X to pay for unfunded mandates' when most of the people who will pay for them have not been born yet, is just so transparently wrong that it flatly demonstrates someone who either doesn't understand what they are writing about, or doesn't care about misleading their audience.

And if you want to talk about the actual US debt, a plurality of the huge numbers that ussually get cited is intragovernmental debt that one department will be paying another such that the government doesn't actually lose that money when paying it, followed by debt held by US investors such that the money stays in the US when it is paid so it's not a net loss to the economy, followed by foreign investors who mostly want to use the bonds and notes the debt is held in as critical financial tools that they could not perform their own jobs if they closed out.

I'm not literate enough in this area to say that our current level of debt is good or correct or w/e. But I'm literate enough to know when alarmists are being hugely incorrect or misleading at a fundamental level, and that happens consistently enough in the alarmist arguments I encounter that I am no longer alarmed about this topic.

We had a major economic crisis in Sweden in the 90s and rebalanced our unsustainable social security system, which was previously thought inconceivable. It wasn't the end of the world. There is still fairly generous social security, pensions, our nation debt is down from 73% to 32% and taxes are down (probably unrealistic for the US...).

It can be done if a crisis gets bad enough, the insanity can stop.

Politicians usually do the right thing as soon as they've explored every other option. Not every country is Argentina.

That sounds rad. Where’d the money come from? People just get less out of the benefits?

Mostly cut spending leading to less generous benefits in a whole swathe of areas, pensions among them. Eventually economic growth allowed for lowering taxes, the initial decreases of which were likely a Pareto improvement due to their high level.

The point is that this wasn't the end of the world. The welfare state could still exist and be fairly generous (and shoulder the burden of ill-advised immigration) despite being balanced.

Argentina just balanced its budget!

As of now total Unfunded liabilities stand at 213 trillion dollars, $633,000 per US Citizen (Man woman, and newborn babe)

Therefore, let's wave through as many million new 'citizens' as possible to drive that number down. If it doesn't work, just keep at it. Quantity has a quality all to itself.

Things are just shittier in the future. Brazil is still a country. This is your future.

I wish. I have a buddy who is leaving the US to go back home to Brazil. Brazil is hardened and adapted to life with huge deadweight from giant indigenous/oppressed populations. Our thing is something brand new. This is the first time in recorded history a population was in/voluntarily invaded. If anyone can think of another time - please let me know.

Related but equally important: any examples of a people killing themselves to free their own slaves? Yes sometimes the slaves would fight, but are there any other examples of people "rising up" against themselves for their slaves?

What do you mean by in/voluntary invaded? Forgive me if I'm missing something but I assume that refers to immigration? But it seems to me that either way you address it it's not a voluntary invasion. If you want someone to come, it's not an invasion, since there is presumably a notion of mutual benefit. And even on the other hand, there are lots(majorities?) of people in areas that care about too-high legal and illegal immigration, they are doing something about it physically, legally, etc. So in that sense it's not a voluntary invasion either, they're doing lots to resist it. I suppose you could synthesize the ideas to the political reality that /some/ people want it, and /some/ people don't but at that point could say every time a country's ruling or military class did something in history that the majority of the middle and lower classes opposed. In that sense you could probably point to the population and cultural changes(opposed by Anglos and Saxons but not Normans?) after William the Conqueror became king of England.

I agree with the thrust of your argument.

This is the first time in recorded history a population was in/voluntarily invaded. If anyone can think of another time - please let me know.

The Roman and Byzantine empires often invited Barbarian tribes into their lands. This was almost never a positive thing in the long run, but it often did serve to meet short term goals such as higher tax revenue, military recruitment, or protection from scarier tribes further afield.

The Social War, in Republican Rome, involved tripling the number of Roman citizens.

As for your second question, the American Civil War is an obvious choice.

My bad, I should've clarified I was looking for any other example than the American Civil War

But are you short the market?

The arguments seem sound, however I don't really believe that we are about 6 years away from a "provisional" US government.

I definitely don't subscribe to Kulak's dramatic ideas for the future. I think our future is like Brazil's present (depending on where AI goes).

With high inflation incoming, shorting the market would be a path to ruin.

You're missing 5.: we manage to cut the fat successfully and take out the people who are currently kept in power by a combination of Boomer social standards (education spiral is 100% their baby- remember, their parents were GI Bill recipients) and luxury (natural resource development). There's a lot of ruin in the nation, but there's also a lot of possible reform, provided the people currently profiting from the ruin aren't able to keep a grasp on that power. And being that the countries most affected by this are the US (too well-armed and too large for DC to maintain order) and Canada (Laurentian Elite too strategically isolated to prosecute a Canadian civil war + 25,000 active duty servicemen not from Western Canada) they, in my opinion, have the best chance of any nation to turn out OK. All the US has to do is not get too dramatically wrecked as far as its economic inputs go (like, for instance, losing a war over Taiwan).

Problem areas currently include:

  • Lots of land, but illegal to develop it (and the resources under it) due to luxury beliefs (environmentalism), Boomers not wanting their houses to be devalued (which might get worse in an environment of old age pension collapse), and government has a hard time giving land away that it'll never get back (it can enforce that now, but what about it having to compromise in order to resist rebellion?)
  • Overeducation and excessive spending thereon. Education becoming more intensive but ending at Grade 10 (like we used to- insert obligatory Kulak "you had to be as smart as a university graduate in 2023 to pass Grade 12 in 1923" graph here) combined with technologically advanced tutoring programs (we already know they scale, it's just illegal to take advantage of that) would allow us to fire a lot of sub-par teachers and save on their salaries- hell, that's probably half a million dollars per person in government money right there (especially if you include the money it's not making in income taxes from the 16-24 demographic).
  • Insurance costs, liability law, and safetyism make it difficult to explore novel business opportunities.
  • Social services for the underclass. They're going to get institutionalized again, and jails are going to become vastly worse places (or they'll be disappeared to a concentration camp in the middle of nowhere to make those social services more efficient, and nobody is going to care).

It's noteworthy that all of these things are progressive goals; fortunately, as far as a peaceful transition of power goes, that group generally has a very hard time raising legions to fight for them given their politics are literally "you're fighting for your own oppression, which is right and just" (rather than along ethnic or religious lines).

obligatory Kulak "you had to be as smart as a university graduate in 2023 to pass Grade 12 in 1923" graph

I take it this is a deeply misleading graph that fails to account for the Flynn effect/IQ being renormalized over the decades. A 100IQ in the 1930s is equivalent to around an 80IQ circa 2000.

"The numbers used to be bigger" is less impressive when you know that the scale changed.

I tend to agree that the debt is not an intractable problem. Our position at the top of the world gives us a lot of unpleasant but not existential ways to mitigate it.

I’m also confused. Are you suggesting that the “fat” in your example consists of progressives? There is an obvious bloc with lots of property, a demand for SS and Medicare, low tolerance for investment risk, and Boomer social norms: the Boomers themselves. And they’re not really known for their progressivism.

It is weird that young, oppression-conscious progressives are making common cause with Boomers. Maybe it’s a natural progression as unions or universities leave a power vacuum. Maybe there’s a high-low coalition where the young defend entrenched interests in exchange for cultural victories. Regardless, force of arms won’t come into it.

The Boomers are going to die off. The proudest fiscal conservatives are going to age and retire and suddenly realize that they are the entrenched interests. And cutting entitlements will remain political suicide.

I'm not familiar with the illegality of tutoring or whatever. Do you have more information or somewhere you can point me?

Maybe I'm missing it, but isn't Kulak making the basic mistake that Social Security (etc) are, by design, an immediate transfer from the young to the old? I will pay so much more than my 633k in taxes over my career. I get that most people pay less tax, and it doesn't all go to Social Security. Still, the analysis seems to fall short of showing that amount can't be paid off per person.

My prior of "nothing interesting happens" strongly objects, e.g. to

Sometime soon, the economic weight will become non-viable, like a broke gambler doubling his bet each time he loses, the debts will go exponential then asymptotic… and instead of a a lifetime to find a way to squeeze all that money out, there will be a crisis, and the American, probably “provisional” government at that point, will have to decide:

As far as I understand the $200 trillion is the difference between liabilities and tax income if taken from the perspective of government's infinite horizon intertemporal budget constraint. It takes into account the net present value of such liability and the number is 200 trillion. I actually like this calculation even for home budget as you can put on the same playing field different type of spending. Imagine that you want to compare value of drinking a $3 coffee every day compared to let's say once in a lifetime expenditure you are about to undertake such as let's say some medical procedure or even a voucher entitling you to one free coffee for the rest of your life, which for that $3 coffee is around $20,000 net present value with around 5% interest rate. You can use this method to discover ponzi schemes if somebody tries to do magic with cash flow - as the US government wants to do.

Similarly here, the solution can only be to increase taxes to increase income to finance those liabilities, or decrease payouts which means reneging on those liabilities or some combination of thereof. Also you are correct that Social Security is a transfer from young to the old but with implicit assumption that the young will receive similar from young if they themselves are old. Except there is a huge risk that by the time it should happen the boomer or even Gen X generation will be long dead and the Millenials and Zoomers will end up with no place to sit in this metaphorical musical chairs game.

Unfunded liabilities have an open time window, ie those obligations are what we expect to pay out over the next 50, 75, 100, 200 years...

Most of the people who will pay the taxes for that money haven't been born yet.

So the operation of dividing that number by the total number of current citizens and saying we each have to pay our $X share, is just transparently wrong and misleading.

Nothing happens, until it does. The American currency depends on the American navy regulating and protecting international trade, and you can only get embarrassed by so many Vietnamese Aghans Iraqis Houthi "cavemen" until everyone just kind of shrugs

The problem with huge debts is not that you have to come up with the money. You can just borrow more to pay for whatever unfunded liability you have. The issue is the growing interest bill reduces your capacity to spend on things that people actually want, for any given level of taxation. The system doesn't collapse, you just have shitty roads, underfunded police, and high taxes.

The solution is simple, if difficult. Balance the budget. Hell, you don't even need to go that far, just get the rate of debt growth below the rate of economic growth. Keep it that way, and the problem becomes steadily more and more manageable over time.

As a digression, this is one of the differences in political culture between Australia and America that I think defies the standard view of Australia being more left wing. America seems to have just given up on even pretending they're going to ever address the problem. Australia doesn't always balance the budget but our governments, Liberal or Labor, are always under pressure to do so. We currently have a left wing government delivering tax cuts and budget surpluses. I'm not sure why the difference exists, but it's notable.

...Or just default on the debt. Lending to Uncle Sam in the current situation is irresponsible behaviour, after all - you wouldn't* lend to an alcoholic during a binge.

Defaulting on debt is not much of a plan if you're not also balancing the budget.

Easier to balance a budget when not paying close to a trillion a year in interest payments.

True! But that's still only half the deficit.

"wouldn't", surely, unless you're really black-pilled even by TheMotte standards.

Officially the debt clause may make default tricky. Unofficially hyperinflation is just as "good" and still an option.

an alcoholic during a binge.

For an extra-close metaphor, imagine you're planning to try to collect the debt from the alcoholic's kids.

Section 4 Public Debt

[...] But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States

Declare past US governments illegitimate.

That's a great way to finance an insurrection.

Until recently there wasn't a large difference in the U.S. either. In fact, Republicans (Reagan, Bush, Trump) seemed to be much more spendthrift than Democrats (Clinton, Obama).

That seemed to shift with the election of Biden who has spent beyond all restraint, racking up nearly record deficits during an economic boom.

While Australians are uniquely blessed with immense resources (such as coal and iron) and a tiny population, I wouldn't count your blessings just yet. Debt to GDP has risen from 10% in 2006 to 35% in 2023.

https://en.wikipedia.org/wiki/Australian_government_debt

I do hope that the lucky country will continue to be lucky. But the rot which spreads from Los Angeles and New York seems to reach fertile soil in Australia. Hard to believe that left-wing governments will resist extravagant spending.

What?

I don’t know how you can look at this graph and conclude Republicans are “spendthrift.” Edit: looks like I had the valence reversed! Spendthrift is a defensible description.

The last balanced U.S. budget was signed by Clinton. Bush flipped the other way by April 2001, even before the War on Terror.

What about the Tea Party? Responses to the 2008 crash were expensive enough to spawn a grassroots movement dedicated to dunking on Obama fiscal conservatism. Unfortunately, those Republicans have been near-completely subsumed by the Trump wing, which was profoundly uninterested in balancing the budget.

I think it’s ridiculous to insist that Biden is the only one without any mitigating circumstances. I’m saying that as someone uncomfortable with the direct payments, the rent distortions, and the education subsidies. If Republicans want a reputation for fiscal conservatism, they have to earn it.

We agree. Spendthrift means "given to spending money freely or foolishly : wasteful with money". It is an antonym of thrifty, not a synonym. Probably a common confusion.

Well, heck. I’ll edit accordingly.

Still think it’s a bit weird to describe Biden as particularly bad, given the state of the economy when he took office. Maybe you’re right; I certainly don’t understand where all that money is going.

I should probably avoid using the word "spendthrift" since it would appear to mean the opposite of what it does.

Still think it’s a bit weird to describe Biden as particularly bad, given the state of the economy when he took office.

Biden took office during the best economic conditions possibly ever. Nominal GDP increased by 14.5% in 2021 alone. https://fred.stlouisfed.org/series/NGDPNSAXDCUSQ

Biden's entire Presidency has been one debt-fueled spending bonanza, although I agree it's slightly unfair to pin it all on him as other people in his party want to go much further.

What examples come to mind of rot spreading down under?

American attitudes towards social justice seem to have taken root in Australia even more firmly than in America.

The recent effort to give Aboriginal Australians a veto over elected governments (which thankfully failed) is an example of this.

Cane toads.

The greatest budget deficit ever was under Trump, though Biden continued very large but smaller deficits.

Yes but that was the pandemic and Democrats wanted even more deficit spending.

Biden's deficits are truly remarkable given there is no crisis and in fact the economy is booming.

I'm very aware of our recent fiscal history. We fell into deficits during the GFC, and kept running them all the way until covid, and have only recently climbed out. Obviously that period of time is going to leave a significant amount of debt (though still a fraction of what the US is burdened with).

But it's also true that all that time we were running deficits, outside of the immediate emergencies of the GFC and covid, those deficits were controversial. Wayne Swan loudly and repeatedly promised to return us to surplus, and was roundly mocked when he failed. Joe Hockey loudly and repeatedly promised to return us to surplus, and was roundly mocked when he failed. Scott Morrison went a step further and brazenly claimed to have already returned us to surplus and produced commemorative coffee mugs celebrating the achievement... based on projections for 2020. Of course covid happened and he got mocked even more roundly than his predecessors.

It was the current left wing government that ended the deficits. I'm under no illusions that Labor sincerely cares about fiscal responsibility of course, and their cheerleaders in the media are constantly agitating for them to tax and spend more. But the party is very serious about winning elections and they know that normal Australians don't like deficits or taxes.

But the party is very serious about winning elections and they know that normal Australians don't like deficits or taxes.

This is partly an answer to your question in another comment: complaints about "deficits" and spending got coded in America as right-wing, and then tribal instincts took over. It doesn't help that the government is broadly understood as a left-wing institution, and therefore cutting it is a partisan act. (A lot of Democrats believe, at a basic level, that Republicans trying to shrink the government sre really trying to cripple it, for example.)

This year Debt concerns have been in the news a few times, as Congress repeatedly passes halfway stop-gap funding. Every time without fail NPR has had some economist on to explain how concerns about the debt are really unreasonable, because Modern Monetary Theory proves we don't have to worry about debt.

People nowadays will ask: "What about Trump? He presided over the greatest deficits?" So, quickly: Trump correctly perceived that this was not a winning political issue. Voters don't really care that much. If you balance the budget you habe to cut spending somewhere, and Americans like government funding more than they like balanced budgets. And there were things Trump wanted to spend money on. (If you wanted to be really cynical, we could discuss the different demographics of Australia and America -- some groups get out more than they pay in.)

Budget balancing really has more to do with Congress than the president. The President can lead well enough, but when an unbalanced budget passes Congress no one wants to torpedo the whole budget over something persnickity like debt.

Dubya was the turning point in GOP debt reduction good faith. Clinton--Gingrich ran a surplus the year before Dubya won the presidency. Dubya expanded DC massively, built whole new federal departments ((Biden may actually be the first president in decades not to introduce a whole new federal department)), started wars, all while endeavoring to cut taxes while raising spending.

After Dubya we have not seen any mathematically serious effort by the GOP to balance the budget. Paul Ryan came close, but without addressing increasing revenue it was ultimately unrealistic.

In terms of solutions, simplifying the tax code to eliminate deductions and improving collections is more important that increasing rates. The IRS should be abolished and replaced by private tax collection contracted out to financial institutions. They'll do a better job.

total Unfunded liabilities stand at 213 trillion dollars

Where did he get this number from? I looked at other estimates in the 100-200 range, this paywalled article from 2017 says 210 which suggests it'd be way higher now.

https://www.forbes.com/sites/johnmauldin/2017/10/10/your-pension-is-a-lie-theres-210-trillion-of-liabilities-our-government-cant-fulfill/

I don't disagree with the premise, US is not fiscally sound. But unfunded liabilities seem to mean all different kinds of things over different time horizons.

This website reports 213 trillion in unfunded liabilities, listing the US Treasury as its source, though I can't seem to find the exact source myself.

https://usdebtclock.org/

I read the document around page 63 like the Forbes article says and couldn't find it.

https://home.treasury.gov/system/files/261/FSOC-2016-Annual-Report.pdf

Recursive link-following from the above Forbes post says that the 210 trillion is an estimate by a cabal of right-wing economists of the NPV of future federal deficits out to an infinite horizon (as of 2015). In other words, it is a voodoo number - it is sensitively dependent on assumptions made about demographic and technological change in the 22nd century.

The up-to-date equivalent number out to the 75-year horizon used in the official Financial Report of the United States Government (see Cato commentary) is $80 trillion

The 213 trillion on the Debt Clock is given by debt ($34 trillion) + unfunded Social Security benefits ($27 trillion) + unfunded Medicare benefits ($41 trillion) + unfunded federal employee pensions (including veterans' benefits). The debt clock doesn't give a number for the employee benefits, but the official number is about $13 trillion. It looks like the reason why the numbers don't add up is that the debt clock people are using the 75-year horizon for the SS and Medicare numbers given in isolation, but the infinite horizon numbers (which, for those two programmes only, are official US Treasury numbers) as part of the grand total.

Those big scary SS/Medicare numbers are not "liabilities" in an accounting sense - the debt clock misleadingly describe them as GAAP numbers, but a private-sector organisation with underfunded pension liabilities would account for them very differently under GAAP. They are just NPVs of future cashflows - in the case of Medicare parts B and D which are funded on a PAYG basis, the "unfunded liability" is just a projected NPV of gross spending. A private sector GAAP analysis would only count a liability for accrued benefits - i.e. benefits that were "earned" through taxes paid in the past that will be paid in the future. An NPV analysis includes pensions that will be paid to people who haven't started working yet. In particular, the SS projections assume that people who are now under 15 or not yet born will get more out of SS than they pay in to the tune of $17 trillion, and include that as a "liability".

If I am correct about the debt clock methodology, the two numbers are similar because the largest component of both is infinite-horizon projections of SS and Medicare spending, where they both use the same official Treasury estimates.

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