Trump and Social Security; San Francisco corruption; Phones making us dumb; Ukraine and drones; Abundance stuff; Indian industrial policy; Steve Glinert on CHIPS reform
You identified one thing that Ukraine is getting from the US : long range missiles. Two other extremely important parts of US aid are maintenance and ammunition for Patriot anti-missile systems and intelligence. Ukraine's ability to defend itself was greatly diminished when we stopped sharing intelligence with Ukraine briefly.
The news about China inviting Ukrainian drone makers was news to me, but not surprising. Far more important to XI is China's future than Russia's future. China is following its old playbook of inviting innovators into their country so they can be the absolute first to steal it and then manufacture it on a great scale. For the sake of US future security, Trump needs to get those Ukrainians out of China right away. It would be so ironic if Taiwan was conquered using Ukrainian designed drones.
The drones that Ukraine uses aren’t terribly scaled up at the moment - pretty low payload and are almost “personal”.
The purpose of bombardment are most often to reduce enemy resupply (materials, supply lines), reduce enemy firepower (artillery, tanks, planes, missiles) and create opportunities for advancement by attrition of opposing forces (including air defenses). Ukraine’s drone-heavy strategy fails at the third, has some minor impact on the first (Russia has shifted assets out of Crimea and away from front lines) and has been pretty good at the second.
NATO doctrines don’t call for infantry advances without air cover or air superiority against entrenched opposition. Despite its successful drone war, Ukraine has not been able to weaken spots along Russia’s front line and advance, in part because attacking troops are vulnerable to drones and artillery from Russian lines. The drones have not proven capable of creating openings or neutralizing Russian artillery and drones.
Sending a few small drones with small bombs out to an airfield is nice, but what Ukraine really needs is to scale up to the point where hundreds of drones could be sent to the airfield. Those days are coming, but maybe not in Ukraine.
Similarly, 1000 drones loitering over a small segment of Russian lines seeking out artillery, drone operators, command posts, etc would be nice.
That being said, an Air Force and air superiority would be nice, which is what NATO counts on (at least until it faces thousands of anti-aircraft drones).
Aircraft would be unlikely to face thousands of anti-aircraft drones as the requirements to contest a fighter is significantly beyond the capabilities of any drones demonstrated in Ukraine. The average jet flies at 40k ft and around Mach 1.3, and any attributable drone even attempting to contest such an area would become prohibitively expensive to the point it makes more sense to use an anti-aircraft missile.
A very interesting thing to watch for is the burgeoning defense against drones. The US has invested billions and have quietly developed some promising counter measures that make the shot exchange ratio more favorable. It’ll be interesting to see what works
We'll be in Japan beginning March 29 and would also love to meet you in person. I've been a fan of your thinking and writing for some time. We'll be in Tokyo the weekend of your meetup and would appreciate details. My email is davidharris3700@gmail.com. Thank you!
Everything Glinert says about CHIPS could have been said by Klein-Thompson (if they wanted to be confrontationally consistent) except the part about tariffs. At a company level a tariff is a subsidy for domestic sales. How can that be better than a subsidy on ALL sales, including exports. Could subsidies be withdrawn by new politicians with different priorities? Yes, but tariffs can also be withdrawn. And while it IS irrelevant if we are talking about one tariff on one item, the exchange rate effect of tariffs in the aggregate mean positive taxation of exports (not just a failure to equally promote export sales of tariffed items) and to encourage imports of non-tariffed items.
No one that is serious about industrial policy [I'm excluding preventing imports of specific items from China from "industrial policy"] should be promoting tariffs.
I'm sort of negative about industrial policy, but if it's promoted solely by subsidies that do not increase the deficit (part of a low deficit fiscal stance) and deregulation, go for it!
Industrial policy/public-private partnerships have had a lot of boondoggles, but also a lot of wins. Indeed, Tesla, SpaceX, and most tech companies and chip companies owe their existence to American industrial policy (and the Cold War)
I don’t object to any specific argument that the output of firm X should be subsidized. It is producing externality Z, so the economic return on the investment is greater than the financial return. But that’s gone on forever. So what is “Industrial Policy?”
Industrial policy refers to government strategies that influence economic development by supporting specific industries through subsidies, tariffs, tax incentives, R&D investment, and regulations. I think a key distinction is that there is an explicit goal (we want to make X thing) and a whole of government approach.
You’re right that the government hasn’t ever really stopped industrial policy (mostly through defense). I just merely pointed out that industrial policy can be quite successful
A subsidy paid for by taxes is pretty close to a tariff from macro perspective.
It creates an artificial cost differential for a domestic supplier and then detracts from available dollars for consumption across the economy.
The difference is the effective tax that is the tariff primarily takes from those consuming the affected product and so can inspire substitution effects. Raising taxes to pay for subsidies hurts everyone’s consumption for all products at the margin.
The IRA, if it had been paid for by taxes rather than borrowing would have been akin to the biggest tariff program since Smoot-Hawley.
Of course, if we assume that deficits restrict future consumption we will be paying in the end.
Making more chips at home is essential from a national security point of view, IMO. Though subsidising factories to build mostly second tier chips isn’t a panacea. After all, America did used to manufacture chips. That was moved overseas for two reasons- cost and shareholder value. Shareholders don’t like expensive, cyclical and inflexible fixed assets. They prefer a model where the high value design activities are kept in house and the capital-intensive, commoditized activities are outsourced.
I would argue that those two drivers have not changed at all and the factories we are paying to build now will, in time, suffer the same fate as the chip fabs America used to have.
Not really because a subsidy paid from taxes does not affect the relative prices of traded (exports and other non-tariffed import substitutes) and non-traded goods, as your comment recognizes. So, what do you mean by “macro” in this context?
Re #2: I want to stop funding non-profits, consultants, and anyone else with government funds. We should be using those to build state capacity to do those things if we want to have them. It makes no sense to enrich others to do so. The “non-profit” schemes are usually just as bad as any for-profit rent seeking. Let’s just make government effective and responsible again.
Re #5: this is a bullying tactic I’d actually like to see the Federal government use. Zoning and land use has turned into a behemoth to strangle any form of change in our cities and countryside. It needs to be severely curtailed so we can build and rebuild what we need. The NIMBYS will whine that they’re losing out, but so many more are losing out with this fossilized system.
Re #8: I’d love to see the US reindustrialize. It’ll be difficult and will be majorly automated. It’s not going to be the panacea that many think, but reducing supply chain length and reliance on unreliable partners will be good for us in the long run.
If people want things to be done they can volunteer their time or donate to non-profits themselves. I don’t see why the government needs to fund them when “we” are the government and we can fund things or do things ourselves (and also stop doing them or stop funding them, which the government has a hard time doing).
Paying taxes to hire government workers to do things is less direct. If the government notices something working well on a small scale it could decide to launch the activity itself on a larger scale if enough voters approved.
Dang, I just came back from Japan about a week ago!
And I gotta say, I totally got lost in Shibuya and Umeda even if I used to work in Shibuya and spent 5 years in Komaba - and my cram school was in Umeda back in high school and was able to navigate that underground city but not anymore lol
And idk if this is of your interest but UTMD (Todai Market Design Center) hosts free coffee hour called UTMD coffee (no need for reservations iirc) - they say they can have discussion in English too! (UTMD is the institute built by Dr. Kojima as he was called back from Stanford)
While I have no confidence in Elon Musk's approach to reorganizing governmental departments, he is not wrong that Social Security is a major problem. It is not actuarially solvent, so yes, somebody at some point has to mess with Social Security or people like me will have about a 22% cut in my monthly benefits
In fact, if we had done what GW Bush wanted to do, SS would be if a far better economic position. If done properly the changes would affect people under 30. I am sure there are many things that can be done to expand ROTH IRA’s, or even annuities to supplement the smaller SS checks which are inevitable.
We have a birth crisis, and Elon is right the current funding scheme is more like a Ponzi scheme. So I am not sure ridiculing the serious nature of our unfunded liabilities and blob known as our entitlements for the elderly are the best use of your words.
There's a simple and obvious solution to maintaining Social Security benefit levels in the face of shortfalls: give Social Security more money. And there are two simple and obvious ways to do this: raise more money from Social Security taxes (by raising the rate and/or the cap on the income subject to Social Security tax) or allow the Social Security Administration to pay for benefits from from general revenues.
It's not complicated, just not necessarily something Congress actually wants to do.
Declining birth rates mean declining general tax revenues as well.
There's no way to One Weird Trick our societies out of this. The financial numbers just reflect the base reality that fewer people supporting more people = either doing more with less (care home robots? AI driven abundance pushing down prices a lot?) or just accepting that in future there will be more poverty. Probably a mix of both. But you can't just top up social security with higher taxes on billionaires or whatever other Bernie-brained scheme they're suggesting today. The math doesn't work out.
Provide a simple choice: Either pay a little bit higher SS taxes and retire at current age caps, OR retire at new revised ages. Older people near retirement would choose the former, younger people could do whatever. Their choice.
Eliminate the cap on income and add this to the above choice and the problem is solved with zero harm to the economy or to existing retirees.
My hot take is social security represents a detrimental wealth transfer from the young to the old and that at some point we should think about rebalancing the transfer (raising the retirement age, etc)
It’s simple to explain but represents a significant tax increase to both businesses and high earners. People haven’t been presented with the choice yet. Some may choose reduced benefits over a tax increase now.
The reply to Barro seems off. Barro cited that Klein/Thompson said they aren’t aiming at Rs because they don’t share their climate goals. Which seems like an admission. It really does. You left out Barro’s crucial citation from the book.
Texas isn’t as great of an example as you suggested because they are starting from a low base. No one is claiming the efficient amount of renewable is zero.
Because it is cheaper than the alternative *at current subsidy levels*. The subsidies are huge and multi-layered. If you take the subsidies away, will Texas keep building solar/wind/batteries? Maybe. Let's find out!
"Tons of things are at a low base and NEVER get built."
That's fair. What I meant to get at was just that the investments in Texas show that these renewables are estimated by stakeholders to be cost-effective "at the margin", and that margin is calculated with respect to that very low base.
So let's take Solar, as an example. For the very first solar project (starting at baseline = zero), we can try to find a piece of land that gets sunshine, but is (for whatever reason) not ideal for agriculture, but is also convenient to connect to the grid, not on the radar of NIMBYs, etc. Since no one has yet been buying up properties to develop solar, we might find some properties that fit the bill. As more and more solar is built though, there are fewer and fewer "ideal for solar" properties to develop. Solar developers have to start bidding on properties that are attractive to more and more industries. In other words, the marginal cost of adding a unit of solar energy production may very well increase as solar is built. Learning curves might make it so that marginal costs decrease as more solar is built. I think either possibility is plausible. That's the supply side.
There is a similar issue on the demand side. Starting from a low base, solar might be a cheap alternative to fossil fuel generation. As more solar is installed, the electricity price gets lower during the day and higher at night. That phenomenon makes additional solar investment increasingly uneconomic, as the energy produced can only be sold into the less and less lucrative day market. As more solar is installed, fossil fuel generation becomes increasingly valuable, relative to solar. Harder to replace.
Texas only tell us that these renewable investments are economic "at the margin, and with respect to the current baseline". That's all. It says nothing about whether we can reach any particular level of decarbonization without significant costs.
It should be evident by now that I don't think "which one will be cheaper?" is really a meaningful question. The various energy sources in the mix just are not perfect substitutes. There will never be a point in time in which solar becomes "cheaper" than natural gas. Not at night.
Of course, you are well aware of the seasonality/intermittency issues with solar (and wind and hydro). You are also aware of very promising technologies to store energy to deal with these issues. You are also aware of 'smart grid' technologies to dynamically control a diverse mix of energy generation sources. It is not even really appropriate to discuss whether this 'mix' will ever be cheaper than fossil fuels.
Again, "cheaper" is a local concept. Everything at the margin.
A more principled formulation of the question is, "will we reach a point where, starting from a zero baseline, fossil-fuel generation is uneconomic". That is, free-market net-zero. I think this would be very far off. The first unit of fossil-fuel energy is the easiest to replace, and the last is the hardest. The Pentagon, for instance, is already today committing to very concrete plans to use jet fuel for stealth combat aircraft into the distant future.
It does however, seem reasonable that fossil-fuels could become a very small part of the economically optimal energy mix. Presumably, *something* eventually beats out fossil fuels. I am just not confident that it will happen *with these particular technologies* or on a fast enough timeline.
Of course, you've indicated in these newsletters that you think renewable energy can and will displace fossil-fuels, as long as government gets out of the way. (Forgive me if I'm misrepresenting your position). Indeed, I've learned quite a bit about that debate from the newsletter. I'm just not convinced. I'm not convinced of the opposite either. I'm agnostic. On the other hand, I am less familiar with Klein and Thompson's beliefs, whom I don't read as religiously. From what Josh Barro excerpted, it doesn't seem like those two have the same strength in their convictions. I haven't read the book, but it just struck me that you seemed to take Barro's critique kind of personally, when it applied to Thompson/Klein more than to you. I think Josh Barro is a great writer, but his opinion on the future price of hydro power isn't why I'm reading him. He did spot that contradiction within Thompson/Klein though (if not you).
The Texas thing. I dunno man. I'm not sure why I am giving a basic econ lecture to someone that is much more knowledgable about econ than myself. As you frequently praise Barro's takes, I'm just not sure why you didn't read him more charitably here.
You can argue that _this_ book at _this_ time is not the place and time to make the argument, but K-T DO elide the issue that there IS some deadweight loss (measured in prices that consumers actually see) in even the lowest cost policy to reach global CO2 concentration goals. Smart regulation alone will not be enough and they do not propose anything to do about it.
“China, interestingly, seems to have noted Ukraine’s prowess in drone manufacturing and tactics. There are reports of Chinese factories flying Ukrainian flags and teaming up with the Ukrainian drone makers. Trump, on the other hand, has chosen to side with Russia instead of with the emerging leader in drone weaponry. That choice is seeming less intelligent by the day.”
The small country of Portugal conquered much of the world with the caravel and lateen sails. I suspect Trump has no sense of history’s David and Goliaths.
Everybody keeps talking abut the downsides of social media use, so why not tax it in a content neutral way? And is certain kinds of use are more harmful that others, that that kind more.
By "everyone" you mean left wing writers. The fact that they keep talking about something doesn't automatically mean it's true, for goodness sake. Nobody has yet successfully shown that this is true; on close inspection every argument for the harmful effects of social media or smartphones turns out to be based on deceptive or low quality use of evidence.
Agree talk isn’t evidence. But I though the feeling that social media is toxic was as common on the “Right” as the “Left.” Elon bought Twitter because it was so bad.
What about in schools? Is getting smartphones out of schools a good or just a Left-wing idea?
A lot more thought that that of a Substacker should go into this, but I had in mind things like a tax on ad revenue, maybe higher % on ads appearing with high engagement content, like a progressive tax on internet attention. :)
Ukrainian drone swarms are the Palmer Luckey School of modern warfare. Future countries bristling with such sophistication and scale of leading-edge weapons technology fashioned from cheaper, off-the-shelf components that no country would dare attack it. This is the approach of today’s small, sophisticated and powerful satellites. It began with Planet Labs taking the cheaper components of a smart phone and rewiring them for use in a satellite. Today’s smart phones have more computing power than anything in NASA’s Apollo Program.
In your opinion, does social security actually have to be reformed at all? And how?
Can't some of the increase in 'struggle to process information' have been caused by COVID? A fair amount of change appears to occur between 2018 and 2022
Since Ukraine appears to be at the forefront of drone tech, would it make sense for the rest of the western world to collaborate with Ukraine on knowledge transfer and drone production improvements? It's quite extraordinary that Ukraine was able to achieve such scale in its production while being at war! It would be another matter of it was a war that was being fought far away from their lands
“Domestic drone production has made Ukraine much less dependent on aid from the U.S.”
Ukraine’s torpedo drones took out Russia’s biggest ship in its Black Sea Navy. A number of other Russian battleships were sunk or seriously damaged, as well as the bombing of the Russian Navy’s Officers complex near Odessa. So, Russia started with 93 ships in the Black Sea, and all but three turned tail and sailed back to home ports. Simply put, Russia couldn’t defend its navy from Ukrainian drone torpedos.
Back in Cold War days, Russia had one of its largest missile manufacturing factories in Ukraine. Both Russian and Ukrainian rocket scientists working together. This was one of the first targets attacked/bombed when Russia invaded Ukraine. One problem: there is no shortage of missile and rocket scientists in Ukrainians are fully educated, trained, and adept at new designs and fuels. Whoops.
Putin and much of the West doubted Ukraine could stop the Russian military. Ukraine destroyed a few billion dollars worth of conventional equipment with new designs/tactics of cheaper drone warfare. And Russia’s economy and educated-youth demographic has been depleted for two generations.
The days of empire building by going to war with conventional military equipment and training ended with the Korean War. You face a choice: completely destroy a country and its people, or face years of the grind of guerrilla/asymmetrical warfare, e.g. Vietnam, Afghanistan (both Russia and the U.S. retreated back to their respective countries), Iraq, and now Ukraine.
The most powerful countries in the world are slow learners in re the limits of power.
You identified one thing that Ukraine is getting from the US : long range missiles. Two other extremely important parts of US aid are maintenance and ammunition for Patriot anti-missile systems and intelligence. Ukraine's ability to defend itself was greatly diminished when we stopped sharing intelligence with Ukraine briefly.
The news about China inviting Ukrainian drone makers was news to me, but not surprising. Far more important to XI is China's future than Russia's future. China is following its old playbook of inviting innovators into their country so they can be the absolute first to steal it and then manufacture it on a great scale. For the sake of US future security, Trump needs to get those Ukrainians out of China right away. It would be so ironic if Taiwan was conquered using Ukrainian designed drones.
The drones that Ukraine uses aren’t terribly scaled up at the moment - pretty low payload and are almost “personal”.
The purpose of bombardment are most often to reduce enemy resupply (materials, supply lines), reduce enemy firepower (artillery, tanks, planes, missiles) and create opportunities for advancement by attrition of opposing forces (including air defenses). Ukraine’s drone-heavy strategy fails at the third, has some minor impact on the first (Russia has shifted assets out of Crimea and away from front lines) and has been pretty good at the second.
NATO doctrines don’t call for infantry advances without air cover or air superiority against entrenched opposition. Despite its successful drone war, Ukraine has not been able to weaken spots along Russia’s front line and advance, in part because attacking troops are vulnerable to drones and artillery from Russian lines. The drones have not proven capable of creating openings or neutralizing Russian artillery and drones.
Sending a few small drones with small bombs out to an airfield is nice, but what Ukraine really needs is to scale up to the point where hundreds of drones could be sent to the airfield. Those days are coming, but maybe not in Ukraine.
Similarly, 1000 drones loitering over a small segment of Russian lines seeking out artillery, drone operators, command posts, etc would be nice.
That being said, an Air Force and air superiority would be nice, which is what NATO counts on (at least until it faces thousands of anti-aircraft drones).
Aircraft would be unlikely to face thousands of anti-aircraft drones as the requirements to contest a fighter is significantly beyond the capabilities of any drones demonstrated in Ukraine. The average jet flies at 40k ft and around Mach 1.3, and any attributable drone even attempting to contest such an area would become prohibitively expensive to the point it makes more sense to use an anti-aircraft missile.
A very interesting thing to watch for is the burgeoning defense against drones. The US has invested billions and have quietly developed some promising counter measures that make the shot exchange ratio more favorable. It’ll be interesting to see what works
https://www.twz.com/31615/air-force-tests-laser-guided-rockets-in-the-air-to-air-role-to-shoot-down-cruise-missiles
https://www.twz.com/air/bluehalos-fe-1-low-cost-surface-to-air-missile-fired-for-first-time
https://www.wsj.com/video/series/wsj-explains/this-laser-weapon-zaps-drones-at-3-a-beam/02EAA94A-8F58-4D43-BD2D-6BD030CC88CE
I also happen to be in Japan at the moment! Would be neat to be able to meet you in person at one of your book-promoting events.
I'll do a meetup, probably next weekend! Depending on when the cherry blossoms are out.
Looking forward to it!
Likewise, my wife and I are in Japan the next two weeks and would love to attend
We'll be in Japan beginning March 29 and would also love to meet you in person. I've been a fan of your thinking and writing for some time. We'll be in Tokyo the weekend of your meetup and would appreciate details. My email is davidharris3700@gmail.com. Thank you!
I'm going to go later in the year!
Everything Glinert says about CHIPS could have been said by Klein-Thompson (if they wanted to be confrontationally consistent) except the part about tariffs. At a company level a tariff is a subsidy for domestic sales. How can that be better than a subsidy on ALL sales, including exports. Could subsidies be withdrawn by new politicians with different priorities? Yes, but tariffs can also be withdrawn. And while it IS irrelevant if we are talking about one tariff on one item, the exchange rate effect of tariffs in the aggregate mean positive taxation of exports (not just a failure to equally promote export sales of tariffed items) and to encourage imports of non-tariffed items.
No one that is serious about industrial policy [I'm excluding preventing imports of specific items from China from "industrial policy"] should be promoting tariffs.
I'm sort of negative about industrial policy, but if it's promoted solely by subsidies that do not increase the deficit (part of a low deficit fiscal stance) and deregulation, go for it!
Industrial policy/public-private partnerships have had a lot of boondoggles, but also a lot of wins. Indeed, Tesla, SpaceX, and most tech companies and chip companies owe their existence to American industrial policy (and the Cold War)
I don’t object to any specific argument that the output of firm X should be subsidized. It is producing externality Z, so the economic return on the investment is greater than the financial return. But that’s gone on forever. So what is “Industrial Policy?”
Industrial policy refers to government strategies that influence economic development by supporting specific industries through subsidies, tariffs, tax incentives, R&D investment, and regulations. I think a key distinction is that there is an explicit goal (we want to make X thing) and a whole of government approach.
You’re right that the government hasn’t ever really stopped industrial policy (mostly through defense). I just merely pointed out that industrial policy can be quite successful
A subsidy paid for by taxes is pretty close to a tariff from macro perspective.
It creates an artificial cost differential for a domestic supplier and then detracts from available dollars for consumption across the economy.
The difference is the effective tax that is the tariff primarily takes from those consuming the affected product and so can inspire substitution effects. Raising taxes to pay for subsidies hurts everyone’s consumption for all products at the margin.
The IRA, if it had been paid for by taxes rather than borrowing would have been akin to the biggest tariff program since Smoot-Hawley.
Of course, if we assume that deficits restrict future consumption we will be paying in the end.
Making more chips at home is essential from a national security point of view, IMO. Though subsidising factories to build mostly second tier chips isn’t a panacea. After all, America did used to manufacture chips. That was moved overseas for two reasons- cost and shareholder value. Shareholders don’t like expensive, cyclical and inflexible fixed assets. They prefer a model where the high value design activities are kept in house and the capital-intensive, commoditized activities are outsourced.
I would argue that those two drivers have not changed at all and the factories we are paying to build now will, in time, suffer the same fate as the chip fabs America used to have.
Not really because a subsidy paid from taxes does not affect the relative prices of traded (exports and other non-tariffed import substitutes) and non-traded goods, as your comment recognizes. So, what do you mean by “macro” in this context?
Re #2: I want to stop funding non-profits, consultants, and anyone else with government funds. We should be using those to build state capacity to do those things if we want to have them. It makes no sense to enrich others to do so. The “non-profit” schemes are usually just as bad as any for-profit rent seeking. Let’s just make government effective and responsible again.
Re #5: this is a bullying tactic I’d actually like to see the Federal government use. Zoning and land use has turned into a behemoth to strangle any form of change in our cities and countryside. It needs to be severely curtailed so we can build and rebuild what we need. The NIMBYS will whine that they’re losing out, but so many more are losing out with this fossilized system.
Re #8: I’d love to see the US reindustrialize. It’ll be difficult and will be majorly automated. It’s not going to be the panacea that many think, but reducing supply chain length and reliance on unreliable partners will be good for us in the long run.
If people want things to be done they can volunteer their time or donate to non-profits themselves. I don’t see why the government needs to fund them when “we” are the government and we can fund things or do things ourselves (and also stop doing them or stop funding them, which the government has a hard time doing).
Paying taxes to hire government workers to do things is less direct. If the government notices something working well on a small scale it could decide to launch the activity itself on a larger scale if enough voters approved.
Dang, I just came back from Japan about a week ago!
And I gotta say, I totally got lost in Shibuya and Umeda even if I used to work in Shibuya and spent 5 years in Komaba - and my cram school was in Umeda back in high school and was able to navigate that underground city but not anymore lol
And idk if this is of your interest but UTMD (Todai Market Design Center) hosts free coffee hour called UTMD coffee (no need for reservations iirc) - they say they can have discussion in English too! (UTMD is the institute built by Dr. Kojima as he was called back from Stanford)
While I have no confidence in Elon Musk's approach to reorganizing governmental departments, he is not wrong that Social Security is a major problem. It is not actuarially solvent, so yes, somebody at some point has to mess with Social Security or people like me will have about a 22% cut in my monthly benefits
In fact, if we had done what GW Bush wanted to do, SS would be if a far better economic position. If done properly the changes would affect people under 30. I am sure there are many things that can be done to expand ROTH IRA’s, or even annuities to supplement the smaller SS checks which are inevitable.
We have a birth crisis, and Elon is right the current funding scheme is more like a Ponzi scheme. So I am not sure ridiculing the serious nature of our unfunded liabilities and blob known as our entitlements for the elderly are the best use of your words.
There's a simple and obvious solution to maintaining Social Security benefit levels in the face of shortfalls: give Social Security more money. And there are two simple and obvious ways to do this: raise more money from Social Security taxes (by raising the rate and/or the cap on the income subject to Social Security tax) or allow the Social Security Administration to pay for benefits from from general revenues.
It's not complicated, just not necessarily something Congress actually wants to do.
Declining birth rates mean declining general tax revenues as well.
There's no way to One Weird Trick our societies out of this. The financial numbers just reflect the base reality that fewer people supporting more people = either doing more with less (care home robots? AI driven abundance pushing down prices a lot?) or just accepting that in future there will be more poverty. Probably a mix of both. But you can't just top up social security with higher taxes on billionaires or whatever other Bernie-brained scheme they're suggesting today. The math doesn't work out.
Provide a simple choice: Either pay a little bit higher SS taxes and retire at current age caps, OR retire at new revised ages. Older people near retirement would choose the former, younger people could do whatever. Their choice.
Eliminate the cap on income and add this to the above choice and the problem is solved with zero harm to the economy or to existing retirees.
My hot take is social security represents a detrimental wealth transfer from the young to the old and that at some point we should think about rebalancing the transfer (raising the retirement age, etc)
It’s simple to explain but represents a significant tax increase to both businesses and high earners. People haven’t been presented with the choice yet. Some may choose reduced benefits over a tax increase now.
The reply to Barro seems off. Barro cited that Klein/Thompson said they aren’t aiming at Rs because they don’t share their climate goals. Which seems like an admission. It really does. You left out Barro’s crucial citation from the book.
Texas isn’t as great of an example as you suggested because they are starting from a low base. No one is claiming the efficient amount of renewable is zero.
Why is Texas building so much solar/wind/batteries?
"Starting from a low base" isn't an explanation. Tons of things are at a low base and NEVER get built.
Why is Texas building these things at a rapid and accelerating pace?? Tell me why!
Because it is cheaper than the alternative *at current subsidy levels*. The subsidies are huge and multi-layered. If you take the subsidies away, will Texas keep building solar/wind/batteries? Maybe. Let's find out!
"Tons of things are at a low base and NEVER get built."
That's fair. What I meant to get at was just that the investments in Texas show that these renewables are estimated by stakeholders to be cost-effective "at the margin", and that margin is calculated with respect to that very low base.
So let's take Solar, as an example. For the very first solar project (starting at baseline = zero), we can try to find a piece of land that gets sunshine, but is (for whatever reason) not ideal for agriculture, but is also convenient to connect to the grid, not on the radar of NIMBYs, etc. Since no one has yet been buying up properties to develop solar, we might find some properties that fit the bill. As more and more solar is built though, there are fewer and fewer "ideal for solar" properties to develop. Solar developers have to start bidding on properties that are attractive to more and more industries. In other words, the marginal cost of adding a unit of solar energy production may very well increase as solar is built. Learning curves might make it so that marginal costs decrease as more solar is built. I think either possibility is plausible. That's the supply side.
There is a similar issue on the demand side. Starting from a low base, solar might be a cheap alternative to fossil fuel generation. As more solar is installed, the electricity price gets lower during the day and higher at night. That phenomenon makes additional solar investment increasingly uneconomic, as the energy produced can only be sold into the less and less lucrative day market. As more solar is installed, fossil fuel generation becomes increasingly valuable, relative to solar. Harder to replace.
Texas only tell us that these renewable investments are economic "at the margin, and with respect to the current baseline". That's all. It says nothing about whether we can reach any particular level of decarbonization without significant costs.
It should be evident by now that I don't think "which one will be cheaper?" is really a meaningful question. The various energy sources in the mix just are not perfect substitutes. There will never be a point in time in which solar becomes "cheaper" than natural gas. Not at night.
Of course, you are well aware of the seasonality/intermittency issues with solar (and wind and hydro). You are also aware of very promising technologies to store energy to deal with these issues. You are also aware of 'smart grid' technologies to dynamically control a diverse mix of energy generation sources. It is not even really appropriate to discuss whether this 'mix' will ever be cheaper than fossil fuels.
Again, "cheaper" is a local concept. Everything at the margin.
A more principled formulation of the question is, "will we reach a point where, starting from a zero baseline, fossil-fuel generation is uneconomic". That is, free-market net-zero. I think this would be very far off. The first unit of fossil-fuel energy is the easiest to replace, and the last is the hardest. The Pentagon, for instance, is already today committing to very concrete plans to use jet fuel for stealth combat aircraft into the distant future.
It does however, seem reasonable that fossil-fuels could become a very small part of the economically optimal energy mix. Presumably, *something* eventually beats out fossil fuels. I am just not confident that it will happen *with these particular technologies* or on a fast enough timeline.
Of course, you've indicated in these newsletters that you think renewable energy can and will displace fossil-fuels, as long as government gets out of the way. (Forgive me if I'm misrepresenting your position). Indeed, I've learned quite a bit about that debate from the newsletter. I'm just not convinced. I'm not convinced of the opposite either. I'm agnostic. On the other hand, I am less familiar with Klein and Thompson's beliefs, whom I don't read as religiously. From what Josh Barro excerpted, it doesn't seem like those two have the same strength in their convictions. I haven't read the book, but it just struck me that you seemed to take Barro's critique kind of personally, when it applied to Thompson/Klein more than to you. I think Josh Barro is a great writer, but his opinion on the future price of hydro power isn't why I'm reading him. He did spot that contradiction within Thompson/Klein though (if not you).
The Texas thing. I dunno man. I'm not sure why I am giving a basic econ lecture to someone that is much more knowledgable about econ than myself. As you frequently praise Barro's takes, I'm just not sure why you didn't read him more charitably here.
You can argue that _this_ book at _this_ time is not the place and time to make the argument, but K-T DO elide the issue that there IS some deadweight loss (measured in prices that consumers actually see) in even the lowest cost policy to reach global CO2 concentration goals. Smart regulation alone will not be enough and they do not propose anything to do about it.
https://thomaslhutcheson.substack.com/p/energy-abundance
“China, interestingly, seems to have noted Ukraine’s prowess in drone manufacturing and tactics. There are reports of Chinese factories flying Ukrainian flags and teaming up with the Ukrainian drone makers. Trump, on the other hand, has chosen to side with Russia instead of with the emerging leader in drone weaponry. That choice is seeming less intelligent by the day.”
The small country of Portugal conquered much of the world with the caravel and lateen sails. I suspect Trump has no sense of history’s David and Goliaths.
Everybody keeps talking abut the downsides of social media use, so why not tax it in a content neutral way? And is certain kinds of use are more harmful that others, that that kind more.
Change the pricing model to subscription and outlaw advertising and sale of personal data?
By "everyone" you mean left wing writers. The fact that they keep talking about something doesn't automatically mean it's true, for goodness sake. Nobody has yet successfully shown that this is true; on close inspection every argument for the harmful effects of social media or smartphones turns out to be based on deceptive or low quality use of evidence.
Agree talk isn’t evidence. But I though the feeling that social media is toxic was as common on the “Right” as the “Left.” Elon bought Twitter because it was so bad.
What about in schools? Is getting smartphones out of schools a good or just a Left-wing idea?
A lot more thought that that of a Substacker should go into this, but I had in mind things like a tax on ad revenue, maybe higher % on ads appearing with high engagement content, like a progressive tax on internet attention. :)
Ukrainian drone swarms are the Palmer Luckey School of modern warfare. Future countries bristling with such sophistication and scale of leading-edge weapons technology fashioned from cheaper, off-the-shelf components that no country would dare attack it. This is the approach of today’s small, sophisticated and powerful satellites. It began with Planet Labs taking the cheaper components of a smart phone and rewiring them for use in a satellite. Today’s smart phones have more computing power than anything in NASA’s Apollo Program.
Are you doing any public events while you’re in Japan, Noah?
I will be, yeah!
In your opinion, does social security actually have to be reformed at all? And how?
Can't some of the increase in 'struggle to process information' have been caused by COVID? A fair amount of change appears to occur between 2018 and 2022
Since Ukraine appears to be at the forefront of drone tech, would it make sense for the rest of the western world to collaborate with Ukraine on knowledge transfer and drone production improvements? It's quite extraordinary that Ukraine was able to achieve such scale in its production while being at war! It would be another matter of it was a war that was being fought far away from their lands
“Domestic drone production has made Ukraine much less dependent on aid from the U.S.”
Ukraine’s torpedo drones took out Russia’s biggest ship in its Black Sea Navy. A number of other Russian battleships were sunk or seriously damaged, as well as the bombing of the Russian Navy’s Officers complex near Odessa. So, Russia started with 93 ships in the Black Sea, and all but three turned tail and sailed back to home ports. Simply put, Russia couldn’t defend its navy from Ukrainian drone torpedos.
Back in Cold War days, Russia had one of its largest missile manufacturing factories in Ukraine. Both Russian and Ukrainian rocket scientists working together. This was one of the first targets attacked/bombed when Russia invaded Ukraine. One problem: there is no shortage of missile and rocket scientists in Ukrainians are fully educated, trained, and adept at new designs and fuels. Whoops.
Putin and much of the West doubted Ukraine could stop the Russian military. Ukraine destroyed a few billion dollars worth of conventional equipment with new designs/tactics of cheaper drone warfare. And Russia’s economy and educated-youth demographic has been depleted for two generations.
The days of empire building by going to war with conventional military equipment and training ended with the Korean War. You face a choice: completely destroy a country and its people, or face years of the grind of guerrilla/asymmetrical warfare, e.g. Vietnam, Afghanistan (both Russia and the U.S. retreated back to their respective countries), Iraq, and now Ukraine.
The most powerful countries in the world are slow learners in re the limits of power.
Of course Trump's team isn't worried about future elections! If Trump isn't running, why *should* they care?
Nice list