The unpleasant reality that neither party wants to contemplate is that we don't just need to raise taxes and cut spending: we need to raise taxes _on the middle class_ and significantly cut spending. America already has one of the most steeply progressive tax systems in the world. There are lots of loopholes we can and should close to prevent the ultra-rich from paying less than their fair share -- I favor eliminating preferential capital gains tax, eliminating step-up in basis, taxing unrealized gains used as collateral to secure loans, and significantly reducing inheritance tax exemptions, myself -- but there just aren't enough ultra-rich to tax to plug the budget gaps, and they're already paying a significantly outsized share of taxes relative to their percentage of total national income.
People often idolize the welfare states of Northern Europe while neglecting to notice that those welfare states are not paid for with punitive taxes on the rich, but rather by tax rates on the middle class that are close to double what Americans pay. We've been living beyond our means as a nation for some time now, and that bill is coming due. And both parties are simply hoping the other one is forced to answer the door when the debt collectors come knocking.
It does also occur to me that this may be one of the under-appreciated societal ills caused by the collapse in birthrates, too. As American birth rates have collapsed and the ratio of older, wealthier people to younger working people increases, people voting their own economic interests results in numerous areas of public policy that condemn future generations to indentured servitude to fuel the hedonistic lifestyles of their forebears. Maybe no generation has exemplified this so strongly as the Baby Boomers, born into a society of plenty who never missed an opportunity to pull up the ladder behind them. And now this giant regressive tax bill is one last big middle finger to the country on their way out.
Oh yes! The Medicaid expansion was for the elderly. The Obamacare subsidies were for the elderly. The student loan handouts were for the elderly. The runaway public school spending is for the elderly. The Bidenflation was for the elderly. The green handouts were for the elderly.
You are so observant and spot on! Those darn elderly boomers just keep shoveling cash to themselves. 😂🤪
Yes, the federal government should stop spending primarily on the elderly and retired people and start spending more on working age adults, families, and children. The federal government spends about ten times as much on adults over 65 as it does on children under 18. Even when you include state and local government spending on K-12 schools, all levels of government in the United States still spend about twice as much on adults over 65 as they do on children under 18. This is one reason why the expanded Child Tax Credit under Biden was such a good idea and it was such a shame that he and the Democrats didn't do more to try to extend it. Democrats in the future should pass the extended CTC again and don't call it an tax credit. They should explicitly call it a stipend for children and families.
One idea I've seen floated to address declining birth rates is to condition government benefits for retirees on having a minimum number of children. There's a cold but inescapable logic to it: if you produced more taxpayers, you invested a lot of money that will benefit society in the future, and you're being compensated for it in your old age. If you didn't produce future taxpayers, you had a lot more disposable income your entire working life; if you spent it on luxuries rather than saving it for retirement, that's not the rest of society's fault and they have no reason to subsidize that choice.
People who support this abominable idea are moronic libertarians and if you agree with them, then you're a moronic libertarian too. This is somewhat analogous to the incredibly tone deaf idea that wealthy people's votes should count a lot more than everyone else's votes simply because they make a lot more money and pay a lot more in taxes.
And if you are a woman who had very difficult births, with dangerous hemorrhaging and blood loss, etc., you'll get dinged for quitting after just one. And if you had fertility problems. And so on.
Less and less countries have above replacement fertility. On top of that, when immigrants are brought in they assimilate into the fertility regime of the host country. As a result, immigrants are a short term solve to the long term problem of Americans not wanting kids.
At that point shouldn't you also take into account the likely economic contribution of the children?
If you have 4 kids and 3 of them end up being career criminals who spend half their lives in prison you've probably cost the country more money than if you didn't have any kids at all. The only way to make up the crime and prison costs is if the 1 kid who isn't a criminal becomes the mystical super rich person who actually pays their taxes.
And if you have a severely disabled kid who consumes a huge amount of state subsidized healthcare from birth till death and will never live independently (ask me how I know) why should you get more retirement benefits than someone who is childless but works for Google and pays a lot of taxes (again, ask me how I know)?
I think when you're crafting policies like this, you have to look at the aggregates and probabilities. No matter what kind of system you design, there will always be edge cases where "deserving" people fail to be rewarded and "undeserving" people get rewarded anyway. The goal is to minimize them; attempting to eliminate them is a lost cause unless you're handing over governance to a godlike superintelligent AI.
I take your point, but I’ll offer two counterpoints: first, because of the public choice effect, raising taxes (which has diffuse costs) has historically been more successful than slashing benefits (which has concentrated costs). People grumble, but it’s been managed many, many times throughout the country’s history, while dramatically slashing widespread social benefits… well, if you can think of any examples, I’m all ears, but I can’t. The closest I can think of is Clinton’s welfare reform in the 1990s, and that was targeted at a very narrow slice of the population and fueled by media stories of “welfare queens”. In general, the trend of social welfare programs in the democratic world has been to expand until they cause a dramatic fiscal crisis (e.g. Greece) and only then will people consider austerity, once the consequences are being broadly and keenly felt.
My second point would be that Europe’s welfare states are usually running deficits as well: they have much higher taxes, and much higher spending, but other than Germany (which has a far more parsimonious welfare model than Scandinavia), they’re still not running balanced budgets. And with a debt load of over 120% of GDP right now and our committed future expenditures set to balloon, we can’t afford to just balance the budget: we need to run significant fiscal surplus to dig ourselves out of this hole. That’s going to require dramatically higher taxes.
I agree completely that this is not politically palatable. But that is, as I said in another comment, why I’ve soured on democracy (at least with universal suffrage) as a viable form of government. The public will not ever voluntarily accept minor pain now to forestall major pain later, especially not in a two-party system where the opposition party is always looking to weaponize any prudent fiscal policy against you. Only once the catastrophe has fully manifested and the major pain is being felt will people be willing to address it.
your general point, that the american middle class needs to be taxed more heavily, is one of the central bitter truths of american politics that nobody wants to admit. and politically, adequate deficit reduction might only be achievable with spending cuts
however, there's no particular economic need to cut spending overall. case-by-case, of course, there are some things i disagree with, but (e.g.) a 15% value-added tax, while painful, would be about enough to bring the deficit to zero (before accounting for reduced interest rate expense and improved GDP). of course there are many other taxation options, and zeroing out the deficit may not be a desirable goal, but there are lots of prosperous nations with spending levels higher than America's; Australia, Germany, Canada, all of Scandinavia, etc.
obviously a 15% VAT would be political suicide; in practice it seems likely that major cuts to popular programs will be made as part of any vaguely realistic deficit reduction scenario. (if that's all you meant then I have wasted your time)
I blame liberals. If they hadn't made tax policy part of the culture wars conservatives wouldn't be backing these self-destructive irresponsible tax cuts for the rich.
And not only does the middle class face extremely high income taxation (in some cases > 50% marginal rates), they also face massive and regressive VATs in the 10-20% range.
If you consider tax paid as a percent of income, VAT is regressive because a lower percentage of income is used on VAT taxable expenditures by higher earners.
There are a lot of strange conventions on describing the impact of taxes depending on where you stand; in the article Noah mentions making sure that the rich are paying their fair share when of course the already pay at a higher rate than anyone.
Yes. America’s combined state and local marginal taxes on the rich aren’t terribly out of line with many other social democracies. European Social democracies, though do a much better job of raising average (rather than marginal) tax rates as high marginal tax rates are distorting and destructive. In Europe the social welfare state can be viewed as a sort of forced consumption- rather than allowing the working, middle and professional classes to keep their own money and spend it as they like, the government takes it via VAT, energy taxes ($8/gallon gas); sin taxes and high tax rates on the middle and professional classes (eg 40 pct tax bracket in UK starts at around $55k and there are very few deductions- no mortgage deductions, etc) and then provides an assortment of consumption programs (healthcare included) to all. Europeans like the safety net and understand this rubric- normal people pay for social democracy, not the “rich”.
If the Dems ever told the truth- that their is no free lunch and that the middle class was going to have to get soaked for their own benefits, with the “rich” paying for very little- how many votes would they win? American voters haven’t bought into the Euro idea of paying for their own handouts, nor do they love the idea of leaving consumption decisions up to bureaucrats.
The 2024 election was contested between a party wishing to extend current tax rates and add a few more freebies (tax on tips, etc) that at least paid lip service to cutting spending vs another that was going to extend all but the highest bracket and then use the meagre revenue from raising the highest bracket to spend even more money, while paying no lip service at all to spending restraint.
I think America made the right choice, fiscally, or rather, the least bad of two really inane fiscal platforms.
It is very clear that spending needs to be cut dramatically and that average tax rates need to rise. I personally don’t mind a 40 percent tax bracket, but it should apply to everyone, with a big standard deduction. Meanwhile, eliminate the SALT deduction entirely as well as the mortgage deduction and the charitable deduction and the marriage penalty. Eliminate the estate tax and instead tax capital gains at death. Rather than a 40 percent rate; I’d prefer something like 33 percent that would apply to both capital gains and ordinary income. There is no reason for financial capital to be taxed less than labor. We aren’t ready for this yet- will require a crisis. And the first thing that will be tried is stealing money from the rich because a scapegoat is needed. Pogo isn’t around any more.
I’ve been bothered by all this for quite a while, too.
I believe that many European states did try soaking the rich to pay for everything, it just didn’t work. Tax revenues fell well short of targets as high earners moved or engaged in avoidance strategies. When fiscal crises arrived they elected to raise taxes (broadly) rather than cut spending. I think Americans just haven’t had this lived experience yet. When you don’t actually have a huge federal budget, it’s easier to speculate about how to pay for it.
AIUI the problem with both the US and UK (relative to continental Europe, especially prior to mass third-world immigration) is that their ability to justify tax rises to their public is shakier because their legitimacy is weaker.
In the US the societal split is racial (the success of the Civil Rights movement in the 1960s delegitimized the state among white supremacists) while in the UK's case it is regional: the historic dominance of South East England was temporarily weakened by the Industrial Revolution (which favoured the North with its coal and water power resources) but electrification has allowed South East domination to reassert itself, which is delegitimizing the state among both southerners who resent paying taxes to subsidize the north, and among northerners who despair at the state's seeming inability to do much to improve the places where they live.
Blacks (and Native Americans, although _their_ numbers aren't enough to matter in most parts of the US) are fundamentally different from other US ethnic minorities in that they've been present for the entire history of the US, and thus had an effect on how the US political system developed.
And my point wasn't about how different races vote in elections, but about how racism makes white Americans more anti-tax than white Europeans.
the GINI coefficients are much lower in Northern Europe as well and generally speaking their taxes include their healthcare costs. Our taxes generally are on top of onerous health insurance costs.
While what you write about the rich paying a large share of taxes, I think fixing the loopholes you mention, as well as increasing the tax rates for the rich, would have to come first before increasing taxes on the middle class. I'm probably in the lower third of the middle-class income spread, so I first need to see that everyone above is paying a "fair share" before I'd be willing to pay more. But pay more I agree we in the middle class will eventually need to do.
Agree with all this. I just wanted to note that when we finally do tax wealth more reasonably, and the whinging begins, everyone needs point to all these decades of low taxes, tax cuts, and loop holes...in unison.
Yes European social democratic welfare states are paid for by high taxes on the middle class rather than punitive taxes on the rich. But the wealthy in America are much richer than the wealthy in most other Western countries. This is why we have such a high per capita GDP compared to most other countries. It's not because our middle class is so much richer compared to other Western countries. This could be seen as one benefit of our high level of economic inequality. We can pay for a larger and more comprehensive welfare state primarily with higher taxes on the rich rather than higher taxes on the middle class. Higher taxes on the rich could be seen both as a tax on economic inequality and a way to bring inequality down.
This is a common belief about the US, but it's not true: our median per capita incomes (PPP adjusted), and more importantly, our adjusted household disposable income (which takes into account taxes and state services) are dramatically higher than nearly all European countries and also very closely in line with the mean differentials as well. It's not a few rich outliers pulling the US averages up: it's the giant middle class being much wealthier. Noah wrote about this a few years ago (https://www.noahpinion.blog/p/americans-are-generally-richer-than) but note that he was using data through 2019, prior to the pandemic. The differences have gotten even more extreme since the pandemic and the US medians are ahead of even Switzerland now according to the most recent OECD data set.
Neoliberal types, including Silicon Valley liberals like Noah, often claim this about the American middle class. And while there might be some merit to this claim, I think that it's significantly overstated. I think that's its hard to accurately compare a single country as large and diverse as the United States to a bunch of smaller European countries or even the European Union as a whole. It doesn't really matter how rich the American middle class is. My point is the American upper class or rich are much wealthier than their counterparts in European countries and that there is a wide economic divide between American upper class and the American middle class, even the upper middle class. Most dual earner households in high cost of living American metropolitan areas in which both spouses make six figures don't feel rich even though on paper they are much more well off than their counterparts in cheaper parts of the country as well as their counterparts in most European cities. All of these counterparts have a similar standard of living even though there are significant cost of living differences that even PPP doesn't necessarily account for.
I think the idea of PPP is suspect anyway. Using PPP, many or even most countries are apparently much richer than they seem to be on paper according to nominal GDP. According to nominal GDP, Israel's economy is almost twice as large as Iran's economy. But according to PPP, Iran's economy is much larger than Israel's in line with its much larger population. I agree that nominal GDP doesn't necessarily account for all aspects of a country's economy. But that doesn't mean that PPP is the best way way to measure those economic aspects. The most curious aspect of PPP is that the difference between nominal GDP and PPP is much greater for poorer countries than it is for richer countries. If those poorer countries were actually as rich as PPP says that they are, then how come their nominal GDP isn't higher in the first place?
Macroeconomists should really do a serious examination of how PPP is usually measured. But there is a statistically significant difference between nominal GDP and PPP even for most richer countries. Canada is the country that is most like the U.S. But Canada still has a statistically significant difference between its nominal GDP and its PPP, which is apparently because healthcare and education are much cheaper in Canada than in the US. But having a lower cost of living doesn't necessarily make you richer than your counterparts in higher cost of living jurisdictions. This is my point. Cost of living and standard of living obviously aren't the same thing.
If you don’t adjust for PPP and use nominal GDP figures instead, the US median wealth/income advantage over Europe looks even _more_ extreme. There’s simply no way you can slice the data where the median American isn’t significantly better off in real material terms than the median European. (As Noah pointed out in the article I linked, America is a much better place to be a median citizen than Europe. It’s a much worse place to be a _poor_ citizen.) Yes, there are lots of even wealthier people in the US. But that has no impact on whether the median person is better off than their counterparts in foreign countries, only whether or not they _feel_ wealthy when they look on with envy at people who have even more than they do.
People in San Francisco and other rich coastal cities who are making literally an order of magnitude more than median household income while self-describing as “middle class” always make me roll my eyes. My experience has been that when they complain they’re “just getting by”, it’s because they’re taking a large number of conveniences for granted: things like professional childcare, private prep schools, expensive gym memberships, frequent dining out at high-end restaurants, and so on. They may not “feel” rich because their social circle makes them think all of these things are “normal”, but objectively they are obscenely rich compared to the median person, and it’s not remotely being inflated away by _actual_ cost of living expenses like rent, taxes and higher prices on basic necessities. They’re just so throughly bubbled in the luxury lifestyle that they have no clue at all how ordinary people live, and there’s a real “let them eat cake” mentality going on. This is my general social circle and I’m always fighting so hard to bite my tongue when someone is complaining about how unaffordable the world is for the middle class because their nanny just quit and their private school tuition for the kids is going to hit six figures, so they’re considering *gasp* maybe not taking the family on a vacation to Hawaii this summer.
Lifestyle inflation is a powerful force, and very few people manage to form and retain an accurate picture of their own privilege. Meanwhile everyone looks on with envy at people who have more than they do and assumes that wealth is unearned, while what _they_ have is obviously theirs by dint of hard work. As Megan McArdle once pithily put it, “everyone’s in favor of taxing the rich, where ‘rich’ is defined as ‘about 20% more than I expect to make’”.
None of this is to say that taxing the rich isn’t a good idea. But concentrating on billionaires is just scapegoating a small slice of the population and playing to greed and envy rather than forcing people to acknowledge that many of the ones shouting “eat the rich!” should be looking in a mirror.
While it doesn't necessarily correspond with their policy views, having even affluent upper middle class people feel relatively poor or like an exploited proletariat is a likely prerequisite for a larger and more comprehensive social welfare state in this country. Again, it doesn't really matter whether or not the American middle class is significantly richer than their counterparts in peer countries. Maybe they are and maybe they aren't. The point is that the American middle class feels relatively poor compared to the very wealthy.
The American middle class is not only at least somewhat wealthier than their counterparts in peer countries but they are definitely much wealthier than the American middle class in the 1950s and 1960s. And many Americans across the political spectrum still have nostalgia for the economy of 1950s and 1960s. Why is that? Because economic inequality was much lower then. A rising tide lifted all boats during that period unlike today. We may be much wealthier today than we were then but we don't always feel wealthier today as a result of both higher economic inequality and the related increases in the cost of living.
A high level of economic inequality is inherently incompatible with stable liberal democracy. Our high level of economic inequality is directly responsible for both Trump and his MAGA movement and their analogues on the left. I also wouldn't be surprised if many Americans across the political spectrum would prefer to be as "poor" as people like you and Noah claim Western Europeans are if we had a much lower level of economic inequality, including a more adequate social welfare state, though it is true that economic inequality has risen throughout the First World.
Seems like the decision makers and donors of the Republican party have always been motivated by one thing, tax cuts for the rich, and the social issues are just a way to fool the masses into voting for them.
Correct. I am one of those people. I hold appallingly retrograde opinions like sports should be segregated by sex and that people of all races should be treated equally for employment and education.
Haitian immigrants eating cats and dogs, likening immigrants to an invasion of serial killers or insane asylees (poisoning the blood of our country if you're extra bold), believing that totally healthy newborns are killed on demand by abortion providers, at best equivocation on whether political violence is OK and at worse supporting political violence insofar as it's done in Trump's name, the general tendency to inflame tensions among the country even by leveraging the suffering of hurricane victims for cynical political ends. Say what you will about the crazy lefties (and I'd likely agree with you) but the culture-war crazies on the left or right have succeeded in taking over only one party so far (which isn't to say the same fate won't meet the democratic party in the future).
You're not incorrect about the Republicans. But the Democrats absolutely are captured by the culture war crazies even if they're smart enough not to talk about it in their campaigns. If you don't think so, then tell me what did they put on page 1 of their party platform? https://democrats.org/wp-content/uploads/2024/08/FINAL-MASTER-PLATFORM.pdf
Yep. Just bait and switch. Culture War issues invented and spread by FOX News, to get the rubes riled up on nothingburgers like Critical Race Theory and Trans kids in sports, and drive them to the polls.
The BBB will provide some minor middle class tax relief. That will be more than offset by spikes in health insurance premiums, electric utility rates, and home/car/business loans. As the specifics of the bill get out to the public, approval for it is dropping like a stone. But much less so among GOP voters. FOX News has done its work well.
Republican rule is turning out to be an economic disaster.
What, supporting federal recognition for as yet unrecognized Native American Tribes? NA's--like every other ethnic minority--are all stakeholders in the Blue Tent.
If you're talking about actual Dem *policy*, y'know actual *legislation*, this means you're gung ho about the BBB? About gutting Medicaid and SNAP, reducing SS, putting a *tax* on renewables, supporting Russia over Ukraine...all so Jeffy can buy another yacht?
IF you're a billionaire or multi-multi-millionaire, or just a major shareholder in a GOP-centric corporation I'd understand your love of the GOP: you'll get a bundle on taxes, and your equities will appreciate nicely.
The dyspeptic orange dunce's MO is crude but consistent with the GOP MO since Reagan...gin up a race panic, get power, sack the treasury for poor little rich people...rinse, repeat. The shameful, willful innumeracy and cynicism is breathtaking.
The problem is spending, not taxes. Just look at federal spending as a percent of GDP-- it's clear that spending is the issue over the last 15 years.
And you said "the bill is an engine of upward redistribution." Declining to confiscate rich people's money is not "upward redistribution." That's quite a communist perspective on tax cuts.
Isn't it inevitable that government spending will rise as a percentage of GDP in most rich countries due to aging populations, as much of that spending is on the needs of old people (Social Security and Medicare, in the US case)?
Not really that much you could do about that short of going Logan's Run...
Yes- there is a pig in the python demographic bubble affecting these Ponzi schemes around most of the OECD)
However, there is no reason whatsoever for the US not to be fully funding all other spending at full employment. Social security is not in deficit (yet) and the Medicare deficit is less than half the US total deficit.
If the US ran a cyclically balanced fiscal policy (ex soc sec and Medicare) then deficits would be cut in half and interest rates and interest funding costs would fall.
Strangely, neither party proposed fiscal sanity during the 2024 elections!
I think the DOGE fiasco shows that there isn't really that much spending that is "waste" that could be cut without serious consequences, so I'm still of the opinion that it's tax rises that are needed to deal with the budget deficit.
There's tons of waste. The government is still using 1970s technology for many important functions. If you're paying an army of employees to do something that can be automated, that's waste.
There's a lot of waste, but most of it is due to congressional mandates. What DOGE demonstrated as much as anything else is that the President doesn't have the power to fix a lot of the dysfunction in federal agencies. That takes changing and/or repealing laws, many of which have noble-sounding purposes and which your opponents will seize upon to savage you at the polls. You're against the Freedom of Information Act? What have you got to hide?! What kind of despotic tyrant wants to do away with notice-and-comment rules? Are you seriously suggesting that we should get rid of environmental review, you capitalist monster?! You just want to cut civil service protections so you can flood the government with your cronies! And so on.
Spending is going to need to be cut- waste or not. There is a lot of fraud to eliminate, sure, but that will take years, not weeks (and require some tech investment and controls).
Taxes will also need to rise, of course, on everyone- not just the rich.
I’ve always thought we should require each party in Congress to come up with a hypothetical plan to balance the budget in 5 years and keep it balanced for a succeeding 10 years. If voters were informed and actually saw the degree of tax hikes and spending cuts necessary to pay for the mess we have already made, then parties that promised more handouts (free student loans!) or more new tax cuts (no tax on tips!) would be laughed out of town and maybe pols would get serious. Then again, maybe not- that is what the bond vigilantes are for.
No, DOGE showed very little. They didn't even target any large spending categories, and they did a terrible job analyzing the ones they did work on. Granted, real spending cuts probably require legislation, and neglecting that was another shortcoming of the DOGE approach. If we took a serious look at entitlements and tax enforcement, I bet we could squeeze a trillion out of the deficit. Of course, we'll probably never find out because no one will actually work on it.
The “trust fund” (read as “money the government owes itself”) is not zeroed out, so mandatory cuts have not occurred to balance the SSA’s revenues with its expenditures.
The financial situation is simple math. To maintain financial stability one of these two things (or some combination thereof) must happen:
1. Massive cuts to Social Security and Medicare
2. Massive tax increases on the middle class
The political situation is just as simple. Anyone who proposes either of these things will be destroyed in the next election. Therefore, the resolution must begin with a change of state in politics. Probably it will be a massive financial crisis that will do it, as that's the path we're on now. The fact that this simple problem is not politically resolvable has turned me against democracy (or at least the universal suffrage version of it).
If we balance the non-social security/medicare spending, the old age deficit is actually quite manageable (and half of the current deficit) for a decade or two.
While there are demographic reasons for the old age Ponzi schemes to be in deficit at the moment, there is zero reason for other spending to be in deficit at full employment.
Balance that first, which will lead to reduced borrowing, lower rates and lower interest costs and then turn to the third rail of amending the programs people mistakenly think they have “paid” for via payroll taxes.
The other issue is that the history of cuts/tax hikes on social security and Medicare is that they are spent on new handouts and freebies, making the budget even less sustainable.
Examples:
The Reagan/O’Neill social security tax hike led to the Clinton surplus (well, that and defense cuts). Gore talked about a “lockbox” but the government lived off of that social security surplus- GWB added Medicare part D and fought a couple of expensive wars.
Obama “cut” Medicare, but using the CBO accounting rules in reconciliation, then spent more than that on new handouts (Medicaid expansion and Obamacare subsides)
Biden “cut” Medicare, but then spent that money on Chinese batteries.
Until some party shows some seriousness to balance spending at full employment (ex Medicare s d social security) and keep it balanced, any “cuts” in social security or Medicare would simply be spent (more than spent, actually, leaving us worse off)- that was the case under GWB, Obama and Biden.
Did you read the post? See figure 5. The non Medicare/SS budget is already balanced long term with Medicare/SS responsible for a $124 trillion shortfall over the next 30 years.
Give everyone the option to either pay slightly higher premium, OR retire slightly later. Their choice.
Current retirees would be protected (great for votes). Everyone near retirement age would choose the higher premium. For those decades off it doesn’t matter what they choose as it is actuarially sound, but they are guaranteed a fiscally sound program that would otherwise be spent.
Problem solved. The only other major thing I would do is not expand the tax cuts in the current bill.
We just need a real leader to pull this off. Don’t hold your breath.
There are no easy solutions to Medicare and Social Security. The programs were designed to have many workers paying in to support the few who need it.
Social security started with over 8 people paying in per beneficiary. Now it’s down to around 2.3 and projects to keep getting worse.
If the population isn’t constant increasing, paying for these programs with current revenue (rather than having an actual funded pension) becomes a big problem.
In short, we needed to fix these programs decades ago, but we haven’t. That has left them in a place where any fix will be incredibly painful because it will require substantial benefit cuts or substantial revenue increases.
First of all, Mandatory spending for SS and Medicare are funded by the payroll taxes and could use some tweaks and but it would not need to be massive.
Second, our current deficit is not being driven by them (yet) because they have their own sources of funding.
Mandatory spending is 3/4 of our spending and in addition to Medicare and SS also includes things like food stamps and Medicaid and interest. It is called Mandatory because congress can't simply allocate less money to these programs in the budget or use the BR.
In order to change these programs one must overcome a filibuster in the Senate, because it requires a change in policy. How they got work requirements to pass the parliamentarian is a bit of a mystery to me since it seems like a policy change not tax or spend or part of a regular budget.
Anyway, SS and Medicare are not the problem for our current situation - with the deficit!
Then one has to look at discretionary spending which is what congress votes on yearly.
Discretionary spending is only 1/4 of all spending and 1/2 of it is for defense.
Discretionary spending is also the same percentage of GDP as it was under Clinton when we had a surplus at about 6.3%.
So the budget that the House votes on is also NOT the cause!
The deficit is now the same size and all of discretionary spending at 6.3% of GDP.
Thus, to simply get rid of the yearly deficit, one would have to cut ALL of it, even all of defense!
So how did we get to a place where federal funds revenue (non-payroll taxes) is no longer cover any of our discretionary spending?
Mostly ax cuts of abt 800 billion per year and 1 trillion in net interest from all the debt the GOP have racked up from decades of tax cut fueled deficits, unfunded wars, financial crisis, covid, etc.
When the government used the excess trust fund revenues to fund the government for decades, the money was borrowed and is held as the part of our debt known as intragovernmental transfers.
There is something like 7 trillion in that account that earns interest and this interest is paid back into the trust funds every year.
This is why we only concern ourselves with "net interest" rather than total interest because part of the interest we pay on the total debt into the funds is both an outlay as well as revenue.
It is also why we concern ourselves with debt held by the public rather than the amount held as intragovernmental transfers when we look at debt/GDP ratio which is a metric which gives is a barometer on if we have a big enough economy to pay our debt obligation.
Intragovernmental Transfers is largely money we owe to ourselves and largely to the Trust funds (SS and Medicare)
They can't be insolvent when trillions is owed to them and is on the books.
The events of the last decade have caused me to sour a great deal on democracy as well. In particular, I worry a great deal that the internet -- and especially social media -- is the technology which makes democracy untenable as a system of government much as the printing press was the death blow for feudalism. What America needs right now is in fact a tyrant who can completely ignore the will of the people to do what needs to be done, because the people have shown themselves, though their selection of representatives, to be complete and utter fools. Sadly, we don't get to have a Lee Kwan Yew; we get Donald Trump.
US political discourse is weird. The GOP wants to benefit the rich at the expense of the poor, in spite of the poor being the reason they're in office. The Democrats are fighting this change, in spite of blue state professionals being their base and amongst the ones to benefit the most.
I understand this is all the result of coalition building the 2 party system requires, but things would feel so much more rational with a parliamentary system.
AI has the potential for that, but I think regulation will get in the way. No state is going to let an AI write even a trivial prescription, for example.
Noah, from an economics perspective - how are Republicans able to repeatedly get away with this kind of economic illiteracy without real-world fallout, when a similar stunt across the Atlantic caused absolute carnage in the bond and mortgage markets and killed Liz Truss's political career?
Is the American economy just inherently more privileged due to holding the world's reserve currency and other factors?
You are confusing artificial CBO math built around special exceptional rules (reconciliation) for the real world.
In your fantasy world, raising the SALT cap to $40k “reduces” the deficit. That is insane.
In the real world people look at current programs and deficits and project them out into the future (next year’s deficit is going to be about the same as last year’s, or smaller, if anything). Unless, of course, there is a political party that campaigns on a massive change in the existing trajectory.
The 2024 campaign was between a party that wanted to extend current income tax policy (by and large) and a party that was going to extend almost all of it except reverting to higher rates for those making over $400k. All the revenues from the latter change were going to be spent (and more) on new freebies.
Remember the Dems were the party that spent recklessly and unnecessarily on Covid handouts, expanded Obamacare subsidies, student loan handouts and ran 6 pct deficits at full employment.
The “market”, which is comprised of real thinking people rather than CBO fantasy accountants, looks at the current policy and trajectory and prices in the risk of new polticial regimes (both of which in 2024 were largely going to extend tax rates and neither of which was going to materially reduce deficits).
Truss, on the other hand, was proposing something well outside the trajectory, catching the “market” unaware. The impact was exacerbated by the UK’s own pension rules and “portfolio insurance” (ie naked options) that had been sold by banks to pension funds that caused market moves to be temporarily magnified.
You do not seem to know how the CBO works or deficits. CBO reports are public and online and are excellent, as well. The GOP only call them "fake" to excuse and hide the massive amounts of deficits and debt they have added over decades.
The truth is that a significant portion of our debt has been incurred to give tax cuts to their wealthy donors and we are now also stuck with massive interest on the debt as well.
When you the look at GDP growth, you also see that the notion that we get growth out of them is also a lie.
We had far more growth under Clinton than Bush or Trump (even pre-pandemic) despite Trump's lies to the contrary his growth was below average and he nearly doubled the deficit even before covid it with his tax cuts!
I don’t like this big bill either, but being Devil’s advocate, are we really sure the tax reductions didn’t contribute to growth? Compare the US to every other wealthy developed nation over the past 20 years and despite starting at the top, we still grew faster than just about all of them. How much of this growth and how much of the higher dynamism and higher rate of entrepreneurial start ups is explained by our lower (and yet more progressive) taxes?
The point is that CBO estimates and baselines are just fancy guesses. If I was to compare which developed nation has had the best political/economic/tax climate this century, I think the US might still take the gold.
The CBO estimates are hypotheticals and are linked to the arcane reconciliation “rules” Congress arbitrarily establishes. Extending current policy doesn’t increase anything and nobody bases forecasts based upon fantasy hypotheticals. No Congress is bound by prior Congresses- the new guys and gals can do whatever they like. The proper comparison is what the new Congress does relative to the last one. As neither party campaigned on letting all the tax cuts expire, nobody expected them to expire, which is why bond and equity markets haven’t reacted.
Let’s remember that under CBO “current legislation rules”, social security payments are meant to be cut when the trust fund balance runs out. By those “rules” a Congress and prez who lets those payments be cut (in reality) shouldn’t ever be accused of a “cut” because current law presumes the cut. Any senior who thinks their payments have been “cut” is hallucinating (well, unless they look at their bank balance). Conversely a prez who allows next months soc sec checks to be the same as last months should be accused of a multi-trillion increase in spending. Ask the recipient- they know whether they have been cut or whether they are getting the same. Just as a taxpayer paying the same rates next year as last year knows that nothing has changed, no matter what the CBO fantasy or the media implies.
Well since GDP growth did not increase after they were passed and because growth was often higher under Clinton and Biden and also very good for many decades before Reagan's tax cuts....there is simply zero evidence tax cuts at the top have helped.
Businesses will only grow and hire when there is an increase in demand for their products. Simply getting a tax cut will not cause them to spend money needlessly and expand a business if there are not more customers.
In addition, growth related expenses are not taxed anyway and are removed before arriving at profit or net income which is then taxed, so changes in the tax rates at the top or for business do little to inspire growth. They tend instead to go into assets like stocks and homes and boost those prices.
In contrast, tax cuts (or credits at the bottom) cause an increase in demand which inspires businesses to produce more to meet demand. The entire economy grows.
For example, after Biden's increase in the child tax credit started to go out we saw a massive 7% GDP growth in Q4 of 2021 and nominal GDP growth was so large (over 10%) that the debt to GDP ratio even fell (GDP being the denominator).
Sadly Manchin and the GOP axed it.
If GOP tax cuts worked we should see some evidence of growth, and we simply do not.
Only Reagan saw growth, but this was because the Federal Reserve massively cut interest rates after they had been high for a very long time. No one has been able to replicate cutting taxes at the top and growth, all they have seen is massive increases in deficits and debt ever single time and now our debt is massive.
Reagan tripled the deficit and started the debt/GDP ratio rising again when it had fallen for decades after WWII.
Bush took us from a 236 billion surplus under Clinton to a 1.186 trillion deficit and even before the collapse he had taken us 692 billion per year in the wrong direction with our deficits and saw only average growth.
Obama cut Bush's deficit in 1/2 to 559 billion by the time he left, and gave us healthcare, but Trump quickly doubled the deficit again to over 1 trillion with his tax cuts even before the pandemic hit our shores requiring trillions more and even before the pandemic he saw below average growth at only 2.8%
There simply is zero evidence tax cuts at the top work and a ton of evidence that they explode deficits and debt.
The evidence of growth isn’t measured by made-up projection vs actual results, but rather by actual results vs other countries. I am willing to entertain that this might be wrong, or only partly right, but it is worth considering as an open-minded non partisan (who dislikes the new bill).
How are other countries more reflective than comparing times to growth when we had higher taxes in the USA?
I am not using made up projections but comparing different eras in the USA.
Growth was much higher under Clinton than Bush or Trump and Clinton was post Bush Sr tax increases.
Growth was higher in the decades following WWII as well, until the oil crisis hit and taxes were the highest they have ever been then, as well, even higher on the wealthy than on many European countries and it did not inhibit growth because wages were good and we had a large middle class to drive economic growth due in large part to unions.
We are more like ourselves as a comparison than we are like other nations.
We have not gotten serious boosts to growth from tax cuts on the wealthy - period - there is simply zero evidence for this.
In addition, nothing I typed was "made up" this is the data.
I did not think I would have to mention this but I do have a degree in business and economics and when I post this on economic sites, no one questions it since it is fairly common knowledge.
I, for one, am proud of our prudent fiscal warriors who, by raising the SALT deduction cap to $40k from $10k actually cut the deficit. Well, by CBO “math” 😂😂🤪
According to CBO math, which has always been proven correct, the bill will add trillions to deficits and debt, just like Reagan and just like Bush and Trump.
Reagan tripled the deficit. Bush Jr took us from a 236 billion surplus under Clinton to a 1.186 trillion deficit before Obama was sworn in and Obama cut this number in 1/2 to 559 billion before he left. Trump doubled this deficit even before the pandemic hit our shores to 1.015 trillion according to the Jan 2020 CBO report and 984 billion the year before and then we got the pandemic.
Then when you look at GDP growth under Bush and even Trump pre-pandemic they were average or below average after adding trillions.
The reason the GOP lie about CBO math is because it shows they are the ones who are largely responsible and always have been.
Every penny the government spends goes right back into the economy driving economic growth. Money spent in the economy rises to the top, as well. When more is taxed at the bottom, this is then money that does not flow into businesses creating jobs.
The GOP like to complain, but in reality they know that taxing at the bottom spells death for business and if they bothered to think for a minute they would realize that all of this money eventually makes its way to the top and into corporate profits, as well. They get richer as a result, too even if they pay a higher tax rate to help keep consumption (the driver of our consumer based economy humming).
When you cut services for the poor, it is like taxing the poor, because now what little they do have from a paycheck is now spent on those things that were cut and not going into local businesses and not making its way to the top.
In this scenario the entire economy shrinks.
An economy is based on economic activity which is based on both consumer confidence and the ability of the majority to spend and engage in it. Even if ones business caters to the well-to-do, at some point along the chain, those folks got their earnings from someone further down the income scale, etc. The economy expands the most, like I said when the most have enough to spend in the economy to drive growth and it also has the chance to expand the most when one starts from the bottom because it can expand every time that dollar changes hands. One person's spending becomes another person's income.
In the past, there have often been debates on how to achieve this and often it comes down to either much higher min wages or adding services and tax credits so the poor can have enough left over to engage in the economy and giving them tax breaks.
When push came to shove, it was always a preference of businesses for the government to subsidize wages with a progressive tax system and social services rather than force them to pay a higher minimum wages.
Thus, we tend to help "the many" have enough left over to engage in the economy to help it remain robust (called priming the pump) and then wait and tax more once this money works its way up the chain and into the pockets of wealthier folks who do not use every penny for consumption.
The rich tend to get this money back from their taxes paid, due to a larger economy and better corporate profits as the many are able to spend more and keep the system going, so I would not call it "theft" it is simply a way to keep things flowing and growing and taxes spent this way are like a farmer using some of his crop to reseed for the following year, it pays off with far more than is planted as the poor can spend and the economy grows.
Each time this money changes hands with consumer spending it drives production and growth and the economy actually expands. When you start from the bottom and with "the many" there is far more opportunity for economic expansion and consumer confidence also plays a role.
Biden saw a massive 7% economic growth in Q4 of 2021 after his child tax credit began to go out and nominal GDP growth was so large that the debt/GDP ratio fell.
Articles on WSJ marveled at how massive corporate profits were, as well, so this money was making its way to the top and stocks reached record highs.
Then Manchin and the GOP axed it in December.
Was the CTC expansion too big? Maybe, I personally think so, but it simply shows what happens with the power of the consumer and helping the poor - it all goes back up to the top.
So yes, the rich may pay a higher rate to keep the water in the pump (consumer spending) flowing, but they reap the rewards as all this money that is being spent and driving the economy and making it larger reaches them as well.
When the poor and masses get hit, like with Trump's cuts, the economy will shrink. The rich may save on taxes, but they will also make a lot less money as well.
If taxes are spent helping the poor it is good seed planted and it creates a good crop.
I think you meant “call that a tax cut”. Yes, much of this debate is over not increasing taxes, and this is being called “a tax cut for the rich”.
Don’t get me wrong, I still think this bill is a travesty and that huge deficits are very worrying. But it is primarily avoiding a tax increase on the rich.
What you call reckless and unnecessary Covid handouts were done by both the Biden administration and the Trump administration. Now yes, the Democrats did want to do additional covid relief spending while Trump was president that Trump and Senate Republicans were unwilling to do. But you still can't claim that Biden and the Democrats were entirely or mostly responsible for our covid era inflation and conveniently ignore the two covid relief packages that were passed under Trump. Plus, the Federal Reserve provided significant relief funds to banks and large companies, which might have been an ever bigger factor in higher inflation than covid relief spending under both Trump and Biden.
$900 billion of covid handouts were passed by Pelosi and signed by Trump in Dec 2020. Biden added about another $2 trillion a couple of months later, in an economy that was already strongly recovering. That nearly $3 trillion was almost 15 pct of GDP dumped on an economy that was only a few percentage points below potential at that point. Doesn’t take a genius to see that this massive overstimulus was going to mean too much money chasing too few goods. Unfortunately, Yellen and Powell were of below average intelligence when it comes to economics,
Biden then went on to run record peacetime deficits of $2 trillion even after the Covid handouts stopped.
Sorry- that fiscal performance is indefensible. Note that I am not defending Trump or the BBB. I simply noted that, while fiscally inane, it is probably better the better choice than keeping the Dems in charge. This years deficit should be less than last year due to tariff revenues and next year’s may be as well.
The economy was recovering but it was still far from where it was before the covid pandemic. And we were still at the height of the pandemic at that point. Yes the covid vaccine was being rolled out and Republicans were trying to pretend that the pandemic was over. But that didn't mean that the pandemic actually was over, especially since so many Republicans refused to get the vaccine, which caused the covid virus to mutate and spread. The U.S. had far more covid deaths after the vaccine was introduced than most other countries did. Yes, Biden's covid relief package was probably too big, but Jerome Powell said that it would be better to spend too much than to spend too little on covid relief.
Powell said and did a lot of things- mostly in error.
Prolonging lockdowns was also an error. Spending well in excess of the output shortfall was also an error. Almost all of the unnecessary spending ended up as inflation rather than real growth. Whoops.
Anyway, rehashing the past is only useful because the party in question had never renounced its mistakes (and obviously their supporters bend over backwards to excuse mistakes).. Not that any party ever renounces mistakes, of course. I don’t expect to see Trump admit years from now that tariffs didn’t bring manufacturing back to the US.
Biden and the Democrats' main mistake was that they didn't raise taxes to pay for any of their COVID relief spending. If they had paid for at least part of their COVID relief package, then inflation would have been lower. Now the same is definitely true of Trump and Republicans, but they were obviously never going to raise taxes on the rich. But Democrats are supposed to be the party of raising taxes on the rich, which was one of Noah's points.
The fact is that US cannot afford tax cuts for anyone. I spend a lot of time bashing Biden and the Democrats but what Trump is doing in his second term is so grotesque that it’s hard to compare to a normal presidency. Just sheer incompetence everywhere.
Also, there is no reason to bash Biden or Obama who did not have the votes. Obama had a financial collapse to deal with and Biden only had a 50/50 Senate and Sinema would not budge.
I am going to bash Biden because he signed off on a lot of debt financed legislations. Total debt added under Biden was more than Trump’s first term. He was an irresponsible jackass just like Trump.
Have you ever wondered why the GOP talk about debt rather than deficits? Also what makes you think Biden's was higher?
The federal fiscal year begins the prior Oct 1, so the second stimulus was signed by Trump before leaving office.
In addition, deficits are our yearly shortfall and they always rise under the GOP and fall under Dems.
Here is a more personal type of example.
Say you and your spouse have a mortgage and other long term obligations. Then one of you decides to cut your hours or loses a job (less revenue like a tax cut). You may find that your income is not enough to cover your bills and so you have a deficit.
When a person or the government has a yearly deficit, they then have to borrow to pay the bills and this adds to debt. Maybe even have to take out a second mortgage.
Now say you decided your spose who was no longer helping to bring in enough funds was a deadbeat and not for you and you marry someone else (like if we get a new president)
You are still stuck with the huge financial obligations and yearly deficits you racked up with the last person you were married to (the last president)
Now, you still have that mortgage and all of that debt and it can take a long time to get your yearly shortfalls under control and so more still keeps getting added to debt.
Under Dem administrations, the yearly shortfalls typically always decline as they try to right the ship from the massive deficits left by a GOP administration.
So, although they get things reduced over time, they still end up adding to debt in the meantime because they are still held to obligations the last guy made.
Reagan tripped the yearly deficit, and Clinton left a surplus. Bush took that yearly surplus and turned it into a 1.186 trillion dollar deficit before Obama was ever even sworn in source CBO: the budget and economic outlook 2009-2019.
Obama cut the deficit in 1/2 over 8 years and left with a 559 billion deficit. Trump nearly doubled this again pre-pandemic to 1.015 trillion even before the pandemic hit (same report as above insert 2021-2031 for years.
Then Trump left with a 3.5 trillion dollar deficit before Biden was even sworn in because of Trump pandemic spending adding on top of his trillion.
Biden left with a 1.9 trillion deficit and Trump's is now projected even higher, by a 160 billion, once again according to the monthly budget review and this is even before this bill is passed which adds even more with hundreds of billions in defense and border spending and more tax cuts and revenue loss.
CBO gets their numbers from the treasury department - so they are real and accurate.
Facts. The treasury (also CBO) publishes these numbers. Trump added 7.8 trillion and Biden added roughly 8.4 trillion. (It's only available till Jan 1st 2025, the next data update will be in Oct 2025.
I'm not interested in any kind of back and forth with partisans who don't think facts are important. If you're Republican or Democrat, good for you. Please keep advocating for your party.
Edit:
"Then Trump left with a 3.4 trillion dollar deficit before Biden was even sworn in because of Trump pandemic spending adding on top of his trillion."
The problem with this fact is that it's an attempt to fool people into thinking that it was due to permanent increases in spending instead of emergency Covid spending which was also passed by a Democratic controlled House.
I also point out that Trump nearly doubled the deficit before the pandemic even hit, and a lot of the stimulus, credits continued on for years, as well and yes, the loss of revenue from GOP tax cuts also continue on every single year until stopped. If we had the same revenue to GDP that we had under Clinton that we would cause 840 billion less in our deficit.
I think you should have understood from my initial comments that I’m not a fan of Trump and his fiscal policies. Both Biden and Trump were terrible Presidents on fiscal issues. Stop trying to convince me that Biden was good and Trump was bad. I’m an independent and I get annoyed by this kind of partisan lying.
You seem to be unaware that the fiscal year begins the prior Oct 1.
Technically this is also when the budget is also supposed to be passed.
Thus the 2021 fiscal year began under Trump on Oct 1 2020 and so when a new president takes office, it is always considered the fiscal year of the outgoing president.
The GOP count on people not knowing this so they can spin their spin about deficits and debt and who they belong to.
Before Obama ever took office in 2009, the deficit had already been projected at 1.186 trillion under Bush for that fiscal year because of TARP and the GOP then spun this as Obama's because they knew their base would buy into the nonsense. The stimulus was a 10 yr price tag and only 200 billion in tax cuts and spending went out in 2009 under Obama, so he did not cause a 1.4 trillion deficit since most of it occurred before he was sworn in. CBO the budget and economic outlook 2009-2019 that came out on Jan 7 2009.
However, a lot can happen after a new president takes office so I always use the CBO report that comes out, or complied right before they are sworn in.
I use the numbers from when the outgoing president leaves.
If you do not then you have to give the entire 2021 fiscal years deficit to Trump
Before leaving office, Trump signed a second stimulus. Based on this and the numbers coming in from Treasury, the deficit was projected at 3.5 trillion for Trump's 2021 budget year. Biden also signed one but since the economy recovered revenues from a growing offset a good chunk of his stimulus. Nominal GDP growth in Q4 of 2021 was over 10% under Biden and real GDP growth was 7% - HUGE!
CBO: The Budget and economic outlook 2020-2030 page 10
What needs to be talked about more is blue state income taxes. Many (like myself) would be far more accepting of higher federal taxes if state taxes were reined in. As it is, I pay over 50% in income taxes to say nothing of property tax. That's plenty, and it's going to the wrong place.
I believe these States are robbing the citizenry and the federal government to subsidize bloated and ineffective state bureaucracies that waste beyond belief.
I've asked my fellow liberal Californians what our higher taxes buy us, I've never heard anyone come up with anything. Some mention our low property tax rates, but the truth is we still pay a lot in property tax nominally.
So do pass higher taxes, but also limit state and local income tax rates, otherwise we're stuck.
As a fellow Californian, I totally agree. The state is just robbing us without providing anything in return that you don’t get in other states with zero income taxes or sales taxes.
Top marginal tax rate in CA is 13.3%. Federal 37%. Then there are other income based taxes,
social security, Medicare, city business business tax, and state business tax. They all blend together at various incomes and even with the loopholes those in my tax situation are allowed I keep less than 50 cents for every dollar I make with which I pay property tax, sales tax, DMV fees property tax, utility taxes.
I consider myself quite lucky, but so is CA who cashes my checks when I could live in any state and it would have no effect on my income.
The fact still remains, no one can tell me what CA gets for such stratospheric taxes. And to my original point, this all makes it politically difficult to raise taxes where they are needed.
Of course, the above explains why Trump keeps haranguing the Federal Reserve to lower interest rates. Trump is now suggesting that Powell is un-American and costing the treasury billions needlessly. He wants rates reduced to 1%, which would help the government to afford interest on the debt.
When it was proposed to let the rates of higher-income individuals expire, it was a good political and fiscal suggestion. Then, of course, the complaint was that it would hurt the GOP brand of budgetary restraint. I defy anyone to explain that cognitive dissonance.
I don’t recall my 2017 tax bill being onerous. The difference between 37% and 39.6% is not that much. I don’t remember whether the 2017 tax bill eliminated the Obamacare tax of 3%. Either way, the wealthy did just fine, and I don’t recall a groundswell to lower rates for the rich.
As a Reagan Republican, the additional debt is negligible compared to the current debt. The real issue is the $2 trillion a year in deficit spending that will be added to the debt. We’re looking at ending up with $50 trillion in debt, and the interest on that, no matter what the rate is, will be destructive.
Our current political class cares nothing about America or Americans. We cannot keep borrowing, and soon we will not be able to afford our debt. Cuts are coming, forced by the insolvency of Social Security and Medicare. Every day, our politicians dither while our debt grows. The longer they wait, the higher the cost.
They are un-American, every single one of them. They care about two things: not being primaried and not losing their seat. Everything is secondary.
"because people knew the rich were paying their fair share to help bring the deficit down."
Please define "fair share." With our progressive tax system, the rich not only pay more total tax dollars, but also a higher percentage. The proposed "Tax cuts for the rich" really just means moving to a LESS progressive system, but the rich still pay much more in taxes than the poor and middle class.
If everyone paid the same percentage in taxes, I believe many fewer people would have voted for big government over the last century and we wouldn't be in the mess we're in with the national debt.
I assume the negative impacts on the average voter will take some time to realize, and by then the voter would’ve moved on to something else outrageous. That’s if the voter even has heard of the OBBBA in the first place. We have a surfeit of low-information voters who probably just cast a ballot based on gut feeling.
I've had this notion, probably wrong, that there's too much money floating around in rich people's coffers with no good purpose to put it to. Which is maybe part of the reason they invest it in real estate in markets they personally have no familiarity with (maybe why real estate is so expensive now). Maybe that's why we have all these exotic financial vehicles backdropping the stock market that only serve to increase the wealth of investors without actually doing anything productive, which causes the cost of everything to exceed what it should be. Can too much capital actually cause harm?
If we simply had the same revenue to GDP that we had when Clinton left office that would be 2.8% more on a 30 trillion economy, or 840 billion less in deficits per year!
That is the damage of the Bush and Trump tax cuts.
Then you have to add the interest on all of that debt the GOP have racked up with the tax cuts and unfunded wars and the finical crisis that happened on their watch and covid, etc., but in reality it is largely the tax cuts.
Even Reagan tripled the deficit, as well and Bush took us from Clinton's 236 billion surplus to a 1.186 trillion deficit before Obama was ever even sworn in.
Then Obama cut the deficit in 1/2 and left with a 559 billion deficit (and gave us healthcare) a deficit which Trump nearly doubled even before the pandemic hit our shores to 1.015 trillion (Jan 2020 CBO report) largely with his tax cuts.
However when you say...
"And yet somewhere in the years since Clinton, the Democrats lost their appetite for taxing the rich"
This is 100% untrue, and you do not seem like the type of person who would fall into a "talking point" trap.
In fact, you point out that it is important to know how things work, and I agree!
Obama took office only a few months after the financial collapse of 2008 and had to deal with a massive recession. The conventional wisdom is not to raise any taxes in such a massive crisis, so he could not and there is no way in heck to get votes to go against conventional wisdom in a crisis.
The Tea Party was then formed on massive amounts of disinformation regarding deficits and TARP, the bank bailout.
The truth was that the deficit was already 1.186 trillion before Obama was ever sworn in, since the fiscal year begins the prior Oct 1 and so the 2009 fiscal year had begun on Oct 1 2008 under Bush.
TARP was also passed under Bush, not Obama.
Then, when it came time to pass the stimulus for ordinary folks, Obama still did not have a supermajority needed due to Kennedy's death and Franken's delay in being seated, thus the stimulus had to be cut to get a few republicans for passage to overcome a filibuster (I assume that the yrs single allowed BR had already been used by Bush). Then the supermajority that was delayed was short lived since Scott Brown (R) won Kennedy's seat, so they barely passed a massive healthcare bill with the help of some independents who caucused with them and one of these was a bit more conservative, Lieberman, but without him, no bill at all from what I recall.
Yet, the GOP was able to spin the trillion dollar deficit Obama inherited, as well as a narrative about TARP as if these things occurred under Obama (they did not) and the Tea Party was born even though the trillion dollar deficit existed before Obama was ever even sworn in as well as TARP.
The lies about the deficit caused Obama to lose congress, when it had been Bush who had taken us from a 236 billion surplus under Clinton to a 1.186 trillion deficit before Obama was ever even sworn in. Obama's stimulus had a 10yr price tag and only about 220 billion went out in 2009 1/2 of this was emergency payroll tax cuts and 1/2 spending, if I remember correctly (It is in Oct 2009 CBO monthly budget review). Much of what followed was aid to bankrupt states, as well.
As far as Biden goes, he only had a 50/50 Senate and thus could not lose a single vote. Sadly, Sinema from AZ was not on board with some of the proposed tax increases, so even using a BR could not get the job done.
I am really tired of people claiming there was a lack of will from Dems, when there has been a lack of ability based on "how things work."
It would not have mattered if a more progressive person was in charge because the situation on the ground would have been exactly the same - the votes in congress would not have been there, etc.
Still, in the end, Obama cut the deficit in 1/2 before leaving and we had a deficit to GDP that was less than Bush pre-collapse and we also had healthcare.
So we were at least heading in the right direction, but then Trump came along.
One way to make responsible budgets more palatable would be to embrace an abundance agenda. 1. Enable housing builds of all sorts to lower costs for everyone. 2. Adopt pretty much ANY other rich country’s health system to cover everyone at a much lower cost. 3. Support and incentivize day care and universities to drive those costs down (it’s like a second mortgage to families with kids).
Over time, people have more money to live AND pay their taxes.
Controversy over taxes have been the mainstay of American political history since before our founding. Why should anything change?
But Republican tax cuts are entirely understandable, and they go hand in hand with Republican efforts to defund the IRS. The reason - simple. Republican mega-donors don’t want to pay taxes any more than anyone else, but they control the Republican Party. Citizens United hasn’t helped.
The unpleasant reality that neither party wants to contemplate is that we don't just need to raise taxes and cut spending: we need to raise taxes _on the middle class_ and significantly cut spending. America already has one of the most steeply progressive tax systems in the world. There are lots of loopholes we can and should close to prevent the ultra-rich from paying less than their fair share -- I favor eliminating preferential capital gains tax, eliminating step-up in basis, taxing unrealized gains used as collateral to secure loans, and significantly reducing inheritance tax exemptions, myself -- but there just aren't enough ultra-rich to tax to plug the budget gaps, and they're already paying a significantly outsized share of taxes relative to their percentage of total national income.
People often idolize the welfare states of Northern Europe while neglecting to notice that those welfare states are not paid for with punitive taxes on the rich, but rather by tax rates on the middle class that are close to double what Americans pay. We've been living beyond our means as a nation for some time now, and that bill is coming due. And both parties are simply hoping the other one is forced to answer the door when the debt collectors come knocking.
It does also occur to me that this may be one of the under-appreciated societal ills caused by the collapse in birthrates, too. As American birth rates have collapsed and the ratio of older, wealthier people to younger working people increases, people voting their own economic interests results in numerous areas of public policy that condemn future generations to indentured servitude to fuel the hedonistic lifestyles of their forebears. Maybe no generation has exemplified this so strongly as the Baby Boomers, born into a society of plenty who never missed an opportunity to pull up the ladder behind them. And now this giant regressive tax bill is one last big middle finger to the country on their way out.
baby boomers (60-75) were about evenly split. Trump's base of support was 50-65 year olds, which corresponds roughly to GenX (45-60)
https://www.pewresearch.org/politics/2025/06/26/demographic-profiles-of-trump-and-harris-voters-in-2024/
Oh yes! The Medicaid expansion was for the elderly. The Obamacare subsidies were for the elderly. The student loan handouts were for the elderly. The runaway public school spending is for the elderly. The Bidenflation was for the elderly. The green handouts were for the elderly.
You are so observant and spot on! Those darn elderly boomers just keep shoveling cash to themselves. 😂🤪
Yes, the federal government should stop spending primarily on the elderly and retired people and start spending more on working age adults, families, and children. The federal government spends about ten times as much on adults over 65 as it does on children under 18. Even when you include state and local government spending on K-12 schools, all levels of government in the United States still spend about twice as much on adults over 65 as they do on children under 18. This is one reason why the expanded Child Tax Credit under Biden was such a good idea and it was such a shame that he and the Democrats didn't do more to try to extend it. Democrats in the future should pass the extended CTC again and don't call it an tax credit. They should explicitly call it a stipend for children and families.
One idea I've seen floated to address declining birth rates is to condition government benefits for retirees on having a minimum number of children. There's a cold but inescapable logic to it: if you produced more taxpayers, you invested a lot of money that will benefit society in the future, and you're being compensated for it in your old age. If you didn't produce future taxpayers, you had a lot more disposable income your entire working life; if you spent it on luxuries rather than saving it for retirement, that's not the rest of society's fault and they have no reason to subsidize that choice.
People who support this abominable idea are moronic libertarians and if you agree with them, then you're a moronic libertarian too. This is somewhat analogous to the incredibly tone deaf idea that wealthy people's votes should count a lot more than everyone else's votes simply because they make a lot more money and pay a lot more in taxes.
I see some merit in that, but you'll be lambasted as being homophobic and pro family values
Doesn't need to be limited to biological children. The major expense and service to society isn't having a baby, it's raising one to adulthood.
And if you are a woman who had very difficult births, with dangerous hemorrhaging and blood loss, etc., you'll get dinged for quitting after just one. And if you had fertility problems. And so on.
Yeah coercing parenthood is so likely to make for happy families. /s
Why not just more immigration instead of stupid MAGAts flogging the issue for votes.
Less and less countries have above replacement fertility. On top of that, when immigrants are brought in they assimilate into the fertility regime of the host country. As a result, immigrants are a short term solve to the long term problem of Americans not wanting kids.
At that point shouldn't you also take into account the likely economic contribution of the children?
If you have 4 kids and 3 of them end up being career criminals who spend half their lives in prison you've probably cost the country more money than if you didn't have any kids at all. The only way to make up the crime and prison costs is if the 1 kid who isn't a criminal becomes the mystical super rich person who actually pays their taxes.
And if you have a severely disabled kid who consumes a huge amount of state subsidized healthcare from birth till death and will never live independently (ask me how I know) why should you get more retirement benefits than someone who is childless but works for Google and pays a lot of taxes (again, ask me how I know)?
I think when you're crafting policies like this, you have to look at the aggregates and probabilities. No matter what kind of system you design, there will always be edge cases where "deserving" people fail to be rewarded and "undeserving" people get rewarded anyway. The goal is to minimize them; attempting to eliminate them is a lost cause unless you're handing over governance to a godlike superintelligent AI.
Who ever it spends on make revenues = expenditures
This was a good comment, but I think it's a little misguided! I bumped it up to the main body of the post, and added an update! :-)
I take your point, but I’ll offer two counterpoints: first, because of the public choice effect, raising taxes (which has diffuse costs) has historically been more successful than slashing benefits (which has concentrated costs). People grumble, but it’s been managed many, many times throughout the country’s history, while dramatically slashing widespread social benefits… well, if you can think of any examples, I’m all ears, but I can’t. The closest I can think of is Clinton’s welfare reform in the 1990s, and that was targeted at a very narrow slice of the population and fueled by media stories of “welfare queens”. In general, the trend of social welfare programs in the democratic world has been to expand until they cause a dramatic fiscal crisis (e.g. Greece) and only then will people consider austerity, once the consequences are being broadly and keenly felt.
My second point would be that Europe’s welfare states are usually running deficits as well: they have much higher taxes, and much higher spending, but other than Germany (which has a far more parsimonious welfare model than Scandinavia), they’re still not running balanced budgets. And with a debt load of over 120% of GDP right now and our committed future expenditures set to balloon, we can’t afford to just balance the budget: we need to run significant fiscal surplus to dig ourselves out of this hole. That’s going to require dramatically higher taxes.
I agree completely that this is not politically palatable. But that is, as I said in another comment, why I’ve soured on democracy (at least with universal suffrage) as a viable form of government. The public will not ever voluntarily accept minor pain now to forestall major pain later, especially not in a two-party system where the opposition party is always looking to weaponize any prudent fiscal policy against you. Only once the catastrophe has fully manifested and the major pain is being felt will people be willing to address it.
If we do a major expansion of the welfare state, then we will need to raise taxes on the middle class, probably with a VAT or similar.
your general point, that the american middle class needs to be taxed more heavily, is one of the central bitter truths of american politics that nobody wants to admit. and politically, adequate deficit reduction might only be achievable with spending cuts
however, there's no particular economic need to cut spending overall. case-by-case, of course, there are some things i disagree with, but (e.g.) a 15% value-added tax, while painful, would be about enough to bring the deficit to zero (before accounting for reduced interest rate expense and improved GDP). of course there are many other taxation options, and zeroing out the deficit may not be a desirable goal, but there are lots of prosperous nations with spending levels higher than America's; Australia, Germany, Canada, all of Scandinavia, etc.
obviously a 15% VAT would be political suicide; in practice it seems likely that major cuts to popular programs will be made as part of any vaguely realistic deficit reduction scenario. (if that's all you meant then I have wasted your time)
I blame liberals. If they hadn't made tax policy part of the culture wars conservatives wouldn't be backing these self-destructive irresponsible tax cuts for the rich.
Sad that conservatives are regarded as so lacking in rational though, and thus agency, that liberals are blamed when conservatives do dumb things.
I agree. I was being sarcastic. Needling Noah. He is constantly blaming liberals for causing conservatives to do dumb things.
I figured the comment could be sarcastic. You never know these days, unfortunately.
A VAT wouldn't be political suicide if personal income taxes on the middle class were lowered or ended.
But then it would be financial suicide.
Well it would be politically preferable to cutting spending on popular programs. It could be paired with additional tax increases on the rich.
And not only does the middle class face extremely high income taxation (in some cases > 50% marginal rates), they also face massive and regressive VATs in the 10-20% range.
Actually VAT in the Scandinavian countries is 25%.
https://en.wikipedia.org/wiki/European_Union_value_added_tax
it's misleading to describe VAT as regressive simply because they are less progressive than graduated income taxes:
https://mattbruenig.com/2017/04/05/why-consumption-taxes-are-fine/
If you consider tax paid as a percent of income, VAT is regressive because a lower percentage of income is used on VAT taxable expenditures by higher earners.
There are a lot of strange conventions on describing the impact of taxes depending on where you stand; in the article Noah mentions making sure that the rich are paying their fair share when of course the already pay at a higher rate than anyone.
Yes. America’s combined state and local marginal taxes on the rich aren’t terribly out of line with many other social democracies. European Social democracies, though do a much better job of raising average (rather than marginal) tax rates as high marginal tax rates are distorting and destructive. In Europe the social welfare state can be viewed as a sort of forced consumption- rather than allowing the working, middle and professional classes to keep their own money and spend it as they like, the government takes it via VAT, energy taxes ($8/gallon gas); sin taxes and high tax rates on the middle and professional classes (eg 40 pct tax bracket in UK starts at around $55k and there are very few deductions- no mortgage deductions, etc) and then provides an assortment of consumption programs (healthcare included) to all. Europeans like the safety net and understand this rubric- normal people pay for social democracy, not the “rich”.
If the Dems ever told the truth- that their is no free lunch and that the middle class was going to have to get soaked for their own benefits, with the “rich” paying for very little- how many votes would they win? American voters haven’t bought into the Euro idea of paying for their own handouts, nor do they love the idea of leaving consumption decisions up to bureaucrats.
The 2024 election was contested between a party wishing to extend current tax rates and add a few more freebies (tax on tips, etc) that at least paid lip service to cutting spending vs another that was going to extend all but the highest bracket and then use the meagre revenue from raising the highest bracket to spend even more money, while paying no lip service at all to spending restraint.
I think America made the right choice, fiscally, or rather, the least bad of two really inane fiscal platforms.
It is very clear that spending needs to be cut dramatically and that average tax rates need to rise. I personally don’t mind a 40 percent tax bracket, but it should apply to everyone, with a big standard deduction. Meanwhile, eliminate the SALT deduction entirely as well as the mortgage deduction and the charitable deduction and the marriage penalty. Eliminate the estate tax and instead tax capital gains at death. Rather than a 40 percent rate; I’d prefer something like 33 percent that would apply to both capital gains and ordinary income. There is no reason for financial capital to be taxed less than labor. We aren’t ready for this yet- will require a crisis. And the first thing that will be tried is stealing money from the rich because a scapegoat is needed. Pogo isn’t around any more.
I’ve been bothered by all this for quite a while, too.
I believe that many European states did try soaking the rich to pay for everything, it just didn’t work. Tax revenues fell well short of targets as high earners moved or engaged in avoidance strategies. When fiscal crises arrived they elected to raise taxes (broadly) rather than cut spending. I think Americans just haven’t had this lived experience yet. When you don’t actually have a huge federal budget, it’s easier to speculate about how to pay for it.
AIUI the problem with both the US and UK (relative to continental Europe, especially prior to mass third-world immigration) is that their ability to justify tax rises to their public is shakier because their legitimacy is weaker.
In the US the societal split is racial (the success of the Civil Rights movement in the 1960s delegitimized the state among white supremacists) while in the UK's case it is regional: the historic dominance of South East England was temporarily weakened by the Industrial Revolution (which favoured the North with its coal and water power resources) but electrification has allowed South East domination to reassert itself, which is delegitimizing the state among both southerners who resent paying taxes to subsidize the north, and among northerners who despair at the state's seeming inability to do much to improve the places where they live.
The split in US politics is not racial in origin. The votes percentages in 2024 by race were:
White 57 - 42
Latino 46 - 51
Asian 40 - 55
Other 55 - 41
Black 13 - 86
There is only a major race based alignment among blacks who only make up 11% of the electorate. For the rest, the divide only about as strong as the gender divide. https://edition.cnn.com/election/2024/exit-polls/national-results/general/president/0
Blacks (and Native Americans, although _their_ numbers aren't enough to matter in most parts of the US) are fundamentally different from other US ethnic minorities in that they've been present for the entire history of the US, and thus had an effect on how the US political system developed.
And my point wasn't about how different races vote in elections, but about how racism makes white Americans more anti-tax than white Europeans.
We need to stop using the term welfare state. It’s just bait for the Fox News crowd
The debt collector knocks twice
Cut spending on the military first. Trumps a peace maker why does he need the armament??
2024 EU Gini 30: US Gini 42 so there aren't as many European Billionaires to tax in the first place.
the GINI coefficients are much lower in Northern Europe as well and generally speaking their taxes include their healthcare costs. Our taxes generally are on top of onerous health insurance costs.
While what you write about the rich paying a large share of taxes, I think fixing the loopholes you mention, as well as increasing the tax rates for the rich, would have to come first before increasing taxes on the middle class. I'm probably in the lower third of the middle-class income spread, so I first need to see that everyone above is paying a "fair share" before I'd be willing to pay more. But pay more I agree we in the middle class will eventually need to do.
Agree with all this. I just wanted to note that when we finally do tax wealth more reasonably, and the whinging begins, everyone needs point to all these decades of low taxes, tax cuts, and loop holes...in unison.
Yes European social democratic welfare states are paid for by high taxes on the middle class rather than punitive taxes on the rich. But the wealthy in America are much richer than the wealthy in most other Western countries. This is why we have such a high per capita GDP compared to most other countries. It's not because our middle class is so much richer compared to other Western countries. This could be seen as one benefit of our high level of economic inequality. We can pay for a larger and more comprehensive welfare state primarily with higher taxes on the rich rather than higher taxes on the middle class. Higher taxes on the rich could be seen both as a tax on economic inequality and a way to bring inequality down.
This is a common belief about the US, but it's not true: our median per capita incomes (PPP adjusted), and more importantly, our adjusted household disposable income (which takes into account taxes and state services) are dramatically higher than nearly all European countries and also very closely in line with the mean differentials as well. It's not a few rich outliers pulling the US averages up: it's the giant middle class being much wealthier. Noah wrote about this a few years ago (https://www.noahpinion.blog/p/americans-are-generally-richer-than) but note that he was using data through 2019, prior to the pandemic. The differences have gotten even more extreme since the pandemic and the US medians are ahead of even Switzerland now according to the most recent OECD data set.
Neoliberal types, including Silicon Valley liberals like Noah, often claim this about the American middle class. And while there might be some merit to this claim, I think that it's significantly overstated. I think that's its hard to accurately compare a single country as large and diverse as the United States to a bunch of smaller European countries or even the European Union as a whole. It doesn't really matter how rich the American middle class is. My point is the American upper class or rich are much wealthier than their counterparts in European countries and that there is a wide economic divide between American upper class and the American middle class, even the upper middle class. Most dual earner households in high cost of living American metropolitan areas in which both spouses make six figures don't feel rich even though on paper they are much more well off than their counterparts in cheaper parts of the country as well as their counterparts in most European cities. All of these counterparts have a similar standard of living even though there are significant cost of living differences that even PPP doesn't necessarily account for.
I think the idea of PPP is suspect anyway. Using PPP, many or even most countries are apparently much richer than they seem to be on paper according to nominal GDP. According to nominal GDP, Israel's economy is almost twice as large as Iran's economy. But according to PPP, Iran's economy is much larger than Israel's in line with its much larger population. I agree that nominal GDP doesn't necessarily account for all aspects of a country's economy. But that doesn't mean that PPP is the best way way to measure those economic aspects. The most curious aspect of PPP is that the difference between nominal GDP and PPP is much greater for poorer countries than it is for richer countries. If those poorer countries were actually as rich as PPP says that they are, then how come their nominal GDP isn't higher in the first place?
Macroeconomists should really do a serious examination of how PPP is usually measured. But there is a statistically significant difference between nominal GDP and PPP even for most richer countries. Canada is the country that is most like the U.S. But Canada still has a statistically significant difference between its nominal GDP and its PPP, which is apparently because healthcare and education are much cheaper in Canada than in the US. But having a lower cost of living doesn't necessarily make you richer than your counterparts in higher cost of living jurisdictions. This is my point. Cost of living and standard of living obviously aren't the same thing.
If you don’t adjust for PPP and use nominal GDP figures instead, the US median wealth/income advantage over Europe looks even _more_ extreme. There’s simply no way you can slice the data where the median American isn’t significantly better off in real material terms than the median European. (As Noah pointed out in the article I linked, America is a much better place to be a median citizen than Europe. It’s a much worse place to be a _poor_ citizen.) Yes, there are lots of even wealthier people in the US. But that has no impact on whether the median person is better off than their counterparts in foreign countries, only whether or not they _feel_ wealthy when they look on with envy at people who have even more than they do.
People in San Francisco and other rich coastal cities who are making literally an order of magnitude more than median household income while self-describing as “middle class” always make me roll my eyes. My experience has been that when they complain they’re “just getting by”, it’s because they’re taking a large number of conveniences for granted: things like professional childcare, private prep schools, expensive gym memberships, frequent dining out at high-end restaurants, and so on. They may not “feel” rich because their social circle makes them think all of these things are “normal”, but objectively they are obscenely rich compared to the median person, and it’s not remotely being inflated away by _actual_ cost of living expenses like rent, taxes and higher prices on basic necessities. They’re just so throughly bubbled in the luxury lifestyle that they have no clue at all how ordinary people live, and there’s a real “let them eat cake” mentality going on. This is my general social circle and I’m always fighting so hard to bite my tongue when someone is complaining about how unaffordable the world is for the middle class because their nanny just quit and their private school tuition for the kids is going to hit six figures, so they’re considering *gasp* maybe not taking the family on a vacation to Hawaii this summer.
Lifestyle inflation is a powerful force, and very few people manage to form and retain an accurate picture of their own privilege. Meanwhile everyone looks on with envy at people who have more than they do and assumes that wealth is unearned, while what _they_ have is obviously theirs by dint of hard work. As Megan McArdle once pithily put it, “everyone’s in favor of taxing the rich, where ‘rich’ is defined as ‘about 20% more than I expect to make’”.
None of this is to say that taxing the rich isn’t a good idea. But concentrating on billionaires is just scapegoating a small slice of the population and playing to greed and envy rather than forcing people to acknowledge that many of the ones shouting “eat the rich!” should be looking in a mirror.
While it doesn't necessarily correspond with their policy views, having even affluent upper middle class people feel relatively poor or like an exploited proletariat is a likely prerequisite for a larger and more comprehensive social welfare state in this country. Again, it doesn't really matter whether or not the American middle class is significantly richer than their counterparts in peer countries. Maybe they are and maybe they aren't. The point is that the American middle class feels relatively poor compared to the very wealthy.
The American middle class is not only at least somewhat wealthier than their counterparts in peer countries but they are definitely much wealthier than the American middle class in the 1950s and 1960s. And many Americans across the political spectrum still have nostalgia for the economy of 1950s and 1960s. Why is that? Because economic inequality was much lower then. A rising tide lifted all boats during that period unlike today. We may be much wealthier today than we were then but we don't always feel wealthier today as a result of both higher economic inequality and the related increases in the cost of living.
A high level of economic inequality is inherently incompatible with stable liberal democracy. Our high level of economic inequality is directly responsible for both Trump and his MAGA movement and their analogues on the left. I also wouldn't be surprised if many Americans across the political spectrum would prefer to be as "poor" as people like you and Noah claim Western Europeans are if we had a much lower level of economic inequality, including a more adequate social welfare state, though it is true that economic inequality has risen throughout the First World.
Seems like the decision makers and donors of the Republican party have always been motivated by one thing, tax cuts for the rich, and the social issues are just a way to fool the masses into voting for them.
There's some truth in this, but I don't doubt that many of them have appallingly retrograde opinions on social issues too!
Correct. I am one of those people. I hold appallingly retrograde opinions like sports should be segregated by sex and that people of all races should be treated equally for employment and education.
That order comes with a side of:
Haitian immigrants eating cats and dogs, likening immigrants to an invasion of serial killers or insane asylees (poisoning the blood of our country if you're extra bold), believing that totally healthy newborns are killed on demand by abortion providers, at best equivocation on whether political violence is OK and at worse supporting political violence insofar as it's done in Trump's name, the general tendency to inflame tensions among the country even by leveraging the suffering of hurricane victims for cynical political ends. Say what you will about the crazy lefties (and I'd likely agree with you) but the culture-war crazies on the left or right have succeeded in taking over only one party so far (which isn't to say the same fate won't meet the democratic party in the future).
You're not incorrect about the Republicans. But the Democrats absolutely are captured by the culture war crazies even if they're smart enough not to talk about it in their campaigns. If you don't think so, then tell me what did they put on page 1 of their party platform? https://democrats.org/wp-content/uploads/2024/08/FINAL-MASTER-PLATFORM.pdf
Yep. Just bait and switch. Culture War issues invented and spread by FOX News, to get the rubes riled up on nothingburgers like Critical Race Theory and Trans kids in sports, and drive them to the polls.
The BBB will provide some minor middle class tax relief. That will be more than offset by spikes in health insurance premiums, electric utility rates, and home/car/business loans. As the specifics of the bill get out to the public, approval for it is dropping like a stone. But much less so among GOP voters. FOX News has done its work well.
Republican rule is turning out to be an economic disaster.
Tell me what is on page 1 of the Democratic party platform? https://democrats.org/wp-content/uploads/2024/08/FINAL-MASTER-PLATFORM.pdf
Keep pretending it's not real and you will keep losing elections.
What, supporting federal recognition for as yet unrecognized Native American Tribes? NA's--like every other ethnic minority--are all stakeholders in the Blue Tent.
If you're talking about actual Dem *policy*, y'know actual *legislation*, this means you're gung ho about the BBB? About gutting Medicaid and SNAP, reducing SS, putting a *tax* on renewables, supporting Russia over Ukraine...all so Jeffy can buy another yacht?
IF you're a billionaire or multi-multi-millionaire, or just a major shareholder in a GOP-centric corporation I'd understand your love of the GOP: you'll get a bundle on taxes, and your equities will appreciate nicely.
Then why haven't Dems moderated on social issues?
The dyspeptic orange dunce's MO is crude but consistent with the GOP MO since Reagan...gin up a race panic, get power, sack the treasury for poor little rich people...rinse, repeat. The shameful, willful innumeracy and cynicism is breathtaking.
Our enemies are doing happy dances.
The problem is spending, not taxes. Just look at federal spending as a percent of GDP-- it's clear that spending is the issue over the last 15 years.
And you said "the bill is an engine of upward redistribution." Declining to confiscate rich people's money is not "upward redistribution." That's quite a communist perspective on tax cuts.
Isn't it inevitable that government spending will rise as a percentage of GDP in most rich countries due to aging populations, as much of that spending is on the needs of old people (Social Security and Medicare, in the US case)?
Not really that much you could do about that short of going Logan's Run...
Immigration is the obvious solution in the US. No reason at all population should decline.
Yes- there is a pig in the python demographic bubble affecting these Ponzi schemes around most of the OECD)
However, there is no reason whatsoever for the US not to be fully funding all other spending at full employment. Social security is not in deficit (yet) and the Medicare deficit is less than half the US total deficit.
If the US ran a cyclically balanced fiscal policy (ex soc sec and Medicare) then deficits would be cut in half and interest rates and interest funding costs would fall.
Strangely, neither party proposed fiscal sanity during the 2024 elections!
I think the DOGE fiasco shows that there isn't really that much spending that is "waste" that could be cut without serious consequences, so I'm still of the opinion that it's tax rises that are needed to deal with the budget deficit.
There's tons of waste. The government is still using 1970s technology for many important functions. If you're paying an army of employees to do something that can be automated, that's waste.
There's a lot of waste, but most of it is due to congressional mandates. What DOGE demonstrated as much as anything else is that the President doesn't have the power to fix a lot of the dysfunction in federal agencies. That takes changing and/or repealing laws, many of which have noble-sounding purposes and which your opponents will seize upon to savage you at the polls. You're against the Freedom of Information Act? What have you got to hide?! What kind of despotic tyrant wants to do away with notice-and-comment rules? Are you seriously suggesting that we should get rid of environmental review, you capitalist monster?! You just want to cut civil service protections so you can flood the government with your cronies! And so on.
Spending is going to need to be cut- waste or not. There is a lot of fraud to eliminate, sure, but that will take years, not weeks (and require some tech investment and controls).
Taxes will also need to rise, of course, on everyone- not just the rich.
I’ve always thought we should require each party in Congress to come up with a hypothetical plan to balance the budget in 5 years and keep it balanced for a succeeding 10 years. If voters were informed and actually saw the degree of tax hikes and spending cuts necessary to pay for the mess we have already made, then parties that promised more handouts (free student loans!) or more new tax cuts (no tax on tips!) would be laughed out of town and maybe pols would get serious. Then again, maybe not- that is what the bond vigilantes are for.
No, DOGE showed very little. They didn't even target any large spending categories, and they did a terrible job analyzing the ones they did work on. Granted, real spending cuts probably require legislation, and neglecting that was another shortcoming of the DOGE approach. If we took a serious look at entitlements and tax enforcement, I bet we could squeeze a trillion out of the deficit. Of course, we'll probably never find out because no one will actually work on it.
Per the SSA, Social Security has run a deficit since 2021:
https://www.ssa.gov/OACT/STATS/table4a3.html
The “trust fund” (read as “money the government owes itself”) is not zeroed out, so mandatory cuts have not occurred to balance the SSA’s revenues with its expenditures.
The financial situation is simple math. To maintain financial stability one of these two things (or some combination thereof) must happen:
1. Massive cuts to Social Security and Medicare
2. Massive tax increases on the middle class
The political situation is just as simple. Anyone who proposes either of these things will be destroyed in the next election. Therefore, the resolution must begin with a change of state in politics. Probably it will be a massive financial crisis that will do it, as that's the path we're on now. The fact that this simple problem is not politically resolvable has turned me against democracy (or at least the universal suffrage version of it).
If we balance the non-social security/medicare spending, the old age deficit is actually quite manageable (and half of the current deficit) for a decade or two.
While there are demographic reasons for the old age Ponzi schemes to be in deficit at the moment, there is zero reason for other spending to be in deficit at full employment.
Balance that first, which will lead to reduced borrowing, lower rates and lower interest costs and then turn to the third rail of amending the programs people mistakenly think they have “paid” for via payroll taxes.
The other issue is that the history of cuts/tax hikes on social security and Medicare is that they are spent on new handouts and freebies, making the budget even less sustainable.
Examples:
The Reagan/O’Neill social security tax hike led to the Clinton surplus (well, that and defense cuts). Gore talked about a “lockbox” but the government lived off of that social security surplus- GWB added Medicare part D and fought a couple of expensive wars.
Obama “cut” Medicare, but using the CBO accounting rules in reconciliation, then spent more than that on new handouts (Medicaid expansion and Obamacare subsides)
Biden “cut” Medicare, but then spent that money on Chinese batteries.
Until some party shows some seriousness to balance spending at full employment (ex Medicare s d social security) and keep it balanced, any “cuts” in social security or Medicare would simply be spent (more than spent, actually, leaving us worse off)- that was the case under GWB, Obama and Biden.
Did you read the post? See figure 5. The non Medicare/SS budget is already balanced long term with Medicare/SS responsible for a $124 trillion shortfall over the next 30 years.
Easy solution to Medicare and SS:
Give everyone the option to either pay slightly higher premium, OR retire slightly later. Their choice.
Current retirees would be protected (great for votes). Everyone near retirement age would choose the higher premium. For those decades off it doesn’t matter what they choose as it is actuarially sound, but they are guaranteed a fiscally sound program that would otherwise be spent.
Problem solved. The only other major thing I would do is not expand the tax cuts in the current bill.
We just need a real leader to pull this off. Don’t hold your breath.
I like the option but I think it needs to be more than slightly higher
To cover the size of the deficit
Also for healthcare spending, we need to stop doing a heroic end of life care
We spent a lot of money in that last little bit of period of time putting patients through literal hell
Sorry posted in the wrong place
There are no easy solutions to Medicare and Social Security. The programs were designed to have many workers paying in to support the few who need it.
Social security started with over 8 people paying in per beneficiary. Now it’s down to around 2.3 and projects to keep getting worse.
If the population isn’t constant increasing, paying for these programs with current revenue (rather than having an actual funded pension) becomes a big problem.
In short, we needed to fix these programs decades ago, but we haven’t. That has left them in a place where any fix will be incredibly painful because it will require substantial benefit cuts or substantial revenue increases.
The solution is easy to articulate. It is “only” difficult politically. All that is needed is higher premiums and lower (or delayed) benefits.
Eliminate the cap on taxed income.
Either increase premiums, or delay retirement/benefit age. Let people choose which option is least painful.
First of all, Mandatory spending for SS and Medicare are funded by the payroll taxes and could use some tweaks and but it would not need to be massive.
Second, our current deficit is not being driven by them (yet) because they have their own sources of funding.
Mandatory spending is 3/4 of our spending and in addition to Medicare and SS also includes things like food stamps and Medicaid and interest. It is called Mandatory because congress can't simply allocate less money to these programs in the budget or use the BR.
In order to change these programs one must overcome a filibuster in the Senate, because it requires a change in policy. How they got work requirements to pass the parliamentarian is a bit of a mystery to me since it seems like a policy change not tax or spend or part of a regular budget.
Anyway, SS and Medicare are not the problem for our current situation - with the deficit!
Then one has to look at discretionary spending which is what congress votes on yearly.
Discretionary spending is only 1/4 of all spending and 1/2 of it is for defense.
Discretionary spending is also the same percentage of GDP as it was under Clinton when we had a surplus at about 6.3%.
So the budget that the House votes on is also NOT the cause!
The deficit is now the same size and all of discretionary spending at 6.3% of GDP.
Thus, to simply get rid of the yearly deficit, one would have to cut ALL of it, even all of defense!
So how did we get to a place where federal funds revenue (non-payroll taxes) is no longer cover any of our discretionary spending?
Mostly ax cuts of abt 800 billion per year and 1 trillion in net interest from all the debt the GOP have racked up from decades of tax cut fueled deficits, unfunded wars, financial crisis, covid, etc.
Social security and medicare are already in a deficit
And the so-called trust fund for social security will run out in 2031 or so. With a 20% cut to social security?
No.
When the government used the excess trust fund revenues to fund the government for decades, the money was borrowed and is held as the part of our debt known as intragovernmental transfers.
There is something like 7 trillion in that account that earns interest and this interest is paid back into the trust funds every year.
This is why we only concern ourselves with "net interest" rather than total interest because part of the interest we pay on the total debt into the funds is both an outlay as well as revenue.
It is also why we concern ourselves with debt held by the public rather than the amount held as intragovernmental transfers when we look at debt/GDP ratio which is a metric which gives is a barometer on if we have a big enough economy to pay our debt obligation.
Intragovernmental Transfers is largely money we owe to ourselves and largely to the Trust funds (SS and Medicare)
They can't be insolvent when trillions is owed to them and is on the books.
The events of the last decade have caused me to sour a great deal on democracy as well. In particular, I worry a great deal that the internet -- and especially social media -- is the technology which makes democracy untenable as a system of government much as the printing press was the death blow for feudalism. What America needs right now is in fact a tyrant who can completely ignore the will of the people to do what needs to be done, because the people have shown themselves, though their selection of representatives, to be complete and utter fools. Sadly, we don't get to have a Lee Kwan Yew; we get Donald Trump.
Isn't this a big fault of our education system
We need to spend the 4 years of high school. Teaching the kids, basic economics and financial literacy
And that there's no such thing as a free lunch
US political discourse is weird. The GOP wants to benefit the rich at the expense of the poor, in spite of the poor being the reason they're in office. The Democrats are fighting this change, in spite of blue state professionals being their base and amongst the ones to benefit the most.
I understand this is all the result of coalition building the 2 party system requires, but things would feel so much more rational with a parliamentary system.
Healthcare costs need to drop dramatically. We need to have an abundance mindset focused on health in addition to housing!
AI has the potential for that, but I think regulation will get in the way. No state is going to let an AI write even a trivial prescription, for example.
Housing, healthcare and auto repair are inherently people intensive making it very hard to bring in efficiencies.
Noah, from an economics perspective - how are Republicans able to repeatedly get away with this kind of economic illiteracy without real-world fallout, when a similar stunt across the Atlantic caused absolute carnage in the bond and mortgage markets and killed Liz Truss's political career?
Is the American economy just inherently more privileged due to holding the world's reserve currency and other factors?
You are confusing artificial CBO math built around special exceptional rules (reconciliation) for the real world.
In your fantasy world, raising the SALT cap to $40k “reduces” the deficit. That is insane.
In the real world people look at current programs and deficits and project them out into the future (next year’s deficit is going to be about the same as last year’s, or smaller, if anything). Unless, of course, there is a political party that campaigns on a massive change in the existing trajectory.
The 2024 campaign was between a party that wanted to extend current income tax policy (by and large) and a party that was going to extend almost all of it except reverting to higher rates for those making over $400k. All the revenues from the latter change were going to be spent (and more) on new freebies.
Remember the Dems were the party that spent recklessly and unnecessarily on Covid handouts, expanded Obamacare subsidies, student loan handouts and ran 6 pct deficits at full employment.
The “market”, which is comprised of real thinking people rather than CBO fantasy accountants, looks at the current policy and trajectory and prices in the risk of new polticial regimes (both of which in 2024 were largely going to extend tax rates and neither of which was going to materially reduce deficits).
Truss, on the other hand, was proposing something well outside the trajectory, catching the “market” unaware. The impact was exacerbated by the UK’s own pension rules and “portfolio insurance” (ie naked options) that had been sold by banks to pension funds that caused market moves to be temporarily magnified.
You do not seem to know how the CBO works or deficits. CBO reports are public and online and are excellent, as well. The GOP only call them "fake" to excuse and hide the massive amounts of deficits and debt they have added over decades.
The truth is that a significant portion of our debt has been incurred to give tax cuts to their wealthy donors and we are now also stuck with massive interest on the debt as well.
When you the look at GDP growth, you also see that the notion that we get growth out of them is also a lie.
We had far more growth under Clinton than Bush or Trump (even pre-pandemic) despite Trump's lies to the contrary his growth was below average and he nearly doubled the deficit even before covid it with his tax cuts!
I don’t like this big bill either, but being Devil’s advocate, are we really sure the tax reductions didn’t contribute to growth? Compare the US to every other wealthy developed nation over the past 20 years and despite starting at the top, we still grew faster than just about all of them. How much of this growth and how much of the higher dynamism and higher rate of entrepreneurial start ups is explained by our lower (and yet more progressive) taxes?
The point is that CBO estimates and baselines are just fancy guesses. If I was to compare which developed nation has had the best political/economic/tax climate this century, I think the US might still take the gold.
The CBO estimates are hypotheticals and are linked to the arcane reconciliation “rules” Congress arbitrarily establishes. Extending current policy doesn’t increase anything and nobody bases forecasts based upon fantasy hypotheticals. No Congress is bound by prior Congresses- the new guys and gals can do whatever they like. The proper comparison is what the new Congress does relative to the last one. As neither party campaigned on letting all the tax cuts expire, nobody expected them to expire, which is why bond and equity markets haven’t reacted.
Let’s remember that under CBO “current legislation rules”, social security payments are meant to be cut when the trust fund balance runs out. By those “rules” a Congress and prez who lets those payments be cut (in reality) shouldn’t ever be accused of a “cut” because current law presumes the cut. Any senior who thinks their payments have been “cut” is hallucinating (well, unless they look at their bank balance). Conversely a prez who allows next months soc sec checks to be the same as last months should be accused of a multi-trillion increase in spending. Ask the recipient- they know whether they have been cut or whether they are getting the same. Just as a taxpayer paying the same rates next year as last year knows that nothing has changed, no matter what the CBO fantasy or the media implies.
Well since GDP growth did not increase after they were passed and because growth was often higher under Clinton and Biden and also very good for many decades before Reagan's tax cuts....there is simply zero evidence tax cuts at the top have helped.
Businesses will only grow and hire when there is an increase in demand for their products. Simply getting a tax cut will not cause them to spend money needlessly and expand a business if there are not more customers.
In addition, growth related expenses are not taxed anyway and are removed before arriving at profit or net income which is then taxed, so changes in the tax rates at the top or for business do little to inspire growth. They tend instead to go into assets like stocks and homes and boost those prices.
In contrast, tax cuts (or credits at the bottom) cause an increase in demand which inspires businesses to produce more to meet demand. The entire economy grows.
For example, after Biden's increase in the child tax credit started to go out we saw a massive 7% GDP growth in Q4 of 2021 and nominal GDP growth was so large (over 10%) that the debt to GDP ratio even fell (GDP being the denominator).
Sadly Manchin and the GOP axed it.
If GOP tax cuts worked we should see some evidence of growth, and we simply do not.
Only Reagan saw growth, but this was because the Federal Reserve massively cut interest rates after they had been high for a very long time. No one has been able to replicate cutting taxes at the top and growth, all they have seen is massive increases in deficits and debt ever single time and now our debt is massive.
Reagan tripled the deficit and started the debt/GDP ratio rising again when it had fallen for decades after WWII.
Bush took us from a 236 billion surplus under Clinton to a 1.186 trillion deficit and even before the collapse he had taken us 692 billion per year in the wrong direction with our deficits and saw only average growth.
Obama cut Bush's deficit in 1/2 to 559 billion by the time he left, and gave us healthcare, but Trump quickly doubled the deficit again to over 1 trillion with his tax cuts even before the pandemic hit our shores requiring trillions more and even before the pandemic he saw below average growth at only 2.8%
There simply is zero evidence tax cuts at the top work and a ton of evidence that they explode deficits and debt.
The evidence of growth isn’t measured by made-up projection vs actual results, but rather by actual results vs other countries. I am willing to entertain that this might be wrong, or only partly right, but it is worth considering as an open-minded non partisan (who dislikes the new bill).
How are other countries more reflective than comparing times to growth when we had higher taxes in the USA?
I am not using made up projections but comparing different eras in the USA.
Growth was much higher under Clinton than Bush or Trump and Clinton was post Bush Sr tax increases.
Growth was higher in the decades following WWII as well, until the oil crisis hit and taxes were the highest they have ever been then, as well, even higher on the wealthy than on many European countries and it did not inhibit growth because wages were good and we had a large middle class to drive economic growth due in large part to unions.
We are more like ourselves as a comparison than we are like other nations.
We have not gotten serious boosts to growth from tax cuts on the wealthy - period - there is simply zero evidence for this.
In addition, nothing I typed was "made up" this is the data.
I did not think I would have to mention this but I do have a degree in business and economics and when I post this on economic sites, no one questions it since it is fairly common knowledge.
I, for one, am proud of our prudent fiscal warriors who, by raising the SALT deduction cap to $40k from $10k actually cut the deficit. Well, by CBO “math” 😂😂🤪
According to CBO math, which has always been proven correct, the bill will add trillions to deficits and debt, just like Reagan and just like Bush and Trump.
Reagan tripled the deficit. Bush Jr took us from a 236 billion surplus under Clinton to a 1.186 trillion deficit before Obama was sworn in and Obama cut this number in 1/2 to 559 billion before he left. Trump doubled this deficit even before the pandemic hit our shores to 1.015 trillion according to the Jan 2020 CBO report and 984 billion the year before and then we got the pandemic.
Then when you look at GDP growth under Bush and even Trump pre-pandemic they were average or below average after adding trillions.
The reason the GOP lie about CBO math is because it shows they are the ones who are largely responsible and always have been.
How much extra are you sending in every month?
Or are you simply covetous of other people’s money?
Every penny the government spends goes right back into the economy driving economic growth. Money spent in the economy rises to the top, as well. When more is taxed at the bottom, this is then money that does not flow into businesses creating jobs.
The GOP like to complain, but in reality they know that taxing at the bottom spells death for business and if they bothered to think for a minute they would realize that all of this money eventually makes its way to the top and into corporate profits, as well. They get richer as a result, too even if they pay a higher tax rate to help keep consumption (the driver of our consumer based economy humming).
When you cut services for the poor, it is like taxing the poor, because now what little they do have from a paycheck is now spent on those things that were cut and not going into local businesses and not making its way to the top.
In this scenario the entire economy shrinks.
An economy is based on economic activity which is based on both consumer confidence and the ability of the majority to spend and engage in it. Even if ones business caters to the well-to-do, at some point along the chain, those folks got their earnings from someone further down the income scale, etc. The economy expands the most, like I said when the most have enough to spend in the economy to drive growth and it also has the chance to expand the most when one starts from the bottom because it can expand every time that dollar changes hands. One person's spending becomes another person's income.
In the past, there have often been debates on how to achieve this and often it comes down to either much higher min wages or adding services and tax credits so the poor can have enough left over to engage in the economy and giving them tax breaks.
When push came to shove, it was always a preference of businesses for the government to subsidize wages with a progressive tax system and social services rather than force them to pay a higher minimum wages.
Thus, we tend to help "the many" have enough left over to engage in the economy to help it remain robust (called priming the pump) and then wait and tax more once this money works its way up the chain and into the pockets of wealthier folks who do not use every penny for consumption.
The rich tend to get this money back from their taxes paid, due to a larger economy and better corporate profits as the many are able to spend more and keep the system going, so I would not call it "theft" it is simply a way to keep things flowing and growing and taxes spent this way are like a farmer using some of his crop to reseed for the following year, it pays off with far more than is planted as the poor can spend and the economy grows.
Each time this money changes hands with consumer spending it drives production and growth and the economy actually expands. When you start from the bottom and with "the many" there is far more opportunity for economic expansion and consumer confidence also plays a role.
Biden saw a massive 7% economic growth in Q4 of 2021 after his child tax credit began to go out and nominal GDP growth was so large that the debt/GDP ratio fell.
Articles on WSJ marveled at how massive corporate profits were, as well, so this money was making its way to the top and stocks reached record highs.
Then Manchin and the GOP axed it in December.
Was the CTC expansion too big? Maybe, I personally think so, but it simply shows what happens with the power of the consumer and helping the poor - it all goes back up to the top.
So yes, the rich may pay a higher rate to keep the water in the pump (consumer spending) flowing, but they reap the rewards as all this money that is being spent and driving the economy and making it larger reaches them as well.
When the poor and masses get hit, like with Trump's cuts, the economy will shrink. The rich may save on taxes, but they will also make a lot less money as well.
If taxes are spent helping the poor it is good seed planted and it creates a good crop.
The vast majority of these tax cuts are just extending current tax rates
Only in political fantasy land do we cover the tax cut
Extending those, it won't generate a whole bunch of new economic activity.
But raising those taxes will slow down economic activity
I think you meant “call that a tax cut”. Yes, much of this debate is over not increasing taxes, and this is being called “a tax cut for the rich”.
Don’t get me wrong, I still think this bill is a travesty and that huge deficits are very worrying. But it is primarily avoiding a tax increase on the rich.
Avoiding a tax increase on everyone who pays income taxes….which is only about half the country
If they did not increase activity in the first place, how will they slow it?
The vast majority of these tax cuts are just extending current tax rates
Only in political fantasy land do we cover the tax cut
Extending those, it won't generate a whole bunch of new economic activity.
But raising those taxes will slow down economic activity
What you call reckless and unnecessary Covid handouts were done by both the Biden administration and the Trump administration. Now yes, the Democrats did want to do additional covid relief spending while Trump was president that Trump and Senate Republicans were unwilling to do. But you still can't claim that Biden and the Democrats were entirely or mostly responsible for our covid era inflation and conveniently ignore the two covid relief packages that were passed under Trump. Plus, the Federal Reserve provided significant relief funds to banks and large companies, which might have been an ever bigger factor in higher inflation than covid relief spending under both Trump and Biden.
$900 billion of covid handouts were passed by Pelosi and signed by Trump in Dec 2020. Biden added about another $2 trillion a couple of months later, in an economy that was already strongly recovering. That nearly $3 trillion was almost 15 pct of GDP dumped on an economy that was only a few percentage points below potential at that point. Doesn’t take a genius to see that this massive overstimulus was going to mean too much money chasing too few goods. Unfortunately, Yellen and Powell were of below average intelligence when it comes to economics,
Biden then went on to run record peacetime deficits of $2 trillion even after the Covid handouts stopped.
Sorry- that fiscal performance is indefensible. Note that I am not defending Trump or the BBB. I simply noted that, while fiscally inane, it is probably better the better choice than keeping the Dems in charge. This years deficit should be less than last year due to tariff revenues and next year’s may be as well.
The economy was recovering but it was still far from where it was before the covid pandemic. And we were still at the height of the pandemic at that point. Yes the covid vaccine was being rolled out and Republicans were trying to pretend that the pandemic was over. But that didn't mean that the pandemic actually was over, especially since so many Republicans refused to get the vaccine, which caused the covid virus to mutate and spread. The U.S. had far more covid deaths after the vaccine was introduced than most other countries did. Yes, Biden's covid relief package was probably too big, but Jerome Powell said that it would be better to spend too much than to spend too little on covid relief.
Powell said and did a lot of things- mostly in error.
Prolonging lockdowns was also an error. Spending well in excess of the output shortfall was also an error. Almost all of the unnecessary spending ended up as inflation rather than real growth. Whoops.
Anyway, rehashing the past is only useful because the party in question had never renounced its mistakes (and obviously their supporters bend over backwards to excuse mistakes).. Not that any party ever renounces mistakes, of course. I don’t expect to see Trump admit years from now that tariffs didn’t bring manufacturing back to the US.
Biden and the Democrats' main mistake was that they didn't raise taxes to pay for any of their COVID relief spending. If they had paid for at least part of their COVID relief package, then inflation would have been lower. Now the same is definitely true of Trump and Republicans, but they were obviously never going to raise taxes on the rich. But Democrats are supposed to be the party of raising taxes on the rich, which was one of Noah's points.
The fact is that US cannot afford tax cuts for anyone. I spend a lot of time bashing Biden and the Democrats but what Trump is doing in his second term is so grotesque that it’s hard to compare to a normal presidency. Just sheer incompetence everywhere.
Also, there is no reason to bash Biden or Obama who did not have the votes. Obama had a financial collapse to deal with and Biden only had a 50/50 Senate and Sinema would not budge.
I am going to bash Biden because he signed off on a lot of debt financed legislations. Total debt added under Biden was more than Trump’s first term. He was an irresponsible jackass just like Trump.
Have you ever wondered why the GOP talk about debt rather than deficits? Also what makes you think Biden's was higher?
The federal fiscal year begins the prior Oct 1, so the second stimulus was signed by Trump before leaving office.
In addition, deficits are our yearly shortfall and they always rise under the GOP and fall under Dems.
Here is a more personal type of example.
Say you and your spouse have a mortgage and other long term obligations. Then one of you decides to cut your hours or loses a job (less revenue like a tax cut). You may find that your income is not enough to cover your bills and so you have a deficit.
When a person or the government has a yearly deficit, they then have to borrow to pay the bills and this adds to debt. Maybe even have to take out a second mortgage.
Now say you decided your spose who was no longer helping to bring in enough funds was a deadbeat and not for you and you marry someone else (like if we get a new president)
You are still stuck with the huge financial obligations and yearly deficits you racked up with the last person you were married to (the last president)
Now, you still have that mortgage and all of that debt and it can take a long time to get your yearly shortfalls under control and so more still keeps getting added to debt.
Under Dem administrations, the yearly shortfalls typically always decline as they try to right the ship from the massive deficits left by a GOP administration.
So, although they get things reduced over time, they still end up adding to debt in the meantime because they are still held to obligations the last guy made.
Reagan tripped the yearly deficit, and Clinton left a surplus. Bush took that yearly surplus and turned it into a 1.186 trillion dollar deficit before Obama was ever even sworn in source CBO: the budget and economic outlook 2009-2019.
Obama cut the deficit in 1/2 over 8 years and left with a 559 billion deficit. Trump nearly doubled this again pre-pandemic to 1.015 trillion even before the pandemic hit (same report as above insert 2021-2031 for years.
Then Trump left with a 3.5 trillion dollar deficit before Biden was even sworn in because of Trump pandemic spending adding on top of his trillion.
Biden left with a 1.9 trillion deficit and Trump's is now projected even higher, by a 160 billion, once again according to the monthly budget review and this is even before this bill is passed which adds even more with hundreds of billions in defense and border spending and more tax cuts and revenue loss.
CBO gets their numbers from the treasury department - so they are real and accurate.
"Also what makes you think Biden's was higher?"
Facts. The treasury (also CBO) publishes these numbers. Trump added 7.8 trillion and Biden added roughly 8.4 trillion. (It's only available till Jan 1st 2025, the next data update will be in Oct 2025.
I'm not interested in any kind of back and forth with partisans who don't think facts are important. If you're Republican or Democrat, good for you. Please keep advocating for your party.
Edit:
"Then Trump left with a 3.4 trillion dollar deficit before Biden was even sworn in because of Trump pandemic spending adding on top of his trillion."
The problem with this fact is that it's an attempt to fool people into thinking that it was due to permanent increases in spending instead of emergency Covid spending which was also passed by a Democratic controlled House.
I also point out that Trump nearly doubled the deficit before the pandemic even hit, and a lot of the stimulus, credits continued on for years, as well and yes, the loss of revenue from GOP tax cuts also continue on every single year until stopped. If we had the same revenue to GDP that we had under Clinton that we would cause 840 billion less in our deficit.
I think you should have understood from my initial comments that I’m not a fan of Trump and his fiscal policies. Both Biden and Trump were terrible Presidents on fiscal issues. Stop trying to convince me that Biden was good and Trump was bad. I’m an independent and I get annoyed by this kind of partisan lying.
You seem to be unaware that the fiscal year begins the prior Oct 1.
Technically this is also when the budget is also supposed to be passed.
Thus the 2021 fiscal year began under Trump on Oct 1 2020 and so when a new president takes office, it is always considered the fiscal year of the outgoing president.
The GOP count on people not knowing this so they can spin their spin about deficits and debt and who they belong to.
Before Obama ever took office in 2009, the deficit had already been projected at 1.186 trillion under Bush for that fiscal year because of TARP and the GOP then spun this as Obama's because they knew their base would buy into the nonsense. The stimulus was a 10 yr price tag and only 200 billion in tax cuts and spending went out in 2009 under Obama, so he did not cause a 1.4 trillion deficit since most of it occurred before he was sworn in. CBO the budget and economic outlook 2009-2019 that came out on Jan 7 2009.
However, a lot can happen after a new president takes office so I always use the CBO report that comes out, or complied right before they are sworn in.
I use the numbers from when the outgoing president leaves.
If you do not then you have to give the entire 2021 fiscal years deficit to Trump
Before leaving office, Trump signed a second stimulus. Based on this and the numbers coming in from Treasury, the deficit was projected at 3.5 trillion for Trump's 2021 budget year. Biden also signed one but since the economy recovered revenues from a growing offset a good chunk of his stimulus. Nominal GDP growth in Q4 of 2021 was over 10% under Biden and real GDP growth was 7% - HUGE!
CBO: The Budget and economic outlook 2020-2030 page 10
"You seem to be unaware that the fiscal year begins the prior Oct 1."
No, I'm aware.
"Technically this is also when the budget is also supposed to be passed."
Not true. Congress passes several spending bills throughout the year.
The 1.9 trillion ARP passed under Biden on March 11th 2021 which was part of the fiscal year that started on Oct 1 2020.
Stop lying and trying to fool people.
What needs to be talked about more is blue state income taxes. Many (like myself) would be far more accepting of higher federal taxes if state taxes were reined in. As it is, I pay over 50% in income taxes to say nothing of property tax. That's plenty, and it's going to the wrong place.
I believe these States are robbing the citizenry and the federal government to subsidize bloated and ineffective state bureaucracies that waste beyond belief.
I've asked my fellow liberal Californians what our higher taxes buy us, I've never heard anyone come up with anything. Some mention our low property tax rates, but the truth is we still pay a lot in property tax nominally.
So do pass higher taxes, but also limit state and local income tax rates, otherwise we're stuck.
As a fellow Californian, I totally agree. The state is just robbing us without providing anything in return that you don’t get in other states with zero income taxes or sales taxes.
How do you pay over 50% in income taxes? Even someone making $40 million a year only pays 47% in income taxes. I think you need a new accountant.
Top marginal tax rate in CA is 13.3%. Federal 37%. Then there are other income based taxes,
social security, Medicare, city business business tax, and state business tax. They all blend together at various incomes and even with the loopholes those in my tax situation are allowed I keep less than 50 cents for every dollar I make with which I pay property tax, sales tax, DMV fees property tax, utility taxes.
I consider myself quite lucky, but so is CA who cashes my checks when I could live in any state and it would have no effect on my income.
The fact still remains, no one can tell me what CA gets for such stratospheric taxes. And to my original point, this all makes it politically difficult to raise taxes where they are needed.
Of course, the above explains why Trump keeps haranguing the Federal Reserve to lower interest rates. Trump is now suggesting that Powell is un-American and costing the treasury billions needlessly. He wants rates reduced to 1%, which would help the government to afford interest on the debt.
When it was proposed to let the rates of higher-income individuals expire, it was a good political and fiscal suggestion. Then, of course, the complaint was that it would hurt the GOP brand of budgetary restraint. I defy anyone to explain that cognitive dissonance.
I don’t recall my 2017 tax bill being onerous. The difference between 37% and 39.6% is not that much. I don’t remember whether the 2017 tax bill eliminated the Obamacare tax of 3%. Either way, the wealthy did just fine, and I don’t recall a groundswell to lower rates for the rich.
As a Reagan Republican, the additional debt is negligible compared to the current debt. The real issue is the $2 trillion a year in deficit spending that will be added to the debt. We’re looking at ending up with $50 trillion in debt, and the interest on that, no matter what the rate is, will be destructive.
Our current political class cares nothing about America or Americans. We cannot keep borrowing, and soon we will not be able to afford our debt. Cuts are coming, forced by the insolvency of Social Security and Medicare. Every day, our politicians dither while our debt grows. The longer they wait, the higher the cost.
They are un-American, every single one of them. They care about two things: not being primaried and not losing their seat. Everything is secondary.
"because people knew the rich were paying their fair share to help bring the deficit down."
Please define "fair share." With our progressive tax system, the rich not only pay more total tax dollars, but also a higher percentage. The proposed "Tax cuts for the rich" really just means moving to a LESS progressive system, but the rich still pay much more in taxes than the poor and middle class.
If everyone paid the same percentage in taxes, I believe many fewer people would have voted for big government over the last century and we wouldn't be in the mess we're in with the national debt.
I assume the negative impacts on the average voter will take some time to realize, and by then the voter would’ve moved on to something else outrageous. That’s if the voter even has heard of the OBBBA in the first place. We have a surfeit of low-information voters who probably just cast a ballot based on gut feeling.
I've had this notion, probably wrong, that there's too much money floating around in rich people's coffers with no good purpose to put it to. Which is maybe part of the reason they invest it in real estate in markets they personally have no familiarity with (maybe why real estate is so expensive now). Maybe that's why we have all these exotic financial vehicles backdropping the stock market that only serve to increase the wealth of investors without actually doing anything productive, which causes the cost of everything to exceed what it should be. Can too much capital actually cause harm?
Yes, you are correct about the tax cuts.
If we simply had the same revenue to GDP that we had when Clinton left office that would be 2.8% more on a 30 trillion economy, or 840 billion less in deficits per year!
That is the damage of the Bush and Trump tax cuts.
Then you have to add the interest on all of that debt the GOP have racked up with the tax cuts and unfunded wars and the finical crisis that happened on their watch and covid, etc., but in reality it is largely the tax cuts.
Even Reagan tripled the deficit, as well and Bush took us from Clinton's 236 billion surplus to a 1.186 trillion deficit before Obama was ever even sworn in.
Then Obama cut the deficit in 1/2 and left with a 559 billion deficit (and gave us healthcare) a deficit which Trump nearly doubled even before the pandemic hit our shores to 1.015 trillion (Jan 2020 CBO report) largely with his tax cuts.
However when you say...
"And yet somewhere in the years since Clinton, the Democrats lost their appetite for taxing the rich"
This is 100% untrue, and you do not seem like the type of person who would fall into a "talking point" trap.
In fact, you point out that it is important to know how things work, and I agree!
Obama took office only a few months after the financial collapse of 2008 and had to deal with a massive recession. The conventional wisdom is not to raise any taxes in such a massive crisis, so he could not and there is no way in heck to get votes to go against conventional wisdom in a crisis.
The Tea Party was then formed on massive amounts of disinformation regarding deficits and TARP, the bank bailout.
The truth was that the deficit was already 1.186 trillion before Obama was ever sworn in, since the fiscal year begins the prior Oct 1 and so the 2009 fiscal year had begun on Oct 1 2008 under Bush.
TARP was also passed under Bush, not Obama.
Then, when it came time to pass the stimulus for ordinary folks, Obama still did not have a supermajority needed due to Kennedy's death and Franken's delay in being seated, thus the stimulus had to be cut to get a few republicans for passage to overcome a filibuster (I assume that the yrs single allowed BR had already been used by Bush). Then the supermajority that was delayed was short lived since Scott Brown (R) won Kennedy's seat, so they barely passed a massive healthcare bill with the help of some independents who caucused with them and one of these was a bit more conservative, Lieberman, but without him, no bill at all from what I recall.
Yet, the GOP was able to spin the trillion dollar deficit Obama inherited, as well as a narrative about TARP as if these things occurred under Obama (they did not) and the Tea Party was born even though the trillion dollar deficit existed before Obama was ever even sworn in as well as TARP.
The lies about the deficit caused Obama to lose congress, when it had been Bush who had taken us from a 236 billion surplus under Clinton to a 1.186 trillion deficit before Obama was ever even sworn in. Obama's stimulus had a 10yr price tag and only about 220 billion went out in 2009 1/2 of this was emergency payroll tax cuts and 1/2 spending, if I remember correctly (It is in Oct 2009 CBO monthly budget review). Much of what followed was aid to bankrupt states, as well.
As far as Biden goes, he only had a 50/50 Senate and thus could not lose a single vote. Sadly, Sinema from AZ was not on board with some of the proposed tax increases, so even using a BR could not get the job done.
I am really tired of people claiming there was a lack of will from Dems, when there has been a lack of ability based on "how things work."
It would not have mattered if a more progressive person was in charge because the situation on the ground would have been exactly the same - the votes in congress would not have been there, etc.
Still, in the end, Obama cut the deficit in 1/2 before leaving and we had a deficit to GDP that was less than Bush pre-collapse and we also had healthcare.
So we were at least heading in the right direction, but then Trump came along.
One way to make responsible budgets more palatable would be to embrace an abundance agenda. 1. Enable housing builds of all sorts to lower costs for everyone. 2. Adopt pretty much ANY other rich country’s health system to cover everyone at a much lower cost. 3. Support and incentivize day care and universities to drive those costs down (it’s like a second mortgage to families with kids).
Over time, people have more money to live AND pay their taxes.
Controversy over taxes have been the mainstay of American political history since before our founding. Why should anything change?
But Republican tax cuts are entirely understandable, and they go hand in hand with Republican efforts to defund the IRS. The reason - simple. Republican mega-donors don’t want to pay taxes any more than anyone else, but they control the Republican Party. Citizens United hasn’t helped.