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Comment by crusso | Hacker News Reader

Like the housing bubble, our debt hasn't been a problem and it's not going to be a problem right up until it is a problem. It will be a black swan event and afterward everyone will claim that they saw it coming and "the other guy" ignored it.

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In the mean time, are us Americans ever going to get a president that focuses on paying down the debt?

How much would taxes have to go up (because spending can't go down, right?) for citizens to contribute their fair share of paying down the debt?

There were budget surpluses from 1998 through 2001.

One thing you aren't accounting for is tax receipts going up because the economy grows. It's usually the case that spending goes up at the same time, but it doesn't have to go up.

> It's usually the case that spending goes up at the same time, but it doesn't have to go up.

I just know I read a lot of headlines about how government programs are underfunded. I feel like the base of a lot of Democratic candidate campaigns is about wanting to spend more money for people who need it (impoverished people, etc.)

As opposed to the Republican platform of spending more money while cutting tax revenue?

What do Republicans advertise they are going to spend money on? I'm only familiar with Democrats calling for free health care, free college, universal basic income, etc.

War and enriching military contractors, creating the TSA, subsidies to businesses that don't need them, etc. https://i.ytimg.com/vi/FiW5I95R5xg/hqdefault.jpg

Say what you want about him, but Trump did run an anti-war and anti-military spending campaign. The budgets he's approved are a huge betrayal to his base. There's spending on border security and the wall that's not really happening, but that's chump change compared to entitlements and broader military spending.

So it seems like we have the choice of voting for left-wing politicians who run on increasing spending on new forms of entitlements, and spending will increase precipitously - or voting for right-wing politicians who run on not spending like the neocons do, then just do it anyway, and spending will increase precipitously.

The Senate is largely tilted towards rural areas, and hence Republicans. This provides a pretty natural check on the spending ambitions of Democratic presidents, except in rare circumstances. No such check exists for Republican presidents, which is why our deficits are soaring despite the current record economic expansion. Take that into account when you vote.

The rural Republican base are just the pawns used to build a voting block that can win elections. The party doesn't actually serve them. That's why it makes so many appeals to them on election cycles and then always turns around and only favors policies that benefit wealthy business owners.

https://www.cnn.com/2016/09/06/politics/donald-trump-defense... "Donald Trump on Wednesday called for eliminating the sequester on defense spending and increasing military spending to boost troop levels and the number of ships and aircraft."

Border security, policing, military spending

https://www.ft.com/content/9ce05a54-c424-11e9-a8e9-296ca6651...

advertise ≠ action. take a look at the general slope by party: https://www.axios.com/federal-budget-deficit-trump-obama-f11...

free military

The military and homeland security.

Also: A half reasonable single-payer health care system should save a lot of money over-all. The fiscal conservatives should be all over that one.

Our government already spends more on its healthcare programs (Medicare and Medicaid) than Germany and UK, and they don’t even cover half of the people. I don’t see how paying for everyone would save any money at all. It might make the per capita costs a bit lower, but total tax expenditure will certainly be higher.

We can't go to a program like the UK that's works out to be cheaper in the long run because our current half-assed program costs more? Not following the logic here. We already "pay" for the people we don't explicitly pay for. (Emergency room, lack of preventive care, etc)

The world abounds with concrete examples of systems that provide healthcare at a cost that would allow us to cover all our citizens at less than we're paying now, over all.

E.g., https://www.healthsystemtracker.org/chart-collection/health-...

(BTW, when talking about the overall cost, it doesn't make sense not to count the costs of employer-provided plans.)

The real question is how to we transition from the broken, hodgepodge system we have now to one of those proven better, and cheaper systems.

Right, but it doesn't necessarily mean that it is possible to have such system here. World also abounds with countries building cheap rail, but when we attempt this, it's very expensive. Just because it can be done, doesn't mean that it will end up happening the way you wish it to happen.

I think it would be worthwhile to have a pilot program of it here, say with a single small state introducing it. It could show us how it would end up working in practice.

The problem with a single small state is that providers will leave when you cut their pay.

The thing to do is to encourage many more people to do primary care.

Have you read about Trump's tax cut?

> here were budget surpluses from 1998 through 2001.

... by borrowing from the social security trust fund.

But growing entitlement spending then was not an issue.

Bill Clinton accomplished that but at some cost. My father still laments the cancellation of the superconducting supercollider that he had the pleasure to work on.

Worth noting is that Clinton was president during the dot com bubble, which enabled that surplus... until the economy came crashing down a short while later. Also worth noting is that some of the policy changes of the Clinton white house + Greenspan federal reserve enabled the housing crash as well. I personally feel like we got a surplus only by taking out a mortgage on the next ~15 years of America.

The 2000 crash was mostly a stock market drop. The actual economy never constricted, just approached 0 growth. http://visualizingeconomics.com/blog/2011/03/08/long-term-re...

If anything it was how weak the 2000 correction was that lead to the housing bubble.

Rather, President George W. Bush used the existence of the surplus as a reason to enact two tax cuts. Those tax cuts, their extension (mostly) by Obama, the Trump tax cuts, the wars in Iraq and Afghanistan, and sizable increases in the defense budget are the major contributors to the budget deficit and hence the accumulation of debt since 2001.

You left out the fact that nearly 2/3 of Americans are net tax recipients. Everything that the government does at all levels is paid for by either debt or the highest 40% of earners.

Seems reasonable - after all, those people have more money.

Why is this supposed to be surprising or relevant?

It's a surprise to plenty of people who think that their $70,000/yr income makes them a net tax payer when it actually doesn't. And it's relevant because people will reduce their marginal income, or relocate to more favorable tax jurisdictions, when the tax burden of that income is excessive.

It's also relevant because, at a certain point, the productive portion of the population will fall below that necessary to make payment on the debt at which point the shit hits the fan in a big way.

70k is in the top ~16% so by your description they are net contributors to the tax base. https://graphics.wsj.com/what-percent/

The cutoff for top 40% is around 40k/year.

PS: Numbers are 5 years old but should be a good ballpark.

According to google te median 2019 household income is $63k. And according to the CBO the median income of the middle quintile of households filing tax returns was $72k. That seems to disagree with your wsj link.

Households can contain multiple people filing separately. Did you mean only 40% of households or 40% of taxpayers?

Anyway, people getting Social Security should really mess with this calculation as someone could be making 150k, but up to 45k of that is from the government.

Did that change from Clinton to Bush? If not, then it wasn't how we got from a surplus under Clinton to the deficit.

I was responding to a commenter who enumerated their list of perceived fiscal failings of the government, from Bush to Obama to Trump.

The Clinton years also coincided with a great increase in consumer debt (mostly credit card). When people have more money to spend, they spend it - and the economy grows. There's a cost that comes later, naturally.

A massive tax cut and a few wars also had to do with the deficit during the Bush Jr. years.

Clinton ran a current account surplus, but overall debt grew because Medicare and Social Security were still losing money at the time. Not to mention that it wasn't all Clinton, some of it was the opposition Congress.

This is a dumb unrelated question on my end but are the returns of Social Security very bad?

If you put 6.2% (12.4% total with employer contribution) of your income away into index funds that grew at 7% per year, at $100k/yr gross salary ($12.4k/yr) from ages 25 - 65 (40 years), you would end up with $2.6m (in today's dollars).

$2.6m converted into dividend funds with a 3% yield would be $6.6k/mo.

I don't know anybody getting $6.6k/mo from Social Security...

Social Security funds aren't allowed to be invested in the stock market, and are held in the form of US Treasuries [0]. There was talk of changing that under Bush 44, but his reform plans never gained any serious traction.

[0] https://www.cbpp.org/research/social-security/policy-basics-...

Bush 44 wanted to turn SS into a 401K. SS is mostly invested in the federal government (ie congress spent the surplus).

>There was talk of changing that under Bush 44

I wish it had, I'd love to dedicate X% of my SS check to investing in the stock market.

> Social Security funds aren't allowed to be invested in the stock market

I know, but based on my calculations above, don't you agree that the end user (citizens) are not getting the best bang for their buck?

It depends on your definition of "best bang for your buck".

Social Security doesn't exist to maximize returns, it exists to protect the elderly from extreme poverty once they are no longer able to work. Because of that, the funds are invested in a very risk averse manner.

I'd certainly be open to the idea of a US sovereign wealth fund in some sense, but I don't think privatization or anything else where individuals are making decisions about their own Social Security account is a good idea, since we'll have to create another Social Security-like program to support the people who invested poorly and are unable to support themselves.

>I don't know anybody getting $6.6k/mo from Social Security...

Of course you don't. The maximum benefit in 2019 is $3,770/mo for people who retire at 70. If you retire at 66, then the max is $2,861/mo. And these are only what you get if you maxed out 35 years of SS payments. Besides, SS is designed to only replace 40% of your pre-retirement income.

> The maximum benefit in 2019 is $3,770/mo for people who retire at 70.

How much would you have had to contribute between 18-70 to achieve this number?

They use the highest 35 years of earnings. So I would assume that you'd need to be over the inflation adjusted annual cap to max out the benefit.

$100k/year is way above what most people will ever make. The average person will peak in the $50-60k/year range. If you exclude the top percent or two as extreme outliers, it's even lower.

Ref: https://smartasset.com/retirement/the-average-salary-by-age

I think it depends on where you live. $100k / year here in New York City is not a huge amount of money.

From what I understand, social security has more complex effects as well. It enables people to exit the workforce today, opening more senior positions, allowing for more career growth. So while the returns might not be ideal for an individual, it seems to be a case where it's good for the whole.

Find me 7% growth on $10k dollars for multiple decades running and you can have all my money. In other words, that's a very unreasonable mean growth rate.

https://en.wikipedia.org/wiki/S%26P_500_Index#Annual_returns

Am I missing something here?

Here’s what you’re missing. Imagine you retired in 2007. If SS was invested in private stocks you’re likely destitute and possibly dead, because your home, 401ks and social security are all underwater.

Social security has less volatility and has an associated cost for that.

Essentially, all your numbers are subtly wrong and all of their wrongness is making the final number look much larger. You have to adjust for inflation, including 'weird' inflation. You have to account to suddenly becoming disabled after 20 years. Including the employer contribution is arguably misleading.

Social security is security: no matter how I get screwed, I'm only poor when I'm old, not poverty stricken and dead.

I think you might be right. Could you please rerun them with inflation accounted for just to make sure I didn't miss anything?

That isn’t true. Medicare and Social Security were still pulling surpluses during the Clinton administration (and they continued to do that until very recently).

> How much would taxes have to go up (because spending can't go down, right?) for citizens to contribute their fair share of paying down the debt?

this seems like a weird statement. what is "fair share"? i am a middle class person with a job with fantastic benefits, yet i easily pay over 30% in taxes (probably closer to 40% if one really counts all the "hidden" taxes) and still have to put up with shit infrastructure, terrible public transportation, expensive non-public transportation, expensive insurance, etc. at what point is it considered that i and others are paying our "fair share"?

A fair share (to me) includes progressive tax rates on estates, capital gains, and wealth. Thomas Piketty’s Capital in the Twenty-First Century is a good resource. https://www.hup.harvard.edu/catalog.php?isbn=9780674430006

Also progressive corporate taxes might be enough to stop monopolies.

Banish "fair share" from your vocabulary when speaking of taxation. That is a guaranteed way to derail a productive conversation, by shifting it into arguing about what is fair, rather than what would solve the problem.

If we are intent on fairness, the generations that incurred the debts should be the ones forced to pay them off. So for the sake of argument, let's divide the populace by birth year, and institute a tax called the Debt Retirement Tax (DRT).

I took the historic debt from 1791, and divided it into 40 buckets. For each subsequent year, I charged each bucket 2% over inflation, dumped each bucket into the bucket to its left (except the leftmost), and divided the increase in debt, after interest, evenly across all 40 buckets. In years when the debt shrank, the reduction was divided evenly across all buckets with a debt balance.

This was to simulate the relative contributions to paying off and incurring more debt for working persons for each age 25-64, and all people 65 years or older. I presumed that age brackets younger than 24 have too little political power to significantly affect national debt. Scrolling down to 2018, the age 65+ bucket is now responsible for over 59% of the extant debt. Looking at the numbers over the years, and the clusters of zeroes in particular, whenever the debt is reduced, it is always the younger workers paying off the older people's debts. The eldest have never paid off their share of debt. At the 1835 minimum, the algorithm I used puts 100% of the responsibility for that last bit of debt on the age 65+ bucket. But instead of paying it off, they used their political power to charge up more debt, based on the willingness of the younger folks to work harder pay it off.

For the DRT, you could pay an income tax based on how much debt is in your age cohort's bucket, and if your year's bucket gets emptied, then you don't pay DRT the next year unless the debt goes up, and the interest charged on the other buckets doesn't cover your cohort's 1/40th share of it. The DRT can also include an inheritance tax component, so if you die with more debt in your age bucket, the state takes more out of your estate.

What is happening now is like identity theft. Elders are running up credit debt for their own benefit when their grandchildren's names are the ones on the accounts. What could possibly be "fair", when that situation is never addressed?

What you're proposing goes against normal sensible morality, but the context is true.

Labeling one type of morality as the normal, sensible one is cheating, because normality and sensibility are value judgments. You can say it goes against the modal morality. I think that particular one generally gives older people too much of a pass for harms they inflicted while younger, and for which they never made adequate reparations.

If I expand the number of buckets to 100, modeling for 11-year-olds up to 110-year-old and older (but mostly the dead), the responsibility for the debt in 2018 still shakes out to 20% in the 110+ bucket.

We're still paying the debts of dead people. 1846 is the last year in which the national debt could be truly said to belong entirely to the living, and 1974 was the last year we actually paid off any of the debts of the dead, rather than perpetually refinancing them.

Sorry, I made this post in haste. I meant what I said as a reason why you're being downvoted without saying it. I share your concern that children have been given the bill by their parents. I personally don't agree with your solution, but we can simply disagree on that point.

Not really a solution. It just illustrates the problem of deciding what "fair share" is.

You can't exhume dead bodies and demand that they pay more tax. And the method for allocating new debt to birthyear-based buckets is probably not in line with where the responsibility actually lies.

Since most candidates are running on a platform of promising more free things, it doesn't seem likely.

> Since most candidates are running on a platform of promising more free things

Most candidates are running on a platform of directing the taxes citizens pay towards services the citizens want. It's easy, and dishonest, to deride these as "free things" if you don't want them. Even the tax cut tooth fairy is supposed to be deficit neutral due to "dynamic accounting" gimmickry. The difficult lift is to discern what promises are based on flimflam and which are based on honest accounting and reasonable, time-tested assumptions.

Forget the candidates, what about our current president. He seems plenty happy spending away. Billions in Agriculture subsides to prop up his trade war, just as a start.

While I don't think that subsidies and trade wars are good things. The tariffs collected a lot more than was spent on those agriculture subsidies.

You are aware that the money collected by the tariffs was extracted from American pockets, right, not Chinese? So you are describing a tax and transfer program: Americans who buy Chinese goods are taxed to compensate Americans who are losing income due to the trade war with China.

In the case when prices are increased to cover the tariffs, yes. However, right now the Chinese manufacturers are eating the costs.

> He seems plenty happy spending away

I have more faith in modern politics that one man can veto an entire cabinet of elected officials on what to spend. Whether or not one man can influence them or ask them to keep spending, I have no doubts. But... how many elected lifetime professional politicians sign off on budgets + spending? I am going to guess it is more than "one man".

I'm all for scrutinizing everybody who sits in that chair, but forget the candidates? If you're concerned about the state of our financial situation, I don't see how you can't be scared of these people. It makes me hope they really are just making promises they can't begin to keep.

https://econproph.com/2011/07/14/private-debt-vs-government-...

Government debt is different than private debt.

> for citizens to contribute their fair share of paying down the debt

What does "fair share" mean?

Spending is bound to go up because of population growth and inflation. It would be more appropriate to look at spending and taxation as a portion of GDP (which also goes up with population and inflation). Spending:

https://tradingeconomics.com/united-states/government-spendi...

It has been going down since the Great Recession (44% in 2009 vs. 38% in 2016). Taxation:

https://fred.stlouisfed.org/series/FYFRGDA188S

Taxation was going up a bit relative to GDP towards the end of Obama’s term (which is why the deficit was shrinking), but taxation is now going down (hence the deficit is rising again under Trump).

The answer can be zero. We also own the printing presses. This could act as a general tax on the economy without a tax rate hike.

But why would you do that? That forgoes growth and investment now in exchange for .. what exactly?

Future freedom of action. Being in debt can constrain your future options. If nothing else, it can reduce peoples' willingness to lend to you later when you need them to.

People sitting around doing nothing constrains your actions.

In a country which prints dollars, and borrows dollars, future debt cannot constrain action.

The fear here is whether people will stop lending you dollars, but as we can see in the US we are nowhere close to that situation. (Europe/Germany, which is pathologically committed to not having debts has it even worse/better...people are paying them to take their money).

> because spending can't go down, right?

Why not? Or was that tongue-in-cheek?

In theory, the debt could also be "monetized", meaning converting it to cash via the fed. That should also lead to inflation, but that may be politically easier than raising taxes.

I’m super libertarian and even I would like to see somebody raise taxes and cut spending to cut the deficit… although it would be a battle to get them to lower taxes again once the debt was paid off.

Working for certain branches of the government has made me extremely cynical towards taxes. Just like most non-profit's main goal should be to put themselves out of business, many government programs should have methods of scaling back when objectives are met. I've seen buildings full of people that accomplish nothing but asking for more money.

In recent memory, there's been no trouble getting the American government to lower taxes.

Of course, they've borrowed heavily to accomplish this...

This is a strange opinion to me because there’s many, many people see it coming so it wouldn’t be especially incorrect for people to say this

So you basically didn't read the article, or it passed right over your head if you did...

Could you rephrase that in a way that isn't so insulting that it makes me just want to ignore you?

What are your thoughts on Modern Monetary Theory, that the debt will never be a problem because the US is a currency issuer?

I don't trade at all, but I am curious if there are any prominent indices/securities whose values are tied to the U.S. debt/GDP/etc. ?

As with the climate, the old people in US power don't care about stuff that extends beyond their own lifetimes. The current policies and regulations (or lack of) are evidence of that.

Why would it possibly be a "black swan" event? All the numbers are public and we see it coming from miles away. Black swan event refer to something that isn't easily predicable because of their rarity. The government makes debt payments and calculations constanty. It's not like people just want up one morning and everything changes. That's not how markets work.

The people who pay these "everything will turn in a dine when people really understand" narratives are usually people who the markets are telling them they are wrong and cannot accept it.

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