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The only serious attempt I've seen to address US budget issues was the Simpson-Bowles Commission under Obama in 2010. It recommended a menu of tax increases and benefit reductions. It was promptly ignored by Congress which was not surprising. As an exercise it was useful just to demonstrate what a serious proposal would have to look like and the nature of compromise that would be needed.

Of course, in the 15 years since the fiscal situation has gotten worse, so any of the recommendations it made then would need to be more severe now.

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

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Keynes said something that has always stuck with me.

> Anything we can actually do we can afford

I find it increasingly paradoxical that supposedly, our collective economic capability routinely increases (implied by ever growing GDP), while our budget situation looks ever grimmer.

This is such a profound quote, but most people need more context to understand it. I certainly did when I ran across it a few years ago. I believe our society would be much better if more people did.

Here's a good explanation I found quickly via Google, I'm sure there are others: https://medium.com/mydex/we-can-afford-what-we-can-actually-...

It is a good quote, but the article you link actually undermines it slightly. Keynes' words are relying on a non-expert in construction being confident that construction is easy despite the fact that the systems we use to measure cost-benefit indicating that it cannot or should not be done.

No evidence is mentioned that there was enough available in the way of bricks, mortar, steel, cement or labour. The banker quite likely hadn't checked any statistics or made any estimates. There is no particular reason to consider his opinion even informed on the topic. Britain had just had suffered around a half-million war casualties drawn disproportionately from their able-bodied labourers and their factories for things like steel and cement had probably suffered a few hard blows and were likely being run ragged.

They could have forcefully reallocated resources away from something people thought was more important towards building houses; but the issue that is being glossed over is if someone thought that there were higher priorities than building houses ... what if they were right? The thing about economics is prices aren't arbitrary, they encode a combination of how easy a good is to produce and how much demand there is for a good. They can't just be overridden expecting a good result without factoring in those things.

If Britain had some magic ability to just build whatever they want and there were enough resources available to do whatever then the empire wouldn't have collapsed shortly afterwards. They were way over-extended in terms of what resources they needed vs what they had available.

You're reinforcing the quote. You're questioning the conditional part of the quote, the "if we can do it" part. If they actually couldn't do it, then they couldn't afford it. And that's what Keynes said.

Your second criticism performs the standard hijack. The natural follow on is "if we can do it, and we can afford it, should we do it"? Should we do it is the right question to ask. Just because we can and we can afford it, doesn't mean we should do it. But far too many people try to squelch the debate by asserting that we can't afford it. We can afford universal health care or a modest UBI or a green new deal or whatever expensive thing that the left wants. Whether we should is the question, not whether we can.

There isn't any evidence that they could do what Keynes was suggesting they could. I thought he was making the comment after the war, but I just looked at the date again and realised they were in the middle of WWII at the time! They most certainly did not have spare resources and couldn't possibly afford to be building houses with them. The example he's giving is a case where they couldn't afford it because they couldn't do it. If he'd picked an example where they could do it but people were claiming they couldn't afford it that'd be different and better. But if they could do something we'd probably also find that the financial figures suggesting they could in fact afford it.

"You can afford what you can do" is a truism - if you can do something, the financial system will tell you that you can afford it except if something really weird is going on. If the resources were there to build the houses then the prices would shuffle around until it was also affordable.

It's my first time reading this quote, and the context you provide definitely helped. Thanks.

> Keynes > Anything we can actually do we can afford

Yes, but Keynes also pointed out the result of that: "In the long term we are all dead" :)

Seriously, extraordinary claims require extraordinary evidence, and as much as the economics mainstream likes this to be true nobody ever presented convincing evidence in support of it.

> our collective economic capability routinely increases (implied by ever growing GDP)

Just in the last 3 days, there were several posts on HN that pointed out the inadequacy of the GDP as a measure of economic development, and they presented serious evidence.

Thanks for the profound quote.

I feel that in a sense, "we" (the collective society) can do a lot because of the productivity growth from technology "afford" (enable) us.

In another sense, what "we" (part of that society -- an individual, a group, a government) can do is limited by what we can "afford" (pay). We cannot command the bricks and mortar and steel and cement and labor and architects to build houses and infrastructure without some form of compensation -- money for the architects and builders and cement/steel/mortar/brick makers and movers to exchange for food, drink, and shelter.

And in this grim budget situation, "we" (the government) are running out of ways to ask for productivity (goods and services for healthcare, education, welfare, defense) because we are out of ways to compensate the providers.

What can a government do then?

- force them to offer productivity without equal compensation (communism, colonialism, slavery, forced labor, cheap labor, unequal trade agreements, etc.)

- promise to repay them later (government bonds)

- give them something that they think is valuable but is less so and decreasingly so (money printing)

- encourage giving without compensation (charitable work and donation)

- repay them with compensation collected from those who benefited the most from the economic productivity growth (taxing)

I think the quote "We can afford what we can actually do" encourages the audience to think more about what we (as a society) can do and less about how we (the individual) are compensated.

Might be before your time (1993): https://en.wikipedia.org/wiki/National_Partnership_for_Reinv...

> elimination of over 100 programs, the elimination of over 250,000 federal jobs, the consolidation of over 800 agencies

Didn't solve all budget issues, but was a legitimate and meaningful effort to reduce waste. Polar opposite of DOGE.

Yeah, and the results:

>He had budget surpluses for fiscal years 1998–2001, the only such years from 1970 to 2023. Clinton's final four budgets were balanced budgets with surpluses, beginning with the 1997 budget

I don't really understand why they can't do something like that which was carefully thought out and worked, rather than the present mess. I realise carefully thought out doesn't really go with the current president but I actually had hopes Musk might do something sane.

I think the demographic situation is one difference. The population was younger in 1998-2001 than today, so less of the population was on Social Security/Medicare than now. The article mentions that the increase in spending today is mainly due to Social Security, Medicare, and interest on the national debt.

To illustrate my point, last year the budget was $6.75 trillion and the deficit was $1.83 trillion. Discretionary spending only made up $1.72 trillion of the budget. This means that if Congress decided the federal government shouldn't do anything and cut 100% of discretionary spending, we would still have a slight deficit. It's possible to increase taxes to counteract this, but last year the government only brought in $4.92 trillion so the increase would be significant (and therefore unpopular). If we wanted to continue the surplus, we'd also have to keep increasing taxes through the late 2040s as the proportion of the population on Social Security and Medicare continues to increase. Given that we haven't fixed things for the past 45 years when they would have been a lot easier to fix, I don't see the political will for both spending cuts and massive tax increases to materialize anytime soon.

Clinton's budget surpluses had more to do with the dotcom boom than with his spending plans. Federal spending continued to rise all through the 90s:

https://fred.stlouisfed.org/series/W019RCQ027SBEA

Budgets were balanced by slightly higher tax rates, and a whole lot of capital gains to tax.

We've got a massive market bubble right now, and could potentially make a dent in the deficit by taxing it. The deficit has grown so much since the 90s that you couldn't come anywhere close to balancing it even with an aggressive tax regime, but it would be much more effective than haphazardly firing Federal employees.

We did actually raise taxes a bit -- or rather, tariffs. They've taken in about $150B, more than DOGE has done. But that comes mostly from the poor and middle class, and doesn't come anywhere close to balancing the tax cuts (which go primarily to the upper class).

But it took 5 year, that's slow and inefficient! DOGE can't be slow and inefficient because it's lead by corporate america, not bureaucratic america.

> The only serious attempt I've seen to address US budget issues was the Simpson-Bowles Commission under Obama in 2010.

Wasn't Clinton the last president to balance the budget?

People on HN are younger than you think.

How high can the debt go before it can't go any higher? What happens when the interest payments themselves are higher than annual revenue? What happens when the interest payments are higher than the entire GDP so that even a theoretical 100% tax rate still wouldn't pay it? I feel like this _has_ to crash at some point, but I would have thought we would have hit that point by now. I know what would happen if my own interest debt overtook my own income, but I'm not a government.

Reminds me of this comment I saw under a YT video on the topic, 4mo back: The national debt won’t matter until it does…and then it’ll matter more than anything else.

It's never impossible for the US to pay a dollar denominated debt, as they can always create more dollars to pay it.

The real end point is when no one will buy new debt, because it seems to risky. Either because the US has rapidly growing inflation from creating dollars to pay debts, or because a default seems likely.

Yes, the Fed can always buy the debt so the end point is ultimately runaway inflation. A tale almost as old as money itself.

Spending someone else's money is pretty fun, especially once you find a way to justify it as a moral good.

But this really isn’t about justifying spending as a moral good. The main changes which accelerate this debt are tax breaks for the wealthiest.

Welfare spending and public investment are about a shared sense of public good. That’s really what the US lacks, compared to European countries which support much higher levels of public spending with (historically at least) very broad public support.

>Welfare spending and public investment are about a shared sense of public good

>But this really isn’t about justifying spending as a moral good

hmm

Well, it's been 50 years since I first heard that the debt would cause an imminemt hyperinflation, so I'd say it could be another 50 years.

Sometimes prophets have to revise the date of doomsday, but it doesn't seem to make them any less popular as prophets.

> Well, it's been 50 years since I first heard that the debt would cause an imminent hyperinflation.

I haven't heard anyone predict hyperinflation, but high and under-reported inflation is here and it's not just government debt that is causing it.

20% of the immense USA budget is used to just pay interests.

The gap between revenue, and debt only keeps growing, it's growing at a rate of 4% relative to GDP per year (revenues at ~18%, debt at ~22%), and the lines are diverging with debt growing faster than revenues.

This debt accruance will eat more and more of the budget, less money for all the expenses, diminished levels of public services, less money for infrastructure projects at a time when your infrastructure needs quite a lot of renovation; less money for education, so on and so forth.

At some point it has to give, without reigning in this increasing divergence between debt, and revenues the USA will have to print money to either service interests or basic public services... Inflation might not become hyperinflation but definitely won't be on the 2% target when the burden of interest payment gets really bad.

A leading thesis in the macro space is that the general response to interest burden is for policy to naturally shift to financial repression, or using monetary tools and regulations to suppress real interest rates and devalue the debt stock while dropping interest payments.

Ex: after 2020 debt to GDP went down in real terms despite the massive increase in liquidity.

Of course that just enables more deficit spending and shifts the world more towards a modern monetary policy model, where inflation is the limiting factor.

It's a plausible view. Just as governments that can print their own money will not default, they will print to pay, they will also generally avoid going into a crushing crisis due to interest payment burden. It's politically easier to use the currency as an outlet.

Interest rate payments are supposed to limit the extent of deficit spending (and government budgets getting squeezed by interest is arguably partly deflationary, in that it can spur deflationary crisis and bad real economic environments), but in practice increasing interest payments creates more of a phase shift where the system shifts to forced debt haircuts, and that flows in kind to extra pressure on the currency.

Just look at the current environment where Fed independence is being breached like never before, with the aim of forcing interest rates down without consideration for data driven risk analysis...

It will not crash, they will just print more money, which will raise inflation and devalue debt. So elites and speculators will make money by pumping everything up with debt, and then they will tax (through inflation) the people who need paychecks to survive, while their assets will just go up with inflation. Then the cycle repeats.

We may not live to see a crash but that doesn't mean it won't happen. It doesn't seem like this cycle is stable enough to continue indefinitely

The development of the Global financial system is an ongoing narrative though. It was never going to continue indefinitely. The modern euro dollar system is fairly new, spawned in the 70s. Before that you had a huge shift with the Sterling losing dominance. Then go back another 50 years and you have swarms of independent banks issuing their own currency.

It's a mix of a constantly churning "history rhymes it doesn't repeat" cycles (ex: stablecoins being rehypothecated/used as base level collateral with which to generate leverage is somewhat of a modern version of the late 1800s bank currency cycle), combined with what may be best described as technological development as theories and tools and ecosystems develop.

The zeitgeist is very much that it's about time for the Eurodollar (offshore dollars/Eurodollars bound by the 20 trillion dollar Eurodollar derivative market) to fade, but as of yet there haven't been any good alternatives.

It's a big burden to export your monetary policy and backstop global economic fragility, because it becomes your responsibility. Ex: that doesn't work with a system like China because they don't like putting their own people last in a loud and public way, while in the US the average person regularly and obviously comes away worse off during big interventions. It's also a bit of a trap to step into this, because central banks have mandates to protect systemic stability, yet by unwinding this sort of arrangement, capital flows reverse en-masse which is a clear threat to bond markets (and asset markets in the US's case, since it is so hyper financialized). That's something that is often missed in this conversation. It's a service that has to be provided, and it has costs.

Or perhaps we will attempt to give a system with no bank/regulator of last resort a go again. Probably a "history rhymes" style outcome, but you never know.

> It was never going to continue indefinitely

I'm can't see where you're going with that, can you explain?

The global financial system has gone through successive iterations, each somewhat distinct from the previous version. Ex: post ww2 Bretton Woods to the aptly named "Bretton Woods II" post 1970 gold standard break.

The current iteration is almost certainly a phase, not an end point.

The system itself can be viewed through the lens of a sort of technology that is evolving like any other technology, and concepts like "paradigm shifts" can apply to the monetary system as well.

This particular system that we have is stable (perhaps only) within the context of a stable US centered world monetary order. Usually the conversation quickly veers into the decline of the US, etc, but that's not my point here to be clear. The current system is based on offshore dollars (eurodollars - confusing name, nothing to do with the euro currency) bound together in a 20 trillion dollar eurodollar derivatives market, which essentially takes Fed policy and propagates it through basis trades to the global Eurodollar system that is technically entirely outside of US jurisdiction. When the Fed does something like change interest rates, which is apparently quite important if you look at Bloomberg/Reuters etc, ask yourself what exactly is happening when interbank lending rates change. Map it out, it may be surprising. What's even more surprising is the lack of discussion about what things like rate changes actually mean technically, despite the vast mainstream discussion around these topics.

Since 2020 we have seen first hand that the world is actually quite isolated from the traditional banking space in many ways, on a first order basis. It's the higher order effects (such as policy propagation into global markets which are quite disconnected from Fed policy) that matter. The matter to note is that this is increasingly vestigial in nature, and evolution tends to eventually drop the vestigial remnants.

(I know these conversations tend to veer into doom and conspiracy, that isn't the intent at all. I think most would be surprised if the current system as it stands persists for another 100 years, if not 50, and that's a standard idea to have.)

Ah yes that particular system. Thank you!

Inflating the debt away doesn’t work unless the budget is also balanced.

Otherwise what is inflated away will be recouped by the interest rates when forced to keep borrowing.

Printing money will help paying debt in nominal terms but can scare buying bonds without a premium, why would investors hold bonds paying 4% if the USA government might just devalue it by 3%/year through inflation by the end of the bond term? Increasing rates would cause a spiral.

We remind all federal employees not to use billions as toilet paper, as it is technically defacing the currency.

Nailed it!

Serious question - do cross-party things like this still happen?

It feels like everything is done along party lines now with no room for compromise or working together.

No they do not, except for things that don't even seem to benefit anyone.

Republicans have been openly bragging about preventing the government from doing anything for decades. Specifically about Obama, they vowed to make him a one term president by preventing him from doing anything.

Since that time, the MAGA folk have taken over the party and edict #1 is to hate and obstruct and harm democrats, so anyone who has crossed the party line to get anything done, no matter how important, has been primaried out of the party.

What are your thoughts on https://en.wikipedia.org/wiki/Omnibus_Budget_Reconciliation_... ?

Any budget proposal that cuts Medicare or social security is dead in the water and it's ridiculous for any group to even consider it. Not only would it be political suicide but it would also literally kill people.

Social security lives in a parallel universe to the budget, so they could cancel the program entirely and it wouldn't affect the deficit. Mixing it up with the regular budget is a way to confuse people into being open to killing it, a long-term goal of the cadre of financial geniuses who brought us The Great Depression.

Medicare is another story, and until the US has a come to Jesus moment on single payer healthcare and confronting the regulatory capture in healthcare it will only get worse.

> Social security lives in a parallel universe to the budget, so they could cancel the program entirely and it wouldn't affect the deficit.

100% true, if you're operating in sane-world where anything makes sense.

Here in insane world, my pet theory is that, given another year (maybe two, they might wait until after the midterms, assuming they hold on to congress) we're going to see an attempt to nullify the government debt owned by Social Security by converting it into some convoluted scheme involving crypto-backed-by-the-stock-market or something. Ta-da, debt reduced, deficit reduced (by the amount of interest on the debt owned by the trust fund)! Plus sooooo many opportunities to steal.

This'll kill the program stone-dead, but it'll take a little while. Kinda like how they already killed Obamacare by removing the individual mandate, and they're just waiting for the death-spiral to hit bottom so they can declare the program a failure and proof that we should never try to fix healthcare in any kind of actually-decent way again.

> come to Jesus moment

Haha. Last time it took the great depression and intense economic pain for americans to snap out of it and actually build a slightly better world (New Deal). I wouldn't expect it to take anything less this time around. Europe required 2 world wars and over 100M dead.

> they could cancel the [social security] program entirely and it wouldn't affect the deficit

I don't think this is true. During the surplus years the savings vehicle was US bonds. So social security lent the US government money.

Now that we are not in a surplus situation, we are using money from those bonds to pay benefits (we are also using SS revenue of course, only part of the payouts come from the bonds).

So if the program were cancelled, the bonds could revert back to the US government - in other words a bunch of debt would be forgiven and would not need to be paid out. Deficit (and debt) reduced.

> So if the program were cancelled, the bonds could revert back to the US government - in other words a bunch of debt would be forgiven

That seems like a passive-voice way of saying "We could steal from millions of people, pocketing the retirement savings they worked for their entire lives."

Also, there's nothing stopping Social Security from upping the cap and thus returning to surplus, aside from the group of people who would absolutely love to steal from the fund.

>That seems like a passive-voice way of saying "We could steal from millions of people, pocketing the retirement savings they worked for their entire lives."

You brought up cancelling the program. I was just pointing out that your statement about it having no effect on the deficit was incorrect.

> That seems like a passive-voice way of saying "We could steal from millions of people, pocketing the retirement savings they worked for their entire lives."

For a lot of younger people the view is they promised themselves something unsustainable and expect young people to cover it.

Is it? Is that a thing that has been shown to motivate young voters?

If anything I would believe that younger voters would be in favor of more social safety net. Many would be comfortable with the government outright nationalizing most industries.

More social safety net that goes to everyone, not just the people directly responsible for destroying this one. It's hard to be asked to bail out people who intentionally spiked the ball.

I guess "the children are our future" really was what they meant, we just misinterpreted it.

Our health system already kills people, and people seem essentially okay with that.

But, I agree about the political suicide. I unfortunately don't believe anyone is even going to attempt reform after how successful the Republican party's attacks on Obamacare were. People will just conclude there's no reward for trying.

A couple of points: 1) The deficit applies to discretionary budget. Medicare and Social Security are not discretionary. 2) Really. You can't cut anything out of medicare and social security (both of which are the most expensive program of the kind compared to any other first world equivalent) without killing people? There is not a cent of waste in these programs?

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