Taxing the rich is fine, likely even necessary, but it’s hardly sufficient. The major problem facing the West is that our economic policy is dictated by short term growth. This is because individual investments (retirement plans and pensions, the largest holders of equities) demand that growth. The amoral psychopaths who implement those demands in exchange for money are abundant and replaceable. They do skim an excessive amount off the top, but they aren’t the root of the problem.
The demand for growth at all costs is what led us to outsource our core industries, sell off the mines and factories, and financialize every aspect of the economy. Higher taxes would not have prevented this. Even if we confiscated all the wealth of the top 1%, it would not fund our obligations for long and it would not correct our trajectory.
The postwar US was very different. Cold War paranoia and military Keynesianism ensured that core industries were well funded and key infrastructure was built and maintained. Modern China uses a unique model where the central government sets a vision and provinces allocate state investments according to regional needs. Neither of these models is probably appropriate for the present day US, but there must be something out there besides neoliberalism and full privatization. (Futarchy? Some new branch of government to direct state investment? Allow states to own and operate businesses? Creativity is necessary.)
@iamnowhere this is music to my ears. Under the slap stick stupidity of Congress (albeit with real consequences unfortunately) lay bigger problems.
I'll redo the argument slightly differently. The core management problem is demands on resources always exceed resources. So perhaps the single salient aspect of management is the strategy and parameters which yields a procedure on what demand to reject leaving YES to remaining demands.
One weakness of the current strategy is it's too greedy and short termed. Now perhaps the Chinese take it too far the other way (not consequence free btw) but we USA are too anemic short term.
Perhaps one change post 1980 is prices may have to go up to trade for longer term stability and jobs in the US. Second, although I think corps and top 5% are under taxed (after writeoffs are incl) Washington's congress doesnt have the institutional credibility to tax it because perpetual debt spending is normal ... which is variation on all that matters is the next election ie short term thinking.
Congress is really competent about getting voters stuff now --- they have no self sourced and self disiplined way to manage demands --- and paying for it after the next election by more debt. Nowadays they even stopped faking concern about debt.
> The core management problem is demands on resources always exceed resources. So perhaps the single salient aspect of management is the strategy and parameters which yields a procedure on what demand to reject leaving YES to remaining demands.
True and important. One reason the US did so well after WWII was that resources were abundant, and the technology to exploit those resources improved rapidly until the middle of the century. Although I think industrial policy and infrastructure helped as well.
> Perhaps one change post 1980 is prices may have to go up to trade for longer term stability and jobs in the US.
I definitely think so. It’s strange how luxuries have become so cheap while essentials (food, transportation, and shelter) keep becoming more expensive. As a society I think we could afford to pay a little more for things like smartphones and TVs if that money could be moved towards lowering the cost of essentials. Tariffs and state investment (Intel) may have actually opened the door to thinking about things like this, but we’re a long way from a coherent strategy. I also worry that the bungling of these things may lead the next administration to return to business as usual, if that’s even possible at this point.
Here again I agree. Housing, health insurance, and education costs have risen far exceeding inflation elsewhere. Post-covid food prices are higher and may not return anytime soon. These are serious head winds for the bottom 70%.
Now the return of the 1960s seems nieve when the middle class was more secure. The return of clothing manufacturers, umbrella, USB cords, and a lot of the misc stuff made in China we get at Kmart is not and should not come back to the US.
We could do better by getting more of our supply chain in medicine, manufacturing into NA or Europe. We could also help by a 10 year plan to get debt down with consequent reduction on interest payments in DC. Interest payments on debt are among the top 3 largest federal spends.
Bush junior tried to increase housing ownership which indirectly lead to the 2008 crisis since lenders and brokers passed risk to the fed among other things. Perhaps the fed ought to work with states to simplify and make zoning uniform. From what I understand zoning complications are a major contributor to housing shortage on the supply side.
This is an incomplete list ... but you're right: Washington is a 100 light years away from a technocratic industrial policy that is hybrid capitalism through state strategy.
> This is because individual investments (retirement plans and pensions, the largest holders of equities) demand that growth.
I don't disagree with you but it's much worse in the EU, where mandatory contribution to the state for pension funds are gigantic ponzi schemes: the money wasn't invested in equities but directly spent. Now most EU countries are heavily indebted and simply shall soon have no way to honor the pension they promised their citizens. Greece already (partially) defaulted on its public debt a few years ago. More countries shall follow. France is in a particularly bad position at the moment, for example.
Now there are private, optional, pension funds in the EU and citizens have to opt-in to these and these do put their funds in equities etc. Still beats a full-on ponzi, if you ask me.
Oh yes, same with Social Security in the US. I think we will be able to keep it going a little longer than EU pensions, but short of a miracle (or massive inflationary printing) there’s no way it will stay afloat.
How would massive inflationary printing solve the fact that at some point in the future there will not be enough people working to support people in retirement? (I think inflation would make the problem worse, as the current amount of money in the Social Security Fund would lose its value. But I could be wrong.)
Printing could fund entitlements at the cost of diluting purchasing power for everyone (including retirees). But Social Security is indexed to inflation, so it would pay out more as long as the government chooses to fund it through whatever means are available. Effectively this would continue to fund retirees while taxing all nonretirees, especially those who don’t own assets. Not a great situation and it would have political consequences, but it is theoretically possible.
I think we have enough people to theoretically support retirees (Japan does it with worse TFR), the problem is that declining relative wages makes it politically difficult, as lower earners would share a disproportionate burden. And retirement is just one issue of many, we are trying to run a giant resource-hungry country on a service economy. We’re only able to get away with this by using our aging military resources to force other countries to accept our role as a global middleman. It isn’t sustainable.
I now understand what you mean. This is how post-WW1 Germany tried to pay its WW1 "fines" which were pegged to gold [0]. The result was hyper-inflation - and 2 years later when this scheme was thrown out the currency stabilized. Most likely the same would happen in your scenario - the retirees would come ahead for a while, but only for a short time. So I do not think this is a solution for retirees (no matter their large political power)
These days currencies have no real assets behind them. One cannot expect to be able to purchase real goods / services indefinitely with a fictional construct (fiat currency)
It’s more complicated than that, as Germany’s punitive war debt was designed to cripple it and it didn’t have many options. It’s actually fairly difficult to create hyperinflation without being trapped in an extreme situation. But I agree that it’s generally a bad idea to put yourself at risk of it.
Fiat isn’t necessarily backed by nothing, that’s a misconception. It’s backed by the strength of the underlying economy, the perceived value of claims on the nation’s resources and services, the political stability of the nation, and the need to hold that currency for trade. The problem with fiat is that when those things are in decline, the lack of hard assets can cause a rapid devaluation, as the “invisible assets” backing the currency are now devalued. This compounds the decline.
Ok ok. I can’t wait to see how 2026 and 2027 will shake out. Trump’s choice to replace Jerome Powell will drive short term interest rates to zero because, among other things, US pays around $1 trillion / year in interest for its debt.
Getting these rates to 0 will require the Fed to print massive amounts of USD. Let’s see then how the USD is backed by something other than thin air.
(BTW - lots of countries managed to achieve hyperinflation: Zimbabwe, Venezuela, Russia and my home country of Romania in the 90s. It is not that difficult)
If they lower rates too much, they will have a problem finding buyers for Treasuries, so they are somewhat constrained. We’re not living in the pre-Covid era anymore, and people have better options than low % US Treasuries. The only way I can imagine ZIRP again is if a deflationary crash were about to hit. That might happen (eventually it will happen) but I am not foolish enough to bet on the timing.
The awkward US system is fairly robust against hyperinflation because the government can’t just print money directly. The one option for doing this, minting a “trillion dollar coin” and depositing it with the Treasury, is extremely risky because of the potential impact on normal Treasury funding. I would only expect this as a last resort when the economy is already heading towards disaster.
I suspect that true hyperinflation is an artifact of nations with wrecked economies trying to sustain themselves on fiat. Once you reach that point it’s already too late, so hyperinflation is a symptom, not the cause. In effect it’s a default on debts and a collapse of the monetary system.
> Neither of these models is probably appropriate for the present day US, but there must be something out there besides neoliberalism and full privatization. (Futarchy? Some new branch of government to direct state investment? Allow states to own and operate businesses? Creativity is necessary.)
The French already pioneered this[0]. Their GDP per capita has flatlined for over 15 years, though in real terms (PPP) it's fairing better. Notably, they remain a modern Western nation that still has significant capability for building new things.
Yes, that’s a great example and it’s unfortunate for the French that France has been steadily moving away from it.
I think that part of the problem is that holding firm against international capital, domestic opportunists, currency speculators, and so on requires an iron political will and a certain tolerance for short term pain. Postwar France was able to manage this but later generations don’t have the same perspective. It may be a cyclical political problem without a good solution, other than documenting the problem for future generations whenever it arises.
The demand for growth at all costs is what led us to outsource our core industries, sell off the mines and factories, and financialize every aspect of the economy. Higher taxes would not have prevented this. Even if we confiscated all the wealth of the top 1%, it would not fund our obligations for long and it would not correct our trajectory.
The postwar US was very different. Cold War paranoia and military Keynesianism ensured that core industries were well funded and key infrastructure was built and maintained. Modern China uses a unique model where the central government sets a vision and provinces allocate state investments according to regional needs. Neither of these models is probably appropriate for the present day US, but there must be something out there besides neoliberalism and full privatization. (Futarchy? Some new branch of government to direct state investment? Allow states to own and operate businesses? Creativity is necessary.)