“Today, each taxpayer faces a significantly higher tax rate on a dollar of wages than on a dollar of capital income. Republican and Democratic Congresses continue to channel most increases in spending to the elderly, who now are less likely than the nonelderly, with or without children, to be among the poorer groups in the population. Those two priorities now squeeze out almost every other significant federal government effort.“
So on the one hand, I am probably mostly aligned with your views. But I have a problem with the false equivalence above.
High marginal tax rates on capital reduce investment and so the medium and long-term growth of the economy. And of course high marginal capital gains rates have been shown to reduce tax revenue to the government
You describe cutting capital gains rates as if the reality were static - i .e. that all the revenue would simply flow to government while the economy was unchanged. But as I am sure you know, this is false.
If your point were solely that we don’t need even lower capital gains rates than we have now, that would be fair. But you half state, and 100% imply with your text, that current capital gains rates are a bad idea and that government would have more revenue in the long term if capital gains rates were higher. And this is likely false - and surely false if said rates were raised substantially.
Now i don’t defend the spending on the elderly. Entitlements need to be reigned in, and Trump is exactly as terrible on this issue as are the Democrats. Period.
On the pro-abundance agenda, we need 4 things (in no particular order):
1) low marginal capital gains rates, and not-too-high marginal income tax rates
2) deregulation
3) reign in the entitlements
4) cut back other wasteful federal spending
Trump promises to deliver 1), 2), and 4). Vivek and Elon are on board with DOGE to make 2) and 4) real.
This is the best hope we’ve had along these lines in more than 20 years now.
True, lacking 60 votes in the Senate, it won’t be perfect, but it’ll be more than just a good first step.
Yeah, we ain’t gonna get 3) in the next 4 years. More’s the pity. But we should stop crying about only getting 3/4ths of a loaf, and imo focus on *actually* making that 3/4ths of a loaf a reality.
It troubles me to hear Social Security characterized as a government expense and, by implication, a drag on the US economy. My understanding is that Social Security, an insurance system, is currently funded by dedicated revenue (and by pre-funding via the trust fund) and that recipients are happy with the payments they get and are scheduled to get. Doesn't that make it a wash? Doesn't it contribute $1 trillion a year to GDP while also guaranteeing future income to taxpayers? As for future SS shortfalls, the question should be: Is Social Security the more equitable and cost-effective way for Americans to insure themselves against poverty in Old Age? My work has taken me to other countries, where PAYGO social insurance systems have been replaced by attempts at market-based "collective defined contribution plans" that shift longevity risk and investment risk away from the government to individuals. The complexity, conflicts, expenses, and risks of these programs are substantial, in my observation, and the issues have not been solved even after decades of experimentation in some cases (like Chile). We can choose to contribute a bit more to Social Security starting before 2034, or contribute even more to a risky, expensive national defined contribution plan in the future. The strengths of Social Security should not be taken for granted. It may need tweaking, but it's better than the alternatives. High earners will barely notice a higher FICA limit. Wall Street would love for SS to die. Please don't hand them ammunition to use against it.
“My understanding is that Social Security, an insurance system, is currently funded by dedicated revenue (and by pre-funding via the trust fund…”
Your understanding is wrong.
Even putting aside the trust fund fiction, the excessive growth in annual benefits - partly due to formulas used, partly due to the sheer numbers of Boomers retiring and there not being enough busters (Gen X and even Millenial) to easily support them all - is outstripping the source of funding.
Go read a few posts from Romina Baccia at https://substack.com/@debtdispatch to learn all about it. I don’t agree with all of her proposals to address the problem (with several, I very much do), but she cover the topic in a way that allows you to learn why what you have in your head is incorrect.
Social Security need not be eliminated - and politically that ain’t ever gonna happen - but it does need to be reformed. And the solutions ain’t even all that hard (save finding the political will, of course, which clearly is).
Well said. Collateral damage includes favoritism of the Fed Gov in federal court due to the huge debt, when any significant amount of money is involved. That solves nothing, and exacerbates the diminishing faith in the federal justice system. If the world is going to come to an end, it all makes sense. Otherwise, it makes no sense. Where have all the patriots gone?
“Today, each taxpayer faces a significantly higher tax rate on a dollar of wages than on a dollar of capital income. Republican and Democratic Congresses continue to channel most increases in spending to the elderly, who now are less likely than the nonelderly, with or without children, to be among the poorer groups in the population. Those two priorities now squeeze out almost every other significant federal government effort.“
So on the one hand, I am probably mostly aligned with your views. But I have a problem with the false equivalence above.
High marginal tax rates on capital reduce investment and so the medium and long-term growth of the economy. And of course high marginal capital gains rates have been shown to reduce tax revenue to the government
You describe cutting capital gains rates as if the reality were static - i .e. that all the revenue would simply flow to government while the economy was unchanged. But as I am sure you know, this is false.
If your point were solely that we don’t need even lower capital gains rates than we have now, that would be fair. But you half state, and 100% imply with your text, that current capital gains rates are a bad idea and that government would have more revenue in the long term if capital gains rates were higher. And this is likely false - and surely false if said rates were raised substantially.
Now i don’t defend the spending on the elderly. Entitlements need to be reigned in, and Trump is exactly as terrible on this issue as are the Democrats. Period.
On the pro-abundance agenda, we need 4 things (in no particular order):
1) low marginal capital gains rates, and not-too-high marginal income tax rates
2) deregulation
3) reign in the entitlements
4) cut back other wasteful federal spending
Trump promises to deliver 1), 2), and 4). Vivek and Elon are on board with DOGE to make 2) and 4) real.
This is the best hope we’ve had along these lines in more than 20 years now.
True, lacking 60 votes in the Senate, it won’t be perfect, but it’ll be more than just a good first step.
Yeah, we ain’t gonna get 3) in the next 4 years. More’s the pity. But we should stop crying about only getting 3/4ths of a loaf, and imo focus on *actually* making that 3/4ths of a loaf a reality.
It troubles me to hear Social Security characterized as a government expense and, by implication, a drag on the US economy. My understanding is that Social Security, an insurance system, is currently funded by dedicated revenue (and by pre-funding via the trust fund) and that recipients are happy with the payments they get and are scheduled to get. Doesn't that make it a wash? Doesn't it contribute $1 trillion a year to GDP while also guaranteeing future income to taxpayers? As for future SS shortfalls, the question should be: Is Social Security the more equitable and cost-effective way for Americans to insure themselves against poverty in Old Age? My work has taken me to other countries, where PAYGO social insurance systems have been replaced by attempts at market-based "collective defined contribution plans" that shift longevity risk and investment risk away from the government to individuals. The complexity, conflicts, expenses, and risks of these programs are substantial, in my observation, and the issues have not been solved even after decades of experimentation in some cases (like Chile). We can choose to contribute a bit more to Social Security starting before 2034, or contribute even more to a risky, expensive national defined contribution plan in the future. The strengths of Social Security should not be taken for granted. It may need tweaking, but it's better than the alternatives. High earners will barely notice a higher FICA limit. Wall Street would love for SS to die. Please don't hand them ammunition to use against it.
“My understanding is that Social Security, an insurance system, is currently funded by dedicated revenue (and by pre-funding via the trust fund…”
Your understanding is wrong.
Even putting aside the trust fund fiction, the excessive growth in annual benefits - partly due to formulas used, partly due to the sheer numbers of Boomers retiring and there not being enough busters (Gen X and even Millenial) to easily support them all - is outstripping the source of funding.
Go read a few posts from Romina Baccia at https://substack.com/@debtdispatch to learn all about it. I don’t agree with all of her proposals to address the problem (with several, I very much do), but she cover the topic in a way that allows you to learn why what you have in your head is incorrect.
Social Security need not be eliminated - and politically that ain’t ever gonna happen - but it does need to be reformed. And the solutions ain’t even all that hard (save finding the political will, of course, which clearly is).
Well said. Collateral damage includes favoritism of the Fed Gov in federal court due to the huge debt, when any significant amount of money is involved. That solves nothing, and exacerbates the diminishing faith in the federal justice system. If the world is going to come to an end, it all makes sense. Otherwise, it makes no sense. Where have all the patriots gone?