DEBT SPIRAL: Interest costs on U.S. debt to exceed economic growth by 2045💸💸💸

[dairyair]

Interest costs on U.S. debt to exceed economic growth by 2045, increasing risk of fiscal crisis

"Interest costs will reach a record 3.2 percent of GDP this year – exceeding the cost of defense and Medicare," said a budget watchdog group. That may signal a debt spiral.

justthenews.com

Many like myself would argue we are already in that debt spiral and that the 2045 figure is only possibly by keeping on the rose colored glasses and presuming that at some point on the path between now and then, people will actually embrace some pain points rather than jumping off a cliff and continuing down the same path. As an example the 2045 figure probably presumes that when Social Security goes "banktupt" in 2035 the pain is just allowed to happen and the shortfall in benefits won't be borrowed and thrown on to the rising debt.

Yeah that won't happen so in reality we are probably in that spiral now and have been for a while.



The thing that makes me far more pessimistic than most is that the projections pretty much assume things will continue as they when life is seldom that way. Many people earn a good living until suddenly they can't as an example. Many people are in great health until they aren't. That is the great argument about where you draw the lines in a planning discussion. "Just save $500 a month for the next 20 years" presumes you never have bumps in the road. My style of planning presumes the bumps and thus is far more conservative.

So what is a debt spiral and why is it so bad? You can't grow your way out of the debt at the point. Worse still (and this is why I say we are there now) the pain on the return is so large that the shock can't be fully absorbed and even if successful, there are a lot of secondary factors that just show you managed to mitigate the worst outcome while still having serious secondary outcomes be major problems.

So you can't grow your way out of the debt when the amount of debt you need is more than the economy can likely grow. If you need to add 8% of debt a year and an economy as large as the United States can grow reasonably 3-5% a year (which is great grown BTW) then the debt will just keep growing.

We understand this in smaller matters quite easily. You can't earn your way out of a spending problem. You can't exercise your way out of an eating problem.

The secondary matter is that big spending cuts likely SLOW the rate of economic growth. I'd say that is 100% true but you can't just keep adding debt either. It's a tightrope walk for the most part. Right now the Trump administration is talking about trying to get out spending down to ONLY borrowing a trillion dollars a year.

That will indeed bring pain but seriously, the pain is coming in one form or another. You can't go from borrowing $2 trillion a year to a dollar less than that without someone having some pain involved.

There's a lot more pain coming too. The best one could hope for is promoting the most growth possible while trying to absorb just enough pain to try to correct the path going forward. There is no path with zero pain. It doesn't exist.

The future pain points are coming and the less pain we are willing to confront today, the more we will confront in the future.

Isn't the 1-2% savings from DOGE going to solve that?

Hmm, let's see, which president spent the most ever in a 4 yr term?
That's right, trump. The biggest spending president in history. Outside the war time presidents and Reagan.

 

[Kushinator]

We've already got a pretty big pile of treasuries out there. Shouldn't any debasement have occurred already?

It does every day. It's a terrible idea to let Congress spend at it's discretion.

We've been through this. Remember?

 

[dairyair]

You believe that the last tax cuts during the previous Trump administration we tax cuts for the rich?

It's not my problem that you've been lied to by the Dems, Libs and Progs, and their compliant and complicit MSM.
You need to work on that.

Just the taxes that remain permanent.

Us little taxpayers cuts were temporary. Designed to go away after the last term of the last president. But now those taxes go away under this new terms president.

 

[JohnfrmClevelan]

It does every day. It's a terrible idea to let Congress spend at it's discretion.

We've been through this. Remember?

Debasement due to too much money happens every day? I'm just not seeing that.

I know that we've been through this argument before, but I still don't buy into the idea of govt. spending crowding out investment. In fact, I think it's more likely that govt. spending crowds in investment. It certainly happens when we deficit spend our way out of recessions.

 

[Kushinator]

Debasement due to too much money happens every day? I'm just not seeing that.

We have inflation. Do you see that?

but I still don't buy into the idea of govt. spending crowding out investment.

You don't have to buy it. We can observe when this occurs. Luckily enough, it hasn't gotten to the point where we have a full-blown currency crisis.

In fact, I think it's more likely that govt. spending crowds in investment.

Absolutely! There are instances when government spending crowds in private investment. Countercyclical policy is based on this theory by Keynes which turned out to also be observable.

We've been through this already.

 

[Trumpetman]

This is your thread, and you obviously think that the national debt is a problem.

Do you think that a government with its own currency goes into real, household-style debt when they issue bonds? Or is it merely another way that they exercise their power to create and spend currency, just with another step added?

I'm familiar with MMT but the points that get glossed over are what most of us call, valid criticisms.

You say......just with the step added.

My point is, if the step is really superfluous, why add it.

That was why I circled back on taxation. When you get deep into the discussion about how honestly governments can just issue their own currency and spend as they want with zero taxation necessary in reality (minus inflationary concerns) then you get lots of empty platitudes about why all the taxation has to be on the "rich" and lots of mentions about equality, concentration of wealth and so on.

However how can wealth REALLY be concentrated in terms of currency when the government can issue, borrow and do whatever they want there?

The issues here often drift to "education" and "managing societal expectations" and well, they are far off any actual economic points.

I find the explanations for such matters lacking. If it isn't a zero sum game with regard to borrowing and spending, that is also true on the taxation side.

 

[JohnfrmClevelan]

We have inflation. Do you see that?

Of course I see it, but there are other reasons for the inflation.

You don't have to buy it. We can observe when this occurs. Luckily enough, it hasn't gotten to the point where we have a full-blown currency crisis.

Absolutely! There are instances when government spending crowds in private investment. Countercyclical policy is based on this theory by Keynes which turned out to also be observable.

We've been through this already.

I haven't been on DP for a couple of years, so forgive me if I don't remember everything we talked about.

How do you picture a full-blown currency crisis unfolding, if it were to happen?

 

[JohnfrmClevelan]

I'm familiar with MMT but the points that get glossed over are what most of us call, valid criticisms.

You say......just with the step added.

My point is, if the step is really superfluous, why add it.

We issued bonds under the gold standard for good reason, so we wouldn't overextend our gold obligations. We just didn't change when we went fiat. And there are still good reasons to issue treasuries; they are another tool the Fed has to effect monetary policy, for instance.

That was why I circled back on taxation. When you get deep into the discussion about how honestly governments can just issue their own currency and spend as they want with zero taxation necessary in reality (minus inflationary concerns) then you get lots of empty platitudes about why all the taxation has to be on the "rich" and lots of mentions about equality, concentration of wealth and so on.

The operational reason for taxation is to reduce the private sector's potential demand so the government has fiscal space in which to spend. You don't want to have more demand than your economy can handle.

The economic reason for taxing the rich more is because large disparities in income result in lower consumption and greater demand leakage (savings). That demand gap has to be filled, so that means the PS must go into more debt and/or the government must deficit spend, just so the rich can sit on giant piles of money that don't do anything.

The political reason should be obvious - superrich guys have hijacked our government.

However how can wealth REALLY be concentrated in terms of currency when the government can issue, borrow and do whatever they want there?

Currency concentration isn't the issue. Income concentration, and the resulting wealth concentration, is the problem.

The government could certainly mitigate the structural problems, both by taxation and redistribution and by addressing the structural problems themselves. But the rich guys have made sure that isn't going to happen anytime soon, and they have the perfect president to make sure none of that gets addressed.

The issues here often drift to "education" and "managing societal expectations" and well, they are far off any actual economic points.

I find the explanations for such matters lacking. If it isn't a zero sum game with regard to borrowing and spending, that is also true on the taxation side.

Education, and economic literacy, will remain issues as long as politicians treat the national debt as household debt and continue to pander for votes based on voter ignorance.

 

[Kushinator]

Of course I see it, but there are other reasons for the inflation.

I'm not even speaking for money supply growth. I'm talking about when income exceeds productivity. That's that hart of the demand induced inflationary reality of trusting Congress to manage spending without a financial intermediary (like we have today)... they are politicians.

I haven't been on DP for a couple of years, so forgive me if I don't remember everything we talked about.

You kind of post the same thing every couple of years.

How do you picture a full-blown currency crisis unfolding, if it were to happen?

Well, we're at risk of one right now. As the world continues to dump dollars (really, it's dumping dollar denominated assets) because this administration is making it more costly to trade goods for dollars, input shortages will manifest into pockets where giffen goods markets emerge. This initial wave of debasement will be followed by a revaluation and severe decline in aggregate demand. The currency rebounds as a chunk of debt was erased by high levels of inflation, and an entire generation of productivity is lost (recession / depression). All the while, the rest of the world learns how to live with less access to the American consumer.

Now in terms of the risks of unbinding Congress's fiscal authority: They aren't good at making unpopular decisions because they want to be re-elected. We see crowding out occur all throughout the developed world, and less in the U.S. because we don't have high levels of government spending (%GDP) relative to other countries. Sure, you can find examples of developing countries that have high levels of government spending and strong private sectors, but they are in the process of converging.

The fact of the matter is that the U.S. private sector is a beacon of investment because we don't have higher levels of government spending. The only foreign company within a sniff of top U.S. valuations is a nationalized Saudi Arabian oil company. Of course, this can come at an expense to others, like the poor and disadvantaged. And i'm not forgetting that some investments cannot be done without government involvement.

Giving politicians unrestrained spending authority is ****ing stupid.

 

[Econ4every1]

You should just be more brief and say... yo, bro, MMT and then we can just reply with all the conventional criticisms and concerns around it.

To be clear, operationally, as a description of of sovereign money using government's work, MMT is correct.

So, please.....Tell me where descriptions of sovereign money, of which MMT is one, are incorrect.

Isn't it funny how folks like yourself never have cite, explain or prove anything.

Proof? There is no "proof" in something as complex as macro-econ, evidence yes, but proof will always be illusive in a system as complex as as an economy with nearly $30 trillion in GDP. That said, I'm happy to explain and provide evidence and sources.

I mean starting with if debt isn't a real concern and spending short of inflation isn't a real concern and taxes are just a form of inflation management, then at some point you have to get beyond "management of societal concerns and equity" when it comes to "taxing the rich".

I understand the premise of MMT but it really falls apart on the explanation of the taxation angle. It becomes too many rainbows and unicorns there.

Speaking of lack of explanation or citing anything.....Touché?

Your turn.

 

[Econ4every1]

I'm talking about when income exceeds productivity.

I just want to interject here.

Productivity nationally? Because most of the stuff at Best Buy isn't made here in the US. US productivity moves it once it hits our shores, and builds a store and hires employees to sell it, but most of the labor to fill Best Buy isn't happening here in the US

If Trump Keeps Tariffs in effect, I think we'll see what you are pointing out (though I think he'll chicken out), but as long as the world is happy to sell their productivity to the US, then don't think that debt in excess of productivity is necessarily an issue.

If trade continues to decline, the foreign sector will continue to sell off treasuries (as they will accumulate fewer dollars in trade). In a perfect world those treasuries, or more specifically, the money that treasuries are sold for, will have to make their way back to the US. The purchases made with those dollars should be taxed increasing tax revenue to the government lowing deficits (though I admit that there's a lot of the devils in the details here). If Trump get's his way, and he makes foreign goods too expensive, then you'll be right, but the result here wasn't inevitable, it's an unforced error. like punching yourself in the face. We know (in a tariff scenario) all of the unreachable productivity (foreign goods not being shipped to the US or to expensive for most to purchase) will not be replaced with good paying jobs here in the US to make stuff to fill Best Buy (a stand-in for all the stores whose shelves will lay empty). The reality is there will be a glut of money and not enough productivity to make the stuff people want.

 

[Trumpetman]

To be clear, operationally, as a description of of sovereign money using government's work, MMT is correct.

So, please.....Tell me where descriptions of sovereign money, of which MMT is one, are incorrect.

So to clarify here you ask if something is correct and incorrect and then below declare that there is no proof or that you can't basically demand or declare something to be correct. Be consistent here.

Proof? There is no "proof" in something as complex as macro-econ, evidence yes, but proof will always be illusive in a system as complex as as an economy with nearly $30 trillion in GDP. That said, I'm happy to explain and provide evidence and sources.

Aren't you replying to a post that wasn't directed at you?

Speaking of lack of explanation or citing anything.....Touché?

Your turn.

It's pretty simple, I hit the key criticism of mine pretty clearly. Debt isn't important, spending isn't important but somehow taxation is incredibly important and that is just too incredibly convenient. That's the shorthand version of it. Within these "tax the rich" MMT scenarios I've read, the chief complaint is that the "rich" keep their money and do not spend it while the poor obviously use it to "survive" but the reality is that the rich seldom have their money just sitting in some savings account, it's in the form of assets.

When you have a criticism of Warren Buffet as is often made and declare that he pays a far lower tax rate than his secretary as an example, it is because his secretary is paid a salary while Buffet has his corporations control his money for him and then when they give him his money they do so via dividends that he gets paid by holding large amount of assets aka STOCKS.

So if the secretary gets paid $100k and is taxed on it as income that's a higher rate than a dividend. If the company paying the dividend were paying at say 4%, I'd need to hold $2.5 million in stock to get that same amount of dividend income at the lower rate. Again that stock holding isn't "savings" and something I am intentionally trying to deprive others of in the economy. It is ownership interest that I have to keep to get that dividend income.

Income is something almost all investor class wealthy people tend to avoid. It's far easier to simply control money via your assets than to worry about a "salary" and since intelligent wealthy investors understand this the claims from MMT proponants that they need to "tax the rich" when the other two legs of the chair really show they don't need to do anything to borrow and spend just fall flat to me.

 

[JohnfrmClevelan]

It's pretty simple, I hit the key criticism of mine pretty clearly. Debt isn't important, spending isn't important but somehow taxation is incredibly important and that is just too incredibly convenient. That's the shorthand version of it. Within these "tax the rich" MMT scenarios I've read, the chief complaint is that the "rich" keep their money and do not spend it while the poor obviously use it to "survive" but the reality is that the rich seldom have their money just sitting in some savings account, it's in the form of assets.

It doesn't matter whether or not the rich keep dollars in bank accounts; it's the income distribution that matters. A company's income gets distributed to labor via wages and to rich guys via dividends and/or stock options. If one gets less, the other gets more.

When you have a criticism of Warren Buffet as is often made and declare that he pays a far lower tax rate than his secretary as an example, it is because his secretary is paid a salary while Buffet has his corporations control his money for him and then when they give him his money they do so via dividends that he gets paid by holding large amount of assets aka STOCKS.

So if the secretary gets paid $100k and is taxed on it as income that's a higher rate than a dividend. If the company paying the dividend were paying at say 4%, I'd need to hold $2.5 million in stock to get that same amount of dividend income at the lower rate. Again that stock holding isn't "savings" and something I am intentionally trying to deprive others of in the economy. It is ownership interest that I have to keep to get that dividend income.

Income is something almost all investor class wealthy people tend to avoid. It's far easier to simply control money via your assets than to worry about a "salary" and since intelligent wealthy investors understand this the claims from MMT proponants that they need to "tax the rich" when the other two legs of the chair really show they don't need to do anything to borrow and spend just fall flat to me.

I think we are pretty clear on the fact that the government doesn't need the money from taxing the rich. But as I said before, there are other good reasons to do so.

 

[Econ4every1]

The best thing we could do is Walmartize healthcare

In this world you see, who gets to decide if a procedure is covered? Who get's to decide how much a medical care costs? Because, for most commodities the cost is whatever the market will bear. How much do you think life saving medication is worth to the person that needs it? Do you think that's a good measure?

If the idea is competition, how many real competitors to Walmart are there?

 

[JohnfrmClevelan]

In this world you see, who gets to decide if a procedure is covered? Who get's to decide how much a medical care costs? Because, for most commodities the cost is whatever the market will bear. How much do you think life saving medication is worth to the person that needs it? Do you think that's a good measure?

If the idea is competition, how many real competitors to Walmart are there?

America is the only country in the world where "Walmartizing healthcare" sounds like a good idea to some people.

 

[aociswundumho]

In this world you see, who gets to decide if a procedure is covered? Who get's to decide how much a medical care costs?

Prices would appear just like they do in any other market. Why wouldn't they? There's no reason to think Walmart would be the only provider. Walmart already has an optical department, and you still have plenty of other options.

Because, for most commodities the cost is whatever the market will bear.

You want the price to be "whatever the market will bear", because the alternative is price controls, which leads to shortages and rationing. You know, like in socialist economies.

How much do you think life saving medication is worth to the person that needs it?

That’s like asking, "How much is oxygen worth to a drowning man?". It’s emotionally manipulative, not economically sound. The goal is to expand supply and reduce cost through competition, not to base pricing on desperation.

If the idea is competition, how many real competitors to Walmart are there?

Tons, actually - target, costco, amazon, local chains, dollar general - and even within walmart, you get price competition between brands.

Why do you find the idea of cheap healthcare so offensive? Markets aren’t perfect, but they’re the best system we’ve got for driving down costs, increasing quality, and giving people real choices.

 

[rahl]

Prices would appear just like they do in any other market. Why wouldn't they? There's no reason to think Walmart would be the only provider. Walmart already has an optical department, and you still have plenty of other options.



You want the price to be "whatever the market will bear", because the alternative is price controls, which leads to shortages and rationing. You know, like in socialist economies.



That’s like asking, "How much is oxygen worth to a drowning man?". It’s emotionally manipulative, not economically sound. The goal is to expand supply and reduce cost through competition, not to base pricing on desperation.



Tons, actually - target, costco, amazon, local chains, dollar general - and even within walmart, you get price competition between brands.

Why do you find the idea of cheap healthcare so offensive? Markets aren’t perfect, but they’re the best system we’ve got for driving down costs, increasing quality, and giving people real choices.

Healthcare as you’ve been shown, isn’t a commodity. It makes no difference what the posted price is for a heart attack treatment, broken bone treatment, stroke treatment etc. you have no choice when it comes to life saving treatment. It’s not like choosing the best procedure on a tv. This is why the libertarian fantasy doesn’t and has never worked in all of human history. And also why single payer systems provide better care at a fraction of the cost of the US system.

 

[Trumpetman]

It doesn't matter whether or not the rich keep dollars in bank accounts; it's the income distribution that matters. A company's income gets distributed to labor via wages and to rich guys via dividends and/or stock options. If one gets less, the other gets more.

As I said you make it a zero sum game except when the government controls it's own money and can create and borrow as much as they want, it really isn't a zero sum gain.

I think we are pretty clear on the fact that the government doesn't need the money from taxing the rich. But as I said before, there are other good reasons to do so.

"Other good reasons" doesn't work for me as economics.

 

[JohnfrmClevelan]

As I said you make it a zero sum game except when the government controls it's own money and can create and borrow as much as they want, it really isn't a zero sum gain.

A company's income is a zero sum situation when we are talking about distributing their income between labor and shareholders.

"Other good reasons" doesn't work for me as economics.

I explained the economic reasons a few posts ago. I didn't feel like repeating myself yet again, but I guess you don't feel like scrolling back. Basically, too much of the income pie going to the rich results in less consumption due to their lower propensity to spend. And that is what necessitates higher deficits, and the resulting higher debt, that you seem so worried about.

 

[Trumpetman]

A company's income is a zero sum situation when we are talking about distributing their income between labor and shareholders.

What percentage of their revenue do most companies devote to salaries vs dividends?

I explained the economic reasons a few posts ago. I didn't feel like repeating myself yet again, but I guess you don't feel like scrolling back. Basically, too much of the income pie going to the rich results in less consumption due to their lower propensity to spend. And that is what necessitates higher deficits, and the resulting higher debt, that you seem so worried about.

HIgher deficits are simply an illusion per MMT. They could mint a single coin and erase it tomorrow. The government cannot really default since they can create currency at will. You say they have a lower propensity tp spend. You cannot spend that which is not liquid.

 

[JohnfrmClevelan]

What percentage of their revenue do most companies devote to salaries vs dividends?

That depends on the company and the conditions. The salient point is that when the labor market isn't strong, labor gets less, regardless of how productive the workers are.

HIgher deficits are simply an illusion per MMT. They could mint a single coin and erase it tomorrow. The government cannot really default since they can create currency at will. You say they have a lower propensity tp spend. You cannot spend that which is not liquid.

You are conflating debt and deficits. You can't erase a deficit with a platinum coin.

If you get paid in stock options, you will be able to spend. Some rich guys live off of loans against their wealth. Liquidity is not an issue here.

 

[Econ4every1]

So to clarify here you ask if something is correct and incorrect and then below declare that there is no proof or that you can't basically demand or declare something to be correct. Be consistent here.

You use correct to state that something aligns with facts or rules (e.g., "That answer is correct"). You use proof when referring to the method, evidence, or rigorous argument used to establish that correctness, especially in formal contexts like mathematics or law (e.g., "Show me the proof").

Thus:

• Correct describes a state: being accurate, true, or free from error.
• Proof is the evidence or argument that demonstrates something is correct or true.

Debt isn't important, spending isn't important....

We didn't have to go far to find a flaw in your argument. MMT does not say, full stop, that debt is unimportant. Perhaps you can cite something? And please, should you decide to, make it someone qualified to opine on the topic.

MMT offers a more sophisticated understanding of money as not just debt, but debt/ asset pair, and not just looking at debt from the government's perspective, but appropriately adding the other side, the private sector. For example, $1 in debt to the government becomes $1 in spending in the economy (the debt asset pair and the government side and the private side of that transaction). Looked at that way, the debt itself isn't important, but the totality of the transaction in the context of the real economy is what's important. Debt isn't the measure of what's good or bad, but capacity to put money to productive use.

So yes, debt matters, but not in isolation, only when understood against other economic variables.

....taxation is incredibly important and that is just too incredibly convenient

Taxation is one variable of many.....

So, let me explain:

• Let S = Private Sector Saving
• Let I = Private Sector Investment
• Let T = Taxes (Government Income)
• Let G = Government Spending
• Let M = Imports ( Foreign Income from Domestic Economy )
• Let X = Exports ( Foreign Spending on Domestic Economy )

The balances are:

• Private Sector Balance = (S−I)
• Government Sector Balance = (T−G) (Note: a deficit is G>T, so the balance is negative)
• Foreign Sector Balance = (M−X) (Note: a current account surplus for the domestic country is X>M, so the foreign sector balance is negative)

Putting it together ( S−I)+(T−G)+(M−X)=0

As far as the importance of taxation, the emphasis on it is likely the fact that the government has direct control over just two of the six factors above, Taxes and Spending.

 

[Econ4every1]

Within these "tax the rich" MMT scenarios I've read

This is why you won't ever find me talking about or referring to MMT. I have a dispute with some of the people that support it. I see MMT as a description, of how money works. Sort of like how physics is a description of how the universe works (not to imply that MMT is as rigorous as physics, only that they are both descriptions). Concepts of Physics tell us how to build a bridge, but not what to build it out of, or where to built or if it should be built

So to make it clear, when I talk about MMT or sovereign money or whatever you want to call it, I separate the prescription from the description, because MMT as a description does not hinge on the prescriptions that people that understand MMT make. What we should do with the money we spend as a nation is a political, moral and ethical question that I'm not here to argue with you right now, how sovereign money works, is what I'm discussing. So I'm not here to tell you that MMT is the only way that government's can operate, I'm telling you it is how the US government currently operates and most people misunderstand that, which is why so many people vote for things that aren't reflective of how things work and why our politicians (who believe the same as their constituents) get it wrong as well.

the chief complaint is that the "rich" keep their money and do not spend it while the poor obviously use it to "survive" but the reality is that the rich seldom have their money just sitting in some savings account, it's in the form of assets.

Sure, but economies run on spending, not on saving or investment. If there is too much money in those areas of the economy, relitive to the productivity that results and as a follow on, the number of good paying jobs and creating goods and services that people need and want, you'll find a nation in trouble.

To illustrate this, we know that if one person had 99% of all the money and wealth, that would be a problem, and while not realistic, it is true that it would be a problem. Which raises the question, how close can you get to that number before it becomes a problem? 10 people controlling 99, 100? 1000?, 10,000?, 100,000? Or 99??, 98%? etc.....

When you have a criticism of Warren Buffet as is often made and declare that he pays a far lower tax rate than his secretary as an example, it is because his secretary is paid a salary while Buffet has his corporations control his money for him and then when they give him his money they do so via dividends that he gets paid by holding large amount of assets aka STOCKS.

So if the secretary gets paid $100k and is taxed on it as income that's a higher rate than a dividend. If the company paying the dividend were paying at say 4%, I'd need to hold $2.5 million in stock to get that same amount of dividend income at the lower rate. Again that stock holding isn't "savings" and something I am intentionally trying to deprive others of in the economy. It is ownership interest that I have to keep to get that dividend income.

Ok, so let's summerize:

• Yes, Buffett pays a lower rate — but because his income is taxed differently.
• His wealth is in the form of business ownership, not idle savings.
• The real debate is whether the tax code should tax capital income (like dividends and gains) more like wage income.

My response:

• Concentration of wealth means the richest use legal financial mechanisms to avoid paying taxes on their growing asset incomes.
  They receive income in forms (dividends, capital gains) that are taxed less heavily, or they borrow against their assets to avoid realizing taxable events.
• As a consequence, the bulk of direct taxation falls on wages, consumption, or labor income received by the middle and lower-income groups, who lack the same opportunities for tax planning.
  This can artificially inflate the bottom 90%’s share of the effective tax burden relative to their real income.
• This dynamic has a real economic impact:
  • It weakens the purchasing power of the middle class, which undermines overall demand in the economy.
  • The finance/investor class becomes more extractive, garnering profits that do not necessarily translate into reinvestment in the real economy or broader societal benefits.

Thus, while at first glance it might seem that lower taxes for the wealthy (or a phrase like “debt doesn’t matter”) imply a kind of fiscal irresponsibility at the top, the broader—and more troubling—consequence is that the tax system ends up making the middle class poorer and less able to sustain economic demand.

 

[Econ4every1]

a. Taxi companies lobbied for rules that made it harder for Uber and Lyft to operate.

How did that work out? Do you think Lift and Uber deliver the same or better product as the same or lower price?

I don't.

• Uber lost over $31 billion cumulatively on operations by the end of 2021.
• Their so-called profitability is often inflated through accounting tricks, such as:
  • Valuing illiquid equity from failed foreign ventures (e.g., Didi, Grab).
  • Using adjusted EBITDA metrics that exclude billions in actual expenses.
• The company offered below-cost fares for years to gain market share—effectively destroying local taxi ecosystems with predatory pricing, not innovation.

Now let's talk about lobbying:

• Uber Engaged in aggressive lobbying and regulatory capture.
• Built a network of academics and economists to legitimize its actions with pseudo-scientific studies.
• Manipulated elite media narratives (NYT, WaPo, etc.) to push its story of being a tech-forward disruptor, when in fact, it operated more like a political campaign than a transportation company.

The Uber Files leak confirmed: Uber pursued regulatory arbitrage by ignoring laws, launching operations in defiance of local authorities, and then using public demand and elite opinion to rewrite the rules in its favor.


But you think the solution to this problem of companies using government is to eliminate government? Because whatever takes it's place will be a utopia of fair and competitive markets who will only work to provide a product at a lower price than their competition?

Look, I have no illusions that government is flawed, seriously flawed. it is increasingly captured by the wealthy, but the idea that turning it over to the wealthy is the solution? /facepalm.

The system we have now is regulated capitalism

Regulated to disproportionately favor the wealthy.

and it's obviously terrible.

That's what happens when the wealthy are disproportionately favored in an economy. It tends to get worse for those that aren't.

Both are terrible under the regulated capitalism model. Costs are through the roof, and medical errors are the third leading cause of death. Speed of service is also shit. Dealing with a hospital today is like dealing with any other government regulated monopoly - it's awful.

I won't disagree. People need to think of healthcare as something that has a cost and that they consume. They need to be incentivized to shop for it rather than it being a fixed cost that they learn when they get the bill.

I doubt either of us likes the system we have, but if the prices are what the market will bear, the wealthy will disproportionally consume and control it and outcomes will steeply favor the top 1/3 of Americans.

Let me ask you a very simple question. If you don't answer it, my only response from this point forward will be to ask again.


If a little girl is sick and will die without treatment, nothing earth shatteringly expensive but more than the average family could hope to afford and lower class families absolutely could not afford, should that child die if they cannot pay?

And please, avoid the assumption that donations will fill the gap. If they could they'd be doing it now for the millions of people, including children that don't have healthcare today.

So what's it going to be, let children die to maintain your free market utopia or steal money from "other people" so this child and children like her can live?

A true dilemma.

 

[Econ4every1]

America is the only country in the world where "Walmartizing healthcare" sounds like a good idea to some people.