a brief discussion on American spending, budgets, debt, taxes, and progress

“When I was young I thought that money was the most important thing in life; now that I am old I know that it is.”

Oscar Wilde

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“There's no such thing as a free lunch.”

Milton Friedman

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I’ve been meaning to write about the American debt, balancing the budget, taxes and the asshat politicians who screw up the entire conversation. Let me begin by saying government finances are dynamic amorphous beings that live, eat, and breathe and, yet, we essentially simplify (dumb down) everything into some spreadsheet as if there are no humans involved. Suffice it to say effective government finance is most successful when using a combination of austerity and investment. I will discuss both.

Which leads me to say discussing money on a personal level is uncomfortable at best.

Discussing money, and deficits and debt, on a country or government level isn’t just uncomfortable, it’s often absurd. It becomes absurd mostly because the easiest way for everyday schmucks like me to try and understand governmental finances is to conceptually think about it on a household level, i.e., thinking of a government budget & expenditures at kind of a micro level assuming that it translates to the macro level. This conceptual thinking is not only fraught with peril; it is flawed. Because it is flawed the larger dialogue <mostly driven by politicians> becomes useless and more often misdirected. Economists try and explain the complex dynamics within a framework where there are few absolutes. Politicians try and explain it, okay, they don’t. They simply do whatever is needed to gain and stay in power and trot out the simplistic garbage believing that using the household finance analogy will help overcome the vast difference between a country’s finances and the ordinary voter’s household. Let me just say this. While its more complex then kitchen table budgets, the main problem is what people want – lower taxes, lower debt/deficits, more services/growth – is mathematically impossible; and no one will tell the people that.

Its not simple. Complex dynamic systems need complex dynamic solutions. We may seek simplicity. We may suggest we need simplicity. And the reality is only complexity will maintain progress. Solutions will reside in cuts AND spending, cutting government AND adding government**, public investment AND private investment.

• ** note: I believe it was Noah Smith who noted that in order to facilitate infrastructure building and public/private investments so that things get done efficiently with an effective use of funds, specific government expertise is needed.

Which leads me to say the current debt is unsustainable.

We have to do something. This has become exponentially more difficult with the fact there’s been an incredible decline in what I would consider integrative awareness and thinking, which has led to a focus on specific tactics rather than overarching strategies, Combined with a general attitude that enabling business to do whatever they want to make money. That last attitude leans into a slightly absurd or at least misguided belief that business growth and its increased wealth always translates into a fair distribution of that growth and wealth so that it is shared in some form or fashion. Exacerbating all of that is that we don’t have a central vision for what could unify any tactics which would possibly lower debt and structurally increase the likelihood of shared growth and wealth.

So let me offer up an idea. My idea objective is not to balance the budget, but to actually decrease dependency upon debt and make deficits manageable enough to optimize available resources toward what is best for the United States. With that said:

1. I would adopt some budget reductionary aspects. I hesitate to call this austerity, I would prefer to just call it budgetary responsibility. Without knowing all the details one of the first things that the government could do is to access all unspent funds and funding, i.e., claw back money from existing programs. Not truly committed funds, but the ones that have been allocated and are just lying dormant waiting to be spent. Currently several sources suggest there is about $1 trillion of uncommitted funds (please note this # is estimated and there is no solid one source for a number). For example, the recent border wall appropriated funds could have been, as the Biden administration requested, diverted to other priorities or even just cut because they hadn’t been used yet. Or. There is approximately $56billion of COVID funds unused. Or, well, the list is fairly extensive as you would imagine. So existing programs would maintain their current funding budgets and balance sheet surpluses would be defaulted back to the government. In addition to that I would cut some budgets. The easiest way to do that would be to actually run an audit of all programs and just cut waste. My guess would be is that budgets would decrease, but the programs would not. I would begin there and then adjust with the objective to maintain as many of the social support programs as possible.
2. I would I would get rid of the tax cuts that were implemented during the Trump Administration. Just go back to the old tax structure. That would increase some revenue, but would not involve a complete overhaul of the tax system. That said if there was a way to be able to incrementally change the tax system in order to increase revenue without disproportionately affecting lower income and middle-class income; I would do that. Maybe we do need to increase taxes (although I am willing to suggest this is simply by eliminating loopholes so this is really just saying “tax revenue will increase because we will now have those who should be paying taxes pay taxes”), but I believe there are steps to take before deciding to do that.
3. I would do a one time, one year only, tax on the entire population to correct the budget’s original sin. The original sin was not having tax dollars pay for the Iraq War. The upfront cost was $75billion-ish and the total cost was $1.9trillion-ish. Let’s call the one-time tax objective as $950 billion and call it a day. I’m not an economist so I have not run the numbers, but I would imagine something slightly less than 1%, remember, only one year, additional tax on all income tax returns would most likely be sufficient to pay for the costs of the Iraq War therefore lowering debt and deficit I believe.
4. I would do a two year “tax the wealthy” (some economist identify the %) and those funds would not go into the general revenue pot for the government, but rather a specific fund for infrastructure programs (industrial policy items). This two-year tax would be to fund something specific from which the entire nation would benefit – like essential manufacturing for technology and defense – thereby actually benefiting this wealthy class in the long run. But I would have a sunset date, a specific tax, and I would aggressively tax that percentage against all possible participants in this subgroup AND I would permit anyone taxed to be able to monitor/review how funds were being invested.
5. I would also add a line item on tax returns with a small menu of additional tax options which taxpayers could if they elect to opt in to pay additional taxes. I would do this attached to very small percentages possibly even fractions of percentages tied to very specific things and funding. I’ve always believed the majority of philanthropic organizations are, at worst, scams and, at best, just inefficient use of money. So, I am suggesting that we make government compete against some of those choices and donations. Do I know if many people would actually choose to increase their taxes? Nope. Do I believe it increases the likelihood some people do if I tie it to a specific funding for a particular thing? Yes. Do I care that this could decrease funding and donations to some philanthropic like organizations? No. On this last idea I see no downside. We try it and see if it works.

These are ideas to lower debt, but I imagine my intent is to reset the budget rather than try to have a long-term correction. Generally speaking, I do believe America needs to come to grips with a variety of issues which ultimately affect our economic standing, budget spending and allocation. A downsizing, or right sizing, of the government, eliminate some bureaucracy, streamline some of the regulations, and consolidate some different departments. We need to agree that not all debt is created equal and that debt incurred to build is actually debt with an ROI. We need to agree on what the social contract between business, society, and workers is. Certainly, we need to figure out regulation and oversight of the technological world. We need to enable restructuring of corporations (and their balance sheets) so they can become more dynamic, more globally resilient, and set up to collaborate, emerge, and dissolve and reconfigure continuously according to the flows of value creation that not only benefit the business, but benefit the security of the United States. I imagine in the end I have a slightly utopian hope that a new society, a new government, and a new nation view emerges which develops from new relationships between production, power, humanity, the social contract, and the overall experience of being a United States citizen.

I do believe we need to get a grip on manufacturing. By that I do not mean ‘re-shoring,’ or even cutting all ties with China and certainly do not mean bringing back’ all manufacturing, being isolationist, or disconnect from the transnational, interconnected, global business world. But we do need to insure we have enough manufacturing capability to (a) ensure defense needs in times of supply chain turmoil and (b) enough domestic manufacturing of key items to insure resilience in the midst of global supply chain turmoil. That is suggesting some version of governmental industrial policy, not just invisible hand, free market, wishful thinking for industrial growth due to ‘American exceptionalism’ and entrepreneurship. To make this all work AND to lower debt, we need to actively shape the future we want.

In the end we need all these things.

We do need to spend.

We do need to cut spending.

We need to reduce overall debt.

We need to incur some debt.

We need to cut back on government involvement.

We need to increase government involvement.

We need all of those things.

To be clear, our situation is a confluence of factors and as such the solution will take a combination of factors. And that combination will include some things a lot of people will be really unhappy with. But. Everyone will find something to be unhappy about. That’s the gig, live with it. Ponder.