# Let's be forthright about the tax cuts **URL:** \ **Category:** Great Debates\ **Created:** [September 15, 2018, 9:08pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407 "2018-09-15T21:08:15Z")\ **Posts on this page:** 20\ **Page:** 9
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [September 19, 2018, 6:45pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/161 "2018-09-19T18:45:08Z")
> [@HurricaneDitka](#): > > I don’t know, **Try2B** , does he sound “willing to negotiate” to you? Well sure. He’s still talking to us instead of saying “absolutely no way!” and walking away from the table. Try this: first acknowledge his concerns by demonstrating that you understand them. He didn’t say Medicare can’t be touched, he wants to reduce costs while providing the same level of care. Really, I think everyone who is not a pharma lobbyist could support at least that much. Try to find out how much costs could be reduced- I bet there is a big spending cut right there. He doesn’t want to means test SS. I don’t want to either: it isn’t a charity program, everyone pays into it so that they can benefit later. See how he reacts to cutting 5% from the benefits of current recipients, 10% from the benefits of incoming recipients, and raising the cap on income taxes for SS. It isn’t a perfect solution but I don’t think there will be an easy way out of this. Find common ground: I bet he would be cool with taxing the rich and giving relief to people of modest means. Find out what he would cut. Try to get him talking about what he Is willing to do instead of just where he drawsthe line and see where it goes. He’s not a monster- the bad guys in almost any government story are actually the lobbyists and the liars with the big media megaphones, not “liberals” or “conservatives”. Read the first 150 pages of A People’s History of the United States to get an idea of how elites have always sown division among the common people to prevent them from acting in their own best interests. Don’t let stuff you hear on TV about liberals poison your view of guys like him- we have more in common than differences. ---
**Author:** ![Robot\_Arm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/robot_arm/32/18280_2.png) [@Robot\_Arm](https://boards.straightdope.com/u/Robot_Arm)\ **Post date:** [September 20, 2018, 1:55am UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/162 "2018-09-20T01:55:27Z")
> [@KidCharlemagne](#): > > Trump’s policies are a disaster for the American economy. Tax cuts at full employment just cause inflation, a bubble in equities, and a bigger deficit. His trade policies are, honestly I can’t even bring myself to talk about them. And he’ll be out of office when the rent comes due and it will be blamed on the Democrat who’s in office. I think the stage is being set for a one term Democratic president whose supposed stewardship of recessing economy will keep the Republicans in power for the proceeding decade. God it’s so depressing. Fyi I’m a former Republican. I don’t know. George W. Bush took office with a balanced federal budget and by the end of his term there were big deficits and the economy was on the verge of collapse. If the electorate had any kind of memory that would have paved the way for a long succession of Democrats. But just eight years later Republicans were saying “George who? Never heard of him. Tax cuts!!” ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [September 20, 2018, 11:51am UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/163 "2018-09-20T11:51:31Z")
> [@Try2B\_Comprehensive](#): > > However, I feel like media outlets like FOX aggressively seek to limit the conversation to this one single point. “The average American taxpayer is paying $x less in taxes! That’s good for you, end of story, end of discussion, nothing more to see here!” … The simplistic attitude of GOP preachers and the Americans they gull certainly is part of the problem. One message board participant, when asked to compare his $1500 windfall with trillions for the super-rich had no answer except to say he was getting $2000, not $1500! :smack: (And, as someone in this thread pointed out, that $2000 might turn into $1500 when the April reckoning comes.) > [@Try2B\_Comprehensive](#): > > At a time of general national economic well-being, the country is amassing $1 trillion a year in debt… > > I believe the true message out of the GOP is, " Fuck you, American public. We are openly robbing you to benefit our wealthy sponsors, and if you think you have a voice in your own government, you are a sucker and a rube." > > Point 3- The consequences of the tax cuts will be far worse than the benefits for people like me. This final point is the real thrust of this debate. I cannot see how $1 trillion deficits are justified under the current circumstances. … I see it as a massive scheme. As the debt rises to $20 trillion, maybe $30 trillion and beyond, well, ask yourself, who has the money to buy $30 trillion in bonds? It isn’t me with my extra $2000 in tax cuts, it is the already super wealthy. As interest rates rise, the public obligation to bondholders will surpass $1 trillion PER YEAR in interest payments alone, payments from the public to mosly super wealthy bondholders. > > \>\>\>This is a long post, so let me repeat that. As interest rates rise, the public obligation to bondholders will surpass $1 trillion PER YEAR in interest payments alone, payments from the public to mostly super wealthy bondholders. Yes, interest on the “public debt” is already almost as large as the total Medicaid budget. interest rates are continuing to rise; interest may soon exceed Medicare spending! :eek: And that’s just “public” debt interest — _ **The $310B figure for 2018 doesn’t include interest on bonds held by the SocSec Trust Fund, the FRB, etc.** _ Anyone who doesn’t understand why proper accounting should consider that interest also, report to Econ 1 (down the hall, turn left at the Pit). But I think you mischaracterize the holders of Treasury debt. Sure the rich own a lot more than the working class, but most of their assets are elsewhere. Foreign banks own a lot. Institutional investments (funds, insurance companies, pensions) that serve the public own a lot too. If the U.S. were to pay back its debt 40¢ on the dollar (as Trump liked to do with his hotels’ debt), the U.S. would have a windfall profit of $12T on a $20T debt. As debt mounts the temptation to do this might become irresistible to “thinkers” like Trump. This can be done either with a de facto devaluation of the dollar, or (as Trump seems to prefer) by explicitly renouncing debts. Either way, the big loser would NOT be the super-rich, it would be the long-term future prosperity of the U.S. The Dollar would no longer be respected. _That_ would be the way to push the U.S. into the status of a Greece or Venezuela, not — as some right-wingers pretend — by instituting UHC. ~ ~ ~ ~ ~ ~ ~ ~ If you want to discuss improvements to the U.S. tax system we need to know whether we’re “blue-skying” with everything on the table, or speaking of incremental improvements to the present system. Given present politics it’s difficult to imagine major change for the better: If one party will vote unanimously No, the other party must find agreement among themselves with no bipartisan help. I would propose some major changes that would provide better incentives. For example, reduce the employer burden of payroll taxes by $X and recover the revenue with $X of carbon tax. There! Create an incentive to employ human labor; _and_ an incentive for better energy. But discussing this with a Republican might be difficult. Waste time helping them grasp that $X minus $X equals Zero, and they’ll whine “Give you $X it’ll become $2X in no time!”) As another example, the U.S. could raise money by taxing pollution. This is better than cap-and-trade for several reasons — and is one area where the Board’s Intelligent Libertarian and I might agree — but only cap-and-trade was politically possible. > [@Try2B\_Comprehensive](#): > > Try this: first acknowledge his concerns by demonstrating that you understand them. He didn’t say Medicare can’t be touched, he wants to reduce costs while providing the same level of care. Really, I think everyone who is not a pharma lobbyist could support at least that much. Try to find out how much costs could be reduced- I bet there is a big spending cut right there. > > He doesn’t want to means test SS. I don’t want to either: it isn’t a charity program, everyone pays into it so that they can benefit later. See how he reacts to cutting 5% from the benefits of current recipients, 10% from the benefits of incoming recipients, and raising the cap on income taxes for SS. It isn’t a perfect solution but I don’t think there will be an easy way out of this. High Medicare costs are due to high health costs in general. Progressives want to provide health care to Americans; Medicare changes intended to deny care are undesired. _Ask your GOP friends what they think about Bush’s Congress deliberately increasing Medicare costs to benefit Big Pharma._ I have no particular problem with reductions to Social Security but don’t want to debate details. I get full SocSec even though I’m retired in a low-cost country. Perhaps people like me should have benefits reduced. But people are just plain confused if they think SocSec is the big problem with government spending. SocSec is, more or less, a self-funding system. That these pensions are included in government budget, while most health insurance is not, can be considered happenstance. The reason the GOP is left with SocSec and Medica{re,id} to cut is that _**everything else (except military and interest) has already been cut to the bone.**_ U.S. government spending is NOT anywhere near an historic high, when intelligently measured, but right-wingers refuse even to try to understand this. As a demonstration of how insincere the GOP is about cutting spending, recall that they lay off IRS employees as part of “general cost-savings.” :smack: The IRS is a “profit center.” _ **A good IRS examiner is literally worth his weight in gold!** _ Yet a typical Gopster won’t think beyond “Taxes is bad; the IRS is taxes; therefore IRS is bad.” I honestly wonder whether they understand that IRS doesn’t set tax rates; it just enforces the (already low) tax rates mandated by Congress. ---
**Author:** ![etasyde](https://avatars.discourse-cdn.com/v4/letter/e/9f8e36/32.png) [@etasyde](https://boards.straightdope.com/u/etasyde)\ **Post date:** [September 20, 2018, 3:35pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/164 "2018-09-20T15:35:25Z")
> [@septimus](#): > > But people are just plain confused if they think SocSec is the big problem with government spending. SocSec is, more or less, a self-funding system. I agree with most of what you said, but I’m going to nitpick here. SS is only self funding when the initial premises behind it - namely that the US, or more accurately the Fed, wouldn’t go into totally uncharted waters and nuke the interest rate from the almost perpetually over 5% average that existed before to nearly 0-2% for decades - remains true. Remember, most of SS is in things like bonds or other similar securities and the interest on “safe” assets has been dismal and the “unsafe” assets blew up in 2008. Mortgage Backed Securities loaded with junk bonds and similar financial crappery were AAA rated and made it into plenty of 401K’s and pensions, but I don’t honestly know if they were allowed in the SS accounts. The growth in the account is exponential/compound based on those interest rates. Since rates have been so low for so long, the projected curve has diverged dramatically from the actual account’s curve, which creates a shortfall that will exponentially grow. Right now, the difference is small, but it will get huge as time passes and more withdrawals begin to be made. You can’t really “catch up” to exponential growth without some insane interest rates for a long time, rates that’d be impossible to maintain and wreak havoc on the economy. Actually, I believe SS is solvent so long as average interest rates are 7.5% because they were particularly optimistic at the time. Medicare I believe is self funding at 5%. Anyone can correct me, though, as I’m not positive. Either way, it’s not able to keep up with the interest rates this insanely low. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [September 20, 2018, 5:21pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/165 "2018-09-20T17:21:20Z")
> [@etasyde](#): > > I agree with most of what you said, but I’m going to nitpick here. SS is only self funding when the initial premises behind it - namely that the US, or more accurately the Fed, wouldn’t go into totally uncharted waters and nuke the interest rate from the almost perpetually over 5% average that existed before to nearly 0-2% for decades - remains true. Remember, most of SS is in things like bonds or other similar securities and the interest on “safe” assets has been dismal and the “unsafe” assets blew up in 2008. Mortgage Backed Securities loaded with junk bonds and similar financial crappery were AAA rated and made it into plenty of 401K’s and pensions, but I don’t honestly know if they were allowed in the SS accounts. The Social Security Trust Fund is entirely invested in Government-issued bonds that are constitutionally guaranteed (under the 14th Amendment) to be repaid at the terms of issuance. These bonds have literally nothing to do with any securities issued in the private sector, whether AAA rated, junk bonds, or anything in-between. To emphasize once more: what may happen on the market for stocks and bonds has nothing to do with the Government bonds held in the Social Security Trust Fund. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [September 20, 2018, 5:22pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/166 "2018-09-20T17:22:02Z")
> [@septimus](#): > > High Medicare costs are due to high health costs in general. Progressives want to provide health care to Americans; Medicare changes intended to deny care are undesired. On average, doctors and health care providers lose money treating Medicare patients. About 35% IIRC. > [@](#): > > The reason the GOP is left with SocSec and Medica{re,id} to cut is that _**everything else (except military and interest) has already been cut to the bone.**_ Can you please mention the spending cuts that have been made to programs other than the military and interest and Social Security and Medicare? TIA. Regards, Shodan ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [September 20, 2018, 5:28pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/167 "2018-09-20T17:28:29Z")
> [@Ravenman](#): > > The Social Security Trust Fund is entirely invested in Government-issued bonds that are constitutionally guaranteed (under the 14th Amendment) to be repaid at the terms of issuance. These bonds have literally nothing to do with any securities issued in the private sector, whether AAA rated, junk bonds, or anything in-between. > > To emphasize once more: what may happen on the market for stocks and bonds has nothing to do with the Government bonds held in the Social Security Trust Fund. This post is quite correct. The federal taxpayer is on the hook for the SSTF no matter what the market does. Regards, Shodan ---
**Author:** ![Snowboarder\_Bo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowboarder_bo/32/229_2.png) [@Snowboarder\_Bo](https://boards.straightdope.com/u/Snowboarder_Bo)\ **Post date:** [September 20, 2018, 5:40pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/168 "2018-09-20T17:40:25Z")
> [@Shodan](#): > > On average, doctors and health care providers lose money treating Medicare patients. About 35% IIRC. Cite, please? ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [September 20, 2018, 5:56pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/169 "2018-09-20T17:56:01Z")
Sum up Trump’s actual and proposed tariffs, and he is the middle class tax hike champion: [INDENT] President Trump recently announced plans to impose a 10 percent tax on $200 billion of imports from China effective September 24, escalating to 25 percent effective January 1, 2019. When added to tariffs that have already been implemented, total trade taxes imposed on American consumers and businesses via unilateral executive action exceed all the taxes included in President Obama’s Affordable Care Act (ACA). [/INDENT] Caveats at link: not all the tariff hikes have gone through. But there’s a nice chart comparing Obamacare taxes (levied mostly on the rich) and Trump tax hikes (levied mostly on the middle class). $34 billion for Obama and a whopping $132 billion for Trump. > **[Donald Trump is the biggest middle-class tax raiser of all time](https://www.motherjones.com/kevin-drum/2018/09/donald-trump-is-the-biggest-middle-class-tax-raiser-of-all-time/)** > > Ha ha ha: President Trump recently announced plans to impose a 10 percent tax on $200 billion of imports from China effective September 24, escalating to 25 percent effective January 1, 2019. When added to tariffs that have already been implemented,... As long as favored plutocrats are protected, Republicans think tax hikes are just great. In deeds of course, not words. ---
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [September 20, 2018, 6:02pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/170 "2018-09-20T18:02:47Z")
> [@Shodan](#): > > On average, doctors and health care providers lose money treating Medicare patients. About 35% IIRC. I don’t understand this. If I was a new doctor, and I only saw Medicare patients, I wouldn’t make any money? ---
**Author:** ![etasyde](https://avatars.discourse-cdn.com/v4/letter/e/9f8e36/32.png) [@etasyde](https://boards.straightdope.com/u/etasyde)\ **Post date:** [September 20, 2018, 6:06pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/171 "2018-09-20T18:06:03Z")
> [@Ravenman](#): > > The Social Security Trust Fund is entirely invested in Government-issued bonds that are constitutionally guaranteed (under the 14th Amendment) to be repaid at the terms of issuance. These bonds have literally nothing to do with any securities issued in the private sector, whether AAA rated, junk bonds, or anything in-between. Alright, I was unaware the SS fund was unable to purchase anything _but_ treasuries (I had thought it was a large portion by requirement, not 100%), but that just makes my ultimate point stronger. Interest rates on government issued bonds are the _lowest_ of what was mentioned, meaning the SS fund is literally scraping the mathematical barrel and **not** presently wholly self funding. It would be, if not for the Fed, but the conditions for which the SS model was designed are not being met (average interest rates) and said model cannot be upheld, at current rates, past 2034. Medicare suffers from the same issue, but clocking in at about 2026 by latest estimates. ---
**Author:** ![BobLibDem](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/boblibdem/32/3149_2.png) [@BobLibDem](https://boards.straightdope.com/u/BobLibDem)\ **Post date:** [September 20, 2018, 6:06pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/172 "2018-09-20T18:06:57Z")
> [@Ravenman](#): > > The Social Security Trust Fund is entirely invested in Government-issued bonds that are constitutionally guaranteed (under the 14th Amendment) to be repaid at the terms of issuance. These bonds have literally nothing to do with any securities issued in the private sector, whether AAA rated, junk bonds, or anything in-between. > > To emphasize once more: what may happen on the market for stocks and bonds has nothing to do with the Government bonds held in the Social Security Trust Fund. Damn straight. Amazing the number of ignorant Facebook memes I’ve seen along the lines of “Congress Stole $2.1 Trillion From Social Security! Make Them Pay It Back! Make It Illegal For Them To Borrow From Social Security Again!” etc. The surplus went into safe government investments. Congress did not steal it. Now mind you, imagine the fix SS would have been if the Republicans had their way in the late 1990s and had SS invest the surplus in the stock market. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [September 20, 2018, 6:19pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/173 "2018-09-20T18:19:29Z")
> [@etasyde](#): > > Interest rates on government issued bonds are the _lowest_ of what was mentioned, meaning the SS fund is literally scraping the mathematical barrel and **not** presently wholly self funding. To the extent that any government debt is an investment by the purchaser, yes. But to my recollection, currently 95%+ of Social Security obligations are paid for with FICA revenues, so any general revenue that is spent on the remainder of obligations is approaching decimal dust. But that will change over time, by 2033-ish nearly 20% of payments will come from redemption of the bonds. After which point, if nothing happens, the system will be entirely financed by FICA revenue (and payments will be only ~80% of what was promised). ---
**Author:** ![Akaj](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/akaj/32/145_2.png) [@Akaj](https://boards.straightdope.com/u/Akaj)\ **Post date:** [September 20, 2018, 6:21pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/174 "2018-09-20T18:21:31Z")
> [@Robot\_Arm](#): > > I don’t know. George W. Bush took office with a balanced federal budget and by the end of his term there were big deficits and the economy was on the verge of collapse. If the electorate had any kind of memory that would have paved the way for a long succession of Democrats. But just eight years later Republicans were saying “George who? Never heard of him. Tax cuts!!” This. I’m still disgusted with how quickly the GOP in 2009-10 was able to shuck off responsibility for the collapse (not to mention the disastrous war in Iraq) and rally behind the nonsense of the Tea Party. The pushback and obstruction of the GOP, when the nation was reeling from the worst economic crisis in generations – and the fact that so many Americans fell for it – should have been a red flag as to what was coming in 2016. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [September 20, 2018, 6:22pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/175 "2018-09-20T18:22:58Z")
> [@Shodan](#): > > This post is quite correct. The federal taxpayer is on the hook for the SSTF no matter what the market does. Until the point it is exhausted and no more bonds remain, of course, at which point obviously no more bonds can be redeemed. And as I just said, payments to retirees will have to be cut. Unless the law changes, of course – but there is no mechanism to continue the full payment of benefits through general Government revenues. One could read your post as implying there is. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [September 20, 2018, 6:51pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/176 "2018-09-20T18:51:52Z")
> [@Shodan](#): > > Can you please mention the spending cuts that have been made to programs other than the military and interest and Social Security and Medicare? TIA. [Here’s one!](https://www.irs.gov/statistics/irs-budget-and-workforce) ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [September 21, 2018, 5:56pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/177 "2018-09-21T17:56:29Z")
> [@septimus](#): > > Yes, interest on the “public debt” is already almost as large as the total Medicaid budget. interest rates are continuing to rise; interest may soon exceed Medicare spending! :eek: And that’s just “public” debt interest — _ **The $310B figure for 2018 doesn’t include interest on bonds held by the SocSec Trust Fund, the FRB, etc.** _ Anyone who doesn’t understand why proper accounting should consider that interest also, report to Econ 1 (down the hall, turn left at the Pit). I think it is just a convention that the public debt be separated from the money the government “owes itself.” Am I missing something? > [@](#): > > But I think you mischaracterize the holders of Treasury debt. Sure the rich own a lot more than the working class, but most of their assets are elsewhere. Foreign banks own a lot. Institutional investments (funds, insurance companies, pensions) that serve the public own a lot too. > > If the U.S. were to pay back its debt 40¢ on the dollar (as Trump liked to do with his hotels’ debt), the U.S. would have a windfall profit of $12T on a $20T debt. As debt mounts the temptation to do this might become irresistible to “thinkers” like Trump. This can be done either with a de facto devaluation of the dollar, or (as Trump seems to prefer) by explicitly renouncing debts. Either way, the big loser would NOT be the super-rich, it would be the long-term future prosperity of the U.S. The Dollar would no longer be respected. _That_ would be the way to push the U.S. into the status of a Greece or Venezuela, not — as some right-wingers pretend — by instituting UHC. My thinking on the future of bonds is about as close to a conspiracy theory as I get. I’ve claimed that besides the long-term plan to destroy SS and Medicare with debt, forces like the Kochs and the Mercers are pulling the strings on their puppets in Congress to issue vast quantities of bonds, exploding the debt and driving up interest rates in order to turn US Treasury receipts into a trillion-dollar-a-year income stream. I am not 100% sure of this, but my thinking on this comes from articles like [The Dark Decade Ahead](https://seekingalpha.com/article/4205122-dark-decade-ahead). It seems like every financial news outlet is making an argument like this these days, and it does not seem to be a case of both-siderism where here’s an article promoting a bull run forever, and the perfectly balanced counter-argument that things will turn south. No, the more I look into it, the more it seems like the evidence is on the side of the bear callers: > [@](#): > > **The U.S. stock market is overvalued.** Sure, I know the S&P 500 Index is trading at a perfectly reasonable 16.3 times earnings based on 2019 Q4 non-GAAP estimates that may never come to pass, but I prefer to work with numbers that I can point to as more officially in the books. And even if I concede that 2018 Q3 GAAP earnings come in as currently forecasted (they will almost certainly end up somewhere below), we find that the cyclically adjusted price to earnings ratio (CAPE)) on the S&P 500 Index over the past 10 years is currently a frothy 32.6 times. This ranks in the third percentile of highest readings on this measure over nearly 140 years of stock market history. Now for those CAPE haters out there, it should be noted that today’s P/E ratio based on 12-month GAAP earnings is nearly just as high in the fifth percentile, so today’s song is essentially the same whether you adjust for the business cycle or not - stocks are expensive. > [@](#): > > A few key takeaways are quickly apparent. First, the more expensive the stock market becomes at any point in time, the worse stocks have performed over the subsequent 10 years. And given where we are with valuations today, the best real returns investors should expect from the U.S. stock market over the decade ahead are relatively modest at around +2% annualized at most. Instead, a more realistic annualized real return expectation for U.S. stocks as implied by the red trendline on the chart is more in the neighborhood of -2% to -3% annualized. For all of those recently minted passive index investors out there, I hardly think their expectation to lose money after adjusting for inflation on an annualized basis over the next decade is their primary objective. Yet this is what they have set themselves up for today. If you’re a billionaire at the end of an historic bull run and you want your fortune to continue to grow rather than get eaten by the business cycle, where do you invest your money? Gotta get out of stocks, but you can’t exactly invest that kind of money in CDs. How about inducing the US government to issue another $10 trillion in bonds, driving the interest rate up to 5%-7% or more? Then, while the stock market languishes, you continue to make a killing and all those rubes who thought their government worked for them can foot the bill. Paranoid perhaps, I admit it. But we are on such a dumb path, on such a colossal scale, that I can’t help being suspicious. Do you think I am just seeing the machinations of global banks and giant public pension funds and viewing it through too sinister a lens? > [@](#): > > If you want to discuss improvements to the U.S. tax system we need to know whether we’re “blue-skying” with everything on the table, or speaking of incremental improvements to the present system. Given present politics it’s difficult to imagine major change for the better: If one party will vote unanimously No, the other party must find agreement among themselves with no bipartisan help. Blue sky. I want to Solve The Problem. If we cut the debt in half or more by the end of 30 years, without destroying the safety net, I’d consider that success. > [@](#): > > I would propose some major changes that would provide better incentives. For example, reduce the employer burden of payroll taxes by $X and recover the revenue with $X of carbon tax. There! Create an incentive to employ human labor; _and_ an incentive for better energy. But discussing this with a Republican might be difficult. Waste time helping them grasp that $X minus $X equals Zero, and they’ll whine “Give you $X it’ll become $2X in no time!”) I love stuff like this. If you are a person like me who is in contact with lots of working people, well, maybe they are Democrats, maybe they are conservatives, maybe they are religious or not, maybe they are educated or not, but what they have in common is that they are working hard and not exactly getting ahead. Working people of modest means could use support- that’s who Trump promised to help during his campaign, and that is the evil irony of the GOP today, to convince people they are the ones to help them and then completely screw them over in favor of the billionaire class. So yes, Climate change is bad for the future of working people of modest means. We simply must address it, no matter how much screaming there is from the liars and the people who just don’t get it. > [@](#): > > As another example, the U.S. could raise money by taxing pollution. This is better than cap-and-trade for several reasons — and is one area where the Board’s Intelligent Libertarian and I might agree — but only cap-and-trade was politically possible. Maybe. I’d need to see more details to understand what you mean here. > [@](#): > > High Medicare costs are due to high health costs in general. Progressives want to provide health care to Americans; Medicare changes intended to deny care are undesired. _Ask your GOP friends what they think about Bush’s Congress deliberately increasing Medicare costs to benefit Big Pharma._ Right. It is the kind of thing that might lead one to believe that the billionaire class is orchestrating scams on a massive scale through their network of bought-and-paid-for Congress critters. > [@](#): > > I have no particular problem with reductions to Social Security but don’t want to debate details. I get full SocSec even though I’m retired in a low-cost country. Perhaps people like me should have benefits reduced. > > But people are just plain confused if they think SocSec is the big problem with government spending. SocSec is, more or less, a self-funding system. That these pensions are included in government budget, while most health insurance is not, can be considered happenstance. The reason the GOP is left with SocSec and Medica{re,id} to cut is that _**everything else (except military and interest) has already been cut to the bone.**_ U.S. government spending is NOT anywhere near an historic high, when intelligently measured, but right-wingers refuse even to try to understand this. Well, balancing the budget and preserving SS are both getting lumped into this discussion. If nothing is done, benefits take a big stair-step down and probably continue to dwindle from there. I expect the GOP to seize on this event to declare SS “bankrupt” and push for the end of the program. We don’t want that, and we don’t want the big stair-step either. I don’t want to cut it at all, but something has to give. Also, I think a plan that relies entirely on raising taxes without cutting any spending would be seen as in bad faith by “the other side” and would make it harder to achieve. We’re talking about raising an addition $1 trillion a year in taxes in this case. All government revenues currently amount to[about 30.7% of GDP](https://www.usgovernmentrevenue.com/percent_gdp) right now, so it is do-able but would come as a big shock. And contemporary history shows that American politics is not very good at agreeing to such “take your medicine” solutions- it would take an awful lot of stoicism to stick with that plan long enough for the benefits to appear. Any real solution will be like that though. Just my opinion, what do you think? > [@](#): > > As a demonstration of how insincere the GOP is about cutting spending, recall that they lay off IRS employees as part of “general cost-savings.” :smack: The IRS is a “profit center.” _ **A good IRS examiner is literally worth his weight in gold!** _ Yet a typical Gopster won’t think beyond “Taxes is bad; the IRS is taxes; therefore IRS is bad.” I honestly wonder whether they understand that IRS doesn’t set tax rates; it just enforces the (already low) tax rates mandated by Congress. The GOP acts like it is running a melodrama much of the time. The IRS- they are in the black hats! \<_boo hiss_\> They are in cahoots with those America Hating Liberals (also in black hats) \<_boo hiss_\> Here comes our hero in the White Hat, cutting that dastardly IRS \<_cheers hooray_\> (but all they’ve accomplished is making it easier for the wealthy to cheat on their taxes, something the rubes never seem to notice.) Keep your eye on the birdie, folks! ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [September 21, 2018, 7:10pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/178 "2018-09-21T19:10:02Z")
> [@Try2B\_Comprehensive](#): > > [1] My thinking on the future of bonds is about as close to a conspiracy theory as I get. I’ve claimed that besides the long-term plan to destroy SS and Medicare with debt, forces like the Kochs and the Mercers are pulling the strings on their puppets in Congress to issue vast quantities of bonds, exploding the debt and driving up interest rates in order to turn US Treasury receipts into a trillion-dollar-a-year income stream. > > I am not 100% sure of this, but my thinking on this comes from articles like [The Dark Decade Ahead](https://seekingalpha.com/article/4205122-dark-decade-ahead). It seems like every financial news outlet is making an argument like this these days, and it does not seem to be a case of both-siderism where here’s an article promoting a bull run forever, and the perfectly balanced counter-argument that things will turn south. No, the more I look into it, the more it seems like the evidence is on the side of the bear callers: > > … > [2]Blue sky. I want to Solve The Problem. If we cut the debt in half or more by the end of 30 years, without destroying the safety net, I’d consider that success. > … Working people of modest means could use support- that’s who Trump promised to help during his campaign, and that is the evil irony of the GOP today, to convince people they are the ones to help them and then completely screw them over in favor of the billionaire class. So yes, > … > [3] I don’t want to cut it at all, but something has to give. Also, I think a plan that relies entirely on raising taxes without cutting any spending would be seen as in bad faith by “the other side” and would make it harder to achieve. We’re talking about raising an addition $1 trillion a year in taxes in this case. All government revenues currently amount to[about 30.7% of GDP](https://www.usgovernmentrevenue.com/percent_gdp) right now, so it is do-able but would come as a big shock. And contemporary history shows that American politics is not very good at agreeing to such “take your medicine” solutions- it would take an awful lot of stoicism to stick with that plan long enough for the benefits to appear. Any real solution will be like that though. Just my opinion, what do you think? I won’t respond to all of your interesting and intelligent post but will address the three points I’ve taken the liberty of numbering. [1] I certainly do agree that the “game is being rigged” to favor the super-rich, but I don’t see the rich getting richer off of high treasury yields. Trump wants _low_ interest rates. The Fed will raise short-term rates only as needed to fight inflation. The possibility of high _long-term_ UST or AAA interest rates may lead to an interesting discussion, but in all cases supply-demand rules the day: Bond prices fall (yields rise) because people do NOT see them as a good investment. The article you link to may agree that bonds will perform as well as stocks in the middle term, but that’s not the same as saying USTs will be highly profitable. Your link mentions “Van Hoisington [was rewarded in 2007-2008 when] long-term U.S. Treasury market [rose] by nearly +60%” but UST prices rise _because yields fall._ [2] So you agree that employer-paid payroll taxes should be reduced and the revenue recovered by carbon tax? 🙂 I think it’s a good idea too! [3] One correct point you argue is that it is very difficult, both economically and politically, to raise taxes after they’ve been lowered. (Similarly the best remedy for opioid addiction is to not get addicted in the first place.) It is because of that difficulty that the stupid tax cuts will have long-term insidious destructive effects. The giant $20 Trillion debt is not going away overnight; all we can hope for is to gradually slow the fall into the abyss. The debt will get to $30 T and perhaps worse. (At this point the future is racing toward financial collapse or social dystopia or both. Smart money may be betting on both.) And what are you going to cut? Sure, give SocSec a 10% haircut if that’s so dear to your heart. I don’t like means-testing it, but that may be the least of evils if the opposition insists on some big cuts. But what about the military: should it get a haircut also? The USA spends almost as much on its military _ **as the entire rest of the world added together** _. And, not only is USA #1 in military spending but the #3, #6, #7, #8, #9, #10, #12, #13, #14, #15 and #16 countries are all staunch U.S. allies. _ **Each F-22 cost $340 million.** _ How many hip replacement surgeries can be performed for $340 million? Finally, and especially important, you’ve drunk the GOP Kool-Aid if you think 30% of the economy spent by government is outrageously high. Please remember, again, that most of the bureaucrats and regulatories are “rounding errors.” Other than military (and support for veterans) and debt interest the “huge” government spending is spent on educating, and providing medical care and pensions for many millions of Americans. Here are some comparative figures from two countries which do not have the huge military budget of the U.S.: 44% of the German economy is government, down from a high of 54% in 1995. 41% of U.K. economy is government down from 51% in 1981. The idea that U.S. government “social spending” is too high deserves its own Pit thread. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [September 21, 2018, 7:28pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/179 "2018-09-21T19:28:49Z")
> [@septimus](#): > > … The article you link to may agree that bonds will perform as well as stocks in the middle term … Rereading this, I see that it might be construed as a recommendation to buy bonds. No; in fact I sold some bonds the other day and put the proceeds into gold. :smack: (If you enjoyed this investment advice please Paypal me 30¢. That will include 30¢ for the Paypal service charge; the rest is a fair value for any advice.) ---
**Author:** ![Kobal2](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kobal2/32/20_2.png) [@Kobal2](https://boards.straightdope.com/u/Kobal2)\ **Post date:** [September 21, 2018, 8:15pm UTC](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407/180 "2018-09-21T20:15:05Z")
> [@septimus](#): > > But what about the military: should it get a haircut also? The USA spends almost as much on its military _ **as the entire rest of the world added together** _. And, not only is USA #1 in military spending but the #3, #6, #7, #8, #9, #10, #12, #13, #14, #15 and #16 countries are all staunch U.S. allies. _ **Each F-22 cost $340 million.** _ How many hip replacement surgeries can be performed for $340 million? Well yeah, but do free hip replacements show exactly how big your national dick is ? I think not. [Previous page](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407.md?page=8) [Next page](https://boards.straightdope.com/t/lets-be-forthright-about-the-tax-cuts/821407.md?page=10)