Dark Matter: where cuts in military spending have hidden the costs of these programs
David Parsons: Uh, that’s not actually true.
In "Washington-speak" 'cut' means 'don't increase as fast'.
The best but not the easiest to read. Shows Military spending as a percentage of GDP.
http://www.usgovernmentspending.com/spending_chart_1900_2020USp_17s2li011lcn_30f_20th_Century_Defense_Spending
Defense spending as a percentage of federal
http://www.heritage.org/~/media/images/reports/2011/11/defending%20defense/chart2.ashx?w=543&h=333&as=1
Entitlements vs. Military spending as a gov percentage.
http://www.heritage.org/~/media/images/reports/2012/10/sr121/srfedspendingnumbers2012p12chart1.ashx?w=600&h=531&as=1
David Parsons: I’m not so sure about that.A brief search through the net of a billion lies gives me a bunch of charts that don’t seem to show any sort of exponential growth over the last 100 years. What are the parameters you’re using to claim exponential growth?
Those charts are gov spending as a whole, on a time frame where cuts in military spending have hidden the costs of these programs. Money is fungible, the programs were originally small and military spending originally large.
If you look at military spending as a percentage of GDP over that time frame you'll see a linear line trending down with a few blips up for various wars.
If you track these programs individually you'll see blips up when the seniors have voted themselves higher benefits (most recently the drug benefit), but even absent that they consistently grow a few percentage points over inflation, for decades, the very definition of exponential growth.
Do I get to chose? Very well, let’s get completely rid of the USA Armed Forces “Well, not that”
Very good. That is EXACTLY the conversation we need to have, and the best way to have it is to put the big programs on budgets.
Then there would be a political cost to not funding them (i.e. to not raising taxes), and there'd also be a political cost to funding them by raising taxes.
At the moment we're trying to pass the costs on to future taxpayers, and sooner or later we'll run out of other people's money.
I find that the USA has inverted the discussion about government and taxes by not asking “What do you want the government to do?”, and, when getting the public’s answer, setting the taxes taxes required to pay for those things.
One issue is the gov comes back year after year for exponentially more taxes to deal with the same problem. Because of that, there is a massive disconnect between the publics support (desire) for programs and it's support for the tax increases needed to fully fund them.
IMHO it is very fair to say "do what you can with a limited budget", these programs really need to be structured to tolerate that and put on budgets. If they need more money, let Congress approve it and raise the needed taxes to pay for it.
So long as big government is theoretically possible, even by your own terms every election has big consequences because it will always be possible for the government to act in big ways.
The potential is certainly there, the president has the ability to nuke the planet, he and congress could outlaw cars to fight global warming. However most elections are about incremental change, not massive reorganizations.
In short, the Feds had taken no actual steps to abolish slavery and had exerted considerable power to preserve and extend the institution. But the South rebelled anyway, because if an abolitionist party could win national elections consistently, none of that mattered.
Sure. Agreed with all of that.
just as abolitionism was a genie that couldn’t be put back in the bottle then, the welfare state is a genie that can’t be put back in the bottle now.
The moral case for ending slavery is so extreme that it justified burning down the South's economy and making them start over.
The moral case for the welfare state isn't that extreme. Either we figure out a way limit these programs to what we can pay, or lots of people will get hurt when they run out of money and/or break the budget.
"Breaking the budget" includes "needing to raise taxes above what is politically possible".
And it doesn’t occur to you that the greater morality would be ending slavery even if a few Southern planters could make “economic” (but really social) arguments in favor of it.
I'm not supporting slavery, you're just pretending I am so you have a straw man to argue against.
Of course, it’s probably much more complicated than simply “more taxes = fewer jobs.”
Absolutely. Taxes become services, infrastructure, etc, some are highly beneficial.
Reduce the size of government down to zero and you're looking at places where murder is legal, and there is no power, or roads, or contract enforcement. A government which prevents murder, enforces contracts, and builds roads is highly useful and necessary for certain levels of industry.
Several states (don’t knew the list) have constitutional balanced budget provisions.
It's basically everyone but Vermont. http://www.politifact.com/texas/statements/2010/dec/25/john-cornyn/sen-john-cornyn-says-49-states-have-balanced-budge/
Like the country as a whole, the states can also raise their taxes. And the tax burden, even in horrible, corrupt Ilinois, isn’t that high that there is no more room. Chicago is not 1789 Paris.
Chicago's problem isn't that it's under taxed.
Even if we make the assumption that a really big tax increase will solve everyone's problems, IMHO it'd be a short term fix. Programs would continue to grow, politicians would continue to get elected promising to hand out free stuff, and long term we'd be back in this mess where the government has outstripped it's revenues.
Their budget can’t “break”.
I suspect we're going to test that. Hopefully a few states will break and provide an abject lesson to the rest on what not to do, and after that voters will understand that there are long term issues with "free" things (be they tax cuts or hand outs by the gov).
One of the problems is we're at the bottom of an interest rate super-cycle, multiple generations of politicians and business leaders have come to power thinking that interest rates can only go down, debt can only get cheaper. In that context, it makes sense to take on debt to "invest" or hand out good things to your supporters.
Return interest rates to their historical averages and lots of places will discover debt isn't free and they have real problems.
Your argument is that politicians would rather let the economy collapse and misery go around than raise taxes.
So you're saying you were wrong when you said they would? That deep down you think the GOP's anti-tax crowd aren't serious? Are you claiming the GOP is willing to raise taxes high enough to fund all the programs you want?
And yet, Illinois politicians were willing to raise taxes. They didn’t get the memo.
So hopefully now that they've had a tax increase, all of their problems are behind them and they'll be prosperous. :)
Cost of living? Yes. NYC and suburbs are very expensive places to live. Taxes? No.
A lot of "cost of living" is the effects of taxe and regulations. When you pay for a sandwich you're also paying for the vendor's taxes and overhead, everything that makes his life expensive is passed on to you.
I still don’t get the “let’s uproot from Manhattan and go to Kansas. Have you seen the low taxes there (*)?”
I could increase my income a LOT if I moved to New York or Chicago, occasionally I have job offers. However after taxes and cost of living, I expect I'd be poorer. I'd also have to live in far worse housing, and have a far worse commute as well.
My personal measure is when the budget breaks and the bond market understand there's no money to be made loaning them money.
Alternatively we could have enough civil unrest (or war, or natural disaster) that the state loses its monopoly on violence... but that's unlikely at a state level because the feds would step in.
It’s sad when people run out of arguments and have to recourse to “slavery abolition was expropriation without fair compensation”
By modern standards, every single slave owner could, and should, have been arrested and imprisoned. Further there's a really strong claim that Slavery seriously impeded the South's economy, lowered productivity, misallocated resources, that sort of thing.
But from the standpoint of the South itself, with an economy built around slavery, the end of slavery would have been seen as the end of the economy. Think of it as a one-factory town after that one factory closes down.
That's not an argument for slavery, it's pointing out that the economic/social impact of the federal government was so great that when the other guy won the election, the South went to war.
So yes, more and more power to the gov increases the stakes of the elections.
You have to explain what the cliff is, and how, by what mechanisms, do we get from a low tax burden, moderately growing, hight industrial output, not particularly endebted, high productivity, country that also happens to be the issuer of the currency of its obligations, to a cliff.
:Amusement: You and I have both explained it.
Let me just quote you: The republic as we know it won’t die of a fiscal crisis, brought down by Chinese banks pulling out of Treasuries. It will be brought down by the screeching to a halt of the political process (*). (*) of course, by then, the Lenders would have pulled away, scared by a country that has the assets to pay its debt, but it’s refusing to use those assets as part of their internal political game.
And now let me quote me: Politicians run out of the political will to tax long before they run out of things they can tax.
The modern age required a unification and standardization of the nation. E Pluribus Unum and all that. Today is what we as citizens expect. Having fifty different rules about mortgages, or what is and is not covered by insurance, or what should or should not be recycled just creates confusion in a mobile population that thought the rules they grew up in Ohio will apply in Texas.
Yes and no. I get what you're saying, but imho a lot is gained by forcing the states to compete with each other. Tax too much, regulate too much, and you lose population and/or jobs.
We are probably going to see various states fail because of corruption and/or simple bad policy. Illinois comes to mind.
That's over and above the whole 'tyranny of the majority' thing. A one size fits all approach to policy probably results in bad things for whoever is a minority (likely rural or more-wild-than-rural countryside).
Now days we think of slavery from a civil rights point of view. However from the South's point of view, slavery was also an economic issue. What the federal gov wanted to do (i.e. end slavery) would have destroyed huge amounts of the South's economic "assets", and upended every company large enough to have slaves.
The economic importance of who controls the gov isn't just "taxes" or even "size of gov", it's also the gov's other influences on the economy. The government telling you what you can and can't do with your property and what jobs you can have is up there with direct taxation and direct spending.
That’s the point I’m trying to make: We don’t have a long-term fiscal sustainability problem when we have a growing economy and one of the lowest tax burdens in the developed world.
2% growth should be a serious cause for concern, not a source of pride. Return growth to 5% and we can handwave away a lot of these other issues.
I think it was you who pointed out this past weekend that saving Social Security required just some minor tweaks, but no one will act on those.
If those "tweaks" involve tax increases which can be measured in percentage points of the GDP, then your definition of "minor" is very different than mine.
We have a political problem with a substantial part of our society desiring to cut “entitlements” (other people’s),
In Washington-speak "cuts" means "reduce increase of future spending".
These programs increase in cost every year above inflation and the growth of the economy; Just holding them constant should not be described as a "cut". The cost of these programs has grown, dramatically, and often the basic plan was that future politicians would somehow find the money.
Politicians run out of the political will to tax long before they run out of things they can tax. The political support needed to create these programs, and even to keep them, is less than the political support needed to constantly increase taxes to pay for them long term.
Granted, we need to do something for the old and the sick, but "something" doesn't have to mean "break the budget" or "first call on society's resources".
bridges are not collapsing around us because we are in fiscal trouble and cannot pay for the repairs.
Entitlements are squeezing out things like bridge repair. However we just had a massive stimulus which was sold as going to "shovel ready jobs" to help infrastructure. High speed rail and various "green" infrastructures is where the infrastructure money went... and having pulled that trick once, it's going to be a harder sell the second time.
This year it is, even this decade (although the lack of growth is already a big issue). These are long term problems, and the closer we get to the edge of that cliff the more painful it will be backing away from it.
I don’t think @j_a was talking about hyperinflation, but rather modestly higher inflation than the very low levels we’ve had for the past 30 years.
His exact phrase was: "...deflate its borrowings into nothingness..."
Enough to make our debt load substantially more manageable, but not so much as to ruin the economy. There’s a lot of space between 1.5% and 1000% or whatever.
When you say "make our debt load substantially more manageable" what the bond market will hear is "we can't pay all of you full value".
And the world changes, probably a lot. At a minimum we have a substantial "risk" premium adding to our bonds (which would be awful), at a max on day one there will be a mad rush for the door as every trader tries to save himself. And then we have day two.
At that point we're over the edge of the universe and dealing with the unknown. Things will have had to be awful for us to try this, my expectation is that they'll get a lot worse. One hopes we don't turn to Darth Sidious and instead just let Social Security be cut in half, but we can't really say.
So you want a King to run it? Politics is how we figure out how to govern ourselves. The program is doing far better then people think.
I don't see why a 401k needs a "King" to run it.
My intuition is that the more political meddling we have, the worse it will end up being; whether it's California's retirement accounts being used to further "green" agendas or Social Security's habit of passing it's full cost onto future taxpayers so current retirees can get back more than they put in.
The self-proclaimed “fiscal conservatives” can never get specific about spending, because they instantly run into the trip wire of the fact that the biggest spending programs are also the most popular.
You say that like it's a good thing. I'd object to new gov programs a lot less if it were possible to kill the old ones, or even to evaluate whether or not they're doing a good job. But you really can't, not if you want to get elected.
Every new program becomes politically untouchable because it's "needed" by someone who will vote on that issue, and every dollar of new gov spending becomes permanent. Thus gov only grows, but eventually we'll run out of other people's money.
At the time of the German reunification the FDR and the Bundesbank took the correct, but painful, decision to convert worthless DDR Marks 1:1 into German Marks, then the strongest currency in the world. Doing otherwise would have destroyed 100% of the Osties wealth.
Wait, why would a 2:1 conversion have been deadly?
It's been quite a while but I vaguely recall thinking that was the expected result.
*Comment archive for non-registered commenters assembled by email address as provided.
On “The American Interest: A Republic If You Can Keep It”
real GDP already adjusts for inflation.
You have a point about population but only about 20% of one.
US population roughly doubled between 1940 and 2000, but GDP roughly increased by a factor of 5. So population growth accounts for roughly 20% (ish).
And that assumes no efficiency gains in running the program due to experience (which various industries actually count on).
"
%GDP is exponential because the GDP itself grows exponentially.
So yes, these programs grow "exponentially" (see below links if you don't understand the concept).
http://economics.stackexchange.com/questions/460/why-is-economic-growth-measured-exponentially-rather-than-linearly
https://en.wikipedia.org/wiki/Exponential_growth
"
In "Washington-speak" 'cut' means 'don't increase as fast'.
The best but not the easiest to read. Shows Military spending as a percentage of GDP.
http://www.usgovernmentspending.com/spending_chart_1900_2020USp_17s2li011lcn_30f_20th_Century_Defense_Spending
Defense spending as a percentage of federal
http://www.heritage.org/~/media/images/reports/2011/11/defending%20defense/chart2.ashx?w=543&h=333&as=1
Entitlements vs. Military spending as a gov percentage.
http://www.heritage.org/~/media/images/reports/2012/10/sr121/srfedspendingnumbers2012p12chart1.ashx?w=600&h=531&as=1
"
Those charts are gov spending as a whole, on a time frame where cuts in military spending have hidden the costs of these programs. Money is fungible, the programs were originally small and military spending originally large.
If you look at military spending as a percentage of GDP over that time frame you'll see a linear line trending down with a few blips up for various wars.
If you track these programs individually you'll see blips up when the seniors have voted themselves higher benefits (most recently the drug benefit), but even absent that they consistently grow a few percentage points over inflation, for decades, the very definition of exponential growth.
https://www.brookings.edu/wp-content/uploads/2016/07/Medicare_2-1.png
"
Very good. That is EXACTLY the conversation we need to have, and the best way to have it is to put the big programs on budgets.
Then there would be a political cost to not funding them (i.e. to not raising taxes), and there'd also be a political cost to funding them by raising taxes.
At the moment we're trying to pass the costs on to future taxpayers, and sooner or later we'll run out of other people's money.
"
One issue is the gov comes back year after year for exponentially more taxes to deal with the same problem. Because of that, there is a massive disconnect between the publics support (desire) for programs and it's support for the tax increases needed to fully fund them.
IMHO it is very fair to say "do what you can with a limited budget", these programs really need to be structured to tolerate that and put on budgets. If they need more money, let Congress approve it and raise the needed taxes to pay for it.
"
The potential is certainly there, the president has the ability to nuke the planet, he and congress could outlaw cars to fight global warming. However most elections are about incremental change, not massive reorganizations.
Sure. Agreed with all of that.
The moral case for ending slavery is so extreme that it justified burning down the South's economy and making them start over.
The moral case for the welfare state isn't that extreme. Either we figure out a way limit these programs to what we can pay, or lots of people will get hurt when they run out of money and/or break the budget.
"Breaking the budget" includes "needing to raise taxes above what is politically possible".
"
I'm not supporting slavery, you're just pretending I am so you have a straw man to argue against.
"
Faith is what you're doing when you're staring at math and data filled trend lines and ignoring them. Following the data is the exact opposite.
"
Absolutely. Taxes become services, infrastructure, etc, some are highly beneficial.
Reduce the size of government down to zero and you're looking at places where murder is legal, and there is no power, or roads, or contract enforcement. A government which prevents murder, enforces contracts, and builds roads is highly useful and necessary for certain levels of industry.
"
It's basically everyone but Vermont. http://www.politifact.com/texas/statements/2010/dec/25/john-cornyn/sen-john-cornyn-says-49-states-have-balanced-budge/
Chicago's problem isn't that it's under taxed.
Even if we make the assumption that a really big tax increase will solve everyone's problems, IMHO it'd be a short term fix. Programs would continue to grow, politicians would continue to get elected promising to hand out free stuff, and long term we'd be back in this mess where the government has outstripped it's revenues.
I suspect we're going to test that. Hopefully a few states will break and provide an abject lesson to the rest on what not to do, and after that voters will understand that there are long term issues with "free" things (be they tax cuts or hand outs by the gov).
One of the problems is we're at the bottom of an interest rate super-cycle, multiple generations of politicians and business leaders have come to power thinking that interest rates can only go down, debt can only get cheaper. In that context, it makes sense to take on debt to "invest" or hand out good things to your supporters.
Return interest rates to their historical averages and lots of places will discover debt isn't free and they have real problems.
"
So you're saying you were wrong when you said they would? That deep down you think the GOP's anti-tax crowd aren't serious? Are you claiming the GOP is willing to raise taxes high enough to fund all the programs you want?
So hopefully now that they've had a tax increase, all of their problems are behind them and they'll be prosperous. :)
"
A lot of "cost of living" is the effects of taxe and regulations. When you pay for a sandwich you're also paying for the vendor's taxes and overhead, everything that makes his life expensive is passed on to you.
I could increase my income a LOT if I moved to New York or Chicago, occasionally I have job offers. However after taxes and cost of living, I expect I'd be poorer. I'd also have to live in far worse housing, and have a far worse commute as well.
"
My personal measure is when the budget breaks and the bond market understand there's no money to be made loaning them money.
Alternatively we could have enough civil unrest (or war, or natural disaster) that the state loses its monopoly on violence... but that's unlikely at a state level because the feds would step in.
"
By modern standards, every single slave owner could, and should, have been arrested and imprisoned. Further there's a really strong claim that Slavery seriously impeded the South's economy, lowered productivity, misallocated resources, that sort of thing.
But from the standpoint of the South itself, with an economy built around slavery, the end of slavery would have been seen as the end of the economy. Think of it as a one-factory town after that one factory closes down.
That's not an argument for slavery, it's pointing out that the economic/social impact of the federal government was so great that when the other guy won the election, the South went to war.
So yes, more and more power to the gov increases the stakes of the elections.
"
:Amusement: You and I have both explained it.
Let me just quote you: The republic as we know it won’t die of a fiscal crisis, brought down by Chinese banks pulling out of Treasuries. It will be brought down by the screeching to a halt of the political process (*). (*) of course, by then, the Lenders would have pulled away, scared by a country that has the assets to pay its debt, but it’s refusing to use those assets as part of their internal political game.
And now let me quote me: Politicians run out of the political will to tax long before they run out of things they can tax.
"
You've never heard of anyone moving away from New York (etc) because of the cost of living?
"
Yes and no. I get what you're saying, but imho a lot is gained by forcing the states to compete with each other. Tax too much, regulate too much, and you lose population and/or jobs.
We are probably going to see various states fail because of corruption and/or simple bad policy. Illinois comes to mind.
That's over and above the whole 'tyranny of the majority' thing. A one size fits all approach to policy probably results in bad things for whoever is a minority (likely rural or more-wild-than-rural countryside).
"
Now days we think of slavery from a civil rights point of view. However from the South's point of view, slavery was also an economic issue. What the federal gov wanted to do (i.e. end slavery) would have destroyed huge amounts of the South's economic "assets", and upended every company large enough to have slaves.
The economic importance of who controls the gov isn't just "taxes" or even "size of gov", it's also the gov's other influences on the economy. The government telling you what you can and can't do with your property and what jobs you can have is up there with direct taxation and direct spending.
"
@j_a
2% growth should be a serious cause for concern, not a source of pride. Return growth to 5% and we can handwave away a lot of these other issues.
If those "tweaks" involve tax increases which can be measured in percentage points of the GDP, then your definition of "minor" is very different than mine.
In Washington-speak "cuts" means "reduce increase of future spending".
These programs increase in cost every year above inflation and the growth of the economy; Just holding them constant should not be described as a "cut". The cost of these programs has grown, dramatically, and often the basic plan was that future politicians would somehow find the money.
Politicians run out of the political will to tax long before they run out of things they can tax. The political support needed to create these programs, and even to keep them, is less than the political support needed to constantly increase taxes to pay for them long term.
Granted, we need to do something for the old and the sick, but "something" doesn't have to mean "break the budget" or "first call on society's resources".
Entitlements are squeezing out things like bridge repair. However we just had a massive stimulus which was sold as going to "shovel ready jobs" to help infrastructure. High speed rail and various "green" infrastructures is where the infrastructure money went... and having pulled that trick once, it's going to be a harder sell the second time.
"
This year it is, even this decade (although the lack of growth is already a big issue). These are long term problems, and the closer we get to the edge of that cliff the more painful it will be backing away from it.
"
His exact phrase was: "...deflate its borrowings into nothingness..."
When you say "make our debt load substantially more manageable" what the bond market will hear is "we can't pay all of you full value".
And the world changes, probably a lot. At a minimum we have a substantial "risk" premium adding to our bonds (which would be awful), at a max on day one there will be a mad rush for the door as every trader tries to save himself. And then we have day two.
At that point we're over the edge of the universe and dealing with the unknown. Things will have had to be awful for us to try this, my expectation is that they'll get a lot worse. One hopes we don't turn to Darth Sidious and instead just let Social Security be cut in half, but we can't really say.
"
I don't see why a 401k needs a "King" to run it.
My intuition is that the more political meddling we have, the worse it will end up being; whether it's California's retirement accounts being used to further "green" agendas or Social Security's habit of passing it's full cost onto future taxpayers so current retirees can get back more than they put in.
"
You say that like it's a good thing. I'd object to new gov programs a lot less if it were possible to kill the old ones, or even to evaluate whether or not they're doing a good job. But you really can't, not if you want to get elected.
Every new program becomes politically untouchable because it's "needed" by someone who will vote on that issue, and every dollar of new gov spending becomes permanent. Thus gov only grows, but eventually we'll run out of other people's money.
"
Well put.
Wait, why would a 2:1 conversion have been deadly?
It's been quite a while but I vaguely recall thinking that was the expected result.
*Comment archive for non-registered commenters assembled by email address as provided.