This shouldn't be a surprise. The US came out of WWII with similarly high debt to GDP. They only corrected that through financial repression, and that's likely to be their only chance of lowering that debt ratio today.
If we don't spend the next few decades skating by while the currency is debased under our noses, I assume its because there's a much more severe and tragic response.
That, and there is a looming Social Security crisis due in 2032. Fiscal responsibility hasn't been either party's (or voters') priority for the past two decades, and it's probably going to take another disaster to put it back on the table.
The problem would be much less intractable if one party didn't do 3 pointless multi-trillion dollar tax cuts primarily for the benefit of ultra high earners. Each time promising it would reduce the deficit, with increasing absurdity.
It's depressing to look at the before/after federal deficit estimates over the last two decades without the Bush tax cuts, even before taking out the Trump 1 tax cuts (and future projections from the recent Trump 2 cuts in the BBB). Just a huge unforced error that was completely foreseeable each time.
Contrary to public perception and PR, the "party of fiscal responsibility" has consistently been a disaster for controlling the deficit.
Clinton left office with a budget surplus. He deserves some credit for that, though it was also partly due to the end of the Cold War and the Republican majority Congress under Gingrich. Deficit spending increased dramatically under George W. Bush after 9/11 and every subsequent administration has continued this.
It's easy to place the blame on political parties or the wealthy but at the end of the day the problems that America faces are the result of a series of choices made by the electorate over decades despite the feedback from each of these decisions as they were made.
At then end of the day the way things are in America is a reflection of what the American people want their country to be.
Precarious state of health care access and incomprehensibly opaque costs? That's a choice.
An ever escalating police state that has reached new peaks of immigration police and pulling random people off the street and a national guard perpetually patrolling cities? That's a choice.
Forever wars with no discernible objective or end point in the Middle East? That's a choice.
consolidation of media and economic control into a smaller and smaller group of people? That's a choice.
All of this is a choice that Americans collectively continue to make. And my prediction is that they'll continue to keep making these (imho) poor choices.
It's the Baby Boomers. They will transition to collecting ssi.
This was the "Locked Box" that Al Gore got mocked for on SNL 26 years ago. So people saw it coming and were trying to fix it then. And it was the Democrats trying to fix, it is not a "both sides" case. There is one party trying to destroy Social Security, and one party trying to fix it. I encourage anyone to not take my word for it, and conduct some basic research of their own.
Anyway, the crisis is that there is less income than distribution. So we collect debt (unlikely, given appetite for US debt after the last 20 months or so) or reduce payments.
Since many social security recipients are wealthy and not at risk of poverty, what will happen is likely some sort of reduction after means testing. It is not ideal, but entirely because fiscal choices of America's collective fault.
It doesn't directly. Financial repression does though, its a "solution" to high federal debt and leaves the average person having to eat the cost.
Its a bit like austerity, but instead of taking a share of everyone's wealth they just make all of our stored wealth worse less. They do that by inflating asset prices much faster than wages can keep up, meaning those large corporations at the top get rich while the average person falls further and further behind.
Don't quote me on that, but people are saying that despite American companies are getting more money, people are getting even less.
Or that's my understanding. Happy to be corrected though
Public debt burden increases interest rates, which benefits holders of government bonds, who are disproportionately wealthy households and financial institutions. It also crowds out private investment and inhibits economic growth, which weakens workers' bargaining power.
You can implement policies that tax more than just income. So no not regardless of policy but yes where policies don't exist to reshape a system where capital (i.e. investment in automated production) inherently takes more of the wealth than labour it will inherently lead to an agglomeration of capital.
Today, if sanitation workers go on strike, they rapidly end up with a negotiated settlement. If we had self driving garbage trucks that didn't need them, what political leverage would they have? The same too goes for other industries.
If police have advanced surveillance technology and drones, even violent protest becomes very hard.
What pressure is there to cater to people who are powerless dead weight on the economy?
My conspiracy theory is that Elon was right those years ago when he claimed genuinely autonomous vehicles would soon be achieved, but that the result has been suppressed. If you let people stop working and pay a basic income, it will be hard to put that cat back in the bag when you need labor again, so the policy position would be to have truck drivers keep working for the sake of continuing to work.
But instead, ever since the brief federal surplus at the end of the 90s, we've done multiple multi-trillion dollar tax cuts for the highest earners. Bush tax cuts + 2x Trump tax cuts (most recently in the BBB). In each case after fudging the projections beforehand to claim it will reduce the deficit somehow, then the deficit grows by a massive amount.
We've been reshaping the system to redistribute trillions to capital owners via government IOUs that will eventually come due. Inevitably, this will be "solved" by cutting benefits to workers while insisting no other solution could possibly exist.
Like, you know, undoing these relatively recent handouts to the ultra rich and restructuring policy to the benefit of workers.
One would expect that retirees are mostly living off capital rather than labor. Wouldn't an increased elderly population result in a lower labor share?
Or maybe something else. This paper suggests that as workers get older, they switch jobs less and get fewer raises:
"We find that a 60-year-old worker receives half the marginal product relative to when they were 20. Together with recent demographic trends, this can account for 59% of the recent decline in labor’s share of earnings in the United States."
So here's what I don't get: The United States is the world's largest consumer market. From what I can find, personal consumption expenditures (PCE) account for about two-thirds to 70% of total US economic output. We live and die on consumer spending and confidence.
So next we automate the bejeebus out of this economy with AI robots and Elon believes it grows 3x in under five years. Splendid. But if a consumer-driven economy has no payrolls, it eventually has no buyers. It just seems to me that ultimately, billionaires and investors cannot decouple themselves from the masses... but maybe it's a game of get mine before the system collapses?
Today, around 50% of US consumer spending is by the top 10% of wealthiest households.
The end state of this looks like how humanity looked before the industrial revolution: A single-digit percent of the population has the vast majority of the wealth and virtually all real estate and luxury goods. Between 90% and 95% of the population has just enough to live on, and never enough to build generational wealth or have any class mobility.
if a really powerful mafia got installed into your city, a very small violent group of people demanding people to pay to stay safe... how long before you start organizing? how long before they notice and do something about it?
If billionaires have all the money then there's nothing stopping them from buying all the stuff the economy can produce and leaving the rest of the population to barely get by or starve. Certainly, higher income people might currently spend less than their share of total income (at least between 2017 and 2021, see BLS paper, Garner et al., 2024, Gini of 0.3ish vs what I believe is 0.4ish for post-tax income) because poor people need to spend more of their income on things like food or rent, but there's no reason why the share of spendin by the top x% can't increase. In fact, as I understand it, it already has, according to [2] who themselves cite Moody, the top 20% accounted for 59% of spending in Q3 2025, which was a marked increase from the 40% in the BLS paper.
Now, the top 20% certainly aren't billionaires, but we also have to remember that the Luddites also benefited significantly from the automation of spinning before they themselves were replaced by automated weaving and subsequently suppressed by the state. There is no reason to think our current crop of labour aristocracy immune from the whims of capital when the time comes.
Well, Elon thinks we'll all get a Universal High Income. Holding aside the irony of him thinking the future is socialism, that money has to come from somewhere. If all companies in the future depend on a handful of AI and Robotics companies, I guess that the money has to come from Elon. Seeing as the layoffs have started, what is he waiting for?
A disaster. Economy is a flow of capital, it cycles up. USA needs the general public to have money for necessities as well as a little more for saving and then extras.
Top earnings come from the support of 1000s of participants with lesser earnings. This is an unhealthy economic trend. It's more than a stagnation risk.
Issues like these are created in a short term but take comparatively longer to correct.
Lower wages, job losses or eliminations, structural unemployment and forced entrepreneurship were all concepts that emerged during the Great Depression [1].
The world is a very different place than it was in the early 20th century, but at the same time, "those who do not learn from history are doomed to repeat it".
I say this not to be a "doomer". I say this because those forces I mentioned above were very real and we have to keep our eyes wide open.
Not if we control the prices, the idea of UBI isn't to give money but to give resources, if everyone gets a house, clothes, food and education for free that's UBI as well. Even if it didn't involve a direct benefit transfer.
And that's the only solution to UBI, when resources are abundant enough that UBI isn't needed or with UBI we increase resource enough that there isn't inflation risks.
All UBI experiments till now have proven it's not bad for the people, if we just manage the economy part it will all work out somehow.
Sadly the people behind ycombinator think helping this administration crush woke youth, and spying on us with flock cameras, is more important that preventing fascism or corporotocracy.
Yeah, my thought exactly. Capital is the firm. Labor is the workforce. Wages are the return to labor and profit is the return to capital. Labor and capital are in eternal struggle for their piece of the pie.
Capital historically meant 'that part of production set aside for future production'. Machines, land improvements, infrastructure, intellectual property. Now it tends to include all assets used to generate wealth - including things like land which were once in their own category.
Wages are just money and may or may not become capital according to the discretion and opportunities of the employee.
If we don't spend the next few decades skating by while the currency is debased under our noses, I assume its because there's a much more severe and tragic response.
https://www.statista.com/statistics/222127/quarterly-corpora...
It's depressing to look at the before/after federal deficit estimates over the last two decades without the Bush tax cuts, even before taking out the Trump 1 tax cuts (and future projections from the recent Trump 2 cuts in the BBB). Just a huge unforced error that was completely foreseeable each time.
Contrary to public perception and PR, the "party of fiscal responsibility" has consistently been a disaster for controlling the deficit.
At then end of the day the way things are in America is a reflection of what the American people want their country to be.
Precarious state of health care access and incomprehensibly opaque costs? That's a choice.
An ever escalating police state that has reached new peaks of immigration police and pulling random people off the street and a national guard perpetually patrolling cities? That's a choice.
Forever wars with no discernible objective or end point in the Middle East? That's a choice.
consolidation of media and economic control into a smaller and smaller group of people? That's a choice.
All of this is a choice that Americans collectively continue to make. And my prediction is that they'll continue to keep making these (imho) poor choices.
This was the "Locked Box" that Al Gore got mocked for on SNL 26 years ago. So people saw it coming and were trying to fix it then. And it was the Democrats trying to fix, it is not a "both sides" case. There is one party trying to destroy Social Security, and one party trying to fix it. I encourage anyone to not take my word for it, and conduct some basic research of their own.
Anyway, the crisis is that there is less income than distribution. So we collect debt (unlikely, given appetite for US debt after the last 20 months or so) or reduce payments.
Since many social security recipients are wealthy and not at risk of poverty, what will happen is likely some sort of reduction after means testing. It is not ideal, but entirely because fiscal choices of America's collective fault.
Its a bit like austerity, but instead of taking a share of everyone's wealth they just make all of our stored wealth worse less. They do that by inflating asset prices much faster than wages can keep up, meaning those large corporations at the top get rich while the average person falls further and further behind.
Figure 1: https://www.americanprogress.org/article/why-the-national-de...
The work on technology to take the place of policy is proceeding, thought slower than the leadership would prefer.
If police have advanced surveillance technology and drones, even violent protest becomes very hard.
What pressure is there to cater to people who are powerless dead weight on the economy?
We've been reshaping the system to redistribute trillions to capital owners via government IOUs that will eventually come due. Inevitably, this will be "solved" by cutting benefits to workers while insisting no other solution could possibly exist.
Like, you know, undoing these relatively recent handouts to the ultra rich and restructuring policy to the benefit of workers.
Corporate profits versus labor income https://fred.stlouisfed.org/blog/2018/08/corporate-profits-v...
Why is labor going up? In part due to more hours worked:
Nonfarm Business Sector: Hours Worked for All Workers https://fred.stlouisfed.org/series/HOANBS
If you divide labor income by hours worked, you should get hourly compensation:
Nonfarm Business Sector: Real Hourly Compensation for All Workers https://fred.stlouisfed.org/series/COMPRNFB
Working-age population is leveling off, though: https://fred.stlouisfed.org/series/LFWA64TTUSQ647S
One would expect that retirees are mostly living off capital rather than labor. Wouldn't an increased elderly population result in a lower labor share?
Or maybe something else. This paper suggests that as workers get older, they switch jobs less and get fewer raises:
"We find that a 60-year-old worker receives half the marginal product relative to when they were 20. Together with recent demographic trends, this can account for 59% of the recent decline in labor’s share of earnings in the United States."
https://www.bankofcanada.ca/2023/04/staff-working-paper-2023...
And no matter how you slice it, this is all working with national averages, which tell us little about anyone's personal situation.
So next we automate the bejeebus out of this economy with AI robots and Elon believes it grows 3x in under five years. Splendid. But if a consumer-driven economy has no payrolls, it eventually has no buyers. It just seems to me that ultimately, billionaires and investors cannot decouple themselves from the masses... but maybe it's a game of get mine before the system collapses?
The end state of this looks like how humanity looked before the industrial revolution: A single-digit percent of the population has the vast majority of the wealth and virtually all real estate and luxury goods. Between 90% and 95% of the population has just enough to live on, and never enough to build generational wealth or have any class mobility.
if a really powerful mafia got installed into your city, a very small violent group of people demanding people to pay to stay safe... how long before you start organizing? how long before they notice and do something about it?
Now, the top 20% certainly aren't billionaires, but we also have to remember that the Luddites also benefited significantly from the automation of spinning before they themselves were replaced by automated weaving and subsequently suppressed by the state. There is no reason to think our current crop of labour aristocracy immune from the whims of capital when the time comes.
[BLS 2024]: https://www.bls.gov/cex/a-distributional-approach-to-us-pers... [2]: https://www.empower.com/the-currency/money/life/k-shaped-eco...
so yeah, billionaires without compute or robots will join the permanent underclass
Top earnings come from the support of 1000s of participants with lesser earnings. This is an unhealthy economic trend. It's more than a stagnation risk.
Issues like these are created in a short term but take comparatively longer to correct.
The world is a very different place than it was in the early 20th century, but at the same time, "those who do not learn from history are doomed to repeat it".
I say this not to be a "doomer". I say this because those forces I mentioned above were very real and we have to keep our eyes wide open.
[1] https://en.wikipedia.org/wiki/Great_Depression
Pay peanuts, expect a circus.
At this point, we'll either have universal UBI -=or=- ongoing war.
Unfortunately, the latter is more profitable, so... the future is by design, probably.
And that's the only solution to UBI, when resources are abundant enough that UBI isn't needed or with UBI we increase resource enough that there isn't inflation risks.
All UBI experiments till now have proven it's not bad for the people, if we just manage the economy part it will all work out somehow.
(And I say controlled wages because the natural solution people bring up to paying for UBI is to carpet-tax the assets of the wealthy).
https://pmc.ncbi.nlm.nih.gov/articles/PMC3198075/
In fact according to government data:
>U.S. counties with poverty rates exceeding 35% have age-adjusted obesity rates substantially higher than wealthy counties.
Being fat is actually a disease of the poor.
Wages are just money and may or may not become capital according to the discretion and opportunities of the employee.