On the spending-cut front, only entitlement reform would make a meaningful difference, since programs such as Social Security and Medicare account for a majority of government outlays. No one countenances cutting benefits for current or near retirees. But Social Security and Medicare benefits for future retirees should be [means-tested](https://www.nytimes.com/2013/02/20/opinion/old-and-rich-less-help-for-you.html) — need-based, that is to say — and the starting age for entitlement payments should be linked to American life expectancy.
And on the tax front, it’s time for rich people like me to pay more.
I long opposed increasing the income level on which FICA employment taxes are applied (this year, the cap is $176,100). No longer; the consequences of the cliff have changed my mind.
Mitt also wants to close the cavern of the capital gains tax treatment at death for those with enormous estates. Because under the tax code, capital gains are not taxed at death.
and Sealing the real estate caverns would also raise more revenue: 1031 exchanges allow a real estate developer to defer and possibly avoid paying the capital gains tax on the profitable sale of a building. Depreciating the purchase price of a building, including the debt, shields income from taxes. As with the previous example, hugely profitable real estate properties held at death are not subject to the capital gains tax.
Not until there is some way to force Congress to prioritize spending. I’m not against deficit spending, indeed a good part of our wealth is because of it. That said, it’s also destructive when taken too far - as it currently is. So there must be some mechanism by which it is regulated, by which Congress has to calculate the ability to pay for this and not for that, OR SOMETHING.
No, I don’t have that answer, but identifying the problem is the first step.
The “debt to real GDP ratio”. Currently, it is screaming we are dooming ourselves.
The chart of the ratio from 1949 to 1980 is instructive of economies of scale in heavy industry under a much higher tax regime. The screwing around with it begins immediately in 1981.
As for Congress and administrations, we use Cost/Benefit Analysis. DOGE found they could not cut much because Cost/Benefit Analysis till this day is so good there is little waste.
Maybe. Our debt to GDP ratio is a bit over 100, maybe 130 after the B.B.B. Is in full effect. But then Japan has had a ratio of 240 for years now, and there’s no rioting in the streets, there is still food on the shelves of the grocery stores, inflation is not a crisis.
It hasn’t all been rosy either, the stock market there has been moribund for decades and their innovation is not what it once was, but it’s not the end of the world, either.
Japan did not face a debt contagion outside of the Asian Contagion in 2008. That was not a government debt contagion. Big difference this time. They can’t pass the buck.
Japan kept everyone employed. That is their culture.
We are going to see spreading unemployment.
Look we do not have to default. But do they want to default? It is an excuse to cut social programs and lower taxes.
To a greater extent, we are being cornered economically. If unemployment rockets and deflation comes into the picture tax revenues will drop substantially.
People enjoying the K economy are kidding themselves.
It might be. For Japan, that is. Japan strikes me as being in “retirement”, they are growing older, they are shrinking, and perhaps they are spending down their accumulated wealth as retired individuals do. Eventually they may actually disappear.
We’re not wrestling on the same sumo ring as Japan. Japan’s debt is largely domestically owned, making it possible to keep rates extremely low.
True dat! People on top don’t appreciate there’s a problem at the middle - bottom. Classic Twister scenario playing out.
Japan is in a pickle, that’s for sure. They’re probably a generation ahead of where the rest of the industrialized world will eventually end up. I’m optimistic they’ll figure out how to move forward.
You’ve got to appoint serious, competent people to lead the IRS, and then staff enforcement. That’s not going to happen anytime soon.
“The share of the federal debt held by foreign investors (“foreign debt” throughout this blog), whether governments or individuals, is on the decline. Foreign bank accounts hold more than $8.5 trillion in U.S. Treasury securities, which represents a substantial chunk of the publicly held federal debt—about 30%. This is down, however, from almost 50% in the early 2010s.”
Japan’s government has substantial assets. Foreign creditors hold about 30% of U.S. debt held by the public (DHBP). The U.S. government also has significant assets, with large land holdings.
Debt Held by the Public
Economists generally view debt held by the public (DHBP) as the most meaningful measure of debt, because it reflects the amount that the Treasury has borrowed from outside lenders through financial markets to support government activities. … As of the end of March 2025, the latest month for which breakdown data is available, DHBP was $29 trillion, or approaching 97 percent of GDP. That borrowing came from both domestic and foreign creditors, with the former holding more than two-thirds of it.
Composition of Debt Held by the Public (Billions of $):
