Solution to US debt crisis is severe austerity triggered by a fiscal calamity

Comments

Comment by techgnosis 1 day ago

The healthcare portions of the debt seem unsolvable but I don't know why we think Social Security is that complicated to fix.

1. Define very clearly what SS is. We need to be clear that it's an agreement between the working class and the retired class that says "if you are too old to work and you can't afford to live, we will take care of you"

2. Get rid of the SS tax cap. You don't pay any SS tax above 180k ish, which seems silly. Get rid of the cap and let every earned dollar participate in the program. It doesn't feel like that hard of a sell.

3. You don't get SS payments if you already have enough income. See #1, the agreement. We are agreeing to take care of you if you need it. Many, many retired persons do not need their SS income. Even if you paid SS tax your entire life, see #1. It is not an agreement that you will receive the money you put in later in your life.

Those aren't popular ideas but they are simple and easy to understand for everyone.

Comment by tzs 1 day ago

#2 is popular, according to polling. See [1][2].

[1] https://www.aarp.org/social-security/survey-raising-taxes/

[2] https://www.nasi.org/wp-content/uploads/2025/01/NASI_SocialS...

Comment by ta9000 1 day ago

Of course it is, most people like to tax others to pay for their own benefits. Almost no one in the US maxes out the cap, so for them it would make no difference.

Comment by bdangubic 1 day ago

do that poll in fairfax or loudoun county in northern va or san jose or san francisco and and watch those numbers change… every is up for more taxes as long as someone else pays them

Comment by Hammershaft 1 day ago

That isn't enough to solve the problem.

https://www.crfb.org/socialsecurityreformer/

Comment by FreakLegion 1 day ago

According to the site it is.

Revenues -> Eliminate Tax Max without Benefit Credit (parent's #2) closes the gap by 68%.

Benefit Formula -> Slow Benefit Growth for Top Half of Earners (closest option to parent's #3) closes the gap by 41%.

Together these keep the program solvent indefinitely.

Comment by whimsicalism 1 day ago

? the OP proposed raising the contribution limit & also hinted at some means testing "and you can't afford to live" -- which combined would absolutely be enough to close the gap depending on how aggressive you are with these changes.

Comment by bdangubic 1 day ago

I would let government decide “you cant afford to live” as much as I would let OJ Simpson date my daughter. but that would be a hoot as two parties controlling the government change. while one is in power, 99.99% of retirees would qualify, the other - 0.000065% :)

Comment by whimsicalism 17 hours ago

vacuous anti-government take that doesn’t really do anything to contribute to the discussion, imo. essentially “keep the government out of my social security!”

Comment by bdangubic 10 hours ago

you have a comment to say what you don’t disagree with or just shooting the breeze?

Comment by whimsicalism 1 day ago

healthcare: It might be politically doable if we just keep govt catastrophic care insurance and then give like ~50% of what we were previously spending on medicare/medicaid as a UBI. Would cut spending substantially and make the politics on 'endless healthcare spending without clear benefit' more of an uphill battle.

Comment by iamthemonster 1 day ago

I was interested to hear Trump mention Australia's retirement system the other day (amongst the endless stream of what he normally talks about, it really stood out).

In Australia you have a universal Age Pension which is a backstop against extreme hardship set at the equivalent of US$20.5k, but your rate of Age Pension reduces linearly with income levels between US$9k and US$44k.

Similarly, the rate of Age Pension reduces linearly with asset levels between US$213k and US$474k, but you don't count your own home in that.

The private retirement savings system is similar to the 401(k) and Roth 401(k) except the employer doesn't typically do a match, they are just legally obligated to pay 12% of your salary. You can then contribute an extra US$20k as an income tax reduction or pretty much however much you want after-tax.

Inside the superannuation system, the gains are only taxed at 15%.

In general, it's a pretty perfect system that just leans a little too far towards being a rich person's wealth preservation tool, but overall it enables self-sufficiency while also preventing real poverty in old age.

Comment by ta9000 1 day ago

> Get rid of the SS tax cap. You don't pay any SS tax above 180k ish, which seems silly. Get rid of the cap and let every earned dollar participate in the program. It doesn't feel like that hard of a sell.

No. Frankly getting a bit of a boost to my income at the end of the year is one of the few things I have left to look forward to. The program at best will pay out $0.75 on the dollar of benefits. How much is enough? Do more with less.

Comment by simonsarris 1 day ago

> How severe? A sustainable U.S. debt trajectory would entail elimination of nearly all defense spending or almost all non-defense discretionary outlays, he estimated.

Reminder that infrastructure is ~3% of the budget, the military is ~13%. Almost all of the rest are benefits, either health or money, for old people or various poverty reduction schemes. Or debt.

Social Security was made when there were ~130:1 worker:retiree ratio, now its closer to 3:1 and getting worse. The budget is largely an exercise in transferring money from the younger to the older. Unlike when SS started and the older generations were the poorest, right now they are the richest, so its an exercise in making the richest generations a bit richer at the expense of the current working generations.

Since debt is now a large part of the US budget, this represents the retiree generation (again, the richest generation!) borrowing from even farther in the future to give themselves more money.

There is no solution that doesn't confront this. The old are eating the young at an accelerated pace. People will say things like "But seniors are on a fixed income" as if that didn't represent most people, more or less, or justify the sheer scale of the wealth transfer.

The most realistic solution is that we would have to stop all kinds of benefits to already-rich people and make it solely and exclusively on poverty reduction for the retirees that are in fact poor.

Comment by nobodyandproud 1 day ago

Gen-X here. I’ve grown up with the warning non-stop that Social Security will become insolvent.

My question is this: If I can’t get some or most it, why can’t I steer the money to where I believe the money ought to go?

Comment by simonsarris 1 day ago

There's no steering anything. You are not paying for yourself, you are paying for current retirees on the hopes that there will be enough people to pay for your. Current retirees are not getting enough from that, so they are accumulating debt to pay themselves even more, hence the article.

Since the population pyramid has not worked that way, you will simply have a worse time, and younger people even worse, unless you can convince the people after to take on even more debt.

"Children are the retirement plan" has been true all along, only obfuscated. It would have been more sensible if social security payouts were contingent on how much tax revenue your children made, rather than the current model.

Comment by potato3732842 1 day ago

>Since the population pyramid has not worked that way, you will simply have a worse time, and younger people even worse, unless you can convince the people after to take on even more debt.

Why is "just pay current recipients enough to get them to STFU and phase out the program" not an option?

It's not like anyone under 60 didn't at least have some expectation SS might go tits up. Younger genx on down have been raised to expect nothing so they won't be too sad. They'll be happy to stop paying if anything.

Comment by whimsicalism 1 day ago

gen Xers would fight it tooth and nail, you underestimate.

even many in my Gen Z cohort would be pissed, although i would be celebrating

Comment by potato3732842 1 day ago

>gen Xers would fight it tooth and nail, you underestimate.

I think that's filter bubble speaking. People who aren't ideologically in favor of entitlements would likely be mildly for or against. People who are ideologically against entitlements would consider it a good thing.

Comment by Taikonerd 1 day ago

I feel like even people who don't care much about ideology care a great deal about how much they, personally, are going to be paid.

Especially if they amount they're going to be paid is going from $LOTS to zero.

Comment by whimsicalism 1 day ago

Soon-to-be recipients stand to lose out on tens of thousands of dollars from SS cuts. I think this would skew the normal distribution of ideological views you are imagining far more than you think.

Don’t think this is “filter bubble” as I don’t interact with many Gen Xers and the ones I do likely skew skeptical of SS.

Comment by Hammershaft 1 day ago

Children are the retirement plan but tax revenue positive migrants can also plug the gap.

Comment by phil21 1 day ago

Because social security tax is simply a tax like any other, and social security is a pay as you go means tested entitlement program like any other.

Current workers pay for current retirees. There is no account anywhere with your name on it earmarked for your retirement.

It was enacted with lawmakers well knowing this - it was simply marketed in such a way to make it politically possible to enact and keep around long-term. If it were pitched as an additional tax and spend welfare program it’d have never gotten off the ground to begin with.

Without your dollars going in today, current retirees would not be receiving meaningful benefits - as their contributions largely went towards those retired while they were working. The whole idea is more of a social contract between generations than anything else.

Comment by nobodyandproud 1 day ago

I understand the perspective and I don't disagree with it, but the problem that spawned social security doesn't go away. It takes a crushing amount of time and money to take care of your aging parents, unless we go down a very dark route, and many elderly are abandoned and it becomes a societal mess.

Some approaches I was mulling over:

1. The easiest way is to dilute SS without pushing the years down even further is to remove the required COLA adjustments.

It's probably the easiest; also the least imaginative; and may be too slow.

2. The other is what the other poster mentioned: Real social security really comes down to your kids; and this is what I think should be the basis for a "new deal".

This has to be done very carefully--I can see so many ways this can be abused--but longer-term I think giving some sort of tax break or even tax credit--based on the social security numbers of the parents--allocated by the parent(s).

For the family that can't do it full-time, they can then use that credit or offset to hire some help.

Thoughts?

Edit: I went through this but with hired help. It was both necessary and awful; and I wish I had an option to help my parents directly full-time, but I didn't have the means at the time (I suppose I still don't).

Edit 2: Fixing social security alone doesn't address the wider fiscal problem. It's almost a drop in the bucket. Healthcare is the problem.

Comment by whimsicalism 1 day ago

The American elderly are in 2025 the richest generation to have ever existed in human history. Elder poverty can be solved with a comparably much smaller transfer scheme than what we have crafted.

Comment by nobodyandproud 1 day ago

Sigh. I don’t mean the elderly now or even my generation.

I mean the elderly in 50 years time, when Gen Zers and younger have to deal with the same question.

Comment by salawat 1 day ago

In other words: Ponzi scheme, rather than any sustainable retirement mechanism.

Comment by setr 1 day ago

It’s a tax. You could describe any beneficiaries of a tax in the same manner; we’re paying taxes to at least partially cover group X - homeless, scientists, military, retirees, veterans, etc.

There’s no debt being paid; money is simply taken from Peter, and money is simply given to Paul.

It’s not a retirement program, it’s retirement subsidization.

Comment by salawat 1 day ago

I don't think I'm willing to grant you Social Security as a proper "tax" or "subsidy" unless you're going to pitch me that Social Security is really, in essence, an incentive program for unrestrained natalism to keep population above replacement with all the Manifest Destiny/imperialistic implications and aspirations that come with it, and further, a commitment by the people who started it to never under any circumstances inform descendants of it's true nature.

If you are willing to concede the above, I'll reclassify it as a proper "subsidy" insomuch as it was a law that was passed, and it is a clear act by the government to incentivize activity "X". At which point my discussion will quickly turn to "Holy shit, why are we still trying to empire build in the year of our Lord 2025? Shouldn't we have changed this by now?"

If not... Still seeing it as a Ponzi. A fundamentally degenerate and unstable financial model, intended only to benefit the people who have been in it the longest solely for the purpose of self-enrichment. Well branded, mind; who doesn't want Social Security? But a Ponzi in essence nevertheless.

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Comment by lotsofpulp 1 day ago

Without sufficient automation, all forms of retirement are inherently a Ponzi scheme, unless there is a cap to the age or amount of benefits received in retirement.

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Comment by whimsicalism 1 day ago

we also yeet a ton of money on low efficacy medicare/medicaid where large scale experimental trials and lotteries show limited impact on health outcomes at all.

Comment by qeternity 1 day ago

> Reminder that infrastructure is ~3% of the budget, the military is ~13%. Almost all of the rest are benefits, either health or money, for old people or various poverty reduction schemes. Or debt.

The US Government is an enormous welfare program with a military on the side.

Whenever people talk about the rich paying their fair share, they simply fail to grasp the enormity of the problem. There is no taxing your way out of this problem.

Society's expectations have far outpaced our fiscal strength.

Comment by slillibri 1 day ago

Reminder that social security is funded entirely by a separate tax and not debt, so unless you are planning to cut benefits but continue the tax it would do nothing to reduce the deficit or debt.

Comment by Taikonerd 1 day ago

IIUC, in the future, the SS tax isn't going to cover the benefits that SS will be obliged to pay out. So some analyses model the shortfall as coming out of the government's general budget.

So, yeah, it's "separate" spending in a sense, but it's not totally in its own sandbox.

Comment by Acrobatic_Road 1 day ago

This is already the case. Social Security has been running a deficit since 2010. It's only stayed solvent because of the trust fund, which is expected to run out in around seven years. So the government is currently keeping it afloat using general budget revenue.

Comment by whimsicalism 1 day ago

Yes that is what is being proposed.

Comment by expedition32 1 day ago

Any kind of benefits system the middle class does not qualify for will find itself quickly cancelled through elections.

Comment by akamaka 1 day ago

Rather than reading this opinion piece, you can learn more about the “debt crisis” by just studying this chart which shows what percentage of the federal budget goes toward paying off the debt:

https://fred.stlouisfed.org/series/FYOIGDA188S

The situation is similar to what it was in the late 1980s, and it can mostly likely be managed with the same level of spending restraints we saw in response to that.

Comment by whimsicalism 1 day ago

Share of budget is actually a terrible way to look at this because the budget itself has exploded, and that ratio hides most of the real modern risk.

Interest costs in the 80s spiked because high rates were applied to a much smaller debt base. Today we have the opposite problem: rates that are high compared to the 2010s are now rolling onto a massively larger stock of debt. We’ve only just started to refinance that debt at the new levels, so the full impact hasn’t even shown up yet. We are still seeing significant inflation (meaning rates still have upwards room to grow), beginning signs of an economic pullback, are beginning to see signs of a Fed unwilling to raise rates sufficiently due to the impact on the fiscal environ, etc.

Comment by akamaka 1 day ago

If you compare government budget as share of GDP, you can see that is hasn’t “exploded”, outside of crisis periods. Current spending rate is elevated about 25% over the 1990s period of restraint, but quite close to the 1980s.

https://fred.stlouisfed.org/series/FYONGDA188S

Comment by whimsicalism 1 day ago

You keep switching between flows and stocks and what you want your numerator and denominator to be, why wouldn't I just look at real spending and real debt numbers - ie. the number we ultimately have to pay interest on?

GDP % is only relevant if we are politically able to raise taxes.

Comment by akamaka 1 day ago

Both of the charts I posted have GDP as the denominator (although I incorrectly said the first was “share of budget”).

I think it’s very important to use GDP as a denominator, because otherwise you’ll be stuck crying wolf, saying “debt always keeps going up” even during the good times.

There are a lot of people who simply don’t believe that the government budget needs a trim right now, because people have been continuously saying there was a debt crisis even when the financial situation was relatively favorable.

Comment by Libidinalecon 23 hours ago

You know why Japan is fine with 236% debt to gdp?

Because measuring things against GDP like this is completely meaningless.

If you use your brain for even the slightest moment it would be completely obvious that the sum total amount of a debit is a huge deal because of scale of the interest.

Comment by Taikonerd 1 day ago

IANA economist, but if there were a debt crisis, it would ultimately be about the psychology of the investors who would buy government debt. They want to be very, very confident that they will be paid back (which is why they're willing to accept a low interest rate).

If those investors are satisfied with a return to a late-80s fiscal posture, then great. But if they're worried that spending would just creep up again once the pressure is off, they might "demand" further cuts.

Comment by creer 1 day ago

In particular, investors often like to see the contrast of infrastructure development (investing in future GDP), as opposed to paying day to day operating costs, retirements, interest on debt (never mind larger debt as far as the eye can see), and other creative ways to prevent future GDP. And there is very, very little infrastructure development in US budgets.

Comment by pants2 1 day ago

If we're going off of a "share of budget" metric then the fastest way to reduce debt share is to increase spending in other areas!

Comment by akamaka 1 day ago

I was mistaken to say “share of budget”, because the chart I linked to is actually share of GDP, which hopefully isn’t affected by the problem you pointed out.

Comment by mapleoin 1 day ago

> can mostly likely be managed with the same level of spending restraints we saw in response to that.

so... austerity? Like the article suggests?

Comment by akamaka 1 day ago

Was the 1990s austerity “severe”? I remember a lot of complaining at the time, but it doesn’t seem too bad in hindsight.

Comment by ls612 1 day ago

Given the security situation today repeating the peace dividend is not an option, so it would be much tougher than the early 1990s was.

Comment by Acrobatic_Road 1 day ago

At current trajectory, interest costs will exceed 50% of all tax revenue within 30 years. See footnote 5:

https://media4.manhattan-institute.org/wp-content/uploads/a-...

The author took the CBO's budget projections and adjusted them for "false sunsets", i.e. the tax cuts that were supposed to expire before they were extended, and the fake spending cuts written into the law that will never happen, i.e. the FRA.

Comment by MentatOnMelange 1 day ago

Its amazing to me how many people find the thought of societal collapse more palatable than raising taxes on corporations and capital gains.

Comment by 0xy 1 day ago

Because your proposal leads to layoffs and sell-offs, accelerating decline.

Comment by MentatOnMelange 1 day ago

The alternative, letting the deficit grow while continuing to cut taxes, hasn't worked out either though

Comment by jmclnx 1 day ago

No, solution is to go back to a tax structure we and in the 1950s, were the very rich and corporations paid real taxes.

Starting with Reagan, taxes cuts corporations and the rich has been the main driver of the debt. And I will add to that, falling wages for the middle and lower classes based upon inflation.

Comment by rayiner 1 day ago

The tax level is about as high as it ever has been: https://fred.stlouisfed.org/series/FYFRGDA188S

Comment by PopAlongKid 1 day ago

Are you equating receipts with tax level? Tax is a rate applied to an income or wealth amount. Note that GDP includes government spending, which is not subject to tax but is based in part on debt.

https://www.pgpf.org/article/six-charts-that-show-how-low-co...

Comment by potato3732842 1 day ago

If you are in favor of more taxes nominal vs effective rates is not a can of worms you want to open. Effective tax rate was lower in the past even if the nominal was higher. SALT was amounted to basically nothing back then whereas they are far more now.

Comment by whimsicalism 1 day ago

sure but that sword cuts both ways. it is well documented pretty much nobody actually paid top nominal rates in the 50s because there were so many loopholes

Comment by rayiner 1 day ago

No. The chart shows "Federal Receipts as Percent of Gross Domestic Product"

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Comment by stvltvs 1 day ago

Why choose that metric rather than income, corporate, capital gains, etc. tax rates? Seems like it could obfuscate who bears the burden of those taxes.

Comment by rayiner 1 day ago

Because we are talking about the federal debt, not distributional issues.

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Comment by s0sa 1 day ago

I’d love to see a breakdown of where the tax revenue is coming from (e.g. demographics) over the same period of time.

Comment by eqvinox 1 day ago

Tax level, sure, but not tax distribution.

Comment by whimsicalism 1 day ago

real wages have been going up and the inflationary period saw a very high rate of increase in real wages particularly for low wage workers.

Comment by whimsicalism 1 day ago

We have a VAT or VAT resembling tax in our near future, I bet

Comment by Taikonerd 1 day ago

I got interested enough in the national debt to do some research: is there a single-issue NGO that's working on the national debt? With a platform that you could imagine a Democrat or a Republican supporting?

I found the Concord Coalition [0], and their sister organization Concord Action [1].

I haven't done enough research to endorse them, but I'm just saying: they exist and this is their issue.

[0]: https://concordcoalition.org

[1]: https://concordaction.org/

Comment by Acrobatic_Road 1 day ago

There's the Peterson Foundation and the CFRB.

Comment by Taikonerd 1 day ago

Thank you for these pointers!

Comment by Acrobatic_Road 1 day ago

Maybe the solution to this mess is to tie benefits to the total fertility rate. Would create a lot of interesting incentives.

Comment by ratelimitsteve 1 day ago

lets do austerity for the wealthy first. we give them money hand over fist, in fact we've never met a problem we didn't try to solve by giving the rich more money. we currently fund R&D for three private space programs, from which we buy the technologies we paid the development costs for. Lets get down to 0 publicly-funded privately-owned space programs before we start picking which grandmothers we need to starve out

Comment by Hammershaft 1 day ago

That R&D money to private space companies has lead to the biggest advances in space technology in our lifetimes.

Comment by creer 1 day ago

And for very small amounts too (compared to the whole mess). Fantastic return (on that little bit, out of the whole mess). Same for medical research.

Comment by Hammershaft 20 hours ago

Yeah, estimates of returns on public science generally are dramatic.

Comment by ratelimitsteve 19 hours ago

that's great, but it's not an unqualified Good Thing(tm) when we're putting it up against meeting basic needs for people today. We managed to have amazing gains in technology and a functioning state that can care for its citizens in the 60s. Also, this doesn't imply that 3 publicly-funded privately-owned space programs are better than 1 publicly-funded, publicly-owned space program, only that research is good (which was never the issue at hand).

Comment by Hammershaft 6 hours ago

We had significantly less welfare in the 60s. We also had more poverty per capita in the 60s but living standards were rising as a result of technological improvements. Clearly a private space company (spaceX) has dramatically outperformed our public space company at advancing technology, despite being a scrappy startup with a fraction of the funding 20 years ago.

Comment by burnt-resistor 1 day ago

Austerity for military pork and welfare for the rich first, because there is critical underinvestment in economic and social infrastructure. Cutting healthcare and welfare the poor isn't going to solve anything except increase net costs and drive regional rural hospitals into insolvency. To the former, curtailment in an un-DOGE, organized, and evidenced-based manner would be appropriate.

Comment by dsr_ 1 day ago

....former White House economic adviser says... and it's a bad thing, not a "solution".

Bad headline. No biscuits.

Comment by rawgabbit 1 day ago

Blah blah. Cut social programs while give tax breaks to the corporations. When will this Republican screed stop.

How about reversing the Trump Tax cuts or clawing back the tax holiday for bringing back profits hidden overseas.

Comment by derelicta 1 day ago

What the people crave for is MORE austerity. And by austerity, I mean higher taxes on those who work, and lower for those who dont.

Comment by _DeadFred_ 1 day ago

More taxes for those whose income is via earned wages, less for those profiting from having excess capital.

Comment by charlescearl 1 day ago

The evisceration of the pension system in the united states has created a class of those nearing retirement who will live in poverty. https://www.ncoa.org/article/addressing-the-nations-retireme...

The result of “fiscal restraint” amounts to acceptance of premature death for millions. Likely acceptable to a country that has accepted excess COVID deaths and support for genocides in West Asia, East & Central Africa, and South America. I only hope that boomers turn to anarchist resistance and disruption.

Comment by whimsicalism 1 day ago

this is not at all a causal result. the elderly in America are the richest generational cohort to have ever existed in human history, meanwhile young families are struggling to afford a home to raise their children in.