I discuss many different national issues on this blog.  But, I do believe that the biggest long-term problem our country faces is the uncontrolled growth of the national debt. Thus, I am highly intrigued by a proposal from Brian Riedl of the Manhattan Institute to stabilize our debt over the next thirty years at no more than 100% of GDP.

First, the rationale for his plan:

Annual budget deficits are already approaching $2 trillion annually and are headed toward $3 trillion per year just 10 years from now (see chart below).  There is a way to avert our looming debt crisis without broad-based tax increases or significant cuts to antipoverty and social spending.  However, this involves acting quickly to reform both Social Security and Medicare, as every year four million more baby boomers retire into these programs.  The fiscal consolidation in this report calls for some SS and Medicare benefits for upper-income recipients to be trimmed.

The debt problem is not caused by falling tax revenues.  Federal tax revenues have averaged 17.4% of GDP since 1960 and are projected by CBO to be 17.9% of GDP by 2054.  Instead, the entire increase in long-term debt will come from surging SS, Medicare, and other government healthcare spending (see chart below).

This demographic challenge is worsened by rising healthcare costs and repeated benefit expansions.  Today’s typical retiring couple has paid $214,000 into Medicare and will receive $635,000 in benefits because Medicare’s physician (Part B) and drug (Part D) benefits are not prefunded with payroll taxes and are only partially funded by retiree premiums.  A similar discrepancy applies to SS.

This year SS and Medicare will collect $1,701 billion in payroll taxes and premiums and pay out $2,349 billion in benefits.  Add in $21 billion in interest payments on this shortfall and SS and Medicare will contribute $651 billion to the FY 2024 deficit.  In just 10 years from now, this entitlement deficit will increase to $2.2 trillion (see chart below).

Keep in mind that most seniors are not poor.  Senior incomes have grown 60% (faster than inflation) since 1980, compared with 15% for the average worker.  Simplistic solutions to our debt problem must be rejected.  For example, Medicare-for-all.  There is no evidence that single-payer healthcare could reduce American healthcare expenditures.  A single-payer system would simply shift $32 trillion in private health expenditures over the next decade to the federal government.

The Riedl Plan achieves most of its savings from mandatory programs as follows:

• SS early and normal eligibility ages (currently 62 and rising to 67) are raised by 3 months per year, beginning in 2030, until they reach 64 and 69 in 2037.
• Canceling SS annual cost-of-living adjustments for seniors whose incomes in the previous year exceed $100,000 per individual or $200,000 per couple.
• Make Medicare more efficient by implementing a premium support system for Parts A (hospitals) and B (physicians). This creates a healthcare market where insurers must compete for retirees.
• Raise total senior premiums to cover 50% of Medicare Part B costs and 30% of Medicare Part D. Monthly premiums would rise on a sliding scale based on current, post-retirement income.
• Medicare eligibility age remains 65. The Medicare payroll tax, currently 2.9%, would increase by 1% to contribute to Medicare’s huge cash shortfall, including the overall gradual increase in the cost of healthcare.
• Medicaid reimbursements to the states would be capped at an annual per-capita increase in costs, rather than reimbursing a preset percentage of overall state Medicaid costs.

  

Conclusion.  The Riedl Plan caps our national debt at its current level of 100% of GDP and gradually reduces the debt to 73% of GDP by 2054 (see chart).  Well-off retirees would shoulder most of the costs of bringing SS and Medicare finances, which comprise most of our debt problem, to a sustainable level.  The Riedl Plan shows that our debt problem can be solved mostly with relatively modest changes in entitlement programs.

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On this blog, I write about important national issues, and, of course, this includes politics.  Recently, I have said that both major presidential candidates have huge liabilities, see here and here.  Overall, I think that Biden’s biggest hurdle to reelection is his misguided economic policies, i.e. Bidenomics.

Consider:

• Debt and deficits. CBO has just increased its deficit estimate for FY 2024 from $1.5 trillion to $1.9 trillion.  Adding up the deficits from Biden’s four years, from FY 2021 to FY 2024, produces a total four-year deficit of $7.9 trillion, which represents Biden’s contribution to the total national debt of approximately $35 trillion.  As the debt goes up, interest payments on the debt also go up, compounding the problem.

  

• It is well understood that excessive government spending, especially the $5 trillion in Covid stimulus spending, is the immediate cause of our current round of inflation which took off in March 2021, shortly after Biden signed the so-called American Rescue Plan of $1.9 trillion.  Although inflation has dropped to 3.3% as of May 2024, prices have now risen almost 20% since Biden took office and are still going up.

  

  

• High interest rates. The Federal Reserve has only one tool to bring the consumer price index down to the desired level of 2%, namely by increasing short-term interest rates to try to slow down the economy.  High interest rates not only make our debt that much worse, but cause other problems as well, such as raising mortgage rates.  This tightens the housing market, both for new home purchases, as well as for rentals.

  

• Treating the symptoms rather than the underlying problem.  The Biden Administration is responding to inflation, not by cutting federal spending, but by, for example, forgiving student debt and proposing to forgive medical debt.  This does not reduce inflationary forces but rather increases moral hazard: just borrow more money for college or skip adequate health insurance.

Conclusion:   Biden’s careless economic policy of reckless deficit spending has not only made our national debt problem much worse than before but has also tripped off a new round of inflation that makes life more difficult for millions of people.  His Administration badly needs some competent economic help.

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This blog, It Does Not Add Up, discusses many different national issues, both domestic and international, including political aspects.  I have already started to devote attention to the upcoming Presidential election, and will continue to do so even more as November approaches.  Of course, Trump’s felony conviction in New York creates a huge new issue.  We will soon know, from new polling, how much impact it is likely to have.

Nevertheless, the general outline is clear:  the election is likely to come down to President Biden’s bad policies versus former President Trump’s bad behavior.

Biden’s bad policies:

• The attached chart from Axios, shows that inflation was minimal in January 2021 when Biden took office.  It reached a high of 9% in June of 2022 and has now come back down to 3.4% in April 2024.  This is what economists talk about.  But, the Consumer Price Index (CPI) has risen almost 20% since Biden took office.  This is what people (i.e. the voters) actually experience.  Furthermore, it was the last $1.9 trillion under Biden, of the total $5 trillion in Covid stimulus spending, which tripped off the recent inflation surge.

  

• Open southern border. The attached chart from the Economist, shows that illegal southern border crossings have jumped way up under Biden.  Of course, we need comprehensive immigration reform, but until Congress gets this done, it is the President’s responsibility to enforce the asylum regulations we already have.

  

• Worsening world situation.  Starting with Biden’s disastrous withdrawal from Afghanistan in August 2021, two regional wars (in Ukraine and Gaza) have now broken out.  Does Biden have a plan to deter our adversaries from steps that undermine our security?  If so, what is it?

Trump’s bad behavior:

• Election denial in 2020. Trump filed over 60 lawsuits to try to overturn the 2020 election, without any success.  He also incited a riot at the Capitol on January 6, 2020, to protest the election results.  Although there were well-documented, pandemic-related, mail-in voting irregularities in several states, widespread voting fraud almost certainly did not occur.
• Felony conviction.  His conviction in New York, even though it is likely to be overturned on appeal, demonstrates his often sleazy behavior towards women and others.

Conclusion.  An estimated 70% of voters don’t like either major party candidate.  They will have to decide in November who they think is the least bad candidate between the two.

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Most of the time on this website, I discuss national issues independently of the personalities and political dynamics involved.  But, as we draw closer to the 2024 presidential election in November, it is impossible to avoid talking about President Biden and former President Trump.

The Democratic Party pollster, Mark Penn, has recently explained why Trump is now leading Biden in the polls. Consider:

• Biden is being dragged to the left by his policy advisors. He is not reaching out to moderate swing voters with policy ideas.  These voters look for fiscal restraint without tax increases, climate policies that still give people a choice of cars and fuels, and immigration policies that are compassionate to those who are here but close the borders.  The balanced budget remains one of the single strongest measures that swing and other voters want.
• Biden is pushing the Haley voters to Trump. Eighty-four percent of independents surveyed said they supported Israel more than Hamas in the conflict, and 63% said they believed a cease-fire should occur only after the hostages have been released.
• Biden needs to give a serious speech on the issues of crime and immigration and what they are doing to our inner cities. He has to combine policies of fair policing and treatment of DACA recipients with tougher crime and immigration policies.
• Seventy-eight percent of independents polled said they wanted the Biden Administration to make it tougher to get into the United States illegally, but 63% said they ultimately wanted compromise legislation that strengthens the border while giving DACA recipients a path to citizenship.
• Eighty-three percent of voters said they wanted shoplifting laws to be enforced strictly, and 69% said they supported Justice Department intervention against city district attorneys who are pulling back prosecution of violent offenders.
• Biden’s energy policies, especially his push for more electric vehicles, are not popular, either. Fifty-nine percent of Americans said they opposed the mandate that half of cars sold in the United States by 2030 be electric.  In Michigan, Trump has identified a potentially killer strategy by going around telling autoworkers that electric vehicles will destroy their jobs.  Threats concerning the loss of auto industry jobs could directly affect hundreds of thousands of voters in Michigan.

Conclusion.  The 2024 election is a rematch, but Biden should not assume he will get the same result as he did in 2020 in Michigan, Pennsylvania, Wisconsin, and other swing states. This time, he is older, and the assessment of the job he has done is in negative territory.  He could move more to the center and vacuum up swing voters who want to reject Trump.
He has to push back against his base rather than pandering to it and remember that “swing is king.”

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As we get closer to the November 2024 election, I will be discussing major political issues more and more on this website. I have already pointed out that both Biden and Trump have huge political liabilities:  Biden is a big spender and therefore weak on inflation.  He also has made our open southern border problem much worse.  Trump appears to be an isolationist on foreign policy.  He has also mired himself in untenable election denial claims from 2020.

But let’s look at several big national issues with respect to Trump’s likely policies more carefully. Consider:

• Inflation. Many economists understand that excessive fiscal stimulus makes inflation worse. In particular, Covid pandemic stimulus spending of $5 trillion, especially the last $1.9 trillion under President Biden, was excessive.  How would Trump address inflation in a second term?  According to his campaign website, he would “slash the deficit” by “crushing the deep state.”  I agree that shifting some responsibilities from the federal to the state level would be more fiscally sound, because states spend money more efficiently than the federal government.
• Ukraine. Although I have criticized Trump for being too isolationist, he did not oppose House Speaker Mike Johnson’s recent successful effort to pass additional funding for Ukraine (as well as Israel and Taiwan).  It is critical to continue to help Ukraine defend itself against the Russian invasion.  The U.S must firmly support freedom and democracy around the world when these fundamental values are threatened by our autocratic adversaries.
• Abortion. Roe vs Wade was (is) clearly unconstitutional and it was the Trump- nominated Supreme Court justices who helped accomplished its overthrow.  Even though the national consensus on abortion is for an approximately 15-week cutoff, it is highly unlikely that Congress would be able to enact such a measure.  Democrats want less restrictive regulation while Republicans want it more restrictive.  Thus, the most viable course of action is for each state to pass its own abortion regulations.  This is the approach that Trump has now endorsed.

  

• Open Border. We can rest assured that Trump will return to much more effective control of the southern border, just as he did in his first term.

Conclusion.  At least on the above four major issues: inflation, Ukraine, abortion and border control, Trump has taken sound policy positions.  Whether such policies consist of careful thought on his part, or (more likely) on good advice he is getting, it is reassuring that he’ll have sound positions on these major issues if he is reelected.

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On this website, It Does Not Add Up,I mostly talk about the major problems facing the United States and how I usually think things will work out well for us.  In other words, I am an optimist about our future.

Of course, we do have problems to be concerned about.  Our national debt is huge and out of control.  We have several autocratic adversaries (China, Russia, Iran, North Korea) who want to diminish us.  We currently have monetary inflation that is causing substantial misery for many people.  In a sense, these are all pesky details of national life to be attended to.

But, a major change is taking place at the present time that will transform American society.  As the social analyst, Walter Mead, has described, society is right now undergoing a huge realignment, from the “car city” to the “cyber city.”  Up until about 1920 the “rail city” predominated.  It was then replaced by the car city and is now being replaced by the cyber city.

Until recently, most people thought that the car city was the highest form of urban living and that the Great (car) Migration would dominate our lives forever.  But since the pandemic started in 2020, work-from-home (WFH), has opened the door to a new kind of urban living and the shift from the car city to the cyber city appears to be a major upgrade.

Cities emerge from the interplay of geography and technology.  To start with, railroads allowed cities to reach an unprecedented level of concentration, drawing many millions of people from the hinterlands into urban life by commute.  But then, car cities replaced rail cities in the early twentieth century.  Suburban living and single-family home ownership increased greatly because workers could commute from a much wider area.

The post-WWII flight to the suburbs helped create a new kind of American city as the descendants of ethnic immigrants moved to the suburbs and intermarried.  Many leading trends in American politics are rooted in the contest between the old rail cities and the postwar proliferation of car cities.  The center cities remain more hospitable to left-wing politics today than most suburbs.  The right, by contrast, remains instinctively pro-car and pro-suburb.

Now, tens of millions of American commuters are discovering that they can work from home (WFH).  This happened during the pandemic!  As of March 2024, more than 35 million Americans, close to one in four workers overall, were teleworking all or part of the time.  The rise of WFH threatens a massive dislocation in the life of the American city, a shift that is likely to be more far-reaching than the previous shift between rail and car cities.

WFH and the technologies that power it aren’t just breaking up the Great Migration.  They are opening the doors to a new era of middle-class prosperity that will make the zoomers rich. The real issue is geography as car cities approach their natural limits.   Density proponents want to address the resulting shortage of affordable housing by allowing denser building in existing neighborhoods.   WFH offers a much better path.

As happened after 1945, the wave of new infrastructure construction and new housing that WFH will unleash won’t just help the families who can move into new homes.  It will create millions of new jobs, enabling more workers to join the growing ranks of a rejuvenated American middle class.

Conclusion.  “America is one of a handful of countries well-positioned to lead the transition to a new kind of humane urbanism.  We have the space to expand, we have the growing population, and we have both the ingenuity and the energy to reimagine our cities and upgrade our society.  The age of American opportunity is not drawing toward a close.  It is moving toward renewal.”

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My website, It Does Not Add Up, has a very definite point of view.  Americans are blessed in many ways.  Democracy is the best form of government.  Free enterprise (capitalism) is the best form of economics.  We are both economically and militarily the strongest country in the world.  Our political and economic strength and freedom lead to steady social progress.  It is U.S. dominance that has created and preserved relative peace and stability in the world since the end of WWII.  It is critical for the current U.S.-led world order to continue.

But, nevertheless, we do have problems that we must be concerned about and take seriously.  We have internal political polarization, the worst in many years.  We have several autocratic rivals (China, Russia, Iran, and North Korea) who would like to weaken us.  As the analyst, Hal Brands, says in the current issue of Foreign Affairs, we have at times used amoral means to achieve our liberal goals.  Consider:

• During WWII, we firebombed many cities in Germany and Japan, as well as using atomic bombs against Japan, to defeat the Axis powers. We allied with Josef Stalin’s communist Russia to help us defeat Germany.
• During the Cold War, we allied with Mao Zedong’s communist China to isolate Russia, making it easier to overpower Russia, with our economic and military strength.
• The North Atlantic Treaty Organization, formed to protect democratic Europe from autocratic Russia, has several somewhat autocratic (i.e. barely democratic) members, such as Hungary and Turkey.
• In the Middle East, our democratic ally Israel is at war with Hamas (in Gaza), one of several proxies of terrorist, autocratic Iran. In this conflict, we have two autocratic allies, Egypt and Saudi Arabia.  Egypt, which borders Gaza, is likely to play a significant role in achieving peace, justice, and social progress for Palestinians in Gaza.
• India, the most populous country in the world, is an imperfect democracy where the Hindus dominate other religious groups. Nevertheless, it has a huge common interest with the U.S. in resisting Chinese hegemony in Asia.

Conclusion.  In an imperfect world, the struggle for dominance between democracy and autocracy requires the U.S. to make compromises in working with imperfect democracies, or even other autocracies, to prevail against our main autocratic adversaries.

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Over and over again, on this blog, I discuss the enormous strengths of the U.S., both economically and militarily, compared with the rest of the world.  Furthermore, I discuss the importance of maintaining the U.S.-created and led world order that has preserved relative peace and stability ever since the end of WWII.  I well understand that we have serious internal problems to address, but mostly express optimism that we can solve them.

Nevertheless, I am highly concerned about the current world situation.  As the economist Kevin Warsh points out in a recent WSJ Op-Ed, “the relationship between the U.S. and the rest of the world is more fragile than it’s been in half a century.”  American peace and prosperity grew shaky in the late 1970s with runaway inflation and a weakened military posture.  In the 1980s, inflation was subdued by the Fed with sky-high interest rates, and an aggressive economic and military buildup by Ronald Reagan led to the collapse of communism and the end of the Cold War. 

Now, we again have a world situation somewhat similar to the 1970s.  Massive U.S. spending deficits have set off a new round of inflation. The Federal Reserve has raised interest rates but inflation (3.2% in February 2024) is not yet subdued.  With our disastrous withdrawal from Afghanistan,  Russia’s invasion of Ukraine, war in the Middle East, and China pressing its advantages across the Indo-Pacific,  the analyst Walter Mead says (in the WSJ) that “the Biden Administration is losing its ability to prevent hostile powers from picking at the foundations of the American-led world order.”

We have a big challenge ahead of us.  We need to rein in our reckless deficit spending, now approaching $2 trillion per year, and, at the same time, reach out more forcefully to our allies and potential allies around the world.  As Warsh says, “put plainly, if a country acts as a trusted security partner of the U.S. and treats American businesses and citizens as it treats its own, the U.S. will act reciprocally.  If, however, foreign countries disfavor U.S. interests, they won’t gain the precious benefit of American protection or ready access to U.S. technology or markets.”

Conclusion.  The U.S. is now in a situation comparable to the late 1970s.  We have an inflationary economy and a belligerent world order to address.  We must rein in excessive federal spending, deal more forcefully, and effectively, with our autocratic adversaries, and do both at the same time.  We need leaders who are up to this huge challenge.

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Now that both major party presidential candidates have been all but officially selected, I will be spending more and more time on this blog discussing their stands on the issues.  Both current President Joe Biden and past President Donald Trump have huge liabilities.  First of all, they both have negative favorability ratings.  But, more specifically, each of them is very weak on two different but specific issues.

Joe Biden’s liabilities:

• Inflation and the economy. The huge demand created by the $5 trillion in Covid stimulus spending tripped off inflation in March 2021, shortly after Joe Biden took office and signed the $1.9 trillion American Rescue Plan (see chart below).  Average prices have now increased by 20% in the last three years.  Inflation has come down (3.1% in January 2024) but prices are still increasing.  In particular, housing prices are very high because the only tool the Federal Reserve has for fighting inflation is to raise interest rates, which in turn raises mortgage rates as well as the cost of rental housing.

  

• Open southern border. Apprehensions of illegal immigrants at our southern border are now running at 2.5 million per year, (see chart) more than triple the previous rates under Presidents Obama and Trump, and often exceeding 10,000 per day.  This has created chaos both in southern border towns and large northern cities where many of the undocumented immigrants end up.

  

Donald Trump’s liabilities:

• Election denial. Donald Trump attempted to overthrow the results of the 2020 Presidential Election, which he lost, by filing over sixty lawsuits as well as inciting a riot at the Capitol on January 6, 2021.  His efforts are called a threat to democracy by his opponents but met with zero success.  In fact, there were many (pandemic- related) mail-in voting irregularities (such as missed deadlines) in the November 2020 election, but extensive fraud is unlikely.  Mail-in voting unsurprisingly became popular during the pandemic and remains popular today.  Many states have tightened up mail-in voting procedures in the meantime, so such irregularities are likely to be greatly reduced in November 2024.
• Isolationist foreign policy. Trump’s America First agenda appears to imply less involvement in world affairs. The problem with this attitude is that the U.S. has several autocratic adversaries (China, Russia, Iran, and North Korea) that seek to diminish our strength and influence around the world.  For example, Ukraine needs our help in repelling its invasion by Russia.  It is in our own best interest to join with our many democratic allies to support freedom and democracy whenever they are under threat, as is currently the case with Ukraine.

 Conclusion.  Biden and Trump both have major liabilities that weaken their support with many voters.  How these liabilities will affect the November 2024 election remains to be seen.

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In this blog, I discuss major issues facing the U.S., both foreign and domestic.  The analysis is based on my view that we are fundamentally a strong country.  Of course, we have problems, but our free enterprise economic system and democratic political system enable us to address our shortcomings and make steady progress in improving society.

As strong as we are economically and militarily, we have several autocratic adversaries, such as China, Russia, Iran, and North Korea, who want to diminish us for their own tyrannical purposes.  One glaring example, it has now been two years since Russia invaded Ukraine which badly needs our continued support.  Consider:

• Ukraine wants to be free and independent. Helping Ukraine defend itself is not only the right thing to do; it’s in our own best interest to promote freedom and democracy around the world.  Ukrainians are willing and able to do the fighting. But they need our continued help with military supplies.
• China wants to take over Taiwan. If we are unwilling to help Ukraine defend itself against Russia, will we be willing to help Taiwan defend itself against China?  It’s important to ensure that China gets the proper message about our willingness to defend freedom and democracy.
• Russia is a brutal, tyrannical state.  Political dissident Alexei Navalny recently died in a Siberian penal colony.  The Americans Evan Gershkovich and Paul Whelan are being held in prison on trumped-up spying charges.
• Is Eastern Europe next for Russia?  Russia’s leader, Vladimir Putin, claims that Ukraine was historically a part of Russia and therefore belongs to Russia.  The Baltic countries Estonia, Latvia, and Lithuania have significant Russian populations. If Putin is successful in annexing all or part of Ukraine, will this encourage him to invade the Balts next?
• Eleven European countries are now meeting the NATO target of spending at least 2% of GDP on defense (see chart),and several more have promised to do so this year. If necessary,  Europe must be ready to defend itself against further Russian aggression.

Conclusion.  The United States is very strong, with many democratic allies, but our autocratic adversaries around the world are constantly testing our resolve to defend democracy and freedom.  The greatest threat right now is in Ukraine.  It is vitally in our own best interest to help Ukraine defend itself against Russian aggression.  If Ukraine falls, another currently free country will become the next battleground.

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