All good ideas but still leaves way too much in the hands of the Federal government.
I'd start with asking a ChatBot, "What is the Federal Government doing which it is not empowered to do by the Constitution, as amended?". I figure that wipes out half the government.
Just as a convict on death row gets an automatic appeal, have every new law and regulations issued for such laws sent to the Supreme Court for review. I figure that will slow down the number of new laws and regulations each year to a few hundred pages, not a few hundred thousand.
Return to Federalism. We've seen many citizens the past few years voting with their feet moving to states which do things they like. Let the states make the laws and compete for citizens' business.
If you don't starve the beast, like a cancer, it will continue to grow until it destroys its host.
Thanks Dr Cochrane. Insightful, intelligent, well organized and utterly germane to the present, opportune moment. Hopefully you have the ear of several members of the incoming Cabinet. Do you hold out any hope for Congress to implement some health care, or social spending, or Social Security, or tax policies similar to those you've suggested here?
I was hoping you'd be on the most recent installment of "GoodFellows" to put in a word or two on tariffs. Missed your measured wisdom and your smiling, kindly presence. Hope you'll be back next time.
I have long been a fan of consumption tax replacing income and property tax. One big fear however is that the govt will only add a new mode of taxation without eliminating the others.
I have also thought how many entitle programs we have of some form or another. These entitlements are spread across several departments, like Depts of Agriculture, Housing and Urban Development, and Health and Human Services for starters. Imagine all the redundant systems and workers to run those systems when instead it could be consolidated into one larger system that takes all benefits into account. Or at least a handful of systems rather than over 100 different ones.
Many great ideas from Mr Cochrane. If only we could make it so.
Perhaps your best yet (probably b/c my math/calculus is so so rusty); we should flood links to this on X and see if we can catch someone’s eye/ear. Love the breadth of targets and suggested strategies; well done Grumpy.
Representative Buddy Carter introduced House Bill 25, HB 25. The Fair Tax. A straight consumption tax on spending. It repeals the 16th amendment. It gets rid of the IRS as we know it. It is a 23% consumption tax. Please get behind it on X and other social media outlets.
Require Trump, Elon, Vivek, and other officials with any say on trade policy to read the chapter on tariffs (chapter 11) in Henry Hazlitt's classic Economics in One Lesson.
"Social security fixes are well known. Index to prices not wages. Work longer."
This is the sort of thing that I read frequently in (mostly conservative outlets). Neither idea solves the problem.
The problem is that benefits paid will exceed revenue from the OASDI portion of the social security tax around 2034 and the credit for prior surplus years will be exhausted. When that happens, the current law calls for benefits to be cut to match pay outs to pay ins. Needless to say that would cause a political outcry of seismic proportions.
The moves you mention do not effect either the revenue of the system nor the amounts paid out to then current beneficiaries.
Wage indexing occurs only once in the determination of benefits. That is when the participants average monthly earnings for his pre-retirement career, which are the basis of determining his benefit, are calculated. Post retirement adjustments are based solely on CPI. Changing the AME calculation will not impact any current beneficiary unless you make it retroactive which is politically impossible. It just doesn't do anything for the current revenue shortfall.
Similarly, if you increase the normal retirement age the way we have previously done it -- slowly and well before normal retirement age. It will not impact the current level of benefits for a very long time.
No, the only possible solutions for the crisis are raising the OASDI tax or diverting general revenue funds (what general revenue funds? there aren't any) to Social Security. That would mean raising other taxes.
I think the most politically palatable increase would be to remove the exemption for income in excess of the current wage limit ( $176,100), which has been done for medicare taxes long ago.
But, we will need to raise taxes for lots of reasons over the next few years. My favorites are a VAT and a carbon tax. We can't milk enough money out of the income tax system. Other countries with social welfare systems use excise taxes and will have to do so likewise.
There is another category of useless social security reforms. The we should invest in the stock market reforms. They will point to the historic returns on equity investments and declare that implementing equity investments is the fix we should make. Here is an example:
"Let the market help save Social Security" By Washington Examiner December 26, 2024
"As is well known, the Social Security “trust fund” is projected to become insolvent by 2034, which would require an immediate 23% cut in benefits unless corrective action is taken. ...Andrew Biggs of the American Enterprise Institute reports that a forthcoming study of his will show that if former President George W. Bush’s Social Security investment plan had been adopted in 2005, all but the highest salary earners would by now be seeing benefits 2.5%-3.5% higher than they are."
These calls are seductive, but they also miss the point. Adding equity investment to the current system will not keep it solvent in the short run where the solvency problem is. It cannot possibly affect the benefits of the retirees who will be haircut in 2034. There are a lot of weighty reasons why the federal government should be at complete arms length with the equity markets but those aside. You can't solve the problem we have with them.
Thank you for the insightful policy recommendations. Your near-complete silence on Trump’s anti-market economy policies (not to mention the incompetence of the Trump administration in all matters econ, except for simple income tax cuts), including some that are clearly against everything taught at UofC, speaks volumes about how the ”libertarian” or ”free-market” right (incl. WSJ) have been co-opted by the need to pick sides i the ”culture wars” and the attraction to potential use of coercive gov’t power to promote special interests. The rhetoric at the start of this post is a continuantion in the same vein.
So here’s the problem. I was an Economics major 50 years ago and can agree with all of these points in theory. But the Republicans who want to implement these elements of tax reform and subsidy elimination have no interest whatsoever in actually providing for social welfare. Seriously, they don’t. Their interest is in providing more money for rich people who in turn can use private education, private healthcare and private security to insulate themselves from the mess of public life. It will be a higher-income version of life in Bogota. It’s all good if you have enough money and the rest of the people are welcome to fend for themselves as best they can. Meanwhile an algorithmic social media owned by billionaires can control the outcome of elections. I am sorry to say I actually see it that way.
What can I say? “I hope you’re right?” I do hope you’re right but I am reacting to observations especially over the last 20 years. I’m not saying there is ill will. But I see life in the Red states which are the model for the national program. For most of the population, it is a short life expectancy, limited education, high infant and maternal mortality, bad social metrics. But not for the rich people. They can buy their way out of all of those problems and life is good.
I realize there are some counter examples. I was just in Charleston for a few days and it looks like they’ve done a great job of building that economy for the benefit of everyone. But on average and across society I see it as I described it.
One can hope the phone rings, Cochrane!
This was pretty cool to read. We can dream.
Given that political capital is limited, what would you consider to be the biggest impact change/most important of the above if you had to pick?
You need to run for president
All good ideas but still leaves way too much in the hands of the Federal government.
I'd start with asking a ChatBot, "What is the Federal Government doing which it is not empowered to do by the Constitution, as amended?". I figure that wipes out half the government.
Just as a convict on death row gets an automatic appeal, have every new law and regulations issued for such laws sent to the Supreme Court for review. I figure that will slow down the number of new laws and regulations each year to a few hundred pages, not a few hundred thousand.
Return to Federalism. We've seen many citizens the past few years voting with their feet moving to states which do things they like. Let the states make the laws and compete for citizens' business.
If you don't starve the beast, like a cancer, it will continue to grow until it destroys its host.
Agreed, it leaves too much in the claws of the federal government. But this is the canonical definition of "a good start"!
All good ideas. But the people that actually control the levers of power and benefit the most like the system just the way it is.
Thanks Dr Cochrane. Insightful, intelligent, well organized and utterly germane to the present, opportune moment. Hopefully you have the ear of several members of the incoming Cabinet. Do you hold out any hope for Congress to implement some health care, or social spending, or Social Security, or tax policies similar to those you've suggested here?
I was hoping you'd be on the most recent installment of "GoodFellows" to put in a word or two on tariffs. Missed your measured wisdom and your smiling, kindly presence. Hope you'll be back next time.
I have long been a fan of consumption tax replacing income and property tax. One big fear however is that the govt will only add a new mode of taxation without eliminating the others.
I have also thought how many entitle programs we have of some form or another. These entitlements are spread across several departments, like Depts of Agriculture, Housing and Urban Development, and Health and Human Services for starters. Imagine all the redundant systems and workers to run those systems when instead it could be consolidated into one larger system that takes all benefits into account. Or at least a handful of systems rather than over 100 different ones.
Many great ideas from Mr Cochrane. If only we could make it so.
Exactly this has already happened across Europe and in Canada.
Perhaps your best yet (probably b/c my math/calculus is so so rusty); we should flood links to this on X and see if we can catch someone’s eye/ear. Love the breadth of targets and suggested strategies; well done Grumpy.
Representative Buddy Carter introduced House Bill 25, HB 25. The Fair Tax. A straight consumption tax on spending. It repeals the 16th amendment. It gets rid of the IRS as we know it. It is a 23% consumption tax. Please get behind it on X and other social media outlets.
The key part would be the repeal of the income tax. And unfortunately that is nowhere in sight…
But how to make any of this happen? I trust you to be way better than Trumps advisers.
A new day is much needed. LETS DO IT!!
Tariffs:
Require Trump, Elon, Vivek, and other officials with any say on trade policy to read the chapter on tariffs (chapter 11) in Henry Hazlitt's classic Economics in One Lesson.
The first (1948) edition is available free online. https://fee.org/wp-content/uploads/ebooks/economics-in-one-lesson-pdf.pdf
Fantastic
"Social security fixes are well known. Index to prices not wages. Work longer."
This is the sort of thing that I read frequently in (mostly conservative outlets). Neither idea solves the problem.
The problem is that benefits paid will exceed revenue from the OASDI portion of the social security tax around 2034 and the credit for prior surplus years will be exhausted. When that happens, the current law calls for benefits to be cut to match pay outs to pay ins. Needless to say that would cause a political outcry of seismic proportions.
The moves you mention do not effect either the revenue of the system nor the amounts paid out to then current beneficiaries.
Wage indexing occurs only once in the determination of benefits. That is when the participants average monthly earnings for his pre-retirement career, which are the basis of determining his benefit, are calculated. Post retirement adjustments are based solely on CPI. Changing the AME calculation will not impact any current beneficiary unless you make it retroactive which is politically impossible. It just doesn't do anything for the current revenue shortfall.
Similarly, if you increase the normal retirement age the way we have previously done it -- slowly and well before normal retirement age. It will not impact the current level of benefits for a very long time.
No, the only possible solutions for the crisis are raising the OASDI tax or diverting general revenue funds (what general revenue funds? there aren't any) to Social Security. That would mean raising other taxes.
I think the most politically palatable increase would be to remove the exemption for income in excess of the current wage limit ( $176,100), which has been done for medicare taxes long ago.
But, we will need to raise taxes for lots of reasons over the next few years. My favorites are a VAT and a carbon tax. We can't milk enough money out of the income tax system. Other countries with social welfare systems use excise taxes and will have to do so likewise.
There is another category of useless social security reforms. The we should invest in the stock market reforms. They will point to the historic returns on equity investments and declare that implementing equity investments is the fix we should make. Here is an example:
"Let the market help save Social Security" By Washington Examiner December 26, 2024
https://www.washingtonexaminer.com/opinion/editorials/3264538/let-market-help-save-social-security/
"As is well known, the Social Security “trust fund” is projected to become insolvent by 2034, which would require an immediate 23% cut in benefits unless corrective action is taken. ...Andrew Biggs of the American Enterprise Institute reports that a forthcoming study of his will show that if former President George W. Bush’s Social Security investment plan had been adopted in 2005, all but the highest salary earners would by now be seeing benefits 2.5%-3.5% higher than they are."
These calls are seductive, but they also miss the point. Adding equity investment to the current system will not keep it solvent in the short run where the solvency problem is. It cannot possibly affect the benefits of the retirees who will be haircut in 2034. There are a lot of weighty reasons why the federal government should be at complete arms length with the equity markets but those aside. You can't solve the problem we have with them.
Thank you for the insightful policy recommendations. Your near-complete silence on Trump’s anti-market economy policies (not to mention the incompetence of the Trump administration in all matters econ, except for simple income tax cuts), including some that are clearly against everything taught at UofC, speaks volumes about how the ”libertarian” or ”free-market” right (incl. WSJ) have been co-opted by the need to pick sides i the ”culture wars” and the attraction to potential use of coercive gov’t power to promote special interests. The rhetoric at the start of this post is a continuantion in the same vein.
Very nice. You should be on the President's economic advisory team.
So here’s the problem. I was an Economics major 50 years ago and can agree with all of these points in theory. But the Republicans who want to implement these elements of tax reform and subsidy elimination have no interest whatsoever in actually providing for social welfare. Seriously, they don’t. Their interest is in providing more money for rich people who in turn can use private education, private healthcare and private security to insulate themselves from the mess of public life. It will be a higher-income version of life in Bogota. It’s all good if you have enough money and the rest of the people are welcome to fend for themselves as best they can. Meanwhile an algorithmic social media owned by billionaires can control the outcome of elections. I am sorry to say I actually see it that way.
Your comments are simply not true.
What can I say? “I hope you’re right?” I do hope you’re right but I am reacting to observations especially over the last 20 years. I’m not saying there is ill will. But I see life in the Red states which are the model for the national program. For most of the population, it is a short life expectancy, limited education, high infant and maternal mortality, bad social metrics. But not for the rich people. They can buy their way out of all of those problems and life is good.
I realize there are some counter examples. I was just in Charleston for a few days and it looks like they’ve done a great job of building that economy for the benefit of everyone. But on average and across society I see it as I described it.