RPF0629-In-Depth_Version_Federal_Debt-The_Ticking_Bomb_that_No_One_is_Willing_to

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00:00:30.620 | Welcome to Radical Personal Finance,

00:00:31.820 | a show dedicated to providing you with the knowledge,

00:00:33.420 | skills, insight, and encouragement you need

00:00:35.360 | to live a rich and meaningful life now

00:00:37.060 | while building a plan for financial freedom

00:00:38.500 | in 10 years or less.

00:00:40.000 | Today on the show, we continue our discussion

00:00:41.740 | of federal debt, and let me lay out everything

00:00:43.900 | we're gonna cover in the show up front

00:00:46.300 | so that you can decide if this particular episode

00:00:48.400 | of the show will make a good use of your time or not.

00:00:51.780 | Today's show will not feature much personal commentary.

00:00:54.640 | In yesterday's show, I did add some personal commentary

00:00:58.020 | and discussion onto the topic of the ticking time bomb

00:01:01.480 | that is US federal debt.

00:01:03.320 | Today's show, however, will feature very minimal commentary.

00:01:07.160 | If you are a reader, one who prefers to absorb information

00:01:12.160 | in written form, and/or if you find that reading

00:01:15.200 | is a more productive use of your time than listening,

00:01:18.400 | then all you need to do is simply reference

00:01:20.640 | the two sources cited in the show notes for today's show,

00:01:24.340 | specifically a Washington Post article

00:01:27.680 | from March 5 called "The Federal Deficit Ballooned

00:01:32.080 | "at the Start of a New Fiscal Year,

00:01:33.280 | "Up 77% from the Year Before."

00:01:35.380 | I will read you some excerpts of that article,

00:01:38.320 | and in addition, you can reference the written report

00:01:41.160 | that I will be reading to you

00:01:42.600 | called "A Comprehensive Federal Budget Plan

00:01:44.320 | "to Avert a Debt Crisis" by Brian Riedel.

00:01:47.860 | That is the report that was referenced in yesterday's show.

00:01:51.440 | So if you're one who reads, go ahead

00:01:52.860 | and just use those written resources

00:01:55.900 | to help you make good use of your time

00:01:57.380 | and skip the show.

00:01:58.440 | If you're one who benefits from podcasts such as mine

00:02:01.740 | to turn otherwise unproductive time

00:02:04.120 | into something productive, then I think you'll enjoy this

00:02:07.460 | because I'll give you an audio version

00:02:09.260 | that is fairly balanced and useful,

00:02:13.560 | and the commentary will just help you

00:02:15.260 | to make good use of some of your audio listening time

00:02:17.500 | rather than going and reading these particular resources.

00:02:20.300 | But it won't offend me if you skip this show,

00:02:23.240 | so because of your preference to read.

00:02:26.700 | Specifically, what I'm seeking to do at this point

00:02:29.700 | is after yesterday's show where I talked about the idea,

00:02:34.040 | talked about my concerns, I used the metaphor of the fact

00:02:37.340 | that the federal deficit is metaphorically

00:02:40.280 | a crack in a bridge, and the engineers can look at it

00:02:42.920 | and say, "There's a crack here.

00:02:43.960 | "This bridge is going to fail,

00:02:45.020 | "but we don't know when the bridge is gonna fail.

00:02:46.980 | "We don't know to what level

00:02:48.260 | "that catastrophic failure might actually look like.

00:02:51.720 | "We don't know if that just means

00:02:52.760 | "a little bit is gonna fall off

00:02:53.820 | "or the whole thing's gonna crumble."

00:02:55.340 | These are all things that are unknown.

00:02:57.500 | Predicting the future is generally a difficult business,

00:03:00.900 | and so we're all in that situation.

00:03:02.980 | But one of the groups of thinkers that I wish to reach

00:03:07.100 | is those who are more in the middle,

00:03:09.860 | those who, perhaps like me, are people who say,

00:03:12.940 | "Well, I don't wanna be an extremist.

00:03:14.680 | "I don't wanna be an alarmist.

00:03:15.780 | "I don't wanna all of a sudden

00:03:17.580 | "move into radical alarm territory,

00:03:19.720 | "but I do want an honest discussion of the facts.

00:03:21.760 | "I don't particularly want it

00:03:23.300 | "from a strong partisan perspective.

00:03:25.780 | "I'm not looking for a certain right-wing

00:03:29.160 | "or left-wing approach.

00:03:30.080 | "I want a discussion, an honest analysis

00:03:32.380 | "of different discussions

00:03:33.900 | "so that I can think things through."

00:03:35.900 | And then that way, with that data and with that information,

00:03:39.500 | I can just follow my own observations.

00:03:42.700 | I can try to look at the world,

00:03:43.940 | and as the years go by, tick by in the coming years,

00:03:47.420 | I can start to get a guess

00:03:48.700 | on what I think is gonna happen.

00:03:50.540 | So if that's you, then this will be useful for you.

00:03:54.380 | Now, I was amused to find

00:03:56.260 | that after I recorded yesterday's show,

00:03:58.580 | I quickly, almost right after I had,

00:04:01.980 | a few hours after I'd finished it,

00:04:03.180 | I saw this Washington Post article,

00:04:05.060 | and I thought it was ironic.

00:04:06.460 | I wish it had come out before I recorded the audio,

00:04:08.300 | but it didn't.

00:04:09.140 | But let me read you some excerpts from it.

00:04:10.780 | This is Washington Post, Dateline, March 5, at 6:51 p.m.,

00:04:15.100 | from the business section.

00:04:16.100 | "The federal deficit ballooned

00:04:17.320 | "at start of new fiscal year up 77% from a year before.

00:04:22.320 | "The federal budget deficit ballooned rapidly

00:04:24.600 | "in the first four months of the fiscal year,

00:04:26.360 | "amid falling tax revenue and higher spending,

00:04:28.740 | "the Treasury Department said Tuesday,

00:04:30.540 | "posing a new challenge for the White House and Congress

00:04:32.620 | "as they prepare for a number of budget battles.

00:04:35.500 | "The deficit grew 77% in the first four months

00:04:38.900 | "of fiscal 2019, compared with the same period

00:04:42.200 | "one year before, Treasury said.

00:04:44.480 | "The total deficit for the four-month period

00:04:46.680 | "was $310 billion, Treasury said,

00:04:50.400 | "up from $176 billion for the same period one year earlier.

00:04:55.400 | "'It's big tax cuts combined with big increases

00:04:58.160 | "in spending when they already had big deficits,'

00:05:00.540 | "said former Senate Budget Committee Chairman Kent Conrad,

00:05:03.200 | "Democrat from North Dakota.

00:05:04.880 | "'So guess what?

00:05:05.720 | "'It's craziness,'" close quote.

00:05:07.640 | "When Republicans seized control

00:05:09.220 | "of the House of Representatives

00:05:10.520 | "during the Obama administration,

00:05:12.040 | "lawmakers and White House officials

00:05:13.620 | "embarked on a number of strained negotiations

00:05:16.080 | "to try to reduce the gap between spending and tax revenue.

00:05:19.540 | "During the Trump administration,

00:05:21.040 | "there have not been any similar discussions,

00:05:23.120 | "and President Trump has largely enacted

00:05:25.420 | "an agenda of tax cuts and spending increases

00:05:28.680 | "that had grown the deficit markedly.

00:05:31.180 | "Tax revenue for October 2018 through January 2019

00:05:35.120 | "fell $19 billion, or 2%, Treasury said.

00:05:39.280 | "It noted a major reduction in corporate tax payments

00:05:41.640 | "over the first four months of the fiscal year,

00:05:44.080 | "falling close to 25%, or $17 billion.

00:05:49.000 | "As part of the 2017 tax cut law,

00:05:51.680 | "the tax rate paid by corporations

00:05:53.300 | "was lowered from 35% to 21%.

00:05:56.340 | "Spending, meanwhile, increased 9% over the same period.

00:06:00.280 | "The biggest increases were for defense military programs,

00:06:04.140 | "which saw a 12% increase,

00:06:06.640 | "and Medicare, which saw a 16% increase.

00:06:11.920 | "The Congressional Budget Office has projected

00:06:14.320 | "that the deficit this year will reach close to $900 billion,

00:06:19.320 | "because the government spends so much more money

00:06:21.940 | "than it brings in through revenue.

00:06:24.400 | "The White House next week is expected to propose

00:06:27.960 | "a new budget for the fiscal year that begins in October,

00:06:30.540 | "and Democrats are working on spending plans of their own.

00:06:33.480 | "Pay attention.

00:06:34.460 | "So far, there has been little effort

00:06:36.760 | "to reconcile differences between both parties,

00:06:39.160 | "and neither has shown much interest

00:06:41.700 | "in addressing the widening budget deficit.

00:06:45.380 | "White House economic advisor Larry Kudlow on Tuesday

00:06:48.420 | "acknowledged that national debt as a share of GDP

00:06:51.200 | "has 'inched up a bit,'

00:06:53.700 | "but added in an interview on Fox News,

00:06:56.260 | "We are making an investment in America's future,

00:06:58.840 | "and if that means we incur some additional debt

00:07:01.440 | "in the short run, so be it."

00:07:03.760 | Kudlow said, "Growth solves the problem,"

00:07:07.920 | and predicted that the deficit to GDP ratio

00:07:09.840 | will come down with growth.

00:07:11.680 | "That will solve all of these problems,

00:07:14.320 | "and people will be very prosperous."

00:07:16.640 | Close quote.

00:07:18.080 | The White House plan will propose

00:07:19.360 | cutting a number of domestic programs by at least 5%,

00:07:22.640 | including things like environmental protection,

00:07:24.820 | education, and foreign aid,

00:07:26.160 | according to Trump administration officials

00:07:28.200 | who have previewed some of the plans.

00:07:30.280 | It will also propose adhering to caps

00:07:32.720 | on military and non-military programs

00:07:34.980 | put in place several years ago,

00:07:36.640 | but it will simultaneously propose

00:07:38.440 | boosting defense spending in an uncapped program

00:07:42.600 | as a way to divert more money to the military.

00:07:46.200 | Skipping down, quote,

00:07:48.960 | or continuing to read but skipping down a few paragraphs.

00:07:51.640 | "There has been a total breakdown in Washington, however,

00:07:54.960 | "over how to address the budget deficit.

00:07:57.640 | "The White House has walled off popular programs,

00:08:00.540 | "Medicare and Social Security from any proposed cuts,

00:08:04.840 | "with Trump saying it would be too politically unpopular

00:08:08.000 | "to pursue changes to programs used

00:08:10.160 | "by tens of millions of Americans.

00:08:13.240 | "Democrats are also split over how to proceed.

00:08:16.280 | "The ranks of fiscal hawks have dwindled,

00:08:18.840 | "and a newer vocal wing of the party

00:08:20.900 | "has called for more deficit spending

00:08:23.400 | "to finance social programs.

00:08:25.560 | "Some in that wing argue the debt is less pressing

00:08:28.800 | "than other social maladies,

00:08:30.360 | "such as poverty or inadequate health coverage,

00:08:33.560 | "while others argue the debt

00:08:35.160 | "is of little consequence at all.

00:08:37.760 | "Instead of trying to resolve their differences,

00:08:39.800 | "the White House and some Democrats

00:08:41.360 | "are seeking to make the 2020 elections

00:08:43.880 | "a referendum on economic policy,

00:08:46.360 | "suggesting neither side is looking

00:08:48.320 | "to reach a compromise in the coming months."

00:08:51.200 | Dropping down again in the story,

00:08:54.120 | the quote continuing to read,

00:08:55.340 | "The US economy is still the strongest in the world,

00:08:57.640 | "and investors have retained a healthy appetite

00:09:00.200 | "for US government debt,

00:09:01.840 | "because the country has never defaulted

00:09:04.240 | "on its obligations.

00:09:05.860 | "But large debt levels have caused financial crises

00:09:08.960 | "in a number of other countries,

00:09:10.720 | "and forced major economic changes

00:09:13.020 | "that have led to recessions,

00:09:14.660 | "a phenomenon that some have warned

00:09:16.660 | "could happen in the United States

00:09:18.200 | "if steps aren't taken."

00:09:19.960 | Senator James Lankford, Republican from Oklahoma,

00:09:22.560 | was bemoaning debt levels Tuesday,

00:09:24.360 | a few hours before Treasury reported

00:09:26.280 | the big increase in the deficit.

00:09:27.980 | Quote, "If you take 22 trillion miles, total distance,

00:09:32.260 | "you would fly from Earth to Pluto

00:09:34.300 | "and back 3,081 times,"

00:09:37.160 | Lankford said on the Senate floor.

00:09:38.920 | "This is a heavy debt."

00:09:42.800 | Now, the key thing I wanna draw your attention to

00:09:44.760 | is the political dynamics,

00:09:46.480 | and this is why I personally don't see a solution

00:09:49.860 | that will happen in the future.

00:09:51.500 | All of these news stories,

00:09:52.600 | and have been for the past few decades,

00:09:54.640 | are basically, well, at some point, something will happen.

00:09:56.760 | At some point, something will happen.

00:09:57.880 | At some point, something will happen.

00:09:59.460 | Meanwhile, the numbers just simply continue to grow.

00:10:02.380 | Now, it's possible that at some point,

00:10:04.280 | something will happen,

00:10:05.600 | but if something doesn't happen soon, it's too late.

00:10:09.520 | Now, I personally am convinced it's already too late,

00:10:12.000 | but I'll be watching very carefully in the next few years

00:10:14.580 | to see if, in fact,

00:10:16.280 | some kind of discussion starts to happen,

00:10:18.480 | if, in fact, there is a way for Republicans and Democrats

00:10:22.360 | in the United States to come together,

00:10:23.700 | have intelligent adult conversations,

00:10:25.920 | and start to change spending, start to change deficits,

00:10:29.440 | start to change the debt, and it has to happen.

00:10:32.840 | The problem is, in the moment,

00:10:34.760 | the discussions that happen are completely immaterial.

00:10:39.280 | In order for you to change the structure,

00:10:42.640 | you have to attack Medicaid, Medicare, and Social Security,

00:10:47.640 | and then also defense spending,

00:10:50.200 | and those are considered to be sacrosanct

00:10:52.760 | by many of the people who are involved

00:10:54.880 | in these various programs.

00:10:57.300 | So how do you change those things?

00:10:58.440 | Well, I don't see how it could be possible,

00:11:02.760 | especially in the political environment we are in.

00:11:05.240 | There are many calls by many people

00:11:06.760 | for civility or conversation, et cetera.

00:11:10.320 | I don't see how, in the US-American political fabric,

00:11:13.200 | I don't see how that those conversations

00:11:17.360 | or discussions are possible.

00:11:19.240 | Everyone is basically doubling down on partisanship,

00:11:24.240 | and I just don't see it.

00:11:25.680 | I don't see how it could happen.

00:11:27.020 | And I have lost any confidence that there is a willingness

00:11:31.520 | or even an ability on behalf of a broad swath

00:11:34.960 | of the US citizenry for people to stop

00:11:38.180 | and to think rationally and discuss things

00:11:40.240 | and to vote against their own self-interest.

00:11:42.060 | Nobody is going to vote against their own self-interest.

00:11:44.960 | So that's my perspective.

00:11:47.400 | So watch stories like this as they go on,

00:11:50.100 | and here's what I would encourage you to look for

00:11:52.080 | in the next coming years

00:11:53.480 | as you look at stories like this.

00:11:55.000 | First, you will always hear discussions say,

00:11:57.780 | I'll always hear this optimistic idea that,

00:12:00.820 | well, at some point we need to have a solution.

00:12:02.780 | At some point there needs to be a conversation.

00:12:04.820 | I'm convinced it's too late,

00:12:06.540 | but I hope to be wrong on that particular thing.

00:12:09.020 | But study the data, which we'll get into in a moment,

00:12:11.160 | and see if anything could actually possibly be done.

00:12:13.980 | Secondly, look for all of these,

00:12:17.280 | for lack of a better word, tropes,

00:12:18.940 | and you'll see that basically people aren't serious.

00:12:22.540 | You can't, I love tax cuts.

00:12:24.660 | I think it's great.

00:12:25.700 | I think there'll be some reinvigoration of business

00:12:29.780 | happening in the United States,

00:12:30.800 | but tax cuts because of the lowering tax levels.

00:12:34.160 | We haven't talked extensively

00:12:36.420 | about the Tax Cut and Jobs Act here on the show,

00:12:38.460 | but it should make some difference.

00:12:41.060 | But you cannot make up for in tax cuts

00:12:43.420 | what is happening with the baby boomers retiring

00:12:46.260 | and the heavy pressure on Medicare.

00:12:48.980 | You cannot make up for in tax cuts

00:12:50.740 | what declining birth rates are,

00:12:53.740 | the problem that declining birth rates

00:12:55.100 | are bringing to the country.

00:12:56.100 | You cannot make up for in tax cuts

00:12:57.940 | what stagnant and decreasing wages are happening, et cetera.

00:13:01.740 | So you can't, it's not that one or the other,

00:13:04.060 | but everyone says, "Well, the tax cut's

00:13:05.220 | "gonna solve everything," or just expand spending,

00:13:07.180 | and these are foolish perspectives.

00:13:11.020 | So at some point in time, the bills are not gonna get paid,

00:13:14.420 | and the bills are not gonna get paid in many, many forms.

00:13:17.600 | We don't know what form, which is the problem,

00:13:19.380 | which is why we need to be prepared for many forms.

00:13:23.060 | Now, at this point, I'm gonna discuss here

00:13:25.900 | this paper that I referenced in yesterday's show,

00:13:28.340 | and I'm gonna be reading extensive portions

00:13:31.220 | of this paper to you, again,

00:13:33.460 | to try to make good use of your audio time.

00:13:36.460 | But the paper is titled,

00:13:37.580 | "A Comprehensive Federal Budget Plan

00:13:39.440 | "to Avert a Debt Crisis," by Brian Riedel,

00:13:42.340 | who is a senior fellow at the Manhattan Institute.

00:13:45.800 | From his bio here, Brian Riedel is a senior fellow

00:13:48.140 | at the Manhattan Institute and a member of MI's Economics 21

00:13:52.140 | focusing on budget, tax, and economic policy.

00:13:55.740 | Previously, he worked for six years as chief economist

00:13:58.540 | to Senator Rob Portman, Republican from Ohio,

00:14:01.260 | and as staff director of the Senate Finance Subcommittee

00:14:03.580 | on Fiscal Responsibility and Economic Growth.

00:14:06.140 | He also served as a director of budget and spending policy

00:14:09.140 | for Marco Rubio's presidential campaign,

00:14:11.580 | and was the lead architect

00:14:13.140 | of the 10-year deficit reduction plan

00:14:15.200 | for Mitt Romney's presidential campaign.

00:14:17.200 | During the years 2001 to 2011,

00:14:21.140 | Riedel served as the Heritage Foundation's

00:14:23.060 | lead research fellow on federal budget and spending policy.

00:14:26.360 | Skipping some of the other references,

00:14:29.340 | Riedel holds a bachelor's degree in economics

00:14:30.980 | and political science from the University of Wisconsin

00:14:33.020 | and a master's degree in public affairs

00:14:34.400 | from Princeton University.

00:14:36.380 | So this report was from September 2018,

00:14:39.620 | about six months ago at the time of this recording.

00:14:42.260 | And I think it's quite useful to have

00:14:43.860 | that six-month context.

00:14:45.160 | I'm glad I'm doing this now

00:14:46.260 | instead of right when it came out,

00:14:47.980 | because now we can think about what's happening

00:14:49.800 | in the last six months.

00:14:51.220 | Riedel, of course, from his biography

00:14:52.660 | would tend to be more on the conservative direction

00:14:55.180 | of the political spectrum,

00:14:56.100 | I'm assuming from the institutions that he has represented

00:14:59.300 | and the politicians for whom he has worked.

00:15:02.180 | But I think you'll assess his work here

00:15:04.420 | as fairly well-balanced in the actual report.

00:15:07.420 | Let's get right into it.

00:15:08.620 | Executive summary.

00:15:10.620 | Annual budget deficits are projected

00:15:12.500 | to soon surpass $1 trillion,

00:15:15.140 | on their way to $2 trillion,

00:15:17.020 | or even $3 trillion in 10 to 15 years.

00:15:20.140 | Social Security and Medicare

00:15:21.360 | face a combined $100 trillion cash deficit

00:15:24.520 | over the next 30 years,

00:15:26.440 | which would push the national debt

00:15:28.320 | to nearly 200% of the gross domestic product, GDP.

00:15:32.800 | At that point, interest on that debt

00:15:35.960 | would consume 40% of all tax revenues,

00:15:39.800 | or more if interest rates rise.

00:15:42.720 | Unless reforms are enacted,

00:15:44.800 | global markets will, at some point,

00:15:46.900 | stop lending to the United States

00:15:48.720 | at plausible interest rates.

00:15:50.840 | When that event occurs, or even approaches,

00:15:54.340 | interest rates will soar,

00:15:56.020 | and the federal government

00:15:57.000 | will not be able to pay its bills

00:15:59.160 | with dire consequences for the US economy.

00:16:02.720 | A debt crisis, in short, looms on the horizon.

00:16:06.280 | There is a way to avert this debt crisis.

00:16:09.560 | However, lawmakers must act quickly

00:16:11.680 | to reform Social Security and Medicare,

00:16:14.480 | as every year, four million more baby boomers

00:16:17.060 | retire into those programs,

00:16:19.360 | and the eventual cost of reform

00:16:21.440 | rises by trillions of dollars.

00:16:24.360 | This report presents a specific 30-year blueprint,

00:16:28.080 | each element of which is scored

00:16:30.600 | using data from the Congressional Budget Office, CBO,

00:16:33.880 | to stabilize the national debt at 95% of GDP.

00:16:38.880 | The fiscal consolidation in this report

00:16:41.440 | calls for some Social Security and Medicare benefits

00:16:44.360 | for upper-income recipients to be trimmed.

00:16:46.640 | Some taxes would rise,

00:16:48.480 | spending on defense would continue to fall

00:16:50.720 | as a share of the economy,

00:16:52.360 | but anti-poverty reforms would be limited

00:16:54.960 | to a slight reduction in the growth of Medicaid benefits,

00:16:58.320 | and domestic discretionary spending priorities

00:17:00.640 | would be largely protected.

00:17:02.620 | Without reform, runaway deficits

00:17:04.760 | will all but guarantee a debt crisis

00:17:07.200 | that will profoundly damage

00:17:08.640 | the country's economic and social order.

00:17:11.520 | There is still time to avoid that crisis,

00:17:13.840 | but it will require the nation's

00:17:15.440 | fractious political leaders

00:17:17.360 | to leave their respective comfort zones and compromise.

00:17:20.780 | Thus ends the executive summary.

00:17:24.040 | Now, again, I want to emphasize,

00:17:27.160 | your and my job is to consume arguments such as these,

00:17:32.160 | such as this one, assess them,

00:17:35.120 | and then watch to see if the necessary preconditions

00:17:38.080 | are happening in the coming years.

00:17:40.720 | So, for example, I repeat,

00:17:43.520 | this is a summary of the executive summary.

00:17:46.120 | It's a summary of the executive summary

00:17:48.200 | of the United States Constitution.

00:17:50.200 | It's a summary of the executive summary

00:17:52.360 | of the United States Constitution.

00:17:54.440 | It's a summary of the executive summary

00:17:56.360 | of the United States Constitution.

00:17:58.400 | It's a summary of the executive summary

00:18:00.400 | of the United States Constitution.

00:18:02.520 | It's a summary of the executive summary

00:18:04.560 | of the United States Constitution.

00:18:06.600 | It's a summary of the executive summary

00:18:08.760 | of the United States Constitution.

00:18:10.880 | Now, if you watch election cycles in the United States,

00:18:14.760 | watch what is happening with the proposals.

00:18:16.920 | Let's see what happens with the 2020

00:18:19.000 | presidential and congressional elections.

00:18:22.920 | Let's see what happens, who's elected president.

00:18:24.760 | Let's see what happens with the majorities

00:18:26.760 | in the House and Senate,

00:18:28.520 | and let's watch over the next few years,

00:18:30.040 | and that will give us some idea

00:18:31.800 | of whether or not this kind of political compromise

00:18:36.800 | and serious reform is possible.

00:18:39.360 | We can hope, 'cause none of us wanna go through a crisis,

00:18:43.160 | but I've stated it clearly,

00:18:45.680 | I see no path how that happens,

00:18:47.880 | but I hope that I'm wrong.

00:18:49.680 | Let's discuss the actual data in this report now.

00:18:52.520 | A comprehensive federal budget plan

00:18:54.100 | to avert a debt crisis, introduction.

00:18:56.960 | Annual budget deficits are projected

00:18:58.480 | to soon surpass $1 trillion,

00:19:01.000 | on their way to $2 trillion,

00:19:02.680 | or even $3 trillion in 10 to 15 years.

00:19:05.920 | Social Security and Medicare face

00:19:07.480 | a combined $100 trillion cash deficit

00:19:10.960 | over the next 30 years,

00:19:12.600 | which is projected to bring a $100 trillion national debt.

00:19:17.360 | At that point, interest on that debt

00:19:19.720 | would consume 40% of all tax revenues,

00:19:22.960 | or more, if interest rates rise.

00:19:25.480 | Unless reforms are enacted,

00:19:27.600 | global markets will, at some point,

00:19:30.040 | stop lending to the United States

00:19:31.640 | at plausible interest rates.

00:19:33.600 | When that event occurs, or even approaches,

00:19:35.400 | interest rates will soar,

00:19:37.040 | and the federal government will not be able

00:19:38.560 | to pay its bills with dire consequences

00:19:40.680 | for the US economy.

00:19:42.360 | A debt crisis, in short, looms on the horizon.

00:19:45.440 | Yet most lawmakers tasked with the responsibility

00:19:48.520 | of averting it, express little interest in doing so.

00:19:52.040 | No recent president has presented a specific plan

00:19:55.280 | to stabilize the long-term budget.

00:19:57.720 | Congress recently enacted tax cuts

00:19:59.960 | and discretionary spending increases that,

00:20:02.800 | irrespective of any policy merits,

00:20:05.460 | will add trillions in debt.

00:20:07.440 | Lawmakers promised cheering crowds

00:20:09.400 | that they will never trim Social Security or Medicare,

00:20:12.840 | or accept a penny in new tax increases or defense cuts.

00:20:17.200 | Democratic socialists pledged

00:20:19.160 | to further increase federal spending

00:20:21.460 | by $42 trillion over the decade,

00:20:24.320 | and $218 trillion over 30 years.

00:20:28.280 | Federal spending rises by $150 billion annually,

00:20:32.680 | while bipartisan resistance greeted a proposal

00:20:35.440 | this summer to merely rescind a few billion dollars

00:20:38.680 | in spending authority that was not going to be spent anyway.

00:20:42.520 | Petty squabbles over petty spending cuts,

00:20:44.880 | and the refusal even to discuss the main drivers of debt,

00:20:48.560 | reflect a general unwillingness of Congress,

00:20:51.680 | the White House, and indeed the citizenry,

00:20:54.440 | to face the unsustainability

00:20:56.360 | of Washington's current fiscal path.

00:20:58.920 | There is a way to avert this debt crisis

00:21:02.140 | without major tax increases,

00:21:03.960 | or significant cuts to anti-poverty and social spending.

00:21:07.920 | However, lawmakers must act quickly

00:21:10.240 | to reform Social Security and Medicare,

00:21:12.960 | as every year, four million more baby boomers

00:21:15.600 | retire into those programs,

00:21:17.560 | and the eventual cost of reform rises by trillions of dollars.

00:21:22.160 | This report presents a specific 30-year blueprint,

00:21:25.560 | each element of which is scored

00:21:27.720 | using the most recent Congressional Budget Office

00:21:29.960 | long-term budget outlook,

00:21:31.840 | to stabilize the national debt

00:21:34.120 | at 95% of the gross domestic product, GDP.

00:21:38.760 | Section one identifies the drivers of the long-term debt.

00:21:42.200 | Section two addresses false, easy solutions

00:21:46.160 | deployed to avoid real reform.

00:21:49.240 | Section three presents the blueprint.

00:21:51.200 | Section four defends the blueprint

00:21:53.080 | against both conservative and liberal objections.

00:21:56.480 | The fiscal consolidation in this report

00:21:58.680 | calls for some Social Security and Medicare benefits

00:22:02.200 | for upper-income recipients to be trimmed.

00:22:04.640 | Some taxes would rise.

00:22:06.560 | Spending on defense would continue to fall

00:22:08.720 | as a share of the economy.

00:22:10.600 | In short, there is something in this blueprint

00:22:12.880 | for everyone to oppose,

00:22:14.920 | but letting the country wander into a debt crisis

00:22:17.720 | is even worse.

00:22:19.200 | To be sure, deficit reduction proposals are common.

00:22:22.520 | The problem is that most congressional budget proposals

00:22:25.480 | simply assume generic and unrealistic

00:22:28.600 | long-term spending and tax targets

00:22:31.040 | without spelling out the specific programmatic reforms

00:22:34.640 | that could meet those targets.

00:22:36.240 | Across the policy community,

00:22:37.800 | long-term budget proposals often reflect

00:22:40.440 | liberal or conservative dream scenarios

00:22:43.400 | rather than plans that can appeal to both parties.

00:22:46.560 | By contrast, the blueprint presented here is specific,

00:22:49.960 | scored, and represents politically realistic solutions

00:22:53.800 | rather than partisan fantasies.

00:22:56.560 | It is intended to revive a serious bipartisan discussion

00:22:59.920 | and negotiations.

00:23:01.240 | Section one, why the debt is soaring.

00:23:06.300 | From the mid-1950s through 2008,

00:23:09.240 | the national debt held by the public averaged 35% of GDP.

00:23:14.240 | This level of borrowing could easily be absorbed

00:23:17.560 | by the increasingly global financial markets,

00:23:20.840 | and it resulted in interest costs

00:23:23.080 | averaging 2% of GDP,

00:23:25.480 | roughly 10% of a typical federal budget.

00:23:28.260 | Since 2008, the Great Recession

00:23:30.960 | and the beginning of the baby boomer retirements

00:23:33.360 | have more than doubled the debt to 78% of GDP.

00:23:38.360 | If current policies continue,

00:23:40.620 | the debt is projected to reach an unprecedented 194% of GDP

00:23:45.620 | within 30 years.

00:23:48.040 | And if this debt brings higher interest rates,

00:23:50.640 | as consensus economic theory suggests,

00:23:53.720 | the debt could surpass 250% of GDP.

00:23:57.720 | And servicing the debt could cost 7.5% of GDP,

00:24:02.120 | the equivalent of $1.5 trillion in today's economy.

00:24:07.120 | Americans of all incomes

00:24:08.800 | would face unprecedented tax increases,

00:24:11.920 | higher interest rates for home mortgages

00:24:14.280 | and car, student, and business loans,

00:24:16.760 | and a significant economic slowdown.

00:24:19.800 | Unlike Greece's, the US debt would be too large

00:24:23.320 | to be easily absorbed by the global economy.

00:24:26.140 | What is causing the debt rise?

00:24:29.780 | Not inadequate tax revenues,

00:24:31.880 | which since the early 1950s have usually remained

00:24:35.560 | between 16.5% and 18.5% of GDP,

00:24:39.920 | regardless of tax policies,

00:24:41.720 | and which are projected to rise above historical norms

00:24:44.940 | to 18.6% to 19.8% of GDP,

00:24:49.120 | depending on the fate of various expiring tax cuts

00:24:52.440 | and delayed tax increases.

00:24:54.520 | Nor is it driven on the spending side

00:24:56.380 | by aggregate expenditures for discretionary

00:24:59.320 | and smaller entitlement programs,

00:25:01.800 | which are projected to continue falling

00:25:03.640 | as a share of the economy.

00:25:05.900 | Figure two shows that the entire increase in long-term debt

00:25:09.560 | will come from surging social security,

00:25:13.040 | Medicare, and other government healthcare spending.

00:25:17.760 | According to the CBO,

00:25:18.900 | these costs have risen from 7% to 10% of GDP since 2000,

00:25:23.900 | and are projected to reach 15.5% of GDP by 2048,

00:25:29.520 | or 21.8% of GDP when the interest costs

00:25:34.360 | of Social Security and Medicare's annual deficits

00:25:37.400 | are included.

00:25:38.360 | Why Social Security and Medicare are going bankrupt.

00:25:44.240 | Between 2008 and 2030,

00:25:47.920 | 74 million Americans born between 1946 and 1964,

00:25:52.920 | on average 10,000 per day,

00:25:56.120 | will retire and receive Social Security

00:25:59.000 | and Medicare benefits.

00:26:00.840 | Of this group, those retiring at age 66

00:26:04.880 | and living to age 90 will spend one third

00:26:08.460 | of their adult life receiving federal retirement benefits.

00:26:12.660 | The combination of more retiring baby boomers

00:26:15.380 | and longer lifespans will expand Social Security

00:26:19.020 | and Medicare caseloads far beyond

00:26:21.780 | what current taxpayers can afford

00:26:24.020 | under current benefit formulas.

00:26:26.580 | In 1960, five workers paid the taxes

00:26:29.780 | to support each retiree,

00:26:31.700 | and of course, Medicare did not exist.

00:26:34.820 | The ratio of workers to retirees

00:26:37.020 | has now fallen below three to one

00:26:39.860 | on its way to two to one by the 2030s.

00:26:44.420 | When today's kindergartners are adults,

00:26:47.220 | each married couple will basically be responsible

00:26:50.560 | for the Social Security and healthcare

00:26:53.540 | of their very own retiree.

00:26:56.720 | These demographic challenges are worsened

00:26:59.180 | by rising healthcare costs

00:27:01.620 | and repeated benefit expansions enacted by lawmakers.

00:27:05.820 | Today's typical retiring couple

00:27:07.860 | has paid $140,000 into Medicare

00:27:12.220 | and will receive $420,000 in benefits

00:27:16.500 | in net present value,

00:27:18.020 | in part because Medicare's physician and drug benefits

00:27:21.420 | are not pre-funded with payroll taxes

00:27:24.300 | and only partially funded by retiree premiums.

00:27:27.720 | Most Social Security recipients also come out ahead.

00:27:31.600 | Thus, most seniors' benefits

00:27:33.800 | greatly exceed their lifetime contributions

00:27:36.740 | to the Social Security and Medicare systems.

00:27:39.820 | By 2030, the 74 million baby boomers

00:27:43.560 | will have joined a retirement benefit system

00:27:46.260 | that runs a substantial per person deficit.

00:27:49.880 | According to CBO, between 2018 and 2048,

00:27:54.420 | Medicare is projected to run a $41 trillion cash deficit.

00:27:59.420 | Social Security will run an $18 trillion cash deficit,

00:28:04.140 | and the interest on the resulting program debt

00:28:06.740 | will be $41 trillion.

00:28:09.580 | To adjust these 30-year totals for inflation,

00:28:12.260 | trim by one third.

00:28:13.980 | Rather than adequately self-finance

00:28:15.980 | through payroll taxes and premiums,

00:28:18.360 | these two programs are set to add $100 trillion

00:28:22.100 | to the national debt.

00:28:23.640 | The rest of the federal budget is projected

00:28:25.740 | to run a surplus over the next 30 years.

00:28:29.020 | Figure four expresses the same projections

00:28:31.100 | in a different manner.

00:28:32.340 | By 2048, Social Security and Medicare

00:28:35.240 | will collect 5.9% of GDP in dedicated revenues,

00:28:39.500 | and spend 12.2% of GDP in benefits,

00:28:43.300 | plus 6.3% of GDP in interest costs

00:28:47.100 | resulting from these two programs' deficits.

00:28:50.260 | That 12.6% of GDP budget deficit

00:28:53.100 | resulting solely from Social Security and Medicare

00:28:57.260 | is unsustainable.

00:28:59.020 | The fiscal winter is coming, and autumn has already arrived.

00:29:05.760 | Since 2008, when the first baby boomers

00:29:08.600 | qualified for early retirement,

00:29:11.060 | Social Security and Medicare have accounted for 60%

00:29:15.160 | of all inflation-adjusted federal spending growth,

00:29:18.940 | with Medicaid and the Affordable Care Act

00:29:21.300 | responsible for an additional 31%.

00:29:24.680 | The majority of budgetary savings

00:29:27.220 | achieved by discretionary spending caps,

00:29:30.060 | defense cuts, and rising tax revenues

00:29:33.140 | have simply financed growing Social Security

00:29:36.000 | and Medicare costs,

00:29:37.540 | which will grow by another $130 billion annually

00:29:41.920 | over the next decade.

00:29:43.700 | That is the equivalent of creating

00:29:46.560 | another Defense Department every five years.

00:29:51.460 | This will happen automatically,

00:29:53.580 | without any congressional votes,

00:29:55.660 | and therefore likely with scant media coverage.

00:30:00.180 | And as federal resources further shift to the elderly,

00:30:03.900 | Washington is beginning to run out

00:30:06.100 | of offsetting spending cuts.

00:30:08.420 | This has contributed to the deficit

00:30:10.420 | expanding from $438 billion to $666 billion

00:30:15.420 | over the past two years.

00:30:18.940 | CBO's current policy baseline shows deficits rising

00:30:22.260 | to $2 trillion within a decade,

00:30:24.820 | or $3 trillion if interest rates

00:30:27.260 | return to historical norms.

00:30:29.580 | Unlike the temporary, recession-driven budget deficits

00:30:33.020 | a decade ago, these Social Security

00:30:36.020 | and Medicare-based deficits will expand permanently.

00:30:41.020 | Over the next 30 years, CBO projects

00:30:45.220 | that the national debt will grow

00:30:47.180 | from $20 trillion to $99 trillion,

00:30:51.620 | $54 trillion after inflation,

00:30:54.220 | or much higher if interest rates rise

00:30:56.980 | from the projected 3% to 4% range

00:30:59.620 | to the historically typical 5% to 6%.

00:31:04.620 | President Trump's latest budget proposal

00:31:07.380 | shows the impossibility of reining in deficits

00:31:10.940 | without Social Security and Medicare reform.

00:31:14.880 | By allowing these programs to nearly double

00:31:17.220 | over the decade, from $1.6 trillion to $3 trillion,

00:31:22.220 | the White House is forced to propose

00:31:24.380 | slashing other entitlement spending

00:31:26.500 | as a share of GDP by 1/5 over the decade,

00:31:30.220 | and cutting both defense

00:31:31.900 | and domestic discretionary spending to levels

00:31:34.780 | as a percentage of GDP unseen since the 1930s.

00:31:39.780 | Yet even if these implausible cuts were enacted,

00:31:44.860 | CBO still estimates a budget deficit

00:31:48.060 | topping $1 trillion by 2028.

00:31:51.940 | This deficit would continue escalating thereafter

00:31:55.540 | because Social Security and Medicare costs

00:31:58.460 | would continue growing even after Washington

00:32:01.620 | would have run out of other spending to cut.

00:32:05.100 | Predictably, most of the popular blame

00:32:08.340 | for the rising deficits is currently pinned

00:32:10.500 | on the 2017 Tax Cuts and Jobs Act, TCJA.

00:32:15.500 | TCJA will likely decrease revenues

00:32:17.740 | by roughly 1% of GDP indefinitely

00:32:21.280 | if extended past 2025, when parts of the law

00:32:24.260 | are currently scheduled to expire.

00:32:26.820 | This does not include additional tax revenues

00:32:29.060 | that will arise from the economic growth

00:32:31.060 | that lower tax rates will induce.

00:32:33.300 | The Congressional Joint Committee on Taxation

00:32:35.420 | estimates that these additional tax revenues

00:32:37.700 | would offset the additional interest costs

00:32:40.500 | of the tax law, though not the primary deficit

00:32:43.500 | increasing impact of the tax cuts themselves.

00:32:46.500 | While the government revenues foregone by TCJA

00:32:49.660 | will surely worsen deficits,

00:32:51.860 | they are a much smaller contributor

00:32:54.180 | than Social Security, Medicare, and Medicaid,

00:32:57.860 | spending on which will together rise

00:33:00.140 | by 2.6% of GDP over the decade

00:33:03.140 | and 5.4% over 30 years.

00:33:07.260 | Even without the 2017 tax cuts,

00:33:10.540 | the annual deficit would still exceed

00:33:13.060 | $1.7 trillion within a decade.

00:33:16.260 | In short, TCJA did not create

00:33:18.940 | the federal government's large deficits,

00:33:21.040 | and even repealing them would not absolve lawmakers

00:33:24.360 | of the need to address rising entitlement spending.

00:33:27.500 | How a crisis may play out.

00:33:30.900 | The national debt's share of the economy

00:33:33.180 | cannot rise forever.

00:33:35.300 | At a certain point, even large global savings markets

00:33:38.940 | will be stretched, and investor confidence

00:33:41.820 | in America's ability to finance its debt will evaporate.

00:33:45.720 | The timing of a country's debt crisis

00:33:48.380 | depends as much on market psychology

00:33:51.140 | as on economic fundamentals.

00:33:53.660 | But eventually, as the debt steeply escalates,

00:33:57.220 | investors will move from unease to panic

00:34:01.540 | and demand higher interest rates

00:34:03.380 | to finance the federal government.

00:34:05.420 | These higher rates will make it extremely difficult

00:34:08.240 | for businesses to borrow and invest,

00:34:10.940 | and will make auto loans, student loans,

00:34:13.380 | and home mortgages less affordable,

00:34:15.600 | while also forcing unprecedented tax increases

00:34:19.300 | and/or spending cuts to pay

00:34:20.980 | for Washington's higher interest costs.

00:34:23.940 | Such an outcome is highly likely

00:34:25.820 | if annual deficits continue growing past 10% of GDP,

00:34:30.220 | and the debt continues to approach 200% of GDP

00:34:34.020 | as projected in the current policy baseline.

00:34:37.720 | On the one hand, America will have some leeway

00:34:40.800 | due to its reputation as a safe harbor for investments

00:34:44.580 | and status as the world's reserve currency.

00:34:48.060 | On the other hand, absorbing a debt

00:34:50.020 | of nearly 200% of America's economy

00:34:53.600 | would be much more expensive for the global markets

00:34:56.380 | than absorbing, say, 200% of a smaller GDP,

00:35:00.520 | like that of Greece.

00:35:02.200 | In the absence of fundamental reform,

00:35:05.160 | the more likely scenario is a series

00:35:07.420 | of minor investor panics, forcing up interest rates,

00:35:11.120 | followed by upper income tax increases,

00:35:14.380 | and lower priority spending reductions

00:35:17.260 | that are insufficient to finance

00:35:19.260 | the rising entitlement and interest costs.

00:35:22.360 | Eventually, Washington will run out of such offsets

00:35:26.240 | to reduce deficits, leaving only the choice

00:35:29.660 | between historically large middle-class tax increases

00:35:34.180 | and a drastic reduction in Social Security

00:35:37.260 | and Medicare benefits for current retirees.

00:35:42.940 | Now, I wanna pause for a moment to insert

00:35:44.700 | just a couple words of commentary

00:35:46.180 | before we move on to section two.

00:35:47.980 | You will notice here that this particular author

00:35:51.140 | omits a discussion of inflation.

00:35:55.760 | Inflation, he only uses, he only discusses inflation

00:36:00.640 | in terms of standard economic forecasting,

00:36:03.860 | the type of inflation that we are all accustomed to,

00:36:06.160 | which, by the way, is absolutely devastating.

00:36:09.580 | And every time I run numbers on this,

00:36:10.940 | I absolutely find it devastating.

00:36:12.260 | In my newest course, I have a whole section

00:36:14.380 | on current capital controls,

00:36:16.940 | capital controls and currency controls

00:36:18.860 | under which we currently all live,

00:36:21.180 | because one of the biggest dangers of an economic crisis

00:36:23.500 | is capital controls, and especially currency controls

00:36:26.140 | for us as individuals.

00:36:27.300 | And so I have a whole discussion on capital controls

00:36:29.860 | under which we currently live.

00:36:32.340 | And in analyzing those capital controls,

00:36:34.520 | I calculated the impact of them

00:36:36.380 | on an inflation-adjusted basis,

00:36:38.340 | and they are absolutely devastating.

00:36:40.740 | And I hate inflation.

00:36:43.580 | Anyway, the point is, this author is using

00:36:45.700 | just the standard economic forecasting models

00:36:47.840 | of built-in normal inflation rates of two, 3%,

00:36:51.140 | that type of thing.

00:36:52.180 | Nowhere in this particular paper

00:36:53.780 | does he ever address mass inflation,

00:36:56.340 | and nowhere does he ever address hyperinflation,

00:36:59.340 | with the exception of an argument

00:37:01.660 | that showing that inflation doesn't solve the problems

00:37:05.220 | of Social Security and Medicare

00:37:07.500 | because they are tied to inflation.

00:37:09.380 | We'll get to that argument later.

00:37:10.640 | They're inflation-adjusted.

00:37:12.300 | But I do think that it's worth your,

00:37:14.740 | I wanna point that out to you,

00:37:16.400 | because in addition to these problems,

00:37:18.820 | which are devastating but practically,

00:37:21.580 | but more common, we also need to think about

00:37:26.020 | the potential of mass inflation and/or hyperinflation,

00:37:30.020 | because that's even more devastating.

00:37:32.620 | Now, I think there are strong arguments

00:37:34.620 | that would indicate why the United States

00:37:36.980 | might seek to avoid those policies,

00:37:39.020 | why the US Federal Reserve would avoid that policy.

00:37:41.160 | I think there are strong arguments for it.

00:37:42.900 | But I do think it's plausible.

00:37:45.480 | In the past years in studying it,

00:37:46.940 | I used to think of hyperinflation

00:37:50.080 | in the United States as implausible.

00:37:52.740 | I used to think of mass inflation as plausible.

00:37:57.080 | I have since moved mass inflation

00:37:59.880 | in my own mental categorization

00:38:01.560 | from plausible to increasingly probable,

00:38:05.840 | and hyperinflation from implausible to plausible.

00:38:08.920 | Now, I don't know what will happen

00:38:10.480 | the coming years will tell us a lot,

00:38:13.640 | but we need to watch that.

00:38:15.200 | I just wanna point out that absence to you.

00:38:17.240 | When talking about how a crisis will play out,

00:38:19.840 | this particular author doesn't use

00:38:22.280 | or doesn't factor in the potential

00:38:24.840 | of mass inflation, hyperinflation scenarios,

00:38:27.880 | the devaluation of the currency.

00:38:29.080 | And this is important for you to remember,

00:38:30.560 | 'cause what can happen

00:38:32.880 | in order for these things to be solved?

00:38:35.000 | Well, you can either have an increase in taxes,

00:38:38.840 | which is a real problem for you

00:38:40.760 | as an individual who pays taxes,

00:38:42.560 | it's a real problem for me.

00:38:43.800 | So that can be devastating to your personal wealth.

00:38:45.720 | So we've got a plan to make sure

00:38:46.840 | that we escape those higher taxes.

00:38:49.620 | Or we can have cuts in spending,

00:38:52.520 | but because those cuts in spending

00:38:54.420 | are largely devoted to the baby boomers,

00:38:56.240 | we have a massive problem there

00:38:57.680 | because the baby boomers,

00:38:59.280 | yes, some of them have wealth,

00:39:00.720 | but many people don't.

00:39:01.640 | And so cuts in spending for Social Security and Medicare

00:39:04.560 | will be devastating for many millions of people

00:39:07.920 | for whom that's their only asset.

00:39:09.520 | And they've been sold this idea

00:39:12.720 | that they can just retire

00:39:15.640 | and have these programs there for them.

00:39:16.880 | And you have the largest motivated voting bloc,

00:39:19.220 | which makes the political nightmare just even worse.

00:39:22.360 | And then even if those cuts are enacted,

00:39:24.440 | that has a devastating impact on the economy

00:39:27.160 | with regard to spending levels and consumption levels.

00:39:30.520 | So that's a problem.

00:39:31.520 | Or you can have more borrowing,

00:39:33.120 | or you can have inflation.

00:39:34.760 | Those are basically the only options

00:39:36.280 | you just have those levers to push on.

00:39:38.480 | And so for most of us, these are problems.

00:39:41.600 | So if we have higher taxes,

00:39:42.800 | we've got to figure out a plan

00:39:43.640 | to protect ourself from higher taxes.

00:39:45.500 | If we have fewer benefits,

00:39:46.840 | we've got to have a plan to protect ourselves

00:39:48.280 | from fewer benefits.

00:39:49.840 | If we have inflation, to inflate the monetary supply,

00:39:53.280 | we have to have a plan for that

00:39:54.560 | because that affects everything else.

00:39:56.000 | And so it's a tough nut to crack.

00:39:59.120 | That's why I wrote the whole course.

00:40:00.080 | Anyway, commentary over.

00:40:01.080 | Let's move on to section two

00:40:02.480 | called the Mirage of Easy Solutions.

00:40:06.880 | Standing in the way of making the changes

00:40:08.760 | to be outlined in this budget plan

00:40:10.760 | or other plausible proposals to avert a debt crisis

00:40:14.480 | are a series of false claims

00:40:16.040 | that the problem is easily solved.

00:40:18.840 | Economic panaceas, steep economic growth.

00:40:22.360 | A strong economy is necessary,

00:40:25.160 | but far from sufficient for major deficit reduction.

00:40:29.400 | Growth rates will already be limited

00:40:31.280 | by the labor force slowdown

00:40:33.120 | caused by baby boomer retirement

00:40:35.400 | and declining birth rates.

00:40:37.640 | That leaves productivity to drive growth.

00:40:40.240 | I want to comment also,

00:40:41.560 | and just insert one commentary.

00:40:43.400 | The latest arguments and articles

00:40:44.880 | that I'm seeing right now

00:40:46.240 | is that the potential of declining birth rates

00:40:49.720 | is actually, has the potential

00:40:51.720 | to be far more catastrophic in the United States

00:40:53.640 | than previously anticipated.

00:40:55.560 | There has been a major decline in birth rates

00:40:57.960 | among white people,

00:40:59.280 | but it has previously been assumed

00:41:01.440 | that there would be strong,

00:41:02.840 | there would be stronger birth rates

00:41:04.960 | among brown people,

00:41:06.320 | primarily brown people and black people

00:41:08.360 | in the United States.

00:41:09.640 | What seems to be happening, however,

00:41:11.600 | is there seems to be

00:41:12.800 | a much more significant decline in birth rates,

00:41:15.560 | not only among white people,

00:41:17.280 | but especially among brown people in the United States

00:41:20.000 | than previously anticipated.

00:41:21.960 | So that is something

00:41:23.320 | that you need to keep your eye on as well.

00:41:25.400 | And it'll be interesting to see

00:41:27.120 | if that trend and that data continues,

00:41:29.360 | or if that's just an anomaly.

00:41:30.960 | I have a couple of books I need to read on it,

00:41:32.280 | but I haven't been able to dig into them yet.

00:41:34.160 | But it's something that I'm paying attention to

00:41:35.640 | to see what data starts to come in

00:41:37.440 | on the actual societal decline in birth rates.

00:41:41.240 | And this could also,

00:41:42.840 | additionally, another factor that has to be played into this

00:41:45.320 | is there's been a major drop in family formation

00:41:47.800 | in the United States.

00:41:48.920 | So in addition, all of the previous discussions,

00:41:51.800 | and I'm not a demographer,

00:41:53.080 | so it's possible this is baked in.

00:41:55.000 | But my suspicion is that with the massive decline

00:41:58.800 | in family formation in the United States,

00:42:01.320 | and with the fact that the families are formed

00:42:03.040 | are simply not stable,

00:42:04.680 | that this is going to increase even more

00:42:07.840 | to declines in birth rates.

00:42:11.280 | And so I think there's basically a perfect storm

00:42:14.240 | with regard to family formation,

00:42:15.760 | with regard to children,

00:42:18.960 | that is gonna possibly make these things even worse.

00:42:22.760 | And I think that perfect storm is still gathering.

00:42:25.360 | I think there's some indications,

00:42:27.120 | and we'll see what happens in coming years with that.

00:42:29.400 | But I mean, you see it on all sides.

00:42:34.400 | People kill their babies, don't have babies,

00:42:36.640 | don't form families.

00:42:37.480 | The families that are being formed are not stable.

00:42:39.560 | Generally, it's better among the wealthy,

00:42:42.240 | but family formation among middle-class and poor people

00:42:45.800 | has been just utterly devastated.

00:42:47.800 | Anyway, that's difficult.

00:42:50.680 | And I don't know how much of that is baked into this

00:42:52.680 | into these assessments here.

00:42:53.920 | Let's continue on.

00:42:54.800 | And I'll just repeat the discussion

00:42:58.200 | of the economic panacea of steep economic growth.

00:43:01.480 | A strong economy is necessary,

00:43:03.000 | but far from sufficient for major deficit reduction.

00:43:05.880 | Growth rates will already be limited

00:43:07.640 | by the labor force slowdown caused

00:43:09.440 | by baby boomer retirements and declining birth rates.

00:43:12.200 | That leaves productivity to drive growth.

00:43:14.720 | So, no problem?

00:43:16.040 | Let's start by disregarding CBO's 2018 projection

00:43:19.280 | that total US factor productivity will continue growing

00:43:22.160 | at the 1.2% average rate of the past 30 years,

00:43:26.000 | and instead assume the white hot 1.8% rate

00:43:29.680 | that prevailed from 1992 through 2005.

00:43:33.720 | Most economists would consider this far too optimistic.

00:43:37.480 | Nevertheless, the resulting higher incomes and tax revenues

00:43:41.200 | from this productivity jet stream would seem to close

00:43:44.800 | at least 40% of the cumulative deficits through 2048,

00:43:49.480 | until one accounts for the fact that higher incomes

00:43:52.840 | automatically result in higher social security benefits

00:43:56.000 | when the workers who earned them retire.

00:43:58.640 | Much can be done to increase real economic growth rates

00:44:02.160 | above CBO's long-term 1.9% annual projections.

00:44:06.640 | In particular, lawmakers should aim

00:44:08.680 | to grow the labor force participation rate,

00:44:11.040 | continue to refine the tax code to encourage work,

00:44:13.640 | savings, and investment, and improve policies

00:44:16.280 | in the areas of trade, energy, job training,

00:44:18.600 | education, and healthcare.

00:44:20.280 | However, a refusal to address surging spending and deficits

00:44:25.280 | would still undermine economic growth

00:44:27.920 | by raising interest rates, decreasing business investment,

00:44:31.240 | and ultimately forcing up taxes.

00:44:33.640 | Lawmakers should aspire to faster growth,

00:44:35.920 | but not simply assume it,

00:44:37.440 | especially if entitlement costs keep growing.

00:44:40.920 | Inflate the debt away.

00:44:42.140 | In the short term, higher inflation can dilute some

00:44:44.900 | of today's $20 trillion national debt.

00:44:47.440 | However, social security and Medicare benefits

00:44:50.060 | and payments are also tied to inflation,

00:44:52.680 | so future liabilities would expand.

00:44:55.360 | Additionally, Washington would have to pay

00:44:57.480 | much higher interest rates when borrowing

00:44:59.560 | to finance those benefits.

00:45:02.040 | Low interest rates.

00:45:03.360 | CBO's 2018 long-term budget outlook assumes

00:45:07.200 | that the national debt can rise from 35% to 150% of GDP

00:45:12.200 | between 2007 and 2048,

00:45:15.720 | with its average interest rate peaking at just 4.4%,

00:45:20.320 | which is below even the levels of the 1990s, 6.9%,

00:45:24.440 | and 2000s, 4.8%.

00:45:27.120 | By contrast, the economic policy community consensus

00:45:31.040 | is that such a large increase in federal debt

00:45:34.020 | would raise interest rates.

00:45:36.240 | For each percentage point that interest rates rise,

00:45:40.200 | Washington must pay approximately $13 trillion more

00:45:44.000 | in interest costs over 30 years.

00:45:47.520 | That means an even higher national debt.

00:45:50.600 | Immigration.

00:45:52.600 | Smart immigration policy may, on net,

00:45:55.280 | marginally improve the federal budget picture

00:45:58.320 | and the economy.

00:45:59.640 | It is not a cure-all.

00:46:01.440 | High-skill immigrants send higher tax revenues

00:46:04.340 | during their working careers,

00:46:06.160 | but their eventual retirement into social security

00:46:08.760 | and Medicare would add new liabilities to the system.

00:46:12.480 | Low-skill immigrants generally increase costs

00:46:15.280 | to the federal government,

00:46:16.520 | and especially to state and local governments,

00:46:18.820 | at least in the first or second generation,

00:46:21.280 | because the resulting education, infrastructure,

00:46:24.120 | and social spending exceeds the added tax revenues.

00:46:28.720 | By the way, this discussion on immigration

00:46:30.360 | is one of the more important discussions.

00:46:32.600 | Obviously, it's not being handled well

00:46:36.400 | in the broad-scale United States,

00:46:38.320 | and instead we have various factions

00:46:40.760 | that are retreating into their corners

00:46:43.120 | and not having a rational discussion.

00:46:45.220 | Anyway, it's a major problem.

00:46:50.800 | Continuing on with conservative fantasies.

00:46:52.920 | Pro-growth tax policy.

00:46:54.920 | Economic growth is obviously important to deficit reduction,

00:46:58.200 | and tax legislation that depresses savings and investment

00:47:01.680 | must be avoided.

00:47:03.300 | Nevertheless, the historical record clearly shows

00:47:06.400 | that the vast majority of tax cuts

00:47:08.340 | do not increase tax revenues,

00:47:10.420 | especially by enough to keep pace with federal programs

00:47:14.620 | growing 6% to 7% annually.

00:47:18.280 | What about eliminating welfare and lower priority spending?

00:47:22.440 | Over the past 15 years,

00:47:24.060 | congressional GOP deficit reduction budget plans

00:47:27.040 | have typically imposed nearly all the first decade's cuts

00:47:30.680 | on anti-poverty programs,

00:47:32.560 | Medicaid, ACA subsidies, SNAP,

00:47:35.040 | aka food stamps, and others,

00:47:36.900 | as well as non-defense discretionary spending,

00:47:39.360 | such as education, veterans' health,

00:47:41.520 | homeland security, medical research, and infrastructure.

00:47:44.640 | This pot of spending, 7% of GDP and declining,

00:47:49.640 | would have to be mostly eliminated

00:47:52.100 | to balance the budget a decade from now.

00:47:54.840 | These cuts will never be passed by any Congress,

00:47:58.440 | as their advocates on Capitol Hill

00:48:01.240 | and in top think tanks surely know.

00:48:04.240 | While there are any number of failed

00:48:06.560 | and unnecessary programs in need of major reform,

00:48:09.880 | proposals to eviscerate these entire categories of spending

00:48:14.080 | while letting Social Security and Medicare off the hook

00:48:17.480 | are a politically delusional distraction.

00:48:21.020 | What about impossibly tight spending caps?

00:48:24.200 | Spending caps are a vital tool

00:48:26.160 | to enforce realistic spending targets,

00:48:28.800 | but absent any achievable underlying programmatic reforms

00:48:32.640 | to meet those targets, they are an empty gimmick.

00:48:36.200 | Nevertheless, many conservative budget blueprints

00:48:38.200 | simply divide the federal budget

00:48:39.560 | into five to eight spending categories,

00:48:41.720 | and then assume unprecedented cuts in targeted categories,

00:48:45.440 | with no underlying policy proposals

00:48:47.780 | to achieve those targets.

00:48:49.460 | For instance, President Trump's latest budget proposal

00:48:52.320 | assumes a 60% reduction by 2028

00:48:55.360 | in total non-defense discretionary spending

00:48:58.080 | as a percentage of GDP.

00:49:00.000 | The budget proposal provides no breakdown

00:49:02.400 | of which specific programs would be slashed

00:49:04.840 | and how they would operate once all cuts are enacted.

00:49:08.480 | The 2011 Budget Control Act has shown

00:49:11.000 | that overly tight caps will be canceled

00:49:13.520 | rather than force politically suicidal cuts.

00:49:16.580 | Devolution to state governments.

00:49:19.400 | There is a strong policy case for allowing states

00:49:22.320 | to have more control over poverty relief,

00:49:25.080 | education, infrastructure, economic development,

00:49:27.940 | and law enforcement spending.

00:49:29.960 | However, counting the federal savings from devolution

00:49:33.040 | as the centerpiece of a deficit reduction strategy

00:49:36.280 | is disingenuous because it simply shifts the deficits

00:49:40.240 | and taxes to the state level,

00:49:42.380 | minus modest efficiency gains that might come

00:49:44.980 | from better state fiscal management.

00:49:47.520 | The purpose of deficit reduction

00:49:49.120 | is to limit government borrowing and tax increases

00:49:51.600 | and to limit economic damage,

00:49:53.440 | not merely to change the address where the taxes are sent.

00:49:57.420 | What about liberal fantasies?

00:50:01.200 | What about just tax the rich?

00:50:03.080 | Liberal advocates often vastly overstate the degree

00:50:06.360 | to which upper income tax increases

00:50:08.360 | can finance the ever expanding government.

00:50:11.120 | In the first place, the US already has

00:50:14.360 | the most progressive tax code in the OECD,

00:50:19.360 | even adjusting for differences in income inequality.

00:50:23.240 | And setting aside the moral questions

00:50:25.240 | that would be raised by the government

00:50:26.720 | seizing the vast majority of any family's income,

00:50:30.040 | basic math shows that large tax increases

00:50:33.240 | on high income Americans cannot close

00:50:36.240 | most of the long-term budget deficit.

00:50:39.000 | Start with an extreme proposition,

00:50:41.360 | a 100% tax rate on all income over $500,000.

00:50:46.360 | Result, this would raise barely more than 5% of GDP,

00:50:53.040 | at least for year one.

00:50:55.320 | After that, one needs a heroic, if not absurd projection

00:51:00.220 | that this tax would have no effect on working or investment.

00:51:04.920 | Next, try a slightly more realistic doubling

00:51:07.800 | of the top 35% and 37% tax brackets to 70% and 74%.

00:51:12.800 | Result, this would raise only approximately 1.6% of GDP.

00:51:22.040 | And even that figure ignores all revenues lost

00:51:25.320 | to the economic effects of 85% marginal tax rates

00:51:30.080 | when, including state and payroll taxes,

00:51:32.640 | on work or investment,

00:51:34.480 | as well as tax avoidance and evasion.

00:51:38.480 | And by the way here, you should go and look at figure five

00:51:42.240 | in this particular report,

00:51:43.600 | where each of the various proposals,

00:51:45.480 | including that doubling, talks about,

00:51:47.840 | is calculated in terms of its actual savings

00:51:50.880 | and how far it would actually get you towards these goals.

00:51:54.040 | Popular proposals to impose a 30% minimum tax

00:51:58.240 | on millionaires and to more aggressively tax banks,

00:52:01.620 | hedge fund managers, and oil and gas companies

00:52:04.400 | would raise a combined 0.1% of GDP,

00:52:08.320 | or lose revenue if they trim the economic growth rate

00:52:11.600 | by even 1/20 of 1%.

00:52:14.720 | The 0.4% of GDP raised by a $25 per metric ton carbon tax

00:52:20.360 | would be passed on to households

00:52:21.960 | through higher energy bills.

00:52:24.100 | The top earning 5% of families and pass-through businesses

00:52:28.880 | currently account for 30% of all income.

00:52:32.700 | That means that 70% of this tax base

00:52:35.840 | comes from those outside the top 5%.

00:52:39.040 | Furthermore, that top 5% already pays 42%

00:52:43.680 | of all federal taxes,

00:52:45.600 | including 61% of all federal income taxes,

00:52:49.680 | which leaves less room for additional taxes.

00:52:52.680 | So while some upper income tax increases are possible,

00:52:56.260 | the idea that America can close

00:52:58.440 | an $18 trillion Social Security shortfall

00:53:01.920 | and $41 trillion Medicare shortfall,

00:53:05.000 | and even pay for additional spending proposals

00:53:07.240 | on the liberal agenda solely by sticking it to the rich,

00:53:10.360 | is a fantasy that finds no support in budget math.

00:53:14.980 | Nor can corporate tax hikes close much of the gap.

00:53:18.200 | America's total corporate tax revenues

00:53:20.160 | are generally in line with other developed nations.

00:53:23.320 | Although modest reforms may be on the table,

00:53:26.040 | major changes, such as a 10-point rate increase,

00:53:29.440 | would raise less than 0.5% of GDP,

00:53:32.480 | while giving more companies an incentive to relocate abroad.

00:53:36.320 | Repealing the 2017 Tax Cut and Jobs Act

00:53:39.360 | would not significantly raise corporate tax revenues either,

00:53:42.520 | as that portion of the law was almost entirely paid for

00:53:46.540 | through a combination of tax offsets

00:53:48.960 | and additional revenues from projected economic growth.

00:53:52.840 | An inescapable reality gets lost

00:53:55.480 | in this country's intractable budget debates.

00:53:58.720 | If America wants to spend like Europe,

00:54:01.760 | it must also tax like Europe.

00:54:04.900 | This means, in addition to federal and state income taxes,

00:54:07.640 | a value-added tax, VAT, essentially a national sales tax,

00:54:11.420 | that affects all families.

00:54:13.440 | Lawmakers who pledge to stabilize the debt

00:54:16.140 | without touching government spending

00:54:18.360 | would need new tax revenues equivalent

00:54:21.600 | to a value-added tax that rises to 17% by 2030

00:54:26.600 | and 34% by 2048.

00:54:30.120 | Alternatively, lawmakers could raise the payroll tax

00:54:33.220 | from 15.3% to 33.5%.

00:54:38.220 | Rather than concentrating all the revenues within one tax,

00:54:42.160 | Figure 5 shows that a combination of large income,

00:54:44.840 | payroll, capital gains, corporate,

00:54:46.700 | and value-added tax increases would likely be needed

00:54:50.040 | to raise 6% of GDP and stabilize the debt

00:54:53.680 | without touching Social Security, Medicare, Medicaid,

00:54:57.120 | and anti-poverty and social spending.

00:54:59.680 | While it is easy to say major spending decreases

00:55:02.360 | are a non-starter, the all-tax alternative

00:55:05.380 | is even less plausible.

00:55:08.060 | Now I wanna pause here just to point out

00:55:11.680 | a couple of thoughts for your personal planning.

00:55:14.800 | Before we move on to deep defense cuts,

00:55:17.200 | I want you to think about what you would do

00:55:20.000 | if the top marginal tax bracket were doubled

00:55:23.140 | from 37% to 74%.

00:55:27.000 | I want you to think about what you would do

00:55:29.200 | if a national sales tax were added to the tune of 20 to 35%,

00:55:34.200 | if you had a national sales tax on all purchases

00:55:37.880 | in the United States for up to 20 to 35%,

00:55:40.520 | and/or I want you to think about if your payroll taxes

00:55:43.200 | increased from 15% to 33.5%.

00:55:47.360 | What would you do?

00:55:50.440 | Because one of the scenarios that we have to plan for

00:55:53.060 | is tax planning, is what would happen

00:55:55.520 | if the United States goes down this road.

00:55:57.740 | Now, is it possible?

00:55:58.800 | Possible.

00:55:59.640 | Is it plausible?

00:56:00.480 | Plausible.

00:56:01.300 | Is it probable?

00:56:02.240 | It's hard for me to see it right now,

00:56:04.160 | but demographic changes might change that.

00:56:08.000 | I commonly hear people say,

00:56:09.520 | "Hey, I'm willing to pay more taxes."

00:56:11.480 | Okay.

00:56:12.480 | Maybe we go down that road.

00:56:13.600 | So you need to think about what you would do

00:56:15.560 | in that situation.

00:56:17.220 | Consider it.

00:56:20.000 | We'll see.

00:56:20.840 | I'll tell you this.

00:56:21.660 | I'll teach you how to eliminate all those taxes,

00:56:23.280 | and I wouldn't be around for it.

00:56:25.840 | Deep defense cuts.

00:56:27.040 | What about deep defense cuts?

00:56:28.080 | Since the 1980s, the Pentagon budget has fallen

00:56:31.040 | from 6% to 3% of GDP, not far above Europe's target of 2%.

00:56:36.040 | Cutting US defense spending to the levels pledged

00:56:39.120 | by European members of NATO would save 1% of GDP,

00:56:42.400 | or roughly 1/7 of the Social Security

00:56:45.080 | and Medicare long-term shortfall.

00:56:47.080 | And Europe's target level is possible

00:56:49.160 | only because its leaders can count on protection

00:56:52.440 | from a larger superpower,

00:56:54.240 | a luxury that the United States would not enjoy.

00:56:57.680 | A healthy portion of America's higher defense budget

00:57:00.520 | comes from spending $100,000 per troop in compensation,

00:57:04.900 | salary, pension, housing, healthcare, and other benefits,

00:57:08.400 | which lawmakers are not eager to cut.

00:57:10.960 | Some long-term budget savings are possible,

00:57:13.440 | though it should be noted that President Obama

00:57:15.840 | did not propose reducing the Pentagon budget

00:57:18.700 | to anywhere near the levels of France or the UK.

00:57:23.080 | What about single-payer healthcare,

00:57:25.600 | which is, of course, quite the current discussion

00:57:28.960 | as we move into the 2020 election season,

00:57:33.960 | which, by the way, my one political jab,

00:57:37.000 | which I'll make the rules close your ears.

00:57:39.280 | Does anybody notice how the fact

00:57:42.040 | that the Affordable Care Act, Obamacare, was passed,

00:57:46.040 | and it was failed to be repealed by the Republicans

00:57:50.000 | who promised that they were going to do it,

00:57:51.840 | and then they failed,

00:57:53.320 | has anybody noticed how that's just basically disappeared now

00:57:56.520 | and now the push is, well, we gotta have single-payer,

00:58:00.400 | that's the whole goal, all the energy is there?

00:58:02.460 | Let me tell you just a brief bit of historical fact

00:58:06.840 | from me, Joshua, because these are a couple of things

00:58:09.080 | that have contributed to my own personal struggles

00:58:12.680 | with all this stuff.

00:58:14.280 | When the Affordable Care Act was proposed,

00:58:17.080 | I was a, I sold health insurance.

00:58:21.560 | I had gotten my insurance license

00:58:23.880 | and I sold health insurance.

00:58:25.660 | And my favorite kind of health insurance to sell

00:58:27.960 | was just individual health insurance policies.

00:58:30.200 | I didn't do much group health insurance work,

00:58:33.280 | I just didn't enjoy it.

00:58:34.800 | I came to the conclusion that nobody liked

00:58:36.280 | their health insurance agent

00:58:37.280 | because they were, the money,

00:58:41.600 | the premiums were always going up,

00:58:43.640 | just wasn't fun, I didn't care for it,

00:58:45.600 | so I didn't wanna do it.

00:58:46.440 | Although I knew many successful advisors

00:58:48.160 | that would always keep a small health insurance practice

00:58:51.640 | and they'd make $100,000 a year

00:58:53.440 | from their health insurance book

00:58:54.480 | in addition to all their financial planning work.

00:58:56.360 | So I always thought it could be done,

00:58:57.840 | but I just, I wasn't interested in it.

00:58:59.720 | But I got appointed with a number

00:59:02.500 | of different health insurance companies,

00:59:04.000 | and basically if somebody wanted health insurance,

00:59:06.800 | I would just simply go to one of those companies

00:59:09.240 | and we could get just inexpensive, catastrophic,

00:59:11.840 | individual health insurance policies.

00:59:14.420 | That approach has always made sense to me,

00:59:16.000 | it's always what I wanted,

00:59:17.000 | I'll just pay out of pocket for all my medical bills.

00:59:19.680 | I just want health insurance

00:59:20.800 | where if I have a $100,000 medical bill,

00:59:23.520 | then everything from 10 to $100,000

00:59:27.440 | is picked up by insurance.

00:59:28.400 | And you used to be able to buy that stuff.

00:59:30.440 | The policies were inexpensive,

00:59:32.080 | I sold quite a few of them and I enjoyed it.

00:59:34.340 | When the Affordable Care Act was proposed,

00:59:36.680 | I started to pay attention and I really wondered about it.

00:59:40.040 | And in time, I came to the perspective

00:59:44.200 | of just simply saying, this is not gonna work,

00:59:46.040 | it cannot work, it doesn't make any sense.

00:59:48.920 | It doesn't make any sense financially.

00:59:51.080 | But I would hear people advance the theory

00:59:54.180 | that the whole goal of the Affordable Care Act

00:59:56.560 | was to disrupt and destroy the health insurance marketplace

01:00:00.480 | so that it would usher in single payer healthcare.

01:00:03.100 | It always sounded like a conspiracy theory

01:00:06.200 | that didn't have a lot of support.

01:00:08.160 | And I just thought, no, it's probably not.

01:00:10.040 | But over time in watching it,

01:00:12.000 | I started to come to the conclusion,

01:00:13.520 | I said, this can't,

01:00:14.680 | nobody can think this will actually work.

01:00:17.600 | The data is too clear,

01:00:19.360 | nobody can actually think that this is actually work.

01:00:22.040 | Well, the Affordable Care Act was passed

01:00:23.960 | middle of the night, all kinds of chicanery

01:00:25.720 | to make it pass, no bipartisan consensus,

01:00:28.380 | all Democratic paid for,

01:00:30.540 | sorry, Democratic voted for policies.

01:00:35.720 | When that happened, over the next year or two,

01:00:38.040 | health insurance premiums started to go up.

01:00:40.120 | And then systematically, I just,

01:00:41.880 | I came, I stopped selling health insurance.

01:00:44.320 | Over time, all the policies that I had sold,

01:00:47.600 | the companies massively increased their rates,

01:00:50.160 | all the people that were on those policies

01:00:51.720 | were forced off and forced onto the exchange.

01:00:54.060 | Now, obviously, this did offer

01:00:56.300 | an interesting financial planning opportunity,

01:00:58.640 | because previously, it had always been very important

01:01:01.500 | that a prudent planner maintained

01:01:03.500 | their own health insurance coverage.

01:01:05.480 | But when the requirement of pre-existing conditions

01:01:08.420 | was eliminated, then there became no reason

01:01:10.720 | to have to maintain coverage if you didn't want to,

01:01:14.320 | and if you could work out the tax issues.

01:01:17.500 | But most of my clients were not in that situation.

01:01:19.720 | I liked it, many people were happy,

01:01:22.000 | many sick people started signing up,

01:01:23.120 | people that had had trouble getting health insurance.

01:01:25.500 | So I just kind of moved on.

01:01:27.040 | Then I started to watch, after the day,

01:01:29.440 | then I started to watch all the data that came out

01:01:31.400 | from President Obama's team

01:01:33.400 | that had been the architects of the health insurance.

01:01:36.580 | And the lies that they had said were basically exposed.

01:01:39.720 | And I started to think, you know what?

01:01:42.480 | I bet you there was more to this idea

01:01:45.360 | that the whole thing was designed to fail from the beginning.

01:01:47.680 | 'Cause when you would have the tapes

01:01:49.620 | of the architects talking about the lies,

01:01:51.560 | not just the president's lies,

01:01:52.860 | not just if you like your doctor,

01:01:54.100 | you can keep your doctor,

01:01:54.940 | not if you like your plan, you can keep your plan,

01:01:56.800 | not just that nonsense,

01:01:58.240 | but the actual architects, the behind the scene people.

01:02:01.160 | I came to the point, I said, you know what?

01:02:02.720 | That theory now makes a lot more sense.

01:02:06.080 | Now, as we watch what's happening in 2019,

01:02:09.520 | that theory that I used to resist,

01:02:11.960 | that just sounded too crazy to say,

01:02:13.800 | oh, Obamacare was designed to fail

01:02:15.860 | to usher in single payer,

01:02:17.200 | watch what happens in the next few years.

01:02:20.380 | My crystal ball is broken,

01:02:23.960 | but that theory makes a lot more sense than it ever did.

01:02:27.440 | So it's a frustrating bit of historical analysis.

01:02:33.280 | Just 'cause I was involved in that.

01:02:35.040 | It was all stuff that I did in the last 10 years.

01:02:37.760 | I saw it up front and I've had to admit

01:02:41.460 | that I was wrong 10 years ago.

01:02:43.600 | And now we'll see what happens in the next couple of years.

01:02:46.040 | Moving on now back to the article.

01:02:47.960 | I hope you enjoyed that commentary

01:02:49.640 | and my liberal friends, you can unplug your ears now.

01:02:53.040 | What about single payer healthcare?

01:02:55.000 | When confronted with rising Medicare

01:02:56.680 | and Medicaid costs driving federal deficits,

01:02:59.120 | a popular response on the left

01:03:00.680 | is to propose single payer healthcare.

01:03:03.320 | The theory here is that a fully socialized health plan

01:03:05.940 | would drastically slash costs

01:03:07.840 | to families and the federal budget.

01:03:10.080 | There is some debate over whether single payer

01:03:12.160 | would slightly increase

01:03:13.240 | or decrease total national health expenditures.

01:03:15.920 | The most generous analysis

01:03:17.500 | of Senator Bernie Sanders Medicare for All Act

01:03:20.400 | performed by the Mercatus Center

01:03:23.080 | shows a 3% reduction

01:03:24.960 | in projected national health expenditures.

01:03:27.560 | Although those savings charitably rely

01:03:29.920 | on the bill's assumption

01:03:31.600 | that private health insurance can be nationalized

01:03:34.980 | with reimbursement rates for its health providers

01:03:37.840 | cut by approximately 40%,

01:03:40.320 | a massive reduction that the Mercatus Center analysis notes

01:03:44.320 | is wildly implausible.

01:03:47.080 | Analyses that assume more realistic payment rates,

01:03:50.200 | such as those performed

01:03:51.240 | by the politically liberal Urban Institute,

01:03:53.520 | show a notable increase in national health spending

01:03:56.560 | under a single payer healthcare.

01:03:58.880 | Regardless of whether total nationwide health spending

01:04:01.360 | would slightly rise or fall,

01:04:03.120 | it is obvious that transferring

01:04:05.160 | the entire healthcare system to the federal government

01:04:07.880 | would substantially increase federal spending.

01:04:10.760 | Thus, virtually all analyses of single payer healthcare

01:04:13.920 | from the politically liberal Urban Institute

01:04:16.100 | to the conservative Mercatus Center

01:04:18.120 | have estimated a first decade cost of $24 trillion

01:04:23.040 | to $29 trillion to the federal government.

01:04:26.160 | That is on top of current federal health spending

01:04:30.440 | that is already growing at unsustainable rates.

01:04:33.280 | And if the large provider payment rate reductions

01:04:35.840 | prove to be unrealistic,

01:04:37.560 | the cost will rise by trillions more.

01:04:40.920 | Some suggest that these new federal costs

01:04:42.760 | would be fully paid for by the health savings

01:04:45.680 | to families, businesses, and state governments.

01:04:48.240 | This response leaves unanswered the rather large question

01:04:52.260 | of how to convert every dollar

01:04:54.640 | of current private sector

01:04:56.160 | and state government health spending

01:04:58.160 | into a nearly $30 trillion single payer tax.

01:05:01.800 | Single payer advocates have still not provided

01:05:04.460 | a tax proposal that covers more than half

01:05:07.360 | of the exorbitant federal cost.

01:05:09.540 | The most likely option, a payroll tax,

01:05:12.400 | would need to be set at 30%

01:05:16.160 | on top of the current 15.3% rate.

01:05:20.040 | There is no indication that Americans

01:05:22.720 | would accept tax increases this large

01:05:25.440 | even if they no longer pay premiums for health insurance.

01:05:29.040 | Furthermore, these new taxes would finance

01:05:31.960 | only the added federal costs of the new single payer system,

01:05:36.540 | not the underlying cost of current federal health spending.

01:05:40.520 | In other words, Medicare for all

01:05:42.280 | would not address Medicare's projected

01:05:45.120 | $41 trillion cash shortfall over the next three decades.

01:05:49.080 | It would simply make Medicare more generous

01:05:51.680 | and then expand it to everyone under age 65.

01:05:55.800 | Perhaps lawmakers should figure out how to pay

01:05:58.280 | for the current Medicare system

01:06:00.440 | before pledging nearly $30 trillion per decade to expand it.

01:06:05.040 | Now we move on to cross-partisan fantasies.

01:06:10.160 | Social Security Trust Fund to the rescue.

01:06:12.840 | Some suggest that redeeming the $3 trillion in assets

01:06:16.560 | held by the Social Security Trust Fund

01:06:19.040 | will shield taxpayers from the cost

01:06:21.440 | of Social Security's deficits.

01:06:24.000 | In the first place, this $3 trillion

01:06:26.320 | accounts for a small fraction

01:06:28.360 | of the system's $18 trillion cash deficit over 30 years.

01:06:33.000 | More important, the Trust Fund contains

01:06:35.600 | no economic resources with which to pay benefits.

01:06:39.760 | It consists of a pile of IOUs

01:06:43.080 | in a filing cabinet in Parkersburg, West Virginia.

01:06:47.760 | This $3 trillion in Social Security assets

01:06:51.280 | reflects a $3 trillion liability for taxpayers

01:06:55.640 | who must repay the bonds with interest

01:06:58.320 | over the next 16 years.

01:07:01.120 | All future Social Security benefits

01:07:03.200 | will be financed by future taxes and borrowing.

01:07:06.500 | Long-term budget projections are just theory.

01:07:10.880 | Americans otherwise inclined to be skeptical

01:07:13.680 | of 30-year projections should nevertheless

01:07:16.280 | take these seriously.

01:07:18.440 | Future inflation rates are indeed anyone's guess,

01:07:21.720 | but the 74 million baby boomers

01:07:24.360 | retiring into Social Security and Medicare

01:07:27.280 | are an actuarial and demographic reality.

01:07:32.000 | These present and future retirees exist,

01:07:35.880 | and the payment formulas have already been set.

01:07:39.440 | Furthermore, any future uncertainties

01:07:41.920 | are an argument for caution and prudence.

01:07:46.240 | What about the argument that there's no hurry?

01:07:49.000 | Some assert that lawmakers can wait 10 or 15 years

01:07:51.840 | to address this challenge.

01:07:53.280 | Unfortunately, every year of delay

01:07:55.760 | raises the eventual cost of a budget fix

01:07:58.400 | because, one, on average,

01:08:00.560 | four million more baby boomers

01:08:02.600 | retire into Social Security and Medicare,

01:08:04.640 | and lawmakers have generally avoided

01:08:06.520 | reducing benefits for those already receiving them.

01:08:09.760 | Two, benefit levels rise further

01:08:12.200 | above an affordable level,

01:08:13.760 | and three, the larger national debt

01:08:16.400 | locks in permanently higher interest costs.

01:08:19.440 | The blueprint in this report

01:08:21.240 | assumes that most reforms are implemented in 2023,

01:08:25.200 | which means that stabilizing the debt at 95% of GDP

01:08:29.800 | requires the sum of annual tax increases

01:08:33.040 | and non-interest spending cuts

01:08:34.600 | to rise to 6% of GDP by 2048.

01:08:38.520 | Those required 2048 savings rise to 9% of GDP

01:08:42.600 | if reforms are delayed until 2030,

01:08:44.920 | and 12% of GDP if reforms do not begin until 2035.

01:08:49.920 | Now, I want to insert just a moment of commentary into this.

01:08:54.800 | Remember, this paper is all predicated upon the idea

01:08:59.000 | that in five years,

01:09:01.400 | these things will be put into practice,

01:09:03.600 | and if put into practice,

01:09:05.320 | these comprehensive massive cuts,

01:09:07.120 | which we'll get to in a minute,

01:09:08.480 | if put into practice,

01:09:10.040 | this will stabilize the debt at 95% of GDP.

01:09:13.360 | Not pay it off, but stabilize it at 95% of GDP.

01:09:17.080 | That's the very best, most optimistic scenario.

01:09:19.840 | But everything in this is built upon the idea

01:09:22.440 | that in five years, by 2023,

01:09:25.000 | these reforms will be implemented.

01:09:26.800 | Now, here's the problem.

01:09:27.920 | In 2019, looking forward, let me ask you this.

01:09:31.720 | Do you have any confidence that these reforms,

01:09:34.880 | or anything close to these reforms,

01:09:37.360 | could be implemented in the coming years?

01:09:39.760 | I cannot possibly see it in the current political scenario,

01:09:44.760 | no matter what happens with the 2020 election.

01:09:48.560 | At the moment, of course, just a bit of political analysis,

01:09:52.160 | at the moment in 2019,

01:09:53.560 | we have a strong and ascendant Democratic Party

01:09:57.360 | in control of the House of Representatives,

01:10:00.000 | and there is a decent chance that that energy

01:10:02.800 | in the House of Representatives could continue

01:10:05.440 | with increasing gains in the Democratic majority.

01:10:08.920 | It's possible.

01:10:09.760 | Now, of course, the opposite is also possible,

01:10:11.800 | but it's possible.

01:10:13.400 | In the Democratic Party,

01:10:14.640 | we have a strong and ascendant, hyper left-wing,

01:10:18.000 | very, very big-spendy group of people.

01:10:22.160 | And the massive move in the Democratic Party

01:10:24.520 | has been to the left.

01:10:25.720 | Somebody like Bill Clinton looks like a Republican

01:10:29.000 | at this point in time,

01:10:29.840 | in terms of the massive move to the left.

01:10:32.440 | Just this last week, as I record this,

01:10:34.120 | Senator Sanders has officially launched his campaign.

01:10:38.360 | Now, of course, he faces major challenges,

01:10:40.360 | but if anybody got massive traction

01:10:43.400 | in the 2016 presidential campaign, it was unexpected.

01:10:47.480 | Of course, President Trump's traction was unexpected,

01:10:49.920 | but then, of course, you had Senator Sanders' traction

01:10:52.360 | that was absolutely huge.

01:10:54.520 | So time will play out in the next year.

01:10:56.240 | We'll see what happens

01:10:57.080 | with the Democratic nominee for president.

01:11:00.720 | But there is a very, it's hard to imagine

01:11:04.280 | that a centrist fiscal hawk gets elected as,

01:11:09.000 | or gets nominated as a Democratic candidate for president.

01:11:12.960 | Now, what about on the Republican side?

01:11:14.560 | Well, it looks like it's almost hard to see

01:11:18.480 | how anybody except President Trump

01:11:20.760 | is the Republican nomination.

01:11:22.760 | Now, in theory, if there were some kind

01:11:24.840 | of massive impeachment process,

01:11:28.240 | or some kind of massive illegal activity

01:11:31.560 | that were proved, for example,

01:11:32.760 | by the results of the Mueller report, et cetera,

01:11:35.800 | in theory, perhaps there could be

01:11:37.360 | another Republican candidate.

01:11:39.000 | But first, I don't see how,

01:11:40.680 | and even if there were a Republican candidate

01:11:43.200 | other than Trump, I don't see how a Republican

01:11:45.320 | other than Trump could get reelected.

01:11:47.200 | And all indications are that no such argument would,

01:11:52.200 | no such data is going to come out at this point in time.

01:11:56.040 | Now, of course, the Mueller investigation

01:11:57.960 | should be issuing its report soon,

01:11:59.760 | but I don't see any good evidence

01:12:02.280 | that would indicate that we should expect

01:12:03.600 | any kind of massive upset

01:12:05.520 | to the political equilibrium right now.

01:12:08.400 | Now, will President Trump get reelected or not?

01:12:11.400 | How would we, how can we know?

01:12:13.120 | But I don't see how a non-Trump Republican

01:12:15.920 | could get elected.

01:12:17.160 | I don't see how any kind of other moderate

01:12:21.080 | fiscal hawk Republican,

01:12:22.480 | kind of the same old stayed conservative person.

01:12:25.040 | I don't see how any person like that

01:12:27.120 | could get elected, even if they were nominated.

01:12:30.520 | So you either have, as far as I can tell,

01:12:33.280 | in the presidency, you either have a President Trump,

01:12:36.880 | again, for a second term, going through 2024,

01:12:40.040 | or you have a strongly left-wing,

01:12:43.440 | very spendy Democrat in the presidential office.

01:12:47.640 | Now, what's the only restraint?

01:12:49.120 | The only restraint would seem to be

01:12:50.680 | that there's a decent chance that the Senate,

01:12:52.920 | the fiscal restraint, I mean,

01:12:54.800 | is that it seems almost impossible

01:12:57.160 | in under current projections

01:12:58.960 | that the Senate would lose its Republican majority

01:13:02.040 | for right now, for the coming election cycle,

01:13:05.160 | at the minimum.

01:13:06.200 | So you could have, very plausibly,

01:13:09.040 | you could have a very left-wing,

01:13:11.840 | Democrat-controlled House of Representatives,

01:13:13.920 | and a left-wing Democrat in the president.

01:13:17.520 | You could have a Republican still in the presidency,

01:13:20.920 | and a Democratic House of Representatives,

01:13:23.920 | and a Republican Senate.

01:13:25.200 | Now, who knows with any of these things, right?

01:13:27.600 | We'll watch and see.

01:13:28.440 | But here's the point.

01:13:29.880 | Notice what is entirely absent

01:13:32.320 | in any of those scenarios that I think are plausible.

01:13:34.960 | There are no fiscal conservatives.

01:13:41.480 | There are no fiscal hawks, as they are known.

01:13:44.040 | They're a vanishing breed.

01:13:45.320 | They're disappeared.

01:13:46.520 | Paul Ryan, that was his big claim to fame,

01:13:48.640 | and he's gone.

01:13:49.800 | He slunk out of office, he's gone.

01:13:52.720 | Who, in any case, is actually out there advocating,

01:13:56.480 | saying we should spend less money?

01:13:58.480 | The president that was the most restrained on spending

01:14:00.880 | was President Obama.

01:14:02.440 | And it wasn't because his ideology indicated

01:14:05.000 | that he should be restrained on spending.

01:14:06.280 | It was because he was stymied on every side

01:14:09.520 | by a Republican majority in the House and the Senate,

01:14:12.400 | and that's what kept him

01:14:13.240 | from being able to spend much money.

01:14:15.040 | So he was the biggest fiscal hawk

01:14:16.880 | of any presidency going back for a long time.

01:14:21.800 | So I know this is a lot of political analysis,

01:14:25.440 | but my point is, where does it come from?

01:14:28.240 | Now, let's say that you said, well, even with a whomever,

01:14:31.840 | maybe President Trump is reelected

01:14:35.000 | into the US presidency,

01:14:36.480 | but there is a Democratic majority in the House,

01:14:41.480 | and there's a strong centrist majority in the Senate.

01:14:44.320 | Okay, maybe that's possible.

01:14:45.520 | It certainly is possible.

01:14:47.400 | But where does some coalition come together

01:14:50.560 | that says, we're gonna tackle this budget problem,

01:14:52.960 | we're not actually gonna talk to each other?

01:14:55.000 | When the issues that are at hand in terms of legislation

01:14:59.480 | are so divisive and seem so much more important

01:15:04.480 | in terms of the culture war issues

01:15:06.520 | versus trying to figure out how to rein in the budget,

01:15:10.240 | and when you have such an entrenched political majority

01:15:13.920 | of the baby boomers and their voting bloc,

01:15:16.640 | how on earth does any meaningful reform get enacted?

01:15:20.480 | Now, if I'm missing something, you tell me,

01:15:23.280 | but you watch it over the next few years,

01:15:25.320 | as I will be watching it as well,

01:15:26.880 | and understand that these dire scenarios

01:15:29.360 | discussed in this report

01:15:30.600 | are all predicated on, by 2023,

01:15:36.680 | being able to come up with a political solution

01:15:41.800 | that is bipartisan.

01:15:45.120 | At the moment, it looks to me as though it is impossible.

01:15:48.720 | I can't see the event that would change it.

01:15:51.680 | The most likely course of action in my mind

01:15:53.440 | is that the US starts another major war,

01:15:55.520 | or a war is started with the US,

01:15:57.360 | and then that would just be the worst

01:15:58.960 | because everything goes out the window then,

01:16:00.600 | but time will tell.

01:16:01.440 | We'll see what happens.

01:16:03.200 | One more cross-partisan fantasy back to the paper.

01:16:05.320 | Let the kids deal with the problem.

01:16:07.160 | The final argument against reform

01:16:08.800 | asserts that Social Security and Medicare benefits

01:16:11.240 | represent an unbreakable, unamendable promise

01:16:14.480 | to the elderly.

01:16:15.320 | Consequences be damned.

01:16:17.360 | In reality, retirement benefits

01:16:19.000 | have been repeatedly expanded,

01:16:20.400 | far beyond what current retirees were promised

01:16:22.760 | while they were working.

01:16:24.080 | For example, President George W. Bush and Congress

01:16:26.200 | decided in 2003 that current taxpayers

01:16:29.040 | would pay 75% of the prescription drug costs

01:16:32.120 | of the current typical senior.

01:16:33.920 | This benefit was never earned through payroll taxes,

01:16:36.640 | and today's teenagers never signed up

01:16:38.760 | for this budget-busting deal.

01:16:40.680 | One more commentary on this bit of thing.

01:16:43.120 | All of this assumes some kind of nationalistic identity,

01:16:47.720 | some kind of patriotism,

01:16:49.240 | the sense that, oh, we're Americans

01:16:50.960 | and we're going to just stick with it.

01:16:53.040 | I see that as eroding.

01:16:54.720 | So you have two major cultural issues

01:16:56.720 | with younger generations.

01:16:58.640 | Number one is very few younger people

01:17:02.160 | seem to exhibit much particular care for older generations.

01:17:06.600 | In the US American society,

01:17:08.040 | you have a general disdain on younger people

01:17:11.000 | on behalf of older people.

01:17:12.680 | Age is not something that is appreciated and honored.

01:17:15.240 | Rather, it's something that is generally looked down on.

01:17:17.800 | People write about how they don't want to do it.

01:17:19.600 | Women make stupid comments about,

01:17:21.080 | "I'm not going to tell you my age,"

01:17:22.240 | and it's supposed to be impolite

01:17:23.400 | to ask somebody their age.

01:17:24.960 | There is this general societal disdain for the elderly.

01:17:28.720 | This disdain is continually being expressed

01:17:32.600 | in social changes.

01:17:34.120 | So American parents institutionalize their children,

01:17:37.680 | and then they turn around and wonder

01:17:38.840 | why their children institutionalize their parents.

01:17:41.600 | And then in addition,

01:17:42.680 | you have a massive worldview conflicts

01:17:44.880 | that don't seem to be able to be cared for

01:17:47.880 | and worked out in the society at large.

01:17:49.840 | You have massive differences

01:17:51.600 | between older generations and younger generations

01:17:53.920 | in terms of political ideology, in worldview,

01:17:56.600 | and even just basic considerations of morality,

01:17:59.080 | of what's right, what's wrong,

01:18:00.480 | in lifestyle decisions, lifestyle choices, et cetera.

01:18:03.720 | So when you put all this stuff together,

01:18:05.520 | why on earth do you think that children,

01:18:08.360 | or so, you know, kids in this context,

01:18:10.640 | why would young people want to pay

01:18:12.280 | for all the stuff that old people did?

01:18:14.120 | The disdain, even in the political space,

01:18:16.920 | of younger people to the old people,

01:18:18.600 | who view many younger people,

01:18:20.160 | especially more liberal left-wing political perspectives,

01:18:24.440 | basically view that everything that the past did was wrong,

01:18:27.760 | that the United States was just

01:18:29.320 | a bunch of imperialistic Nazis,

01:18:31.480 | and now everything was wrong.

01:18:32.760 | So why on earth would we expect younger people

01:18:35.520 | to say, "I'm going to buckle in,

01:18:36.840 | "and I'm going to pay this

01:18:37.680 | "to support the older generations."

01:18:39.400 | In addition, you assume that in this case,

01:18:41.520 | that children can't just simply leave.

01:18:43.200 | And now you have a major change,

01:18:45.760 | where there once was a stronger nationalistic identity

01:18:49.760 | of what it meant to be a U.S. American

01:18:51.520 | in the United States of America.

01:18:52.600 | You had this context, "Well, I'm American,

01:18:54.440 | "and we get through this together."

01:18:56.160 | But in the current fractured U.S. American culture,

01:18:58.560 | I don't see much of that.

01:19:00.160 | I do not see much of that at all.

01:19:02.600 | And so the people like me,

01:19:05.280 | who have an affinity for what the United States

01:19:08.720 | has been, and what it has stood for,

01:19:12.160 | I have an affinity for that,

01:19:13.720 | but I don't recognize the country that I live in now.

01:19:16.480 | And so why should I,

01:19:17.880 | and so I'm much more committed to those principles

01:19:20.680 | and ideals, no matter what country they are expressed in,

01:19:23.960 | than I am the actual particular country.

01:19:26.920 | Now, many people have a much more liberal,

01:19:29.560 | but instead of my appreciation

01:19:31.320 | for so many things in the American past,

01:19:33.440 | many of my friends and peers have nothing but disdain

01:19:36.960 | for what happened in the past.

01:19:38.120 | So why on earth would that set of people stick around

01:19:41.160 | to pay much higher taxes for a bunch of old people?

01:19:43.920 | At some point, the kids are gonna stiff the old people.

01:19:46.880 | I don't see any other way around it.

01:19:48.560 | And those are just some of the reasons why I think

01:19:50.320 | that's a rational point of analysis.

01:19:53.400 | I hope that makes sense to you,

01:19:55.880 | but I am far more conservative,

01:19:59.360 | politically, for whatever that means,

01:20:00.880 | but I'm much, I'll just use it

01:20:02.000 | 'cause it's a commonly understood term.

01:20:03.360 | I am far more conservative than almost anybody that I know.

01:20:07.720 | And yet my plan at this point is to prepare my children

01:20:11.160 | to never have to live in the United States,

01:20:12.920 | to never have to deal with this stuff.

01:20:14.360 | Now, if they choose to, or if we choose to, fine.

01:20:16.880 | But at this point, I'm establishing the infrastructure

01:20:19.760 | so that none of us ever have to be in the United States

01:20:22.160 | to do these problems.

01:20:23.000 | And I wanna make sure that their wagons never hitched

01:20:25.920 | to the future of the United States

01:20:27.640 | if they don't choose it to be.

01:20:29.280 | Now, I'm pretty extreme.

01:20:30.640 | I take action more than a lot of people.

01:20:32.720 | But if that's for me, who's a fairly extreme conservative,

01:20:37.120 | much more conservative than many people that I know,

01:20:39.520 | then how does that same theory not press through

01:20:43.040 | for people who are less conservative than me?

01:20:45.160 | About the thing that I don't have

01:20:46.600 | is I don't have the same kind of jingoistic,

01:20:48.880 | blind nationalism that a lot of people have.

01:20:52.120 | But I don't see why many other parents

01:20:54.680 | wouldn't do what I'm doing, which is to say,

01:20:56.520 | okay, well, if the United States continues

01:20:58.120 | to provide a good value proposition

01:20:59.600 | 20, 30 years from now, fine.

01:21:01.320 | But I'm not gonna stick around and deal with the problem.

01:21:03.240 | I didn't create it.

01:21:04.640 | It's not my fault.

01:21:05.480 | It's not my kids' fault.

01:21:06.320 | I'm gonna help them get out.

01:21:08.400 | To me, that seems practical and pragmatic.

01:21:10.720 | So you assess for yourself.

01:21:13.600 | But I see a small portion of the US American population

01:21:18.040 | that ascribes to this intense nationalism,

01:21:21.000 | to the point of jingoism,

01:21:22.400 | that this, you know, salute the flag

01:21:24.720 | and God bless America and all this stuff.

01:21:26.480 | But I don't see how that stands

01:21:31.120 | because that's only a small wing of the Republican Party.

01:21:34.120 | And I think most thoughtful people look at that

01:21:36.120 | and say, you know, I don't stand for this.

01:21:38.960 | I mean, why should I salute the flag

01:21:43.000 | when it stands for all these things?

01:21:44.840 | And as you have an increasing rise

01:21:49.120 | and surging of more left-wing cultural issues

01:21:53.520 | in the United States, for most of us who are on the right,

01:21:55.920 | who tend to have that more nationalism perspective,

01:21:59.640 | that just increasingly adds to the shame

01:22:03.560 | and embarrassment of being associated

01:22:05.600 | with the United States

01:22:06.440 | rather than any kind of nationalistic pride.

01:22:08.560 | I don't know if that's helpful or not.

01:22:10.680 | It's extended commentary here on this idea

01:22:13.160 | of let the kids deal with the problem.

01:22:14.840 | But you have a generational problem.

01:22:17.480 | And I think you can't ever get away from that.

01:22:19.520 | So I'm smack dab in the middle.

01:22:22.480 | I'm a leading millennial and I'm smack dab in the middle.

01:22:26.040 | And I would just say, you know, take that

01:22:28.320 | because there's a big cultural difference

01:22:30.200 | between baby boomers versus me as a millennial

01:22:33.200 | versus our children.

01:22:34.840 | And the problems are going to be presented

01:22:37.920 | as my fellow millennials, as our children

01:22:41.720 | arrive at working age.

01:22:43.640 | And so I think, this sounds very millennial,

01:22:47.400 | but pay attention to what's happening in my generation.

01:22:51.960 | And the most obvious thing you should watch is the data

01:22:56.040 | that my generation's not having children.

01:22:57.720 | So you can't depend on our children to do that.

01:23:02.720 | A few of us, of course, try to break those trends

01:23:04.960 | and single handedly reverse the birthing statistics,

01:23:08.080 | but that's a heavy load to bear.

01:23:09.800 | We'll talk about that more another time.

01:23:11.640 | It's not easy, as you hear in the background of today's show

01:23:15.120 | with my young children doing their very best

01:23:17.880 | to stay quiet while I record this show.

01:23:19.840 | Moving on to section three, a bipartisan plan

01:23:24.160 | to stabilize the long-term federal budget.

01:23:26.520 | Let's get to the actual proposals of this long proposal.

01:23:31.760 | A realistic path to averting the country's

01:23:34.200 | future debt crisis will require lawmakers

01:23:37.480 | to reject gimmicks, slogans, and empty budget targets

01:23:42.480 | in favor of plausible changes to the current arc

01:23:45.960 | of federal spending and taxes.

01:23:48.720 | Specific changes whose effects on the federal budget

01:23:51.760 | can be scored by CBO methodology.

01:23:55.600 | And because deficit reduction policies are never popular,

01:23:59.840 | major reforms need to be enacted on a bipartisan basis,

01:24:04.400 | much like the 1983 Social Security reforms.

01:24:07.840 | Any attempt to pass these major changes on a party-line vote

01:24:12.040 | would undermine their public legitimacy,

01:24:16.440 | would be politically suicidal, and would likely be repealed

01:24:20.240 | when the opposition party returns to power.

01:24:23.720 | The path put forward in this report

01:24:25.640 | is meant to achieve these objectives.

01:24:28.360 | Number one, long-term fiscal sustainability.

01:24:31.480 | Moving to a fully balanced budget is probably not possible.

01:24:36.320 | However, stabilizing the national debt around 95% of GDP,

01:24:41.000 | near the level projected in 2023,

01:24:43.680 | when most policies would be implemented,

01:24:45.720 | would likely stabilize the cost of interest

01:24:48.280 | on the national debt and the debt's effect on the economy.

01:24:51.680 | This means annual budget deficits gradually decline

01:24:54.480 | to 3.2% of GDP over three decades.

01:24:57.920 | Sustainability also means that both spending

01:25:00.800 | and tax revenues stabilize as a percentage of GDP

01:25:05.600 | rather than continue to rise in tandem.

01:25:08.400 | Finally, long-term sustainability means that showy reforms,

01:25:12.680 | such as across-the-board discretionary spending cuts,

01:25:17.360 | are less important than subtle entitlement reforms

01:25:20.720 | that produce larger savings over time.

01:25:23.880 | Number two, achieve most savings

01:25:26.200 | from major mandatory programs.

01:25:29.280 | There are three reasons for this objective.

01:25:31.840 | First, it's the only solution

01:25:34.160 | that addresses the underlying problem.

01:25:36.800 | Mandatory spending is the primary factor

01:25:39.520 | driving the debt upward.

01:25:41.440 | CBO's long-term baseline shows that 100%

01:25:44.720 | of the long-term increase in annual budget deficits

01:25:47.840 | as a share of the economy

01:25:49.280 | comes from the rising cost of Social Security,

01:25:52.640 | Medicare, and other health entitlements,

01:25:55.360 | as well as the resulting interest on the debt.

01:25:58.760 | Remaining federal spending is projected by CBO

01:26:01.680 | to continue falling as a share of the economy.

01:26:05.080 | Tax revenues are projected to rise above average levels.

01:26:08.880 | It is not sustainable to chase ever-rising entitlement costs

01:26:13.600 | with ever-rising tax rates

01:26:16.000 | or to eviscerate all other federal programs.

01:26:19.840 | The second reason is generational equity.

01:26:22.240 | Drowning younger workers in ever-rising taxes

01:26:25.600 | is no more moral than drowning them in debt,

01:26:29.560 | particularly when the entire additional tax burden

01:26:32.840 | will finance the largest intergenerational wealth transfer

01:26:36.680 | in world history.

01:26:38.200 | Retirees are typically wealthier

01:26:40.280 | than working-age men and women,

01:26:41.800 | and over the years,

01:26:42.920 | Social Security and Medicare benefits have been enacted

01:26:46.240 | that far exceed retirees' lifetime contributions

01:26:49.520 | to the programs.

01:26:50.880 | Rather than passing this burden on to their kids,

01:26:54.120 | they have a responsibility to pare back their benefits

01:26:57.640 | to affordable levels.

01:26:59.440 | The third reason is economic.

01:27:01.120 | The level of tax increases that would be necessary

01:27:03.720 | to keep pace with escalating entitlement spending,

01:27:06.960 | including a 33% payroll tax rate or a 34% VAT,

01:27:11.960 | would retard economic growth.

01:27:15.200 | Across other countries,

01:27:16.480 | the most successful fiscal consolidations,

01:27:19.240 | such as Finland and the UK in the late 1990s,

01:27:23.400 | have averaged 85% spending restraint and 15% new taxes.

01:27:28.400 | Consolidations that failed

01:27:30.360 | or significantly harmed the economy

01:27:32.800 | were typically split more equally

01:27:34.680 | between new taxes and spending restraint.

01:27:37.280 | Three, specific and plausible changes only.

01:27:42.760 | Most other long-term budget proposals

01:27:44.880 | show larger and more immediate budget savings

01:27:48.360 | than this blueprint.

01:27:49.680 | Unfortunately, those savings usually rely

01:27:52.160 | on some combination

01:27:53.320 | of overly optimistic economic growth assumptions,

01:27:57.160 | the immediate implementation

01:27:58.480 | of extraordinarily complicated and controversial reforms

01:28:01.320 | to major programs that in reality would take several years

01:28:03.920 | to draft, pass, implement, and phase in,

01:28:06.520 | aggressive spending cut or tax increase targets

01:28:09.360 | along with sample policy proposals

01:28:11.360 | that add up to only a small fraction

01:28:13.120 | of the required budgetary savings,

01:28:15.000 | heavy reliance on unrealistically tight spending caps

01:28:17.800 | without showing how to meet them,

01:28:19.840 | and combining various tax increase proposals

01:28:22.720 | that collectively result

01:28:23.840 | in unrealistically high tax burdens for certain groups

01:28:26.800 | or that generally duplicate or contradict one another.

01:28:30.520 | Additionally, many long-term budget proposals

01:28:32.600 | are based on liberal or conservative pieties,

01:28:36.080 | such as taxing the rich at ultra high rates

01:28:38.680 | or eliminating most welfare

01:28:40.120 | and domestic discretionary spending.

01:28:42.120 | This blueprint attempts to thread the needle

01:28:44.120 | of effective policy and the political reality

01:28:47.400 | that any major lasting deal must be bipartisan.

01:28:52.240 | This budget blueprint works

01:28:53.760 | within the current structure of government

01:28:55.720 | rather than proposing complete rewrites

01:28:58.040 | of major programs or the tax code.

01:29:00.520 | It divides reforms into four tiers

01:29:03.280 | and seeks maximum savings in a given tier

01:29:05.680 | before moving on to the next.

01:29:07.400 | Tier one, squeeze out inefficiencies

01:29:09.640 | from the major health programs driving spending upward.

01:29:12.800 | Tier two, trim Social Security and Medicare benefits

01:29:15.880 | for upper income retirees.

01:29:17.840 | Tier three, trim other federal programs

01:29:20.040 | to the extent feasible on a bipartisan basis.

01:29:23.120 | Tier four, close the remaining gap with new taxes

01:29:25.760 | in the broadest and least damaging manner possible.

01:29:28.920 | The blueprint also provides that the lowest income 40%

01:29:32.200 | of seniors are protected from any Social Security

01:29:34.480 | or Medicare cuts,

01:29:36.000 | although the Social Security full benefit retirement age

01:29:38.240 | would largely rise.

01:29:39.640 | Spending cuts to anti-poverty programs are largely avoided.

01:29:43.200 | Parity between discretionary defense

01:29:45.200 | and non-defense spending is maintained.

01:29:47.560 | Washington structural budget deficits

01:29:49.360 | are not passed on to the nation's governors.

01:29:51.720 | Tax increases are kept within reasonable limits.

01:29:54.680 | Policy changes are phased in gradually,

01:29:57.080 | mostly beginning in 2023,

01:29:59.000 | and economic growth is assumed to be no faster

01:30:02.000 | than in CBO's long-term projection.

01:30:05.120 | The first step towards scoring a long-term budget

01:30:09.720 | is a credible 30-year baseline.

01:30:12.640 | Regarding this blueprint's baseline,

01:30:14.680 | it begins with CBO's June 2018 long-term budget outlook,

01:30:18.120 | which projects the 2018 to 2048 baseline

01:30:21.080 | based on current law.

01:30:23.040 | Next, CBO's current law baseline is converted

01:30:25.800 | to a current policy baseline

01:30:27.560 | by assuming that expiring tax cuts and tax moratoriums

01:30:30.120 | are made permanent for reasons explained

01:30:31.480 | in the following paragraph.

01:30:33.120 | Spending on discretionary and smaller mandatory programs

01:30:35.720 | level off at their projected 2028 percentage of GDP.

01:30:39.440 | I'm going to skip forward here

01:30:41.160 | 'cause this is extremely technical.

01:30:42.400 | This is important, but this is the very most,

01:30:44.400 | this is the most difficult thing to pass forward

01:30:48.520 | with regard to audio, this audio format.

01:30:52.000 | So I'm going to skip all of the baseline discussion here

01:30:54.960 | and move on to what actually needs to happen.

01:30:57.560 | Up to now, I have read the entire paper,

01:31:01.080 | but at this point, it's just too unwieldy for audio.

01:31:03.720 | So let me just give you a couple of these suggestions.

01:31:06.440 | So here is the first set of suggestions.

01:31:09.440 | Social security benefits, 1.2% of GDP

01:31:12.680 | trimmed from the CBO's 2048 baseline.

01:31:15.880 | The Social Security Reform Act of 2016

01:31:18.320 | authored by the House Ways and Means

01:31:19.920 | Social Security Subcommittee Chairman, Sam Johnson,

01:31:22.200 | Republican from Texas, provides the starting point.

01:31:24.800 | While the plan is not perfect,

01:31:25.840 | it provides significant long-term savings

01:31:27.720 | from wealthier retirees.

01:31:29.800 | Instead of rising from 4.9% to 6.3% of GDP

01:31:33.560 | through 2048 and CBO's baseline,

01:31:36.840 | outlays under the Social Security Reform Act

01:31:39.440 | would rise to 5.8% of GDP by 2030.

01:31:43.360 | Forgive me, I thought I could read this stuff.

01:31:44.680 | It's still too complex for this audio format.

01:31:47.160 | So let me just give you a summary of the proposals.

01:31:50.560 | The author suggests a wide tightening

01:31:54.120 | on Social Security, Medicare, Medicaid,

01:31:58.880 | and various other discretionary

01:32:00.600 | and non-discretionary spending programs.

01:32:03.320 | In addition, let's move on to the tax section.

01:32:09.320 | And see how that would be affected.

01:32:11.240 | Getting from here to there with regard to taxes.

01:32:15.800 | Relative to an updated current policy CBO baseline,

01:32:18.480 | the spending reforms in this blueprint

01:32:20.000 | would produce budget savings equal to 4.5% of GDP

01:32:23.440 | annually by 2048.

01:32:25.480 | To reach the blueprint's overall 6.0% of GDP

01:32:29.960 | in non-interest savings,

01:32:31.800 | the final 1.5% must come from new taxes.

01:32:35.400 | A current policy CBO baseline already assumes,

01:32:38.000 | even if the 2017 tax cuts are made permanent,

01:32:40.920 | that revenues will still jump by 2% of GDP over this period

01:32:46.080 | because of real, meaning CPI adjusted, bracket creep,

01:32:49.240 | and the deluge of taxable retirement distributions

01:32:52.160 | from retiring baby boomers.

01:32:54.640 | So the 1.5% of GDP tax hike proposed in this blueprint

01:32:58.520 | would bring the total 2018 to 2048 revenue increase

01:33:01.920 | to 3.5% of GDP.

01:33:04.400 | The 1.5% of GDP in proposed legislative tax hikes

01:33:08.200 | consists of phasing down the tax exclusion

01:33:11.800 | for employer-provided healthcare,

01:33:14.040 | yielding additional revenue of 0.72% of GDP by 2048,

01:33:19.040 | raising the Medicare and Social Security payroll tax

01:33:21.680 | by one percentage point each

01:33:23.480 | while adding a one percentage point income tax surcharge

01:33:26.440 | above the level where the Social Security tax

01:33:28.600 | on earnings maxes out,

01:33:29.760 | yielding additional revenue to 0.73% of GDP,

01:33:33.600 | and allowing various so-called December tax extenders

01:33:36.800 | to be offset or expire,

01:33:38.760 | yielding additional revenue equal to 0.05% of GDP.

01:33:42.680 | Starting in 2023,

01:33:46.440 | the employer healthcare tax exclusions would be capped

01:33:49.200 | at the 75th percentile of health insurance premiums

01:33:52.120 | paid by employers that year,

01:33:54.000 | replacing the Obamacare Cadillac tax

01:33:56.200 | that was never implemented.

01:33:57.760 | The cap level setting a maximum deductible premium

01:34:00.120 | would then grow annually at the rate of the CPI.

01:34:02.720 | Capping the exclusion will reduce business incentives

01:34:05.720 | to overspend on health benefits

01:34:07.520 | and to downplay cost containment

01:34:09.440 | and thus contribute to broader efficiency savings

01:34:12.320 | in healthcare.

01:34:13.360 | It will also increase take-home pay for many workers

01:34:15.560 | because more of their compensation would go toward wages

01:34:18.520 | rather than health insurance premiums.

01:34:20.920 | The exposure of more employee compensation

01:34:22.920 | to payroll and income taxes

01:34:25.000 | means more revenue collected by the federal government

01:34:27.720 | under this proposal equal to 0.2% of GDP.

01:34:31.240 | Raising the Social Security and Medicare payroll tax

01:34:33.640 | by one percentage point each is recommended for two reasons.

01:34:37.080 | First, as stated above,

01:34:38.120 | the Social Security and Medicare systems

01:34:39.680 | face a combined $100 trillion cash deficit over 30 years.

01:34:43.640 | So it makes sense to concentrate budget savings

01:34:45.720 | in those two systems.

01:34:47.360 | Second, any tax increases should be widely dispersed

01:34:49.880 | to minimize economic disruptions.

01:34:51.840 | The alternative of imposing enormous tax hikes

01:34:55.640 | on one industry or group of people

01:34:56.960 | would significantly decrease incentives to work,

01:34:59.260 | save and invest and thus harm economic growth,

01:35:01.920 | which would also decrease the resulting new tax revenues.

01:35:04.960 | A simple two percentage point payroll tax increase

01:35:07.560 | split between Social Security and Medicare

01:35:09.680 | will affect nearly all workers while crippling very few.

01:35:13.000 | The Social Security payroll tax maxes out

01:35:15.000 | at certain income levels, 128,700 in 2018.

01:35:19.060 | The blueprint proposes adding a one percentage point tax

01:35:22.200 | to income above that level

01:35:24.220 | so that the new tax remains proportional.

01:35:27.280 | Those who would prefer that all new taxes

01:35:29.300 | come from upper income taxpayers

01:35:31.340 | should note that these taxpayers would already bear

01:35:33.960 | nearly the entire cost of 3% of GDP

01:35:37.000 | in Social Security and Medicare reforms,

01:35:39.220 | as well as most of the cost of scaling back

01:35:41.780 | the employer health exclusion.

01:35:43.820 | Replacing the two percentage point increase

01:35:45.780 | on the Social Security and Medicare payroll tax

01:35:48.100 | with a 20 percentage point income tax hike

01:35:50.740 | on families earning above $400,000

01:35:53.520 | would raise a similar amount of revenue

01:35:55.420 | yet significantly damage the economy

01:35:58.020 | and raise equity concerns.

01:36:00.280 | Alternatively, eliminating the 12.4%

01:36:03.140 | Social Security earnings cap, raising 0.8% of GDP,

01:36:06.540 | would combine with the benefit changes described above

01:36:08.940 | to leave Social Security with a large surplus

01:36:11.460 | and Medicare with an enormous deficit,

01:36:14.020 | while also pushing combined federal

01:36:16.060 | and state marginal tax rates as high as 62%.

01:36:19.540 | Under this blueprint, the bottom income 40% of retirees

01:36:22.580 | would already see no reduction

01:36:24.360 | in Social Security benefit formulas

01:36:26.220 | and no hike in Medicare premiums.

01:36:28.860 | And there are no significant cuts

01:36:30.520 | to anti-poverty or social spending.

01:36:33.140 | For many who are working,

01:36:33.980 | the modest payroll tax increase

01:36:35.380 | would be their only cost

01:36:36.820 | of this substantial fiscal consolidation

01:36:39.420 | beyond a future higher Social Security

01:36:41.740 | full benefit retirement age.

01:36:43.600 | Now, what about sticking to the blueprint?

01:36:46.580 | To maintain a balance between tax and spending changes,

01:36:50.060 | lawmakers would need to codify

01:36:51.780 | the spending and tax proposals in this blueprint

01:36:54.680 | with 30-year targets.

01:36:56.400 | Every five years, lawmakers should be required

01:36:59.060 | to ensure that Social Security, Medicare,

01:37:01.400 | Medicaid and tax revenues each remain

01:37:03.300 | on their original 30-year path

01:37:05.200 | and to enact further reforms for any category

01:37:07.600 | whose savings are not materializing.

01:37:10.040 | Failure to return any veering categories

01:37:11.860 | to their present path would trigger automatic reforms

01:37:14.220 | to the given category.

01:37:15.660 | Pay-go laws and statutory discretionary spending caps

01:37:18.640 | can help keep the rest of the budget on its preset path.

01:37:22.160 | Statutory caps would be useful

01:37:23.640 | because they would reflect a bipartisan consensus

01:37:26.280 | and specific underlying reforms.

01:37:28.720 | If lower deficits should emerge,

01:37:30.380 | such as from higher tax revenues

01:37:31.880 | thanks to faster economic growth

01:37:33.320 | or lower healthcare spending

01:37:35.160 | due to more expanded efficiencies,

01:37:37.320 | lawmakers should first be required

01:37:39.400 | to offset any recent budgetary losses

01:37:42.080 | from recessions or emergency spending.

01:37:44.300 | If lower deficits should emerge,

01:37:47.040 | such as from higher tax revenues

01:37:49.000 | thanks to faster economic growth

01:37:51.120 | or lower healthcare spending

01:37:52.480 | due to more expanded efficiencies,

01:37:54.600 | lawmakers should first be required

01:37:56.760 | to offset any recent budgetary losses

01:37:59.100 | from recessions or emergency spending.

01:38:01.800 | Once that is done, the next 1% of GDP and savings

01:38:04.520 | should remain unspent as a down payment

01:38:06.680 | on future emergencies or recessions.

01:38:09.300 | Only after that should lawmakers consider

01:38:11.320 | temporary new tax cuts or spending increases.

01:38:14.000 | Congress should avoid enacting

01:38:15.300 | permanently expensive policies

01:38:16.720 | in response to temporary savings windfalls,

01:38:18.860 | especially consider that even with a stabilized debt,

01:38:21.360 | the annual budget will still be in deficit.

01:38:25.040 | Now, I wanna skip past the group impacts.

01:38:29.040 | I just wanna say this.

01:38:30.200 | I appreciate reading articles like this

01:38:34.400 | because they show that in theory,

01:38:38.240 | if you have certain preconditions,

01:38:40.800 | there are solutions to big problems.

01:38:44.360 | And I appreciate that.

01:38:45.820 | However, some of those preconditions

01:38:47.780 | are pretty substantial.

01:38:49.060 | For example, I would say this assumes

01:38:51.540 | that you have an educated and intelligent electorate

01:38:55.460 | willing to disregard self-interest

01:38:58.500 | and things that are personally gratifying

01:39:00.620 | in favor of voting for people

01:39:02.220 | who are virtuous representatives

01:39:04.420 | of what's in the long-term best interest of the people.

01:39:07.220 | Sounds nice.

01:39:09.260 | I don't see it.

01:39:10.100 | I just don't see it.

01:39:12.060 | We don't have an intelligent and educated electorate.

01:39:14.920 | We have a stupid and distracted electorate.

01:39:18.000 | We don't have people who understand

01:39:20.520 | or can even concede of the intricacies

01:39:25.520 | of this kind of thing.

01:39:26.720 | We have people who are motivated by slogans

01:39:29.320 | and foolish things.

01:39:31.880 | The average audience of radical personal finance

01:39:34.640 | is in a very high echelon of the general population.

01:39:40.320 | The fact that I use words,

01:39:41.760 | I mean, I'm using an advanced,

01:39:43.420 | this entire paper is written

01:39:44.980 | in advanced college vocabulary.

01:39:47.580 | This entire discussion is complex.

01:39:50.900 | It's dealing, you need a high degree of numeracy

01:39:54.100 | to sustain these things.

01:39:56.020 | I'm an hour and 40 minutes into this discussion,

01:39:58.780 | which means that I have no doubt lost 80%

01:40:01.460 | of the radical personal finance listening audience,

01:40:05.120 | which is in a tiny fraction of the general population.

01:40:08.740 | The US American electorate is not educated,

01:40:11.800 | is not intelligent, and is not virtuous enough

01:40:15.040 | to vote for things that are against their self-interest.

01:40:17.960 | Even those who are virtuous and willing

01:40:20.760 | to conceive of voting for things

01:40:23.520 | that are against their self-interest,

01:40:24.900 | their own personal self-interest,

01:40:26.720 | do not trust the system.

01:40:29.280 | They simply do not trust.

01:40:30.520 | I would be willing to vote for something

01:40:33.260 | that would be against my own personal self-interest.

01:40:35.880 | I think of myself as a fairly virtuous person.

01:40:39.200 | Whether that's true or not, who knows?

01:40:41.340 | You have to judge that.

01:40:42.540 | But I think of myself that way.

01:40:44.100 | I'm willing to sacrifice.

01:40:46.860 | I would be willing to sacrifice.

01:40:48.780 | So forgive me for pushing myself forward.

01:40:52.900 | Just simply saying that I appreciate

01:40:54.700 | that sometimes difficult decisions have to be made.

01:40:56.780 | I don't trust the system to think that a vote

01:41:01.780 | that's against myself would in any way work,

01:41:04.980 | because then I would have to trust

01:41:06.420 | the virtue of the politicians.

01:41:07.580 | I would have to trust that the system

01:41:09.460 | is going to be worked out equitably.

01:41:11.180 | And all I see on any hand is nothing but favoritism,

01:41:16.180 | crony capitalism.

01:41:18.060 | I have no trust whatsoever.

01:41:19.540 | So first you need a virtuous, educated, intelligent

01:41:22.820 | electorate that would be willing to vote

01:41:24.460 | against their own self-interest

01:41:25.700 | rather than to vote in tribalism.

01:41:27.740 | Ain't gonna happen.

01:41:29.100 | The average American citizen

01:41:33.860 | is destroyed.

01:41:36.820 | The average American citizen cannot pass

01:41:40.220 | just the most basic level of civic understanding.

01:41:43.820 | It's absolutely not gonna happen.

01:41:46.060 | And to get it back would require,

01:41:48.060 | will require, would require generational change.

01:41:52.020 | You have to completely transform the educational system,

01:41:55.820 | which means you have to, I mean, it's impossible.

01:41:59.100 | It's absolutely impossible.

01:42:00.020 | Next problem.

01:42:00.940 | It requires a virtuous and trustworthy political class,

01:42:05.940 | which nobody thinks is gonna happen.

01:42:09.240 | Who is the virtuous and trustworthy politician

01:42:13.900 | that you can name to me?

01:42:15.100 | Who?

01:42:17.360 | I think we could probably, in discussion,

01:42:20.520 | we could probably come up with a handful of people,

01:42:23.940 | maybe five to 10 that we would agree on

01:42:26.620 | from various political persuasions.

01:42:29.020 | We would say, okay, this person believes what they say,

01:42:32.180 | their life is consistent behind it.

01:42:34.300 | But you look at almost any person,

01:42:37.460 | and there is so much hypocrisy in their approach,

01:42:41.980 | you look at almost any politician,

01:42:45.300 | and you don't trust them a bit.

01:42:46.860 | You know that they're liars,

01:42:48.900 | whether they're on the conservative side

01:42:50.540 | and you've got this leading former speaker of the house,

01:42:55.340 | spends years fighting drug legislation,

01:42:57.540 | and now is a major person involved

01:43:00.540 | in a drug pro-marijuana lobbyist organization.

01:43:05.540 | Come on.

01:43:07.080 | You have leading conservative figures who say,

01:43:12.080 | well, I'm all about capitalism and free markets, et cetera,

01:43:17.080 | and then they move right out of office

01:43:18.540 | and they move right into lobbying

01:43:20.420 | for the real estate industry or the insurance industry.

01:43:23.900 | You have leading liberal figures who say

01:43:27.940 | that everybody should pay their fair share,

01:43:31.100 | and yet they have multiple houses that are expensive.

01:43:34.500 | You have leading so-called environmental activists

01:43:38.100 | who propose all kinds of ideas

01:43:42.420 | and all kinds of ways to trim back,

01:43:46.060 | but you go and they're living in a mansion

01:43:47.620 | that consumes more electricity

01:43:49.020 | and more energy than anything else.

01:43:51.620 | Or they don't take public transportation,

01:43:54.300 | they drive a car, or they take Uber or taxis everywhere

01:43:57.780 | instead of actually doing the stuff that they do.

01:43:59.740 | Where is the non-hypocrite that is in office?

01:44:02.940 | Where?

01:44:04.580 | Now again, I think that the point is,

01:44:06.660 | I think there may be five.

01:44:08.440 | Maybe there's 10, I don't know.

01:44:11.300 | I doubt it.

01:44:12.700 | But the point is, even in difficulty

01:44:15.620 | of coming up with a few, you cannot tell me

01:44:18.020 | that you have a majority of the political class

01:44:21.100 | in the United States that aren't thieves and hypocrites,

01:44:24.340 | just simply saying what they wanna say to get elected.

01:44:27.260 | And then the rest of them are stupid.

01:44:30.060 | They don't have any context for these things.

01:44:32.740 | And so all of the political class

01:44:34.900 | is basically driven by intelligent policy wonks

01:44:37.700 | who try to find a politician who'll grab onto that,

01:44:41.060 | and then sometimes votes get through.

01:44:42.900 | But the entire thing is broken.

01:44:44.740 | When you have 1,000-page bills

01:44:46.420 | that are submitted 24 hours before a vote,

01:44:48.860 | nobody can read them.

01:44:50.260 | If you try to read them, you can't read them

01:44:52.020 | 'cause they're written in legalese.

01:44:54.260 | You cannot expect any of these changes

01:44:57.300 | to happen realistically.

01:44:59.220 | I can't see how anybody could be optimistic

01:45:02.500 | about some of this stuff happening.

01:45:04.660 | It's, sloganeering is about the very best

01:45:07.620 | that can be accomplished by today's political class.

01:45:11.320 | So when you add those problems to the fracturing tribes

01:45:15.220 | in the US-American culture,

01:45:16.980 | the fracturing people, whether it's political ideology,

01:45:21.140 | religious ideology, lifestyle decisions, et cetera,

01:45:25.940 | there is no possibility of bringing this electorate

01:45:28.900 | together in a homogenous way.

01:45:30.820 | If there's a solution, the only solution I could come up

01:45:33.340 | with that could, in theory, work out

01:45:36.140 | would be an increasing federalism.

01:45:38.540 | But the trend is not in the direction

01:45:40.220 | of increasing federalism.

01:45:41.660 | The trend is in the direction

01:45:43.940 | of increasing national homogeny.

01:45:47.620 | There's no solution.

01:45:51.420 | There's no, it doesn't, it's not realistic.

01:45:54.780 | So you have an elegant, articulate plan like this,

01:45:58.580 | which doesn't try to make much progress

01:46:00.580 | except to stabilize things in a bad place.

01:46:03.260 | And then you expect Congress to vote

01:46:05.380 | and put 30-year caps and actually stick to them.

01:46:07.980 | You expect that the government wouldn't find some way

01:46:10.880 | to spend and reward some other class of people

01:46:13.580 | when there's a budget surplus.

01:46:16.540 | It is absolutely, completely implausible.

01:46:20.300 | It's academically possible, but when compared to real life,

01:46:25.180 | it's utterly implausible, in my opinion.

01:46:28.620 | Now let's finish up just by reading

01:46:31.220 | this author's defense of his plan.

01:46:33.180 | And I wanna apologize, I had to skip through that section

01:46:36.180 | where it's just so deep.

01:46:37.020 | If you're a policy wonk, go read it.

01:46:38.580 | I'm sorry you don't have a full description

01:46:39.980 | of every single one of those things,

01:46:41.080 | but there wouldn't be a single person listening to my voice

01:46:43.260 | if I read through the whole thing.

01:46:44.840 | In defense of the plan, answering conservative critics.

01:46:47.420 | At first glance, many conservatives will dismiss

01:46:49.860 | the proposals in this report as overly timid,

01:46:52.460 | specifically raising taxes by 1.5% of GDP

01:46:55.560 | rather than aggressively lowering anti-poverty

01:46:57.720 | and non-defense discretionary spending

01:46:59.760 | may be considered a weak need surrendered to big government.

01:47:03.240 | Instead, it is an acknowledgement of political reality.

01:47:06.880 | State governors will not accept or absorb Medicaid caps

01:47:10.080 | that grow no faster than the inflation rate.

01:47:12.600 | ACA will not likely be replaced with nothing,

01:47:15.080 | as proved in 2017.

01:47:17.360 | The 1.5% of GDP spent on non-health,

01:47:20.120 | anti-poverty entitlements,

01:47:21.720 | which includes conservative supported policies

01:47:23.920 | like the refundable earned income tax credit

01:47:26.320 | and child credit, as well as generally untouchable programs

01:47:29.520 | like child nutrition and SSI,

01:47:31.700 | can gradually decline as a share of the economy,

01:47:33.880 | but they will not be eliminated or even halved

01:47:36.560 | in any foreseeable political future.

01:47:39.240 | Other mandatory and non-defense discretionary spending

01:47:42.000 | is dominated by veterans income and health benefits,

01:47:45.760 | military and federal pensions, unemployment benefits,

01:47:48.760 | highways and infrastructure,

01:47:50.560 | the National Institutes of Health,

01:47:52.080 | Homeland Security, disaster relief, and K-12 funding.

01:47:55.560 | They are here to stay.

01:47:57.340 | The argument of this blueprint, simply put,

01:47:59.400 | is that 4.5% of GDP represents the likely outer bounds

01:48:03.820 | of plausible long-term spending cuts,

01:48:06.400 | relative to the 2048 baseline,

01:48:09.040 | and that the voting public would not accept

01:48:11.200 | the additional 1.5% of GDP evisceration of the safety net

01:48:15.440 | and domestic spending just to keep tax increases

01:48:18.000 | completely off the table.

01:48:19.900 | This blueprint essentially freezes federal program spending

01:48:23.680 | at the 19.5% of GDP 2018 to 2022 pre-reform average,

01:48:28.680 | despite 74 million Americans

01:48:31.920 | retiring into Social Security and Medicare,

01:48:34.160 | and despite rising healthcare costs.

01:48:36.800 | It is easy to come up with a conservative dream budget

01:48:39.840 | that would show greater spending savings,

01:48:42.040 | but even a hypothetical Republican congressional

01:48:44.920 | supermajority would find it politically suicidal

01:48:48.360 | to fully overhaul Social Security and Medicare

01:48:51.400 | without Democratic buy-in.

01:48:53.520 | The political model should be the bipartisan

01:48:55.720 | 1983 Social Security reforms, not the 2010 ACA.

01:49:01.400 | Conservatives are in an especially perilous position.

01:49:04.880 | Delay likely guarantees that an eventual budget deal

01:49:07.960 | will be increasingly tax-heavy.

01:49:10.360 | Each year, four million more baby boomers retire,

01:49:13.580 | while Social Security and Medicare benefits

01:49:15.640 | automatically increase, essentially closing the window

01:49:19.260 | on reforming those programs.

01:49:21.240 | Additionally, delays bring permanently higher interest costs

01:49:24.920 | on the growing national debt.

01:49:26.660 | Together, these two developments means

01:49:28.720 | that the savings needed to stabilize the budget

01:49:30.940 | will continue escalating at exactly the time

01:49:33.880 | when baby boomer retirements and rising benefits

01:49:36.320 | make Social Security and Medicare more difficult to reform.

01:49:40.040 | Consequently, if lawmakers wait another five to 10 years,

01:49:44.480 | they will likely have missed the window

01:49:46.360 | on entitlement reform and tax increases,

01:49:48.600 | including a 15 to 20% VAT, will become nearly inevitable.

01:49:53.600 | This VAT would probably be enacted at a low 1 to 2% rate,

01:49:57.720 | but like the income tax a century earlier,

01:50:01.220 | would quickly grow into a massive federal cash machine

01:50:05.420 | to finance continued government expansions.

01:50:08.660 | It is no longer possible to stabilize the national debt

01:50:13.200 | with revenues at 17 to 18% of GDP.

01:50:17.300 | Conservatives can either concede 1.5% of GDP

01:50:20.820 | in limited broad-based taxes now

01:50:23.380 | and begin concentrating spending reforms on wealthy seniors

01:50:27.320 | rather than vulnerable populations,

01:50:29.700 | or wait 10 years and end up with a European-size VAT.

01:50:34.640 | What about answering liberal critics?

01:50:38.180 | Many liberals will also dismiss this proposal

01:50:40.660 | at first glance.

01:50:41.920 | Medicare premium support, significant income relating

01:50:44.900 | of Social Security and Medicare benefits,

01:50:46.700 | and state Medicaid per capita caps

01:50:49.060 | may be considered non-starters,

01:50:51.200 | especially when paired with just 1.5% of GDP

01:50:55.100 | in tax increases that are not limited

01:50:57.460 | to so-called millionaires.

01:50:59.200 | However, tax hikes on upper income earners

01:51:03.580 | and defense cuts alone cannot close a budget gap

01:51:07.060 | equal to 6% of GDP by 2048.

01:51:10.260 | Even raising the top four income tax brackets,

01:51:14.140 | currently 24%, 32%, 35%, and 37%,

01:51:18.020 | to 30%, 40%, 50%, and 70% would raise just 1.6% of GDP.

01:51:23.380 | Or lower when deducting lost revenues

01:51:28.060 | to macroeconomic effects,

01:51:30.340 | while leaving little room to expand

01:51:32.100 | the 12.4% Social Security tax to higher earnings.

01:51:36.220 | Restoring the developed world's highest corporate tax rate

01:51:40.100 | would raise at most 0.7% of GDP.

01:51:44.700 | Proposals popular on the left

01:51:46.660 | to significantly raise taxes on capital gains,

01:51:49.420 | banks, hedge funds, multinational corporations,

01:51:51.980 | and oil and gas companies would barely register

01:51:55.020 | in the long run accounting.

01:51:56.860 | The unforgiving budget math shows

01:51:59.380 | that heading off a debt crisis, mostly through taxes,

01:52:03.460 | must require a huge burden on the middle class.

01:52:08.460 | Even a 15% VAT, which is anything but progressive,

01:52:13.400 | would raise just 2.6% of GDP.

01:52:17.020 | Nor will other fashionable ideas

01:52:19.340 | put the long-term budget on a sustainable path.

01:52:22.820 | The blueprint already assumes that defense spending

01:52:25.420 | eventually falls to 2.6% of GDP

01:52:28.420 | for the first time since the 1930s.

01:52:30.800 | Single-payer healthcare has been scored

01:52:34.120 | as adding nearly $30 trillion

01:52:36.580 | in federal spending over the decade.

01:52:38.500 | And even somehow converting all current family, business,

01:52:43.120 | and state government health savings

01:52:44.620 | into a single-payer tax to finance the initiative

01:52:48.100 | would still merely break even from a budgetary perspective.

01:52:52.460 | It would not significantly affect

01:52:54.820 | Medicare's projected $41 trillion shortfall.

01:52:58.560 | Significant savings to the federal budget

01:53:00.620 | must come from the spending side.

01:53:03.420 | Who should bear the burden?

01:53:05.020 | Presumably, protecting low-income families

01:53:07.380 | and discretionary social spending

01:53:08.880 | are top liberal priorities.

01:53:10.940 | Defense spending is already projected to continue falling.

01:53:14.460 | That leaves healthcare inefficiencies

01:53:16.620 | and well-off seniors to provide

01:53:18.860 | the remaining spending savings.

01:53:21.020 | For liberals who believe that the rich

01:53:23.700 | should pay for their fair share,

01:53:26.180 | trimming their large Social Security benefits

01:53:28.540 | and Medicare subsidies accomplishes the same redistribution

01:53:32.540 | as raising upper-income taxes,

01:53:34.820 | but without the economic damage.

01:53:37.200 | Furthermore, paring back their benefits

01:53:39.220 | avoids the intergenerational redistribution

01:53:41.660 | of burying today's workers in taxes

01:53:44.540 | to finance baby boomer benefits.

01:53:47.140 | Within a decade, the wealthiest half of seniors,

01:53:49.600 | in other words, the wealthiest members

01:53:51.120 | of the wealthiest age group,

01:53:52.660 | will otherwise collect $300 billion

01:53:55.700 | in annual Medicare Part B and D subsidies

01:53:58.980 | that were never earned with payroll taxes.

01:54:01.560 | That would exceed total federal anti-poverty outlays

01:54:05.100 | on SNAP, EITC, SSI, child nutrition,

01:54:08.420 | and the child tax credit.

01:54:10.500 | The Medicare premium support policy proposed here

01:54:13.180 | is generously set at the level of funding

01:54:15.100 | of the average bid plan, rather than the more common,

01:54:18.620 | let me skip on, let me just skip on to the conclusion.

01:54:20.500 | If you're interested in liberal arguments,

01:54:21.820 | if you're a liberal, read those.

01:54:23.260 | Conclusion, for decades, economists and policy experts

01:54:26.540 | warned that a budgetary and economic tsunami would come

01:54:30.100 | when the 74 million baby boomers

01:54:32.220 | retire into Social Security and Medicare.

01:54:35.620 | Nevertheless, a parade of presidents and congresses

01:54:39.460 | did nothing to avert the crisis.

01:54:42.520 | To the contrary, both parties added

01:54:45.660 | a new Medicare drug entitlement in 2003,

01:54:49.460 | after which the Affordable Care Act

01:54:51.460 | further expanded federal health obligations for Medicaid

01:54:54.980 | and new subsidized health insurance exchanges.

01:54:58.300 | Today, one third of the baby boomers have already retired,

01:55:02.420 | and another one third will retire over the next six years.

01:55:06.940 | Annual budget deficits will soon pass $1 trillion

01:55:10.220 | on the way to $2 trillion,

01:55:12.060 | and possibly $3 trillion in 10 to 15 years.

01:55:15.700 | Overall, the Social Security and Medicare systems

01:55:18.900 | face an unfathomable $100 trillion cash deficit

01:55:23.420 | over 30 years.

01:55:24.980 | Without reform, runaway deficits will all but guarantee

01:55:29.980 | a debt crisis that will profoundly damage

01:55:33.420 | the country's economic and social order.

01:55:36.600 | There is still time to avoid that crisis,

01:55:39.580 | but it will require the nation's fractious political leaders

01:55:43.140 | to leave their respective comfort zones and compromise.

01:55:47.380 | And thus endeth the paper.

01:55:51.600 | I hope that you made it through,

01:55:56.860 | and apologies for burying you with the data,

01:55:59.540 | with all the numbers.

01:56:00.380 | I know it's hard in audio format, but it's important,

01:56:03.860 | and I want you to pay attention to it.

01:56:07.700 | And I decided to go ahead and bury you

01:56:09.780 | with two hours of data and policy wonk discussion,

01:56:13.840 | because I thought it was well done.

01:56:15.420 | I thought it was fairly balanced,

01:56:16.640 | but I thought it did a good job of showing the basic problem.

01:56:19.940 | I don't see a solution for the macro economy.

01:56:28.220 | I don't see a solution for the macro budget, et cetera.

01:56:32.620 | To think that, and here's just one more comment.

01:56:35.820 | I've inserted, of course, a lot of commentary.

01:56:37.620 | I didn't intend to, but I'm a talk show host.

01:56:40.180 | I can't help it.

01:56:41.020 | Just even the closing point.

01:56:43.820 | There is still time to avoid that crisis,

01:56:45.980 | but it will require the nation's fractious political leaders

01:56:49.220 | to leave their respective comfort zones and compromise.

01:56:52.900 | The biggest reason why I think that is impossible

01:56:56.420 | is from my observation, it seems to me

01:56:59.940 | that political leaders have stopped trusting one another,

01:57:06.020 | and I think they have good reason

01:57:07.500 | to stop trusting one another.

01:57:09.940 | If I were in politics, I would have a very hard time

01:57:13.060 | believing that I'm negotiating in good faith

01:57:17.060 | with another politician.

01:57:19.780 | I think there are political leaders

01:57:23.160 | who would be willing to negotiate these things

01:57:26.740 | if they believed that the opposition was in good faith.

01:57:31.480 | I think most adults, especially adults

01:57:34.140 | who have a little bit of experience,

01:57:35.460 | recognize that in life, you don't always get what you want.

01:57:38.900 | Sometimes you get what you need.

01:57:40.780 | You don't always get what you want.

01:57:42.860 | And so, although I would argue for a hardline position,

01:57:47.740 | all of us, even when we argue for a hardline position,

01:57:50.780 | we would concede that I can't get there overnight,

01:57:53.380 | and in fact, it's not good for me to get there overnight.

01:57:56.140 | Almost any person in almost any issue that you look at

01:58:00.780 | who would make a hardline argument

01:58:02.900 | would concede that you need time for things to adjust.

01:58:06.120 | But how much trust would you have,

01:58:09.660 | if you were a political leader,

01:58:11.420 | that your opposition is in good faith?

01:58:13.480 | I don't think anybody on any side of the political issue

01:58:17.940 | thinks that their opponents are acting in good faith.

01:58:21.700 | I've tried to read activists

01:58:23.300 | on all sides of the political debate,

01:58:25.580 | and what I observe in my reading is

01:58:28.340 | nobody thinks the other side is genuine.

01:58:30.900 | Nobody thinks they're acting in good faith.

01:58:33.060 | And I think everybody has substantial evidence

01:58:37.280 | that would say that they're right.

01:58:40.860 | Being of the more conservative political bent,

01:58:45.460 | the more freedom-oriented political bent,

01:58:47.420 | I would like to believe that my side is better,

01:58:50.000 | but I would have to concede

01:58:52.380 | that that could just be my own desire to see that confirmed.

01:58:55.860 | I think it might be true,

01:58:57.120 | but I see enough that I can understand

01:58:58.820 | how people who would be night and day different from me

01:59:02.220 | would say, "You're not acting in good faith."

01:59:05.860 | I can see that.

01:59:07.060 | So what do I have to defend?

01:59:10.420 | So if you can't even trust on the simplest of issues

01:59:14.060 | that your opponents are gonna act in good faith,

01:59:16.300 | that they're gonna speak in good faith,

01:59:17.780 | that they're gonna debate in good faith,

01:59:19.620 | on the simple issues,

01:59:21.740 | how on earth do you solve something as complex

01:59:24.440 | as this budget nightmare?

01:59:27.840 | How do you get there?

01:59:28.880 | Now, I hope I'm wrong.

01:59:33.020 | I desperately hope I'm wrong,

01:59:35.100 | 'cause friends, we don't wanna go through a budget,

01:59:39.060 | an economic crisis.

01:59:40.500 | It is a nightmare.

01:59:42.220 | It is a nightmare.

01:59:43.080 | We don't wanna do it.

01:59:44.220 | It is not, if it's your fantasy that you think,

01:59:47.300 | "Well, there's gonna be no rule of law.

01:59:48.660 | "Without rule of law, I'm gonna be able to do what I want."

01:59:50.580 | Nonsense, it is a nightmare.

01:59:52.900 | It is an absolute nightmare.

01:59:54.180 | We don't want to go through it.

01:59:56.080 | It will be pain, depression, dissolution,

02:00:01.080 | suicide on all hands, death on all sides,

02:00:05.320 | massive decline in lifestyle,

02:00:08.600 | massive decline in safety,

02:00:10.640 | massive increase in violence and the risk of violence.

02:00:14.000 | It's not, you don't wanna go through it.

02:00:16.220 | I don't wanna go through it.

02:00:18.080 | So I desperately hope I'm wrong.

02:00:19.780 | And if I can find evidence that says that I'm wrong,

02:00:24.240 | I will share that with you.

02:00:25.660 | But at this point, the data seems pretty clear.

02:00:31.540 | And when I add all the little bits that I've inserted here

02:00:34.260 | into what I've already shared with you,

02:00:36.380 | I don't see how a political solution is possible.

02:00:40.320 | I do not see it.

02:00:41.220 | I hope I'm wrong again.

02:00:43.340 | I don't see it.

02:00:44.660 | Which means it's time for you and me to prepare.

02:00:49.660 | Here's what I do observe.

02:00:52.300 | Although the national and international solutions

02:00:56.460 | to me seem impossible,

02:00:58.580 | the personal solutions are not.

02:01:03.640 | You may not be able to do anything about the level of debt

02:01:09.020 | in the United States of America,

02:01:11.280 | but you can do something about your family's level of debt.

02:01:16.160 | You may not be able to do anything

02:01:20.960 | about the impact of taxes on the broad citizenry,

02:01:25.960 | but you can do a massive change on your level of taxes.

02:01:31.020 | You may not be able to do anything at all

02:01:35.840 | about trying to develop a virtuous citizenry

02:01:39.620 | of knowledgeable people who understand civics

02:01:44.200 | and who are willing to vote for the things

02:01:46.400 | that are in the best interest of their fellow citizens.

02:01:49.360 | But you can do something about your own positions,

02:01:54.360 | your family.

02:01:55.720 | You may not be able to do anything at all

02:01:58.160 | about the Department of Education,

02:02:00.800 | either doubling it if that's what you wanna do

02:02:02.600 | or eliminating it if that's what you wanna do.

02:02:05.260 | But you can do something

02:02:06.320 | about your family's Department of Education.

02:02:09.040 | And so as with many things,

02:02:11.440 | while broad-based collectivist solutions seem impossible,

02:02:16.840 | individual solutions are very, very possible.

02:02:21.840 | There is time for you

02:02:24.480 | to establish the necessary individual solutions.

02:02:27.960 | There is time for you to leave the United States.

02:02:31.480 | There is time for you to get out of debt.

02:02:34.640 | There is time for you to educate your children.

02:02:37.800 | There is time for you to get in better shape.

02:02:40.640 | There is time for you to be in a situation

02:02:43.600 | where you're wealthy enough

02:02:44.440 | that you never need a dime from Social Security

02:02:46.840 | and that you don't need anything from Medicare.

02:02:49.200 | I wanna be a solutions-oriented guy.

02:02:52.180 | I don't see any solutions in this world

02:02:56.080 | of political, collectivist, statist nonsense.

02:02:59.500 | All I see is reaping the problems of the past.

02:03:04.760 | And that's basically what happens.

02:03:06.160 | Why are we in this nightmare?

02:03:07.800 | Well, because past politicians got elected

02:03:11.320 | by promising that they could give away other people's money.

02:03:15.160 | That's how it happened.

02:03:16.680 | Why, the bulk of this is not due to the fact

02:03:19.800 | that the federal government builds roads.

02:03:22.740 | It's the most, you know,

02:03:26.520 | the most being of a more libertarian perspective,

02:03:29.240 | the thing that libertarians laugh at every time

02:03:31.640 | they've said, "Well, if you eliminate the government,

02:03:33.160 | "who's gonna build the roads?"

02:03:34.440 | The roads aren't the problem.

02:03:35.520 | And the answer is the people are gonna build the roads

02:03:36.960 | 'cause the government doesn't build the roads.

02:03:38.200 | All they do is take from one person

02:03:39.580 | to pay to a company that builds the roads.

02:03:40.980 | Anyway, the roads are easy.

02:03:42.840 | But you can keep the road department.

02:03:44.720 | I don't know any libertarians

02:03:47.480 | who are that upset about driving on roads.

02:03:50.040 | What you can't keep is this nightmare.

02:03:53.840 | You can't keep Social Security.

02:03:55.400 | You can't keep Medicare.

02:03:56.560 | You can't keep Medicaid.

02:03:57.760 | You can't keep a defense spending that spends,

02:04:01.960 | this is right, what?

02:04:03.640 | The US government spends more money on the military

02:04:05.800 | than the next, what, 25 countries combined?

02:04:09.160 | Something like that?

02:04:10.280 | Check me on that.

02:04:11.120 | That's, I shouldn't.

02:04:12.420 | Anyway, something like that.

02:04:14.800 | You can't keep a global empire.

02:04:16.780 | You can't keep it all propped up

02:04:18.700 | with fake money borrowed from other people.

02:04:21.260 | You cannot do it.

02:04:23.200 | You can't destroy the families

02:04:25.600 | that form the bulk of a society.

02:04:27.860 | You can't destroy the children

02:04:29.940 | by sticking them into mandatory educational,

02:04:32.100 | compulsory schooling systems

02:04:33.420 | that are designed to destroy them.

02:04:35.180 | You can't destroy the family unit

02:04:38.340 | that holds a society together.

02:04:40.480 | You cannot destroy those things and expect it to go on.

02:04:43.500 | So keep the roads.

02:04:44.560 | I'll pay taxes for roads.

02:04:47.020 | But the rest of this, we're getting our just desserts.

02:04:49.520 | But you can't unravel 80 years of,

02:04:54.520 | 90 years of this progressivist utopia

02:04:59.620 | and expect it not to be painful.

02:05:03.080 | It's gonna stink.

02:05:04.360 | It's gonna be painful.

02:05:08.240 | I forget why I started that rant.

02:05:09.880 | Just simply that we're going to pay for our sins.

02:05:13.720 | You always pay for sins.

02:05:15.520 | You cannot steal and then create a whole class of voters

02:05:20.320 | whose entire political ideology is stealing

02:05:24.280 | against the people that don't deserve it

02:05:26.360 | and who has nothing related to their own virtue.

02:05:28.800 | Everybody wants to steal from everyone else.

02:05:30.520 | Well, that doesn't work.

02:05:32.360 | I thank God he set up a system

02:05:35.060 | in which morality and virtue rule.

02:05:37.820 | Now you can reject that all day long,

02:05:39.460 | but when you build an empire based on theft,

02:05:41.960 | at some point in time, that empire will come crashing down.

02:05:45.740 | It will.

02:05:46.900 | That's what we're gonna see, in my opinion.

02:05:48.960 | So the point is, I see zero political solutions.

02:05:53.960 | I feel like these problems are comprehensive.

02:05:58.800 | Although I concede that it's possible

02:06:01.120 | that solutions could happen,

02:06:03.240 | I don't see the necessary preconditions for those solutions.

02:06:07.400 | For all the reasons previously discussed,

02:06:09.360 | no virtuous electorate, no knowledgeable electorate,

02:06:11.760 | no virtuous politicians,

02:06:13.160 | a system that rewards crony capitalism,

02:06:16.040 | theft, corruption, rather than virtue.

02:06:20.000 | It's impossible.

02:06:21.120 | So I'm done.

02:06:21.980 | I'm not gonna waste my time on it.

02:06:23.080 | I will watch it over the coming years and see.

02:06:25.680 | And if something happens, I will be optimistic

02:06:28.120 | and I hope I am wrong 'cause I don't want us all to suffer.

02:06:31.580 | But in the meantime, I see solutions individual galore.

02:06:37.400 | (audience member coughs)

02:06:40.000 | Guess what?

02:06:40.840 | If you don't wanna be wrapped up in this nightmare,

02:06:44.600 | you don't have to.

02:06:45.560 | And one of the big things that I said

02:06:50.400 | in this new course that I've just launched,

02:06:52.760 | why did I tell you guys I'm no longer in the United States?

02:06:56.080 | Simplest way to remove yourself from all this, just leave.

02:06:59.540 | Because while the United States is destroying itself,

02:07:03.040 | there are places in the world that are not.

02:07:05.360 | And you can put together solutions.

02:07:06.560 | Now, I don't think that's the right solution for everyone.

02:07:08.160 | There are a lot of things that are wonderful

02:07:09.640 | about the United States.

02:07:10.480 | In many ways, it's the best place to be right now

02:07:12.280 | in the world.

02:07:13.180 | But don't fall prey to this idea

02:07:15.560 | that it's just always gonna be that way.

02:07:17.040 | It ain't.

02:07:17.920 | And we'll talk more about that.

02:07:19.980 | I hope that this has been helpful to you.

02:07:22.000 | I know that it's long.

02:07:23.260 | If you find an error in my thinking,

02:07:26.400 | if you can present to me an argument

02:07:28.920 | that would indicate that I'm wrong,

02:07:30.400 | I would ask you to do so.

02:07:33.020 | It has taken me years to come to this perspective.

02:07:36.820 | I don't expect it to you, if this is your first time,

02:07:39.820 | I don't expect you to believe it all of a sudden.

02:07:41.420 | I would expect, but I would encourage you

02:07:43.580 | to just argue with it, argue with me.

02:07:45.900 | If you find something where you think I'm wrong,

02:07:48.740 | then go ahead.

02:07:49.560 | Just don't fall prey to the same old,

02:07:52.440 | I don't know a better word than tropes,

02:07:54.700 | the same old lies, the same old myths

02:07:56.840 | that make you feel good.

02:07:57.820 | Don't think, if you're a liberal,

02:07:59.180 | if you just tax the rich that everything will fix it.

02:08:02.900 | Don't think, if you're a conservative,

02:08:04.220 | that if we just rework welfare

02:08:06.580 | that everything will be better.

02:08:07.580 | It ain't.

02:08:08.460 | You got big systemic problems.

02:08:10.620 | But if you do see a flaw in my thinking,

02:08:14.020 | please show me, because I don't wanna be a fear monger.

02:08:18.180 | I wanna be accurate.

02:08:19.680 | But by going through this,

02:08:20.680 | I hope I've presented to you enough data

02:08:22.820 | to just help you to start to see where,

02:08:26.080 | it's sobering reality.

02:08:31.780 | Don't be depressed.

02:08:33.100 | Just start making your plans and work out individual plans.

02:08:37.060 | And those plans are probably not that different

02:08:40.020 | than what you already face.

02:08:43.580 | Don't be poor.

02:08:45.300 | Be stable.

02:08:46.140 | We'll talk about the solutions another time.

02:08:50.940 | Thank you for listening.

02:08:51.980 | If you would like my initial salvo in this foray,

02:08:55.980 | I would invite you to come by

02:08:58.820 | and sign up for my newest course.

02:09:00.020 | Go to radicalpersonalfinance.com,

02:09:01.300 | click on store.

02:09:03.060 | And there you'll see my newest course available,

02:09:05.500 | which is called How to Survive and Thrive

02:09:07.220 | During the Coming Economic Crisis.

02:09:09.260 | Right now I'm doing a pre-launch sale on that,

02:09:12.740 | a pre-order.

02:09:13.780 | Pre-order sale.

02:09:14.620 | That course will go live on March 15.

02:09:17.740 | In the meantime, if you sign up

02:09:19.100 | between now and March 15, 2019,

02:09:21.780 | you can save 25% by using the discount code,

02:09:26.100 | prelaunchdiscount, 25% discount,

02:09:28.860 | by using that coupon code, prelaunchdiscount.

02:09:31.540 | I would invite you to come by and buy that course.

02:09:34.740 | It will help you go a long way

02:09:36.300 | towards giving you some practical and realistic solutions

02:09:38.780 | that I've come up with for my family

02:09:40.700 | towards solving some of these problems

02:09:42.540 | and giving you options in the future,

02:09:44.020 | no matter what the future holds.

02:09:45.660 | I believe there are some good leverage points

02:09:48.460 | where you can take certain actions that are inexpensive,

02:09:51.340 | not difficult, and yet can make a massive difference now

02:09:54.660 | and benefit you if everything goes well,

02:09:57.820 | and yet be of massive benefit if nothing goes well at all.

02:10:01.380 | So it's a win-win either way.

02:10:03.460 | And that's the stuff that I'm focused on

02:10:05.060 | because there are a lot of those things that you can do

02:10:07.700 | that are a benefit either way.

02:10:09.460 | So come on by radicalpersonalfinance.com,

02:10:11.100 | sign up for my newest course,

02:10:12.180 | How to Survive and Thrive During the Coming Economic Crisis,

02:10:15.220 | and save 25% using the code, prelaunchdiscount.

02:10:17.980 | That's just me helping to have some money coming in

02:10:20.420 | while I finish up the last bit of the course.

02:10:26.380 | And it will help you by giving you a discount.

02:10:28.620 | It helps you to be patient with me

02:10:29.860 | while you wait for March 15.

02:10:31.260 | Thank you for listening, and I'll be back with you very soon.

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02:11:01.460 | (upbeat music)

RPF0629-In-Depth_Version_Federal_Debt-The_Ticking_Bomb_that_No_One_is_Willing_to_Defuse