The reality is taxes must go up, and the bond market will force it to happen. You can’t keep issuing debt forever to steal from the future for today when all of the evidence points to lower future growth.
Voters might be unsophisticated, but the bond market is not.
> Bond vigilantes, who can bring fiscally irresponsible politicians to heel by unloading a country’s debt, may rear their head if Congress doesn’t show any appetite to bring the federal deficit under control.
<< Bond vigilantes, who can bring fiscally irresponsible politicians to heel
I don't want to give people ideas, but at the same time this is not exactly new to anyone following that set of news. During last EU fiscal crisis, EU came up with a novel approach to handling bond issues. Haircut[1].
Treasuries only receive the favorable yields they do because they were considered the safest asset in the world. Any indicator of potential haircut is going to cause a rapid (further) loss in confidence and a spike in yields, leading to a debt spiral. This is why there was a fear of the implications of DOGE controlling the Treasury payment system (BFS), potentially leading to non payment and default. The capital markets are built on a foundation of trust. If you want continued access to capital (and with debt at ~123% GDP, it should be obvious that the US has no choice but to have continued access to the bond market), you must respect the trust relationship.
I will admit that, at the time, I did not see EU debt holders accept it, but accept they did. I know that cultural differences in US may require a different approach that go beyond PR spin ala 'temporary refund adjustment' since there is money on the line, but I can't help but wonder if it is not coming anyway.
Taxes must go up, on our shrinking young population (right as we deport more and more immigrants and dissuade new ones from coming here). Great, Japan here we come
“For reference, the total net worth of all U.S. households is close to $160 trillion. The rich half (top 50%) own about $156 trillion (or about 98% of it). The poorer half only own about $4 trillion. Breaking down that top half even further, the top 1% (1.3 million families) owns about $49 trillion (or about one-third of the total share) by themselves. And going even further, about half of that $49 trillion is owned by the top 0.1%. That’s only around 136,000 households and includes all of America’s wealthiest people.”
Tax wealth, not work, roughly speaking. With that said, stagnation is inevitable due to demographic dynamics. Historical economic prosperity was because of a demographic dividend that won’t be repeated in our lifetimes.
The logistics can be argued elsewhere, I’m simply saying that is where you can tax; there is nowhere else of material value to. The majority of US households can’t even afford to survive, let alone face a tax burden.
> For the bottom 60% of U.S. households, a "minimal quality of life" is out of reach, according to the group, a research organization focused on improving lower earners' economic well-being.
Some countries have a net-worth tax. Here are Switzerland's rules and tax rates.[1] There are few exemptions. The canton of Geneva charges about 0.9% of net worth per year.
Voters might be unsophisticated, but the bond market is not.
> Bond vigilantes, who can bring fiscally irresponsible politicians to heel by unloading a country’s debt, may rear their head if Congress doesn’t show any appetite to bring the federal deficit under control.
https://usafacts.org/government-spending/
https://finance.yahoo.com/news/bond-vigilantes-killed-trump-...
https://ghpia.com/wp-content/uploads/2024/07/Investment-Insi...