Vivek Ramaswamy Is Wrong About the National Debt
We can't grow our way out of its ruinous economic impact. The only way forward is to cut spending.
HD DownloadIf you want to get a politician to change the subject, ask them how they're going to deal with the federal debt, which is growing to be bigger than the U.S. gross domestic product and has us on a path to fiscal disaster. Economists across the political spectrum agree that large, persistent, and growing annual deficits and the national debt depress long-term economic growth, the one known way to increase living standards.
When Reason asked GOP presidential candidate Vivek Ramaswamy what he would do to cut spending, he said he'd focus instead on supercharging the economy so that we can grow our way out of it. Unlike Joe Biden and Donald Trump—who have both sworn that they won't touch a penny of Social Security and Medicare, the major drivers of debt—the millennial and self-described limited-government conservative at least acknowledges that debt is a problem. He just won't commit to any spending cuts to deal with it.
"We've [had] more than 4-plus percent GDP growth for most of our national history," he says. "If we get back to…three-point-something, actually, most of those fiscal problems are completely gone."
But that's not right. According to quarterly data from the Bureau of Economic Analysis, we calculate that annual GDP growth has averaged 2.7 percent since 1970, helped along by a rapidly growing labor force thanks to immigration, the baby boom, and women going to work. Let's say Ramaswamy gets elected for two terms and unleashes economic growth that pushes the U.S. economy up to 4 percent GDP growth through 2033. Would most of our fiscal problems be "completely gone"? Not even close.
According to our calculations, the CBO projects that GDP will grow by 2 percent per year over the eight years of the next two presidential terms. Even if you double that to 4 percent annual growth—a rate more than double what it's been so far in the 21st century—we'll still be swimming in a sea of red ink.
In a recent report, CBO estimated that for every 1.2 percentage points that GDP exceeds its projected level for 2033, the deficit would be $51 billion smaller in that year. By that measure, if GDP growth ran 4 percent instead of 2 percent over those eight years, the projected deficit in 2033 of $1.4 trillion would be cut roughly in half, to $700 billion.
In other words, the government would still be running deficits every year, and the federal debt would keep growing.
These guys want to steer clear of the third rail of American politics—Social Security and Medicare entitlements that already comprise 30 percent of annual spending—and will jack up to about 40 percent over the next decade. But we have to make them grab it fully with both hands.
If we don't start seriously cutting spending and scaling back eldercare entitlements, we're not going to balance the budget or stop growing the debt.
And our economy is headed for disaster.
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Here is the last article where reason castigated the GOP for cutting 4.8T over the next 10 years while ignoring dems asking to increase spending to new levels.
https://reason.com/2023/04/27/dont-believe-the-media-fearmongering-about-spending-cuts/
Why reason continues to deride the side that actually does write bills to cut spending boggles my mind. Enemy of good is perfect and all that.
And yes. You can grow the economy out of debt. It is actually pretty simple. Lock spending at 2018 levels for a decade and yes the deficit will be knocked down substantially.
Assuming even 2% tax revenue growth you just take (current revenue)e^(0.02×10) – current spending and you end up with positive payments against the debt.
But reason doesn’t want to talk about that. They want to, for a somewhat obvious reason, force the GOP to go after the entitlements as the third rail of politics. Locking the budget would do virtually everything that is needed to stop deficit spending, but reason wants to goad the only side actually passing bills on cuts into making a political fire.
Right now baseline budgeting raises federal spending 3% a year. Ending baseline budgeting alone would help with the deficit. Yet I can’t recall a single Reason article about this effect.
Yes I want a shit ton of cutting spent, even off the 2018 budget. But locking it at 2018 would go a long way to fixing shit. So why attack those ideas?
But reason doesn’t want to talk about that. They want to, for a somewhat obvious reason, force the GOP to go after the entitlements as the third rail of politics. Locking the budget would do virtually everything that is needed to stop deficit spending, but reason wants to goad the only side actually passing bills on cuts into making a political fire.
To the point that I almost wonder if Reason circa 2008-2010 wasn’t some sort of “quiet part out loud” fluke. I was actually a bit jazzed that this article actually talked budget numbers and at least presented as “Growing the economy will help but…” rather than just “Don’t Say Gay”. But, your point is cogent, it’s not 2008, Biden is not Bush, and Ramaswamy is not Obama.
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I appreciate Reason acknowledging that a dictator who is willing to let the old people starve or require them to live with their children — if they’ll support them — is the only functional solution to “socialist insecurity”. And yeah, sorry. I’ve already accepted that my “retirement plan” is going to be a bullet to the temple. I don’t know why I’m supposed to care about the old fucks who put me here more than myself.
Better to take some leftists with you than going off on your own when it’s time
Nicholas John Gillespie is an American libertarian journalist who was editor-in-chief of Reason magazine from 2000 to 2008 and editor-in-chief of Reason.com
In other words, Gillespie is an ideologically driven fool, and a Nobody with no education in Economics.
Yep. Demunists claim they want to “tax the rich!!!” Why not have the rich pay for entitlements?
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I opposed the Covid restrictions here in Michigan, at least on a statewide basis, from the beginning, although I felt that some were needed in the Detroit area in the early stages to prevent a collapse of the healthcare system in that part of the state. But looking at the graphs, I can see why Dr Fauci and other public health officials acted as they did. They were dealing with an unknown quantity. Cases and deaths were skyrocketing. There were no vaccines or effective treatments, and the data coming out of China was flawed, to say the least. There is an old saying that hindsight is 20-20, and that certainly applies here. Also the article might have mentioned that the most severe restrictions were imposed during the Trump administration by politicians of both parties.
We must cut spending AND grow the economy to address government debt. NEITHER is sufficient without the other. In addition, both REQUIRE the other to happen.
It’s the government’s responsibility to cut spending.
It’s not the government’s responsibility to “grow the economy”.
When the government is often slowing down economic growth via its policies, it definitely has a role in growing the economy by getting out of the way.
Indeed. Most of government is comprised of worthless, incompetent fucks, who hate, or are at least disdainful of any kind of free market capitalism, and are the ones regulating their betters.
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‘….In a recent report, CBO estimated that for every 1.2 percentage points that GDP exceeds its projected level for 2033, the deficit would be $51 billion smaller in that year….’
What is actually says is if GDP declines .1 per year for 11 years or 1.1 in total, total revenues for those years would be reduced by 439 billion.
Ramaswamy says if instead of GDP declines you add an extra 2.0 to the GDP for 11 years you would increase revenues 20 times over the 1.1 loses or generate $8.7 trillion dollars in increased revenue. I don’t know what he wants to spend, i.e. if you grew at 4% and cut spending back to historical levels of 18% of GDP (1947 to 2007), and got rid of all illegals and went full speed ahead with AI and automation, we’d be in surplus every year.
Nicholas John Gillespie is an American libertarian journalist who was editor-in-chief of Reason magazine from 2000 to 2008 and editor-in-chief of Reason.com
In other words, Gillespie is an ideologically driven fool, and a Nobody with no education in Economics.
Real Modern Monetary Theory has never been tried!!
Can’t try austerity now — everything will collapse!
Can’t try austerity when things are going well either, apparently.
When you use double negatives, you defeat your own argument.
In other words. VendicarD is an ideologically driven fool, and somebody with no education in english.
You should read more than the 1st paragraph of Wikipedia articles.
In other words, you’re an ideologically driven fool, and a Nobody who lacks reading comprehension.
As well as a spammer, who posted the same comment more than once.
Another Reason article going after those pesky republicans.
As it should. Reason isn’t supposed to be Republican, it’s supposed to be libertarian.
That’s right Nick — cut spending! Thank you.
How could the federal government possibly run on a minuscule 4 trillion dollars a year? Somehow they managed to do it, as recently as 2018, when the government was already way too big. Spending has gone up 50 percent in just 5 years. Blame Biden, blame Trump, blame Congress — just bring the axe.
It would be absolutely reasonable to argue against trying to increase revenue if he could muster economic projections showing how raising taxes (however the increases were structured) would decrease economic growth to a point that would cancel out those tax increases. (I.e. Laffer Curve)
Curious that he doesn’t do that and instead simply doesn’t mention increasing revenue as an option at all.
The Laffer Curve is laffable.
At this point, the easiest way to cut spending would be to simply cut the entire Federal budget out of our lives by abolishing the Federal government. It’s become nothing but a criminal crime cartel anyway, no loss.
Vivek: We’ve had 4-plus percent GDP growth for most of our national history
Reason: We calculated GDP for the past 50 years
Gillespie is comparing the past 50 years to close to 250 years. Apples to Oranges.
Reason: “if GDP growth ran 4 percent instead of 2 percent over those eight years, the projected deficit in 2033 of $1.4 trillion would be cut roughly in half, to $700 billion. In other words, the government would still be running deficits every year, and the federal debt would keep growing.”
And if we kept up the growth then in another 8 years the deficit would be gone and then the debt would be shrinking. Gillespie is using the same bad argument Democrats used about drilling under Bush. It doesn’t help RIGHT NOW therefore we shouldn’t do it.
Vivek proposed something that would work. Gillespie can argue he doesn’t think is realistically going to happen. His own evidence shows it would work.
If GDP grows at 4% for that long, then 10 yr interest rates will be 6% (mortgage rates 8-9%). That’s an additional $1 trillion per year in government spending just to carry the debt and keep rolling it over. Not to mention that that sort of growth rate will require additional private debt as well – and that has been destructive to real growth for 20+ years now.
We have been living on a real estate bubble disguised as real growth for an entire generation. The US doesn’t know HOW to grow anymore. Just blow bubbles.
Edit – Not just a real estate bubble (though that’s a big one). An asset bubble as well. See this candidate for Prez. Maybe he thinks govt can IPO its way out of debt.
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If GDP grows at 4% for that long, then 10 yr interest rates will be 6% (mortgage rates 8-9%).
You’re going to have to explain how you got from 4% GDP growth to 6% interest rates.
With the size of the debt now, it is interest rates that matter now not GDP growth
Every 1% increase in interest rates now adds at least $350 billion to annual spending (on nothing productive and all going to the wealthy). That’s in addition to everything else that we always choose to ignore. We got ourselves into this hole over the last 25 years by subsidized interest rates. Helped disguise the hole and gave a ton of subsidy to both the wealthy and to pols. That game is over.
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It’s possible, but only if we freeze spending
With that said, we can’t even slow the growth of spending, much less actually cut spending. So it’s a moot point.
“The only way forward is to cut spending.”
Wrong a way forward is to keep on doing what we are doing, spending like drunken sailors, the treasury printing money to keep up causing inflation the Fed raising interest rates to slow inflation, and Congress and the President ignoring it all. This will eventually have negative consequences, but hey party on like it is 1929 before October 29th (Black Tuesday). Hyperinflation, stock market crash, banks failing, depression and financial collapse. Then the President can declare Martial law, end messy democracy once and for all time and install the new far left socialist government so many crave for the paradise it promises!
Social Security and Medicare combined do make up a large proportion of spending but the majority of Social Security outlays are covered by dedicated taxes.
Hahahaha. Now do Medicare, and while we’re at it, Medicaid, since there are no Medicaid taxes.
Economic analysis from Nick Gillespie.
Were the baboons busy?
I always find it bizarre that everyone treats social security and medicare as if it’s an entitlement when money to pay for such is taken out of every single paycheck a person earns.
Every one.
It SHOULD be paid for. Because we pay for it.
But it’s not.
Because politicians stole that money.
So when people expect that money they’ve been –by force of law– putting away for their retirement, how can asshats call it ‘expecting an entitlement’?
Imagine if your 401K or financial manager told you you couldn’t have the money you’d been saving and investing —that even asking for it was scamming for assistance.
That’s what people are doing when they act as if social security/medicare are ‘entitlements’
Who elected the politicians that looted the money?
Name a politician that ran on a platform of I will steal your money for war, waste, inefficiency, useless projects, nepotism, pandering to my donors and enriching myself and my family?
They all lie to get elected and do the opposite once in power.
That’s because, despite the marketing, the courts have ruled that the taxing and entitlement components of Social Security are, for lack of a better word, severable. Congress could pass a bill tomorrow ending the FICA taxes and continue paying out Social Security benefits–or could keep collecting FICA taxes and not pay out another penny of Social Security benefits. They told you they owed you the money you paid in and that you have an account. They lied to you.
Social Security is two terrible government programs–a highly regressive income tax and an entitlement that is not means tested and pays more out to those who need it least–falsely advertised as an individual retirement plan.
The notion that economists on both sides of the spectrum have acknowledged the spending problem is comical. Name 3 on the left.
If Social Security is truly a “trust fund,” then what different does it make what the government does with spending. (SIC!)
Anyone who thinks that forced euthanasia won’t be a part of the solution to Social Security and Medicare isn’t paying attention. Soylent Green, indeed!
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