The smart thing to do would be to raise taxes (not just on the wealthy) and cut entitlements. Reducing the deficit would indeed slow down inflation, give the Fed room to cut interest rates, and boost business investment. The economy would be in a much healthier place.
Oddly enough, there are plenty of European countries with lower taxes holistically, higher entitlements, and lower debt / deficit levels.
As far as I can tell, the solution isn't nearly that hamfisted. It requires:
- Reinstituting rule-of-law (not just Trump; the whole system)
- Instituting basic proper management of funds
In Europe, I can walk into a government agency and be done in 15 minutes, with a smile from the administrator, for what would take months of fighting in the US. If a part of the government is breaking a rule, I can point them to it, and they'll follow it. Courts are slow, but follow clear laws; I don't see black robe syndrome. And police follow and enforce laws.
US used to be closer to that too; it actually led the world in good governance for much of history.
That's hard work of diving in and cleaning up every piece of the administration. There's no stomach for that. Until there is, the deficit will keep going up.
> Reinstituting rule-of-law (not just Trump; the whole system)
It's probably more correct to just say instituting. While Trump has certainly turned the rule of law on its head, it's a not-so-secret secret that the law has never really applied to the rich and powerful. If we're already going to be making fixes, we should make a real effort to honor the rule of law.
That would necessarily include things like reforming bail and fines so they scale properly with ability to pay, especially in the case of corporate fines.
Trump is a symptom of a trend which has been going for about 40 years, and accelerated in the past 20 years.
It's system-wide.
It's not that rule-of-law was ever perfect in the US, but it was ahead of the world, and ahead of where it is today. Probably, it peaked a little bit after cases like Brown v. Board through around 1990.
From 1800-1900, there were more serious issues than today, obviously, but the baseline of comparison globally were largely dictators, kings, warlords, ..., as well as fledgling systems like the French Revolution and the Haitian Revolution.
1900-1960, the baseline was 2nd and 3rd world.
Today, the US is no longer in the lead, and to the contrary, towards the tail end of democratic developed countries. That's also a bigger club than in 1950.
Targeting "entitlements" as a universal fix ignores both the fiscal math and the human costs. Healthcare makes up the lion's share of that spending; cutting it just shifts uncompensated care burdens onto hospitals and inflates private premiums. Cutting programs like SNAP and WIC means pulling food support from children, which causes long-term economic damage.
If the goal is deficit reduction through spending cuts, policy needs to evaluate actual economic ROI. Programs like nutritional and income supports have positive fiscal multipliers, which is why blunt austerity measures trigger negative feedback loops and contract growth.
Spending cuts have a place, but treating entitlements as a slush fund without accounting for the economic return or impact on people isn’t a productive policy proposal.
>Healthcare makes up the lion's share of that spending;
I heard US healthcare, rather famously, spends more per capita than any country in the world, despite still being rather terrible. Maybe the solution is actually reforming it in an European way (including universal free healthcare)? Your other points are very interesting to me, especially negative feedback loops of austerity - I never thought about that before.
The primary factor (in my view) is that we pay healthcare providers (doctors and nurses) 2x to 3x as much as other developed countries.
That creates knock-on effects throughout the healthcare system:
* Doctor time is worth $xxx/hour, so every second counts. We hire a bunch of support staff to make sure doctors aren't "wasting" time on paperwork, taking vitals or talking to patients. Now it costs more to run a practice.
* Doctor time is worth $xxx/hour, so we need to make sure that health insurance only pays for procedures that people truly need. That leads to insurance companies hiring a bunch of doctors and nurses to adjudicate claims (that's expensive, plus fewer doctors practice medicine). It also leads to denied care.
* Doctors have a lot of money, so if a procedure goes bad and you want to sue someone, they make a juicy target. Now you have higher malpractice insurance, so doctors bill even more.
* Doctors are afraid of being sued (see previous), so they often order more tests than necessary to prove they are providing adequate care. Those tests cost money.
The cause of high doctor salaries is an artificial shortage of doctors. Medical schools collude to limit the number of medical students who matriculate each year, which squeezes supply.
We could very easily fix the American healthcare system in about 10 years by simply allowing doctors and nurses trained in other developed countries to practice here, plus forcing medical schools to accept more students.
Regarding the latter, there is no shortage of qualified applicants:
1. Nearly everyone who starts medical school finishes. Matriculants are so statistically overqualified that hardly anyone washes out.
2. Medical schools have silly-stupid entrance requirements which have little to do with being a good doctor. Beyond GPA, you need many hours of volunteer work outside of class, extracurricular activities, and often research experience. These admissions requirements are imposed because there are simply too many qualified applicants for the number of slots and med schools need some "fair" way to cull the herd.
Yes the US could save a ton with a more efficient healthcare system. Additionally we have shockingly high costs for basic infrastructure as compared to other developed nations which could also provide savings if we could streamline that.
For the economic impact of austerity there has been a lot of good scholarship about this recently. Check out Austerity in Crisis?: A Narrative Review of Its Economic, Social, and Political Effects in Times of Crisis https://arxiv.org/abs/2510.10449
It isn’t as hopeless as it looks. Places like Oregon have been long experimenting with things like coordinated care organizations to better manage healthcare. Also health system like Kaiser Permanente compare more favorably to national healthcare systems than you might think.
There's no "entitlements" you can cut that wouldn't cause more harm to the economy than they would save up in federal spending. And there isn't enough income that taxing it to pay off the debt would be practical. You have to tax capital, that's where the entire world's wealth has been sucked up in the last decades. That's the only solution that doesn't involve the country defaulting on its debts.
Billionaires know that and are already starting to speak against such taxes[0], before there's even any real possibility of them being adopted. They would rather see everything turn to shit than give back a single cent.
How do you arrive at the conclusion that cuts to transfer payments (entitlements) cause economic harm but cuts to productivity (capital investment) does not?
One has a disproportionate first-order effect on the poorer, it's true, but that wasn't your contention.
1. I'm not proposing we tax "capital investments". I want to tax wealth, like unrealized capital gains. Because that's where the majority of the wealth is.
2. Why do you equate "capital investment" with "productivity"? If anything, the current situation should show you that record capital investments (in AI, mostly) are completely decorrelated from how the real economy is doing (which isn't great).
3. I never claimed that such taxes wouldn't cause harm to the economy, simply that cutting transfer payments would be much worse and wouldn't be enough to solve anything. We've been doing austerity for 50 years, it's time we think of something better.
If you want a healthy economy, you have to reduce inequalities. Transfer payments are a way to do it, wealth taxes are another. Cutting "entitlements" only worsens the problem.
