Biden's "Promises"
The Numbers Don't Add Up
Before getting into the meat and potatoes of this week’s edition of the newsletter, I’d like to make it clear that I voted for President Biden in 2020. To me, he was by far the lesser of two evils.
That being said, I have very little faith in his ability to enact any substantial change, and I continue to grow more and more disillusioned with how okay he seems to be with both outright lying to and misleading people.
In illustrating my points in this edition of the newsletter, I will predominantly use The New York Times and a “FACT SHEET” from the White House as sources — that is, sources that 1. often act as a mouthpiece for Biden and 2. that aren’t extreme or fringe — in efforts to bolster the credibility of the point(s) I make.
(Disclaimer: Please note that this edition of the newsletter may not be my sharpest work, as I had four wisdom teeth pulled on Thursday and am writing this in an incredible amount of pain.)
The inspiration for this edition of the newsletter came from an article that a buddy of mine shared with me this week: “Biden’s Promises on Social Security and Medicare Have No Basis in Reality” (The New York Times)
The author of the piece, Brian Riedl, discredits the “promises” Biden made regarding how he plans to continue funding Social Security and Medicare in his most recent State of the Union address by simply checking Biden’s math.
Riedl begins the piece with the following two paragraphs:
“In his State of the Union speech this month, President Biden pledged to block any reductions in scheduled Social Security and Medicare benefits. He also promised that any tax increases would be limited to families that earn more than $400,000 — roughly the top-earning 2 percent of American families.
Together, these promises would ensure an unsustainable debt path that eventually requires deeper and more drastic benefit and tax changes than already needed.”
In other words, if Biden were to actually take the approach to fund Social Security and Medicare that he proposed, he’d just be kicking the can down the road, which would result in the need for greater taxation (or borrowing) in the future.
Riedl continues:
“Over the next three decades, the Social Security system is scheduled to pay benefits $21 trillion greater than its trust fund will collect in payroll taxes and related revenues. The Medicare system is projected to run a $48 trillion shortfall. These deficits are projected to, in turn, produce $47 trillion in interest payments to the national debt. That is a combined shortfall of $116 trillion, according to data from the Congressional Budget Office. (To inflation-adjust these figures, trim by roughly one-third.)”
As I’ve mentioned in previous editions of the newsletter, it’s not just the US’s growing national debt that frightens me, but the interest we owe on it. In Q4 2022 alone, the US spent $213 billion on interest payments on its debt. To put that number in context, the US — a country well known for its military industrial complex — spent approximately the same amount on military expenditures in that same time frame.
If Biden were to enact the plan he proposed in the State of the Union, both the national debt and the interest on the national debt would grow exponentially, likely making the current state of inflation seem like child’s play.
Riedl illustrates what taxes would realistically look like if the US were to cover all of its entitlement expenditures through taxation and without taking on more debt:
“The president’s implication that full benefits can be paid without raising taxes for 98 percent of families has no basis in mathematical reality. Imagine that Congress let the Trump tax cuts expire, applied Social Security taxes to all wages, doubled the top two tax brackets to 70 and 74 percent, increased investment taxes, imposed Senator Bernie Sanders’s 8 percent wealth tax on assets over $10 billion and 77 percent estate tax on estates valued at more than $1 billion, and raised the corporate tax rate back to 35 percent. Combined federal income, state and payroll marginal tax rates would approach 100 percent for wealthy taxpayers, and America would face among the highest wealth, estate and corporate tax rates in the developed world.”
I don’t think Biden would realistically consider rolling out a such a taxation plan, and I can’t even imagine the likes politicians further to the left trying to put something like this into motion.
Riedl states that even if the taxation plan above were implemented,
“Total new tax revenue — 4 percent of G.D.P. — would still fall short of Social Security and Medicare shortfalls that will grow to 6 percent of G.D.P. over the next three decades. Not even halving the defense budget would close the remaining gap.”
So, if the US can’t raise this money through taxes, where will it come from?
Riedl discusses whether or not the US could borrow it:
“Perhaps the president assumes the federal government can just borrow $116 trillion over three decades, on top of the current roughly $25 trillion in federal debt held by the public. But who will lend the government this much money? China and Japan are already paring back their roughly $2 trillion in American debt holdings. It seems unlikely that other countries would step up to take on much more. The Federal Reserve is trying to reduce its own more than $5 trillion in Treasury holdings that temporarily soared during the pandemic, and cannot monetize $100 trillion in debt without hyperinflation. That leaves America’s banks, corporations and investors, which almost surely lack both the capacity and the willingness to lend $100 trillion to a government that cannot control its own finances.”
(It’s numbers like these that keep me up at night.)
Riedl concludes the piece by sharing that at some point “the bond market will likely tap out” and that the longer we wait to address the debt crisis, the more severe the crisis will get.
He isn’t all critical of Biden, though. Riedl actually credits Biden for attempting to take action on the US’s impending debt crisis back in 2011 when Biden “courageously put all taxes and spending on the table in hopes of a grand deal on deficits” as vice president.
While I appreciate Riedl’s insinuating that there may be a way out of the debt spiral that, IMHO, is already well in motion, I’m personally not so optimistic.
Politically speaking, it’s incredibly unpopular to cut benefits like Social Security and Medicare, and, as I said, I can’t imagine any politician running on a platform that includes either doing so or dramatically raising taxes in efforts to do so any time in the near future.
Hence, it’s hard to view Biden’s rhetoric around how the US will fund these programs as anything more than empty promises.
And this isn’t the first time during his presidency that he’s made such types of promises.
Remember how right before the midterm elections Biden “promised” to forgive up to $10,000 in student loan debt for low- to middle-income borrowers?
If you were a Democrat with substantial student loan debt, Biden’s promise to forgive some of your debt probably got you pumped up to vote Democrat in the midterms, no?
Well, just one day after the midterms, when it came out that a judge ruled that Biden did not have the power to cancel said debt, you may have been just a disillusioned as I was.
But make no mistake… My disillusionment didn’t come from the fact that I thought some of my student loan debt would be forgiven and it wasn’t. No, ma’am.
Instead, it came from the fact that Biden essentially bribed low- and middle-class people with student debt for their votes and then didn’t even pay out on his bribe. It hurts to think that he made a “promise” that he didn’t have the power to keep — and that he knew that before he bribed everyone.
What comes to mind as I write this are the words of Jeff Booth (I’ve mentioned this guy so many times in this newsletter that I’m no longer adding biographical info about him when I mention him) from a recent podcast on which he appeared.
Before quoting what Booth said on the podcast, let me first share with you Booth’s thesis on money: Booth believes that money is nothing more than information and that the more that money is corrupted, the more misinformation spreads throughout all levels of society.
I’ve heard others like Booth say similar things like “It’s immoral to corrupt money and, the more you corrupt it, the more immoral society becomes.”
Obviously, “immoral” is a subjective term, but I think it’s fair to say that making promises you know you can’t keep is immoral, yet this is what Biden continues to do. (And it’s what Trump would have continued to do if he were re-elected.)
And on that note, here’s what Booth said on the podcast:
“And all of the song and dance of ‘This regulators good, Trump’s good, Biden’s good.’ Wouldn’t all of that just be nonsense in [the] noise? I can’t even listen to it anymore. And then you just have to ask yourself [about] the other system. Because all Bitcoin is is a ledger, right? It’s based on truth. It’s a decentralized and secure ledger based on truth. So, what would the emergent complex behavior of society look like based on truth? And what we see is two different versions of a world and people moving to the new one. And, yes, the people that are moving early will do better; that’s what’s happening. All of the rest is noise. You cannot fix the system from the system.”
I share this quote less as an advertisement for Bitcoin, and more to illustrate the type of sentiment that has driven many people — including myself — to Bitcoin.
I used to put a lot of faith in what the politicians I supported would say. I thought that good policy could get us out of the mess we are in. I no longer believe that, though, because I no longer believe any politician has the ability to get the numbers to add up, which is to say that I feel that it’s all but inevitable that the debt spiral that’s already begun only accelerates from here.
However, I’m not as confident as Jeff Booth that Bitcoin will replace our current monetary and financial systems when(/if) they fail. (And I do think that the people we elect still matters to a large degree, whether they can entirely solve our monetary and financial problems or not.)
But I do think that Bitcoin will be — at the very least — an incredible tool for wealth preservation, especially for people who don’t own property in the real world, as the debt spiral worsens.
At the very most (Is that a phrase?), the Bitcoin network may just be the thing that replaces the plumbing for our rotten and corrupt monetary and financial systems (as crazy as that may sound).
Whether that would be a good or a bad thing, I don’t know. Probably a little of both, as no system is perfect.
I share this info less as a proponent of Bitcoin and more as someone who’s simply considering all of the options regarding where we go from here as far as our money systems are concerned.
My First Foray into Data Visualization
One of my latest tasks for Finder has been creating statistics pages for the site.
I’ve very much enjoyed taking on this task because 1. I love telling stories with data and 2. I’ve been given the opportunity to learn how to use Datawrapper, a platform that allows you to visualize data in charts, maps and tables.
Here’s a link to my first go at a statistics page: Coinbase statistics 2023
Don’t ask me why I love combing through financial reports for data that helps me to create charts like the one below. I just do.
And that, my friends, is where I will leave off for today.
Thank you all for reading, and I hope you all have a beautiful week!
Best,
Frank
Twitter: @frankcorva
