The editors of the Wall Street Journal, taking note of the trends in the graph above, argue that the United States does not have a tax problem but a spending problem:

You may have heard that the 2017 GOP tax cuts blew a giant hole in the federal budget—or so Democrats tell voters. The Congressional Budget Office’s revised 10-year budget forecast out Tuesday offers a reality check. Spending is the real problem, and it’s getting worse.

CBO projects that this year’s budget deficit will clock in at roughly $2 trillion, some $400 billion more than it forecast in February and $300 billion larger than last year’s deficit. This is unprecedented when the economy is growing and defense spending is nearly flat. The deficit this fiscal year will be 7% of GDP, which is more than during some recessions.

CBO says deficits will stay nearly this high for years, and the total over the next decade is now expected to total $21.9 trillion compared to $19.8 trillion in its February forecast. Debt held by the public will grow to 122.4% of GDP in 2034 from 97.3% last year.

Notably, CBO’s revenue projections are little changed. Revenue is expected to total 17.2% of GDP this year—roughly the 50-year average before the pandemic, as the nearby chart shows. But CBO significantly revised up projections for federal spending. Outlays are now expected to hit 24.2% of GDP this year and average 24% over the next decade. Wow.

You will note that although noisy federal tax revenues as a percentage of GDP have been remarkably stable. Federal tax revenues of roughly 17% are more than a “50 year trend”. That’s basically the post-war trend and marginal tax rates have made little difference.

There are a couple of ways of looking at that. One is that the Congress has carefully crafted the federal tax laws to return that percentage of GDP. Another is that 17% is what Americans are willing to pay in federal taxes. Beyond that they lobby, cheat, or otherwise arrange to limit their federal taxes to 17%. Those two are not mutually exclusive.

I would add that I think our problem is neither a tax problem nor a spending problem but either a consumption problem or a production problem (or both). Either we’re consuming too much or we’re not producing enough.

I wanted to call your attention at an opinion piece at The Hill by Jeremy Etelson, explaining why young voters are turning away from Joe Biden:

The generation that was raised during the global financial crisis and the onsets of the Iraq and Afghanistan wars has been a stalwart for the Democratic Party for over a decade. I was knocking doors for President Obama and local Democrats in 2012 even before I could vote.

I served as a College Democrats chapter president through the 2016 election cycle, and then voted for President Biden in 2020. In 2024, less than four years into the Biden administration, the world and our country have entered alarming trajectories. If Biden is nominated for reelection, he will be the first Democratic nominee whom I do not support.

Biden is currently sitting on top of a seismic shift in the political parties’ voting coalitions. His average approval rating under 38 percent unfortunately is historically low for a president at this time in a first term. In 2020, Biden won young voters by 25 points.

Now disapproval of Biden is widespread among young voters, with him losing 18–29 year-olds and all under-45 voters when polled against all general election candidates. The dissent is not baseless, and not all young dissenters are doing so because of American support for Israel’s war against Hamas. Beyond Biden’s personal cognitive challenges, his administration’s policies are having indefensible consequences.

The United States is now entrenched in numerous international conflicts, each of which is increasingly dangerous and more complicated than a good-versus-evil narrative. Biden is largely responsible for escalating the Russia-Ukraine war, funding Ukraine through their incremental defeat while ignoring diplomatic negotiation and ceasefire offers. Biden has also allowed the funding of Iran throughout their proxy war against American and our Middle East allies. Meanwhile, North Korea has abandoned the decades-long reconciliation process with South Korea, following our escalation of multilateral military exercises in the region. Nuclear world war is now more probable than at any time since the Cuban Missile Crisis.

Read the whole thing. In honesty I can’t follow his logic in some cases. For example, this:

The full effects of the Infrastructure Investment and Jobs Act and the American Rescue Plan Act, which together cost more than $3 trillion, remain to be seen. These new laws take steps to reduce greenhouse gas emissions, but they are insufficient to meaningfully curb climate change.

Does he think that a second Trump Administration would do more to “curb climate change” than a second Biden administration? I doubt it’s even on Trump’s radar.

My only point in highlighting this piece is to illustrate a risk the Biden campaign faces.

I have little objection to President Biden’s announcement of amnesty for violations of U. S. law in the case of spouses of American citizens and their children other than a) I think he’s going beyond his authority without Congressional authorization and b) in addition to the 10 year residency requirement I think they should be required to have been married for one year prior to eligibility and remain married for at least one year to retain amnesty.

I also think some of the complaints about it are rather amusing. Yes, I am shocked, shocked that politicians should engage in baldly political actions during an election year. Such a thing is unheard of!

I agree with Tom Friedman’s conclusion in his most recent New York Times column which is that American leaders should stop courting Israel. His argument has a certain amount of partisan slant:

They have done so much damage already, and yet President Biden, the pro-Israel lobby AIPAC and many in Congress have not come to terms with just how radical this government is.

Indeed, House Speaker Mike Johnson and his fellow G.O.P. mischief makers decided to reward Netanyahu with the high honor of speaking to a joint meeting of
Congress on July 24. Pushed into a corner, the top Democrats in the Senate and the House signed on to the invitation, but the unstated goal of this Republican exercise is to divide Democrats and provoke shouted insults from their most progressive representatives that would alienate American Jewish voters and donors and turn them toward Donald Trump.

but

No friend of Israel should participate in this circus. Israel needs a pragmatic centrist government that can lead it out of this multifaceted crisis — and seize the offer of normalization with Saudi Arabia that Biden has been able to engineer. This can come about only by removing Netanyahu through a new election — as the Senate majority leader, Chuck Schumer, bravely called for in March. Israel does not need a U.S.-sponsored booze party for its drunken driver.

What is notable about the column is that Mr. Friedman does not make a single mention of U. S. interest. What is the U. S. interest in supporting Israel? In supporting the Palestinians? I would say that our interests in either are quite narrow and somewhat abstract. Our interest are humanitarian. Mr. Friedman does, however, point out why we should not support Israel:

Unlike any previous Israeli cabinet, this government wrote the goal of annexing the West Bank into the coalition agreement, so it is no surprise that it spent its first year trying to crush the ability of the Israeli Supreme Court to put any check on its powers. Bibi also ceded control over the police and key authorities in the Defense Ministry to Jewish supremacists in his coalition to enable them to deepen settlers’ control over the West Bank. They immediately proceeded to add settlement housing units in the heart of that occupied territory by record numbers to try to block any Palestinian state there.

He does not similarly point out why we should not support the Palestinians but it’s pretty simple. They are violent radical Islamists. Not only do they support Hamas but the more violent and radical a faction is, the greater is their support for it.

As I’ve pointed out before American supporters of either group are thinking about imaginary Israelis or imaginary Palestinians. Neither the real Israelis nor the real Palestinians are particularly appealing to us.

I wanted to comment on Richard Rubin’s report at the Wall Street Journal on the argument over the federal corporate income tax. Here’s where he sets the stage:

WASHINGTON—The 21% U.S. corporate tax rate is the biggest single variable in the sprawling 2025 tax debate, and the two parties are trying to turn that dial in opposite directions with major consequences for companies’ profits and federal revenue.

The rate could climb as high as 28% if Democrats sweep November’s elections and move as low as 15% if Republicans gain full power.

President Biden’s plan for a 28% rate would reverse half of Republicans’ 2017 rate cut, pushing the U.S. corporate rate back near the highest among major economies. A 15% rate—some Republicans are heading that way, but the party hasn’t settled on a plan—would match the lowest level since 1935, boosting profits and rewarding shareholders. Presumptive Republican presidential nominee Donald Trump told corporate executives last week that he wanted a 20% rate.

Each percentage point is worth more than $130 billion over a decade in tax revenue, creating a $1 trillion-plus gap between the poles of the parties’ positions and giving the largest U.S. companies an outsize interest in the election’s outcome.

I found Mr. Rubin’s report fair and balanced and he does make some good points, for example:

The corporate tax is one of the most progressive ways of raising revenue, with much of the burden falling on higher-income households, but the reality of who pays it is more nuanced than just saying “companies” or “rich people.” Economists and government agencies generally agree that shareholders ultimately bear much of the cost, with workers and consumers paying some, too. Shareholders, generally, are wealthier than the population as a whole.

The corporate tax is one of the few ways the U.S. can, indirectly, tax foreign investors in U.S. securities and nonprofits with large tax-free endowments.

But the shareholder base also includes pension funds, 401(k) accounts and some middle-income households. Biden and Democrats play down effects on those groups. They also don’t count corporate tax increases as violating the president’s pledge to protect households making under $400,000 from tax hikes.

I thought this post might be a good opportunity for me to put down on marker on taxes more generally.

First, from an economic standpoint the corporate income tax is one of the least efficient taxes. The most efficient corporate income tax rate is 0%. Plus, as has been noted at the rate of 28% which President Biden has advocated our corporate income tax would be higher than those of Italy, Canada, France, Netherlands, India, Belgium, Spain, and Luxembourg. It would also be higher than those of Denmark, Norway, and Sweden. As noted that puts U. S. companies at a competitive disadvantage.

In my view if you want to spend more there are several alternatives:

• Raise the personal income tax and increase the effective tax rate (the taxes that people actually pay). The highest effective tax rate in the United States has been around 21% which is where we are now. Retorting that other countries pay higher rates is an inadequate reply. What works in one country does not necessarily work in another. In some countries they eat bats or snails. We don’t in the United States. Plus just about everything the government does in the United States is more expensive than anywhere else to get the same results. As a consequence people in other places trust their governments more than we do.
• Just issue ourselves credit. That is what we have been doing for some time. Not only is that regressive but we should be prepared for our ability to do that to end suddenly and, potentially, catastrophically.
• Cut spending somewhere else. The most tempting target for economization is interest on the debt which would either require us to default on the debt which would be catastrophic or pay the debt down which would be extremely difficult.
• The perennial: eliminate waste, fraud, and abuse. That has proven a lot harder than it sounds which has led some people to conclude that waste, fraud, and abuse are the purpose of our system.
• Increase production. That has proven harder to accomplish than you might expect.

Raising the corporate tax rate is probably the worst alternative.

I also think that we need more basic reorganization of the federal government but that is a topic for another post. Do we really need 73 federal agencies to have armed enforcement officers and police powers?

I think at the very least we need to follow the law of holes. Stop digging or, in this case, stop cutting taxes. Beyond that spend on what we really want and need to spend on, measured by willingness to pay.

I concur with the editors of the Washington Post:

The only problem is that Justice Thomas was correct to point out that the 2018 regulation, issued by the Bureau of Alcohol, Tobacco, Firearms and Explosives, did not represent that agency’s consistent view. In fact, it represented a 180-degree reversal of ATF’s position on bump stocks before the Las Vegas massacre, which had been more or less the same one that Justice Thomas articulated in his opinion. This history shows what can go wrong when such clearly legislative matters are left up to the bureaucracy and the courts. It would be far preferable for Congress to provide fresh guidance, instead of relying on regulators and judges to parse a 90-year-old statutory text.

That is, the surest way to effectuate a bump stock ban that so many Americans clearly want, and which is so clearly consistent with common sense, is through a law.

The regulation was not struck down on Second Amendment grounds but as exceeding the limits of the pre-existing statute.

This problem isn’t restricted to bump stocks but infuses many of the issues producing so much heat these days. There is a word for rule by executive branch regulations and court decisions and it isn’t democracy. It is authoritarianism.

I believe that what we are doing now is not just authoritarian but cowardly. When groups influential with the White House can’t cobble together enough votes to pass legislation or don’t want to leave their fingers on policies they know are unpopular, they get their way through regulations and compliant courts. The Congress needs to amend the National Firearms Act to ban bump stocks. They should also act to control immigration, take a position on abortion, and enact the environmental laws they see fit to put in place. Don’t leave the heavy lifting to the executive branch regulations and the courts.

Unsurprisingly, I disagreed with Nikolas Kristof’s latest column at the New York Times in which he proposes that the reason that West Coast progressives have made such a hash of their states is that ideological purity has become more important to them that outcomes. Here are some examples of the mess that he cites:

The two states with the highest rates of unsheltered homelessness are California and Oregon. The three states with the lowest rates of unsheltered homelessness are all blue ones in the Northeast: Vermont, New York and Maine. Liberal Massachusetts has some of the finest public schools in the country, while liberal Washington and Oregon have below-average high school graduation rates.

Oregon ranks dead last for youth mental health services, according to Mental Health America, while Washington, D.C., and Delaware rank best.

Drug overdoses appear to have risen last year in every Democratic state on the West Coast, while they dropped last year in each Democratic state in the Northeast. The homicide rate in Portland last year was more than double that of New York City.

Why does Democratic Party governance seem less effective on the West Coast than on the East Coast?

and here’s his conclusion:

So my take is that the West Coast’s central problem is not so much that it’s unserious as that it’s infected with an ideological purity that is focused more on intentions than on oversight and outcomes.

I think he’s not connecting the dots. The demographics of California, Oregon, and Washington are drastically different than those of Vermont or Maine. Or New York for that matter. With respect to homelessness the ratios of different races and ethnicities who are homeless don’t vary that much from state to state but the demographics of the states do vary. Asians and people of primarily European ancestry tend to have a lower proportion of the homeless; people of sub-Saharan ancestry and Hispanics higher proportions. Furthermore, there is a strong correlation between substance abuse and homelessness and West Coast states have tended to be more lenient in their treatment of recreational drug use than other states. Combine lax treatment of recreational drug use and more benign climates and you have a perfect formula for homelessness.

Similarly, with on time high school graduation rates. The on time high school graduation rates by race and ethnicity don’t vary that much from state to state but the states’ demographics do.

At the European Center for Foreign Relations Célia Belin, Majda Ruge, Jeremy Shapiro present “six scary policy scenarios” if Donald Trump is re-elected in November. They posit three strains of foreign policy opinion among Republicans:

• Donald Trump remains erratic and inconsistent when it comes to foreign policy. But the broader Republican foreign policy ecosystem forming around his administration is increasingly clear and organised.
• This ecosystem comprises three main “tribes” – restrainers who want US foreign policy to focus on America; prioritisers who want it to focus on Asia; and primacists who want it to continue to focus globally.

and the scenarios they present include a return to the Minsk Accords and a foreign policy crisis in the Indo-Pacific. I found the piece thought-provoking.

I have found Donald Trump’s thought processes puzzling since well prior to 2017. However, I think the authors overestimate how much can be determined about what a hypothetical second Trump term would bring based on prevailing strains of Republican foreign policy thought. Might they consider the first Trump term as a sign of what a second would bring? Maybe that, in fact, is what they’re considering and Trump’s previous European policies are what worry them.

My own observation is that Mr. Trump’s approach to foreign policy is completely transactional—he assesses what’s the best “deal” he can get from any particular situation, “deal” measured variably. I can well see how that would be disconcerting to European leaders.

While I cannot tell you what a second Trump term would do in any given situation, I can give you my impressions of European leadership. I think that the Europeans, particularly the Germans, are very accustomed to pursuing their own national interests, having America pick up the tab, and any change in that is very concerning to them. I also think they’re putting far too much weight on the “2% of GDP” NATO guideline for defense spending when they should be focusing more on readiness. When you’ve spent far less than you needed to for any reasonable level of readiness for over a generation, how much do you need to spend to achieve a satisfactory level of readiness? It could be 2%, 10%, or more? It could be 1%. I’m no expert on European militaries but even the French military, probably that at the highest level of readiness at this point, could probably use some sprucing up, protestations to the contrary notwithstanding.

Furthermore, what do the recent EU elections portend for future European defense spending? My take on the EU elections was that the Europeans were voting their pocketbooks and they’re tired of leadership policies that raise prices and taxes which would include increased defense spending.

I found the result of this study from Pew Research distressing:

While many Black Americans view themselves as at least somewhat successful and are optimistic about their financial future, they are also critical of U.S. institutions. Most say several systems in the United States need significant changes to ensure Black people are treated fairly.

Black Americans’ doubts about the fairness of institutions are accompanied by suspicion. Indeed, most Black adults say the prison (74%), political (67%) and economic (65%) systems in the U.S., among others, are designed to hold Black people back, according to a new Pew Research Center survey of Black adults conducted in September 2023.

The survey also finds that most Black Americans are familiar with specific racial conspiracy theories about U.S. institutions and believe they are true.

Rather than wringing our hands about whether these “theories” are true, I would rather reflect on what so many black Americans believe they are true and the implications of those beliefs.

I believe these beliefs are held because, like most Americans, black Americans derive most of their information from television and social media and that’s what television and social media are telling them. Note, too, that most of the black population is urban or suburban—80% or more—and the cities in which black Americans live tend to have governments controlled by Democrats. In other words this is not a complaint about Republicans. It’s either a complaint about the “uniparty” or about Democrats.

It reminds me of what a black friend of mine told me many years ago to the effect that the same things may happen to each of us but we won’t have the same experiences from them. That’s the world in which our black neighbors live.