2024-11-17XThread

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From my first economic course with Art Laffer: GOVERNMENT SPENDING IS TAXATION. Government spending raises taxes today, or burdens our children with higher taxes in the future, or debases the debt and the dollar with inflation, the most regressive tax of all. .@DOGE is likely to change the mindset profoundly in Washington, as other policies focus on rapid growth to reduce the deficit relative to GDP and, in a virtuous cycle, raises the probability of even lower taxes on individuals and companies. The Reagan revolution extended through President Clinton’s administration, leading to lower taxes, stronger GDP growth, and a bull market rewarding active equity management that lasted nearly 20 years. We believe that this bull market has just begun to broaden out.

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. @DOGE is a once in a lifetime opportunity to increase economic freedom in the U.S. and cut the size of government back to health. The founding fathers were geniuses but (with humility) may have missed the adverse incentives which grow the size of democratic government over time (winning elections by promising more free stuff). To future proof this, we may need a constitutional amendment capping total government expenditure (at say 10%), or a way to align incentives (Buffet famously suggested an unbalanced budget makes all members of congress who vote for it ineligible for reelection). You’d ideally have a way to temporally dial up burn (say in war time), but still have the right incentives to not let spending get totally out of control longer term. An example would be a U.S. sovereign wealth fund, where every citizen gets a share (maybe people can buy more if they want), and any budget surplus pays a dividend. Every citizen then has skin in the game. Maybe congress gets a slightly larger stake. What are the best ideas out there to align incentives toward fiscal discipline long term?
brian_armstrong ↗