The debt nobody wants to pay: deficits, Social Security and the big cycle
Peter Thiel discusses the federal deficit and Social Security, Ray Dalio explains how heavy borrowing fits the big cycle behind the rise and decline of empires, Donald Trump talks about tariffs, taxes and the debt, and Kid Rock raises the national debt with Joe Rogan. The same worry comes up in conversations that otherwise have little in common, which shows how far concern about the debt has spread.
How does Peter Thiel measure the weight of the federal debt? Show answer
By the cost of carrying it: federal interest costs as a share of GDP, rather than the headline size of the debt.
What happened to federal interest costs between 1991 and today, according to Thiel? Show answer
They peaked at around 3.1% of GDP in 1991, fell to about 1.5% in the mid-2010s, and have now climbed back to record levels.
Why did interest costs fall while the debt grew, in Thiel's account? Show answer
Interest rates were held near zero from 2008 to 2021, so the debt was cheap to carry even as it got larger.
What does Thiel say he would do about the deficit and Social Security? Show answer
He gives answers he calls wildly unpopular: a smaller government, raising the Social Security age, and means-testing benefits.
Why does everyone receive Social Security regardless of need, according to Thiel? Show answer
He says it was sold as a pension system rather than as an intergenerational transfer.
What does uncapping the Social Security tax amount to, as Thiel describes it? Show answer
The tax applies up to somewhere near $150,000 of income, so removing the cap is a 12.4% tax increase on higher incomes.
Why does a reserve currency lead a country into debt, according to Ray Dalio? Show answer
Savers want to hold that country's money, so they lend to it, which lets it borrow a lot and get deeper into debt.
Why do politicians keep borrowing, in Dalio's explanation? Show answer
Constituencies see only what they receive, so borrowing and spending is attractive and the cleanup is left to a successor.
What two choices does Dalio say the Federal Reserve has when more bonds must be sold than buyers want? Show answer
Raise rates, which slows the economy and hurts markets, or monetize the debt, which produces inflation in goods, services and financial assets.
Which of his 18 indicators does Dalio call the most important leading one? Show answer
The quality of education, especially broad-based education drawn from the largest possible population.
How does Donald Trump explain the deficit under his administration when Joe Rogan asks? Show answer
He says his tax cuts and tariffs were about to start paying off debt when COVID arrived, and businesses had to be helped to avoid a depression.
What did Kid Rock and Joe Rogan read about who the US national debt is owed to? Show answer
That most of it is owed to Social Security and pension funds in the United States, not to foreign countries like China and Japan.