Analyzing History and Getting to a Better Economic Future

16 thoughts on “Analyzing History and Getting to a Better Economic Future”

1. There are a few observations that I think are important:
   1) post world war I, post world war II and post koren war, were all adjustments to realign the U.S. to a civil economy, ensuring that the services provided by the federal government were aligned again to needs of the internal population.
   2) War economy “pumps” the economy because war economy is expensive! You have to work fast and you burn through a lot of production, and usually you have to do everything yourself because your enemies will try to interfere on the global markets. Post-war, you can reduce the expense and have more efficient production for the same stuff because you can just slow slown and try better solutions and processes, and yet you will not be destroyed.
   3) Despite all the statements (war on fentanyl, war on immigration and so on…) the US now are not at war, so the economy now is already less inflated than a war economy (and for example, if you do not have trade wars, you could source your parts, goods and services from everywhere in the world looking for the best deals). So the situation is not comparable.
   4) Trump promised some sort of immediate golden age, and he also attributed to himself the successes of Biden’s economy stating that the markets were going well because they knew he was going to be president. Now it seems that a recession, hopefully a short one is unavoidable.
   5) In your analysis, you indicate tariffs as “revenues”, but every nation can enforce tariffs only on companies and people on their territories for goods reaching the ports of entry. Therefore TARIFFS DO NOT PROVIDE NET FISCAL REVENUES for anything, if I want to buy an imported good, either the importing company pays the tariff without discharging the extra cost on me ( so the import company reduces its profit and will pay fewer taxes), or the company will increase the final price and I will be the one paying more (reducing my disposable income and impacting other purchases and the global economy, decreasing other tax revenues), or I will buy something sourced internally (that might or might not be what I wanted in the first place) and so there will be no tariffs because the demand for imported goods will decline (there will be an increase of revenues in taxation of internal manufacturers providing similar products). In any case tariffs do not provide NET wealth, because it is just a transfer of wealth that is already within the nation.
   6) Tariffs on the other hand can cause retaliation and inefficiencies in the supply chains (as seen in the brexit case for example)
   7) you did not evaluate the effect of American isolation on the global market and at the strategic level: many nations traded preferentially with the US because it was considered stable both at economic and geopolitical level, and because the US managed their power projection oversea both military and through diplomacy (yes also through usaid programs).
   Trump strategies will decrease US foreign capability and power projection. So why should EU nations buy US weapons and services (yes, also the beloved Starlink and SpaceX launches) if the US establishes the precedent that they can suspend decades-old policies and realign and befriend invaders and dictators? What are the projected losses of all the military contracts that will not be fulfilled anymore because US could suddenly deny weapons and services in the moment of an invasion?
   8) What are the losses due to investments that integrated Canadian, US and Mexican economies and will be worthless (or simply unprofitable) due to tariffs, decrease in volumes and so on…
   9) historical data demonstrate that tax cuts for the wealthy, trickle-down economics, and flat taxation promote only the concentration of wealth in fewer hands. It did not work in the past, why should it work now?
   10 ) regulations guarantee that the long-term collective interests are protected even though they might not be aligned with for-profit short-term strategies (like mining operations that left behind polluted wastelands): how do you calculate the economic impact of long-term losses? Who will evaluate that your infrastructure investments will be up to specifications if there is no enforcing agency? What will be the net losses due to tax evasion once IRS is gutted?

   I think working with AI is nice and everything, but you can ask AI to write you a nice essay on why Red is actually Green. It does not necessarily make it true.

   Regards.

   • Tariffs are government revenue. They are like targeted sales taxes or targeted value added taxes. If there was $200 billion per year in increased tariffs beyond the current $80 billion per year and there was an offset reduction in individual income tax. Then it would like creating a VAT (value added tax) or GST (canada sales tax). However, instead of giving domestic companies or individual credits against across the board sales taxes it would be applied to imported items. It would be reduce the imports (by creating domestic production from the original supplier or encouraging a shift to domestic suppliers).

     Local, state and other levels of government create sales taxes all the time or increase the sales tax on everything by a percent or so. About 9% sales tax in many places.
     European VAT with offsets to domestic european companies are very similar to tariffs. The reciprocol tariffs are the delayed retaliation.

     why don’t we get rid of all sales taxes? Tariffs are supposedly bad, sales taxes must be even more bad. Sales taxes increase the costs for consumers. Tariffs increase the costs for consumers. But how would the local governments pay for anything? They could just run up debt. Some of the complainers don’t seem to care about running up debt for the federal government.

     How much reduced power projection would the US have? The US with 3000 F-16s, F18s, F22s and F35s. versus spending more trillions over 20 years to get more F35s?
     How much reduced power projection with 650,000 standing (army, air force navy) personnel vs 1.3 million. Plus more of the cuts can come from non-combat personnel.

     Total U.S. Defense Personnel
     The total number of DoD personnel includes active-duty military, reserve and National Guard members, and civilian employees. According to data from September 2023 and projections into 2024/2025:

     Active-Duty Personnel: Approximately 1.3 million (1,304,720 as of fiscal year 2022, with slight variations expected by 2025).
     Reserve and National Guard: Around 767,238 to 772,910 selected reserve members, depending on the specific reporting period (e.g., 766,731 in 2022, with minor increases possible by 2025).
     Civilian Personnel: Approximately 778,539 to 867,308, with the higher end reflecting appropriated and non-appropriated fund employees as of fiscal year 2022.

     Adding these together, the total DoD workforce is roughly 2.8 to 2.91 million personnel as of the latest comprehensive reports. This excludes the U.S. Coast Guard (about 39,485 active-duty members in 2022, under the Department of Homeland Security) unless mobilized under DoD authority.

     Potential Reduction: Studies on corporate automation suggest 20-30% of administrative tasks can be fully automated. For the DoD, this could mean cutting 40,000 to 100,000 admin positions, depending on adoption speed and complexity.

     Support roles—logistics, transportation, IT, maintenance, and medical—employ roughly 700,000 to 1.42 million personnel (active-duty, reserve, and civilian combined). Efficiency gains here could be massive:

     Predictive Logistics: Machine learning models can forecast equipment failures (e.g., using sensor data from vehicles or aircraft), reducing the need for large maintenance crews. The Army’s Predictive Logistics initiative aims to halve downtime, potentially shrinking staff by 10-20% in maintenance roles (e.g., 50,000-100,000 fewer mechanics).
     Autonomous Supply Chains: Drones and self-driving vehicles could deliver supplies with minimal human oversight. The DoD’s experiments with autonomous resupply (e.g., DARPA’s Gremlins program) suggest a future where logistics teams drop from dozens to a handful per operation.
     Centralized IT: Consolidating cybersecurity, network management, and software support into AI-driven platforms could reduce the 50,000-100,000 IT personnel currently spread across bases. A single AI system monitoring threats could replace hundreds of analysts.
     Telemedicine: Remote diagnostics and robotic surgery could cut medical staffing by 20-30% (e.g., 30,000-50,000 personnel), especially for routine care, freeing medics for combat zones.

     Potential Reduction: Logistics and support could see a 15-25% staff cut, or 105,000 to 355,000 fewer personnel, as automation and optimization take hold.

     Non-combat roles like intelligence analysis, training, and planning (part of the broader ~2.43-2.73 million non-combat total) could also shrink:

     AI in Intelligence: AI can sift through satellite imagery, signals, and social media faster than humans. The DoD’s Project Maven already uses AI for drone footage analysis, potentially reducing analysts from 50,000-70,000 to a fraction of that—say, 10,000-20,000.
     Virtual Training: VR/AR simulators could replace physical training staff and facilities, cutting instructors (e.g., 10,000-20,000 roles) while maintaining readiness.
     Decision Support Systems: AI-driven war-gaming and strategy tools could reduce planning staff by 5-10%, or 10,000-25,000 personnel, by automating scenario analysis.

     Potential Reduction: A 10-20% drop here could mean 243,000 to 546,000 fewer non-combat roles overall.

     Key Enablers

     Investment: The DoD’s 2025 budget includes $145.4 billion for R&D and modernization, with IT upgrades like the Joint All-Domain Command and Control (JADC2) system critical to this shift.
     Cybersecurity: Robust defenses are needed to protect automated systems, possibly requiring a small, skilled cadre (e.g., 5,000-10,000) to offset some savings.
     Cultural Shift: Resistance from entrenched bureaucracies and unions could slow adoption, requiring retraining rather than immediate cuts.

     IT modernization could slash 388,000 to 1 million admin, support, and non-combat roles, saving billions annually while sharpening the military’s edge—assuming execution overcomes inertia and technical hurdles.

     • VTA is applicable to
       Imported and domestic production, so this is not a tarif …

       I agree that state reform and optimization is needed but I’m sure that you will not be happy soon about what will happen, this is too radical to succeed

2. Why are you so in favor of a flat tax rather than something that is a higher marginal rate at higher incomes?
   What are the arguments either way?
   Maybe just give a link to a discussion, so you don’t have to write an essay to answer my question.

   • I’d say there are three arguments against ‘progressive’ taxation.

     1. It discourages increasing one’s income, by reducing the marginal utility of the next dollar more and more.

     2. It encourages government to increase income inequality, because at a given total amount of income, the government gets more revenue the higher income inequality goes.

     3. By having most of the spending financed by a tiny proportion of the population, expenditures which are wildly cost-ineffective become politically advantageous, because benefits and the costs are experienced by different people, and the people experiencing most of the costs are vastly outnumbered, and so have no political leverage to object to wasteful spending.

     Ideally you want taxes to scale with the cost you impose on government, NOT the benefit you generate for the economy. So as to discourage creating costs, rather than discourage creating benefits.

     • “Ideally you want taxes to scale with the cost you impose on government, NOT the benefit you generate for the economy. So as to discourage creating costs, rather than discourage creating benefits.”

       The general assumption of progressive taxation is that people and entities that own and manage multibillion-dollar behemoths produce more wealth, but also discharge significant costs on the collectivity. This has always been true for resource exploitation businesses (from mining to logging and certain kinds of monoculture that impoverished the land) and heavy industrial processes, but it might also be true for high-tech companies that mine your data as the final product.

       Furthermore, reducing the marginal utility of the next dollar more and more, is not necessarily a negative thing because it limits the advantages coming from wealth concentration (you do not want a nation where, on average, everyone is quadrillionaire but in truth, everybody own nothing except one guy)

       • No, that’s the *excuse* for progressive taxation. There’s absolutely no reason to believe the cost of government services scales with income.

         The real reason is that you can’t buy the masses’ votes with their own taxes, but you can if you’re taxing somebody else.

         • I’ve no idea why that posted as “anonymous”, when I properly entered my name…

   • The best, fairest, most productivity encouraging tax is the Land Value Tax (LVT).
     The LVT on location, quality of land, or ANY of nature’s creations, means Land will not be held for appreciation or speculation, since holding it would incur a tax just as much as developing it would. But by untaxing improvements to Land, you get more improvements and more efficient use of Land (zoning messes this up, but that’s a separate issue).
     All other taxes: Sales, VAT, Flat, Capital (including on buildings), Payroll, even Progressive, discourage productivity. Only the LVT stimulates production.
     This Henry George idea has been tried 100s of times since he wrote about it in Progress and Poverty (1879) and subsequent books. It increases building (measured by permits) always and everywhere.

3. So, we’ve resigned ourselves to accept that the DJT administration and the spending cuts will kick off a recession?

   • I would point to the layoffs of the Gov’t employees coupled with the large layoffs in the corporate domain that are going on now as some evidence that when whatever termination benefits end- there will be less money circulating in the economy, to consume. We have added tariffs so it’s doubtful that exports will rise or stay flat either. When those things begin happening public companies will want to scale back spending further to meet profit growth goals.

   • At least a very brief one. It’s kind of like ending a bender. You ARE going to go through a hangover before you make it to sober again.

   • We are currently driving ourselves off a financial cliff. $37 trillion in debt and increasing at $1 trillion every 100 days. What happens if this is not fixed? Interest on debt was already about $680 billion.

     I think it would be great if the fix looks as good as the plan that I have presented. Previously we had recessions but did not fix any of the spending. Literally trillions are being wasted. People are stealing 30-50% of everyones tax money and doing things that are mostly useless or destructive. You are carrying around dead weight. Four people are carrying one person. That person is taking money from your wallets while you carry them but they give you back 10-20%. You will come out richer and faster and more energetic when you stop carrying them.

     • What to do with people that can’t work or have issues ? This is a very selfish behavior and drive more problems

       • Yeah, they might starve or get sick, or commit crime in order to eat, and curing them or imprisoning them, costs more in the long run. This is not efficient at all.

       • It would be a shame if families and local communities, including churches and civic organizations, started accepting responsibility instead of pawning it off on the federal government, right?

         Selfish nerds who only care about themselves, who do not want to be bothered to get personally involved in the lives of others, seem to populate this website. Always suggesting that we need government to take care of the poor and needy.

         Fatherless homes, fragile kids, and high crime rates are the result of government welfare and people absolving themselves or familial/community responsibility.

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