Top Ten New York Times Bestselling Author
J.W. Mason, "The American Rescue Plan as Economic Theory,"J.W. Mason Blog, March 15, 2021, http://jwmason.org/slackwire/the-american-rescue-plan-as-economic-theory/
AI Summary. Raising payroll taxes to fix Social Security's funding gap preserves earned benefits but reduces take-home pay without added compensation, shrinking labor supply and slowing economic growth.
Core argument: A 5.2 pts payroll tax increase to 17.6% drives reduced labor supply and slower economic growth vs. the status quo.
Imagine that Social Security reform follows the fairness model, in which accrued benefits are paid in full but the rate at which future benefits are earned is reduced. A simple way to do this is to increase the payroll tax rate To keep Social Security permanently solvent, meaning through 75 years and beyond, would require an immediate and permanent increase in the payroll tax rate [from] 12.4% to 17.6%. The higher rate would decrease labor supply and reduce economic growth. [Consider] an alternate reform, which looks clearly unfair: fix Social Security’s funding gap entirely by reducing accrued benefits that Americans already have earned. As of 2025, Americans had accrued $54 trillion in Social Security benefits. Social Security’s unfunded obligation as of 2025 was $26 trillion. So, roughly, this means cutting Americans’ “earned benefits” in half. [Analyzing the 1977 reform that undid the notorious 1972 “double-indexing” of benefits, a group of economists], using SSA earnings data, found that, for every dollar of lost benefits, the affected Americans increased their earnings by 61 cents. Moreover, these additional earnings would be taxed by Social Security, further strengthening the program’s finances. In effect, this makes cutting benefits a “cheaper” way to fix Social Security than raising taxes, because people respond in ways that also increase tax revenues.AI Summary. Sweden has privatized nearly half of primary healthcare and one in three public high schools, shrinking public social spending to 24% of GDP — comparable to the U.S. and well below France and Italy — while projecting ~2% annual growth through 2030, double the rate of France and Germany.
Core argument: Sweden’s public social spending fell to 24% of GDP, matching the U.S. and 6+ pts below France/Italy, driving lower taxes.
For decades, Sweden was shorthand for the brand of high-tax, high-spend government that managed people’s lives from cradle to grave through state-run hospitals, schools and care homes. No longer. With little fanfare, this Nordic country of 11 million has embraced capitalism. Today, nearly half of primary healthcare clinics are privately owned, many by private-equity firms. One in three public high schools is privately run, up from 20% in 2011. School operators are listed on the stock exchange. The capitalist makeover has allowed Sweden to do what few industrialized countries have managed in recent years: shrink the size of the state. That has enabled the government to sharply lower taxes and, economists say, sparked a surge in entrepreneurship and economic growth. Its total public social spending bill—which includes healthcare, education and all welfare payments—has fallen to 24% of gross domestic product, similar to the U.S. and well below the over 30% for nations like France and Italy. Sweden’s economy is expected to grow by around 2% a year through 2030, roughly the same pace as the U.S. and double the growth rates of France and Germany, according to an April forecast by the International Monetary Fund.AI Summary. SNAP enrollment has doubled from 6% to 12% of the U.S. population since 2000, with real costs per capita rising 179% to $279 annually, driven by policy expansions and benefit increases that prevent costs from fully retreating after economic downturns.
Core argument: SNAP participation doubled from 6% to 12% of the population between FY2000–FY2025, driven by policy expansions and demographic shifts outpacing.
Comparing FY2000 with FY2025, the share of the population receiving SNAP doubled from 6% to 12%, while real SNAP costs per capita increased by 179%—from roughly $100 per year to $279 (in 2024 dollars). Despite this growth, per capita participation and costs in FY2025 remained below their pre-pandemic peak in 2013, which coincided with the aftermath of the Great Recession and changes in eligibility and other policies stemming from the 2008 Farm Bill. SNAP is countercyclical, meaning that all else equal, the number of people receiving SNAP should rise during recessions because of increased unemployment and decline as the economy recovers, [though] overall SNAP participation has grown faster than changes in the unemployment rate alone would predict. Over the long run, and especially since FY2020 (due to the Thrifty Food Plan’s increase in the maximum SNAP benefit), costs per capita have not returned to prerecession levels after a period of high unemployment. In FY2023, the share of SNAP households containing an elderly person (36%) exceeded the share containing a child (34%) for the first time. This was a sharp departure from the early 2000s, when more than half of SNAP households contained a child and less than 20% included an elderly person (Figure 2).AI Summary. The U.S. government has deployed $20.9bn across 16 direct equity deals, expanding beyond grants, loans, and tax incentives into direct ownership stakes. This approach has mobilized an additional $4.75bn in private co-investment alongside the government's positions.
Core argument: The U.S. government deployed $20.9bn in direct equity investments since January 2025, expanding beyond traditional grants and loans to drive.
Since January 2025, the U.S. government has invested $20.9 billion across sixteen deals involving direct ownership, broadening a toolkit that has traditionally focused on grants, loans, and tax incentives. The Department of Commerce has participated in six such deals, including taking a 10% stake in Intel. The Development Finance Corporation, the United States’ development bank, has executed three equity transactions in critical minerals, healthcare, and infrastructure. The Department of Defense leads the way with seven such deals. The U.S. government is also working with a range of partners and has mobilized an additional $4.75 billion in investment. Private co-investors include J.P. Morgan, Goldman Sachs, and others.AI Summary. Retirees receive 62 cents of every age-assignable federal dollar, driven primarily by Social Security and Medicare, which together account for 80% of all federal spending directed at adults over 65.
Core argument: Federal spending heavily favors retirees, who receive 38.6 percent of total outlays through Social Security, Medicare, and related programs.
We trace spending items within 52 general spending categories, totalling $7T for the 2025 Fiscal Year. We are able to classify a total of $4.4T across three broad age categories and assign the remaining $2.6T to an all-ages residual. Retirees (adults age 65 and older) receive $2.7T, equal to 38.6% of total federal outlays and 61.9% of age-assignable spending. Working-age adults (ages 26-64) receive $1.2T (27.9% of age-assignable), and children and young adults (under age 26) receive $449B (10.3%). The dominance of the retiree category reflects two programs above all others: Social Security and Medicare. Social Security directs $1.3T to retirees, and Medicare sends $835B. Together, they account for 80% of all age-assignable spending on older adults. But the retiree total extends beyond these two entitlements. Federal employee retirement benefits ($169B), housing assistance for older households, Medicaid long-term-care spending, and VA medical care all contribute, making the federal budget more retiree-focused than a Social Security–only lens would suggest.
Ed Comment:”I’m reacting to both of these at first blush off the top of my head with a quasi-random steam of thoughts. I would love your reaction. I may write this into an op-ed, although it would take a lot more work. Sorry for the typos, I am just banging this out. …and I am very dyslexic. You might want to read the Mason and Cochrane in the thread below first. I don’t think that what the Dems are doing has anything to do with economic theory. It’s just political power. …and wishful thinkers on both sides of the debate justifying their side’s view by over and understating the risks. There is plenty from both Mason and Cochrane to agree and disagree with. But both overlook critical issues. I love Cochrane, but occasionally find that his perfect information/competition/rational POV falls short, even if it is always a side of the argument worth considering. He doesn’t make those mistakes here. Instead, like most economists on the right, his logic largely applies to a 1970-style capital-intensive manufacturing economy with limited international trade, that’s largely constrained by domestic savings and blue-collar labor. Since then, we seem to have eases inflationary pressures by accessing a seemingly unconstrained supply of cheap offshore labor and savings combined with previously restrained monetary policy and now, perhaps clever but surely misunderstood, monetary policy that uses increased regulatory powers, albeit perhaps not explicit, to lock up monetary surpluses as excess bank deposits It’s harder to imagine inflation under these circumstances. Proponents of increased borrowing, like Mason, may be right that we can borrow without constraint, but they are surely driving the car looking in the rearview mirror without differentiating between the one-time expansion of these constrained factors of production and limits we may encounter in the future. Interest rates declining in the face of increased borrowing is not, on its own, evidence that borrowing won't matter in the future. It's not hard to imagine adverse shifts in the supply and demand for savings. The world’s demographics are aging into retirement, especially those of the surplus savers/exporter, chiefly China, Germany and Japan. Europe and Japan’s low fertility and China’s one-child policy exacerbates their demographic shift. That should increase consumption and reduce savings. The Chinese are gradually consuming more regardless. Africa, South America, and South East Asia seem unlikely to replace the surplus savings of brilliant China, Germany, Japan, and Korea. German manufacturers are gradually growing less competitive, as is the rest of Europe, as evidenced by their lower equity multiples. They haven’t been able to transition their industries to the production of information and information technology successfully as the US has. That should pressure profits, prosperity and future savings. American tech companies have spewed profitability and excess savings but are under attack by government regulators across the globe. Regardless, the productivity of research seems to be slowing down, although we may capture some value if the rest of the world, chiefly China, starts to contribute its fair shar. Pay down of domestic mortgages increased the supply of savings after the financial crisis, but that trend seems to be reversing. US investors are likely to be taxed more heavily. And America’s demographics are gradually shifting toward lower-skilled consumers. Mitigating global warming and a growing Chinese military threat could increase demand for capital. Rising interest rates could reduce sky high financial asset multiples, reducing the apparent value of collateral, increasing the risk to lenders, and subsequently increasing real interest rates. In effect we grew assets without needing to grow investment proportionally. Not having to borrowing as much to grow investment, we were able to borrow to increase consumption. That seems unlikely to continue.That said, historically unanticipated creativity has always led to over performance. Although that many not be true if the pond is getting fished out.Neither Mason nor Cochrane raises any of these issues. Without them, it’s hard to take their macroeconomic analysis seriously. As I often say, generalizable chess theory won’t take you very far. You must also carefully study the ever-changing circumstances on the board. So, it’s not hard to imagine a scenario in which future generations wish we had spent the borrowed savings more wisely—to mitigate global warming for example rather than stupidly letting my already pretty prosperous 83-year-old mother-in-law further increase her consumption. Future generations will simply complain that they need more money (ie reallocated production) to mitigate warming rather than blaming Dems for this bout of wasteful consumption. When are children are paying higher interest rates on a lot more debt and demotivating their brightest people with decades of high taxes and lower asset values, at least they won’t have an I-told-you-so counterfactual to compare their “new normal” to. It’s true the government can print money, and savers may not be asking for enough compensation to bear that risk. But it’s also the case that pursuing that strategy in the future, while perhaps more optimal than not, will nevertheless increase the cost of borrowing. Unlke the private sector, when the government borrows and spends by fiat, it distorts the allocation of resources.If it cuts taxes on the payoff for successful risk-taking, it might spur a gradual increase in risk-taking. But increased risk-taking occurs gradually over a long period of time because mining the technological frontier is harder and more complicated than just adding resources. It’s hard to get ultra high-skilled people—the binding constraint to growth today—to switch careers and take new/more risks with their careers. They likely won’t take those risks until they get the necessary on-the-job training and find valuable ideas from years of mining the frontier—both of which are critically important to reducing the risk talented people fear most—missing out on the cushy life they can have without taking much risk at all.For the same reason, we can always raise taxes and increase prosperity in the short run. California can tax the multiplier on the productivity Silicon Valley creates for its workers. Higher taxes obviously reduce the pool/distribution of viable investment opportunities. But a slightly smaller pool has only a gradual effect over a long period of time. Similarly, it’s not as though Europeans would start taking risks tomorrow if they cut their tax rates. Without decades spent gradually building companies like Google to mine the technological frontier, they don’t currently have a wealth of investment-worthy ideas no matter the tax rate. The issue is whether a positive feedback loop gradually takes hold, like it has in the US, and the most capable students eagerly become failed technological innovators rather than do-nothing professors. If, on the other hand, the government gives low-skilled workers money for increased consumption, it demotivates many of them to work. Work sucks for most of those workers. No surprise, over time lower-skilled workers have worked less as they have grown richer and consumption/leisure has grown cheaper and better. Giving them money increases the cost of employing them. In effect, when we borrow money and give it to low-skilled workers we have a choice: hire a domestic worker at a high wage who charges a lot to save, or an offshore worker who does the opposite. Fiscal deficits largely “stimulate” surplus exporters. How? Surplus exporters loan us their risk-averse savings. We underwrite the risk of guaranteeing the return, via government guarantees, and by using the borrowed savings to fund risky consumption rather than investment that would grow the economy enough to pay the interest on the loan. We consume our finite willingness and capacity to bear risk. By borrowing against our collateral, we turn their debt into equity and use it to stimulate their economy, not ours. That said, Americans, often ones who aren’t working, get to increase their consumption without working more. The cost of this consumption is foisted upon future Americans as future interest payments that decrease future consumption. Young people are naively/stupidly liberal. Now I think Keynes was right and Lucas was wrong. The private sector doesn’t logically dial back risk-taking 1:1 to compensate for the risks they are underwriting via the government. Until the risks materialize, we appear to get a free lunch. That’s the beauty of risk-taking. It’s substantially cheaper as long as the risks don’t materialize. However, Ricardian equivalence probably grows as debt grows relative to GDP driving down the value captured by current generations. Leaving aside secondary issues, we spend a dollar of future prosperity for less than a dollar today and the rest of the world captures most of any multiplier over and above the dollar. Again, that might be ok if we were spending the dollar wisely, but we’re not. BTW this is the logic behind the infrastructure investment argument. Sadly though, you mistake a good idea in theory for one that sucks in reality by the time the NYC subways cost multiples of what they should and politicians spread the pork like peanut butter to unproductive investment. And this exposes another flaw in Mason’s and Keynes’s logic. While some downturns may just be peculiar anomalies of animal spirits, many recessions surely result from real failures. Flooding an inherently unstable banking system with risk-averse offshore savings for example, increases the risk of a bank run. But until it occurs, the economy grows faster than it should have. Taking risks accelerates growth, but not without increasing volatility. You don’t get peaks without some valleys. In general, the economy grows faster because it takes risks it fails to recognize. It’s true the economy is probably like a rodent that wanders further and further from its den when it doesn’t encounter danger, and then overreacts and scurs back with it does, only to start its search all over again. But its also the case that every newly encounter threat/risk/shock, shows us the error of our ways, which demands a reallocation of resource—from subprime consumption via subprime mortgages, to a new allocation of savings. That reallocation takes time, failed experiments, innovation, etc. When the government spends money by fiat, it may temporarily sooth the pain of displaced workers, but only by slowing and postponing the reallocation process by diverting resource to yet another misallocation. Like so many economists, Mason only sees the economy statically, as if it merely needs to return to what it did before. Were that the case, most recession would never occur. He doesn’t see that we have to change quickly to stay in place. An underestimation of all the factors I have raised makes it seem as though borrowing a lot of money from offshore savers to buy their production for a one-time increase in our consumption today has less cost in the long run than it surely does. Policy decisions are largely the byproduct of mistaken analysis of a world too complex to analyze, and the overwhelming power of wishful thinking to justify the conclusions we seek. Surely that’s the case with the $1.9 T. Random mutation and survival of the fittest are the only processes likely to find optimal solutions in complex circumstances, like the economy.”
J.W. Mason on the "new" economics implied by the American Rescue Plan which he argues is a major break with the previous marco-orthodoxy, "...suggests a big move in the center of gravity of economic policy debates...."
New “axioms”"... The size and design of ARPA is a more consequential rejection of this catechism. Without being described as such, it’s a decisive recognition of half a dozen points that those of us on the left side of the macroeconomic debate have been making for years.... The official unemployment rate is an unreliable guide to the true degree of labor market slack, all the time and especially in downturns....Thebalance of macroeconomic risks is not symmetrical. We don’t live in an economy that fluctuates around a long-term growth path, but one that periodically falls into recessions or depressions....hysteresis is one important reason that demand shortfalls are much more costly than overshooting... A full employment or high pressure economy has benefits that go well beyond the direct benefits of higher incomes and output. Hysteresis is part of this — full employment is a spur to innovation and faster productivity growth. But there are also major implications for the distribution of income.... Public debt doesn’t matter.... Work incentives don’t matter.... Direct, visible spending is better than indirect spending or spending aimed at altering incentives..... Means testing is costly and imprecise.... Weak demand is an ongoing problem, not just a short-term one.... The public sector has capacities the private sector lacks….”