Lessons for the U.S. from Japan's Lost Decade

https://reason.com/2024/08/06/lessons-for-the-u-s-from-japans-lost-decade/ ^ | 6 Aug 2024 | Thomas Savidge

[anthropocene_x]

The Nikkei just had its worst day since 1987, and the U.S. stock market, which already took a dramatic dive Friday, is tumbling further this week. While it was America's poor jobs report that spurred the global sell-off, there is much we can learn from other countries' experiences—particularly Japan's.

There was a time when leading economists predicted Japan would overtake the United States as the world's leading economy. Instead, the Japanese central bank's loose monetary policy produced a real estate bubble, which eventually burst. The government responded with "stimulus" and easy credit, which dramatically increased the nation's debt and extended the poor economic conditions. The result was the "lost decade" of 1991–2001, characterized by multiple recessions, poor economic growth, high taxes, and high inflation.

In the U.S. now, the total debt held by the public recently surpassed $35 trillion—just 209 days after hitting $34 trillion. Add unfunded obligations for Social Security and Medicare, and that $35 trillion becomes $113.2 trillion.

And yet, few Americans seem to be phased by the news. Economist Brian Reidl laments, "Few voters, or even politicians, have fully grasped how perilous Washington's fiscal outlook has become."

Japan's lost decade didn't just hurt government balance sheets; it brought long-lasting damage to the Japanese people. As deficits and debt crowded out government spending, life became increasingly expensive for the average person in Japan. Despite two short-lived income tax cuts (a yearlong tax cut from 1994–1995 and a two-year cut spread from 1998–2000), long-term aggregate consumption was hindered when the government raised a consumption tax to pay down the rising national debt.

With such weak economic growth, Japan saw a decline in middle-class incomes and employment—and marriage and birth rates. There was an increase in single-person households, individuals living with their parents, and related mental health issues. This "lost generation" is still reeling from the poor fiscal responsibility of those that came before them. I look at the frighteningly high suicide rate in Japan and wonder whether American kids will come to see the world in the same way.

Here in the U.S., net interest payments on the national debt have now exceeded military spending, Medicaid, and all government spending on children. Meanwhile, politicians on both sides of the aisle are happy to ignore debt and unfunded obligations, promising not to touch middle-class entitlements out of fear of losing an election. The combined Social Security Old Age and Survivors and Disability Insurance Trust Fund is expected to exhaust its reserves by 2033. Medicare Hospital Insurance is on track to be insolvent by 2036, and the rest of Medicare is expected to experience major stress. Are we headed in the same direction as debt-drenched Japan?

[Jonty30]

Japan is going to have to adopt solid growth policies and abandon the socialism that is hurting them.

[NorthMountain]

AMERICA is going to have to adopt solid growth policies and abandon the socialism that is hurting US.

[NorthMountain]

And abandoning the socialism necessarily means ending government programs that are widely considered untouchable.

Social Security and Medicare for example. All forms of “income security” for example.

Anybody who thinks these things can be “saved” cannot be taken seriously. And that pretty much eliminates the entire political class.

[anthropocene_x]

And while we’re at it cutting, how about the defense budget which is bigger than the next 20 biggest countries combined? Or should we cut SS and Medicare instead so we can subsidize Europe?

[NorthMountain]

We should END social security, medicare, medicaid, SNAP, TANF, etc. ad mauseaum.

Admit that government-operated retirement plans and social welfare programs are nothing more than armed robbery.

Are you aware that SS/Medicare add up to more than half of federal government spending?

I know ... a bunch of folks are going to screech and holler about how they "paid in" (they didn't) and damn if they aren't going to get their "fair share". Which is zero.

Too many people on the "right" love socialism ... so long as it's THEIR socialism.

Total government spending for 2022:

[Brian Griffin]

Japan depends heavily on the exports of motor vehicles and their parts.

The Chinese are determined to dominate the EV business.

[Brian Griffin]

“SS/Medicare”

If the old folks have no money to pay property taxes, mommy and daddy should plan on FICA/Medicare taxation being replaced by K-12 private school tuition.

Things are not as unfair as some would think.

My parents and their generation paid for my K-12 education.

My parents paid school tax even after my leaving public school, probably enough to cover my and my siblings’ shares of my and their teachers’ pensions.

I’ve paid school taxes for 40 years after college. Adjusted for officially declared government inflation, that’s ~$100,000. Many, many other older Americans have contributed far more than my ~$100,000.

Government social insurance systems pay out heavily at older ages because Americans/Brits would not stick around in the high-priced USA/UK if they didn’t.

I’ll add that if school taxes weren’t imposed, I would have been far more able to risk money in the stock market, which has given huge returns broadly.

[kaktuskid]

Japan needs to have more babies. That is their main problem.

[Jonty30]

The root cause is socialism and women working. If you’re working 12 hour days, which everybody is, where are you going to get the time to make babies?

[Brian Griffin]

Medicare Part B

$100 doctor bill

$20 patient co-pay

$20 covered by Part B premiums

$60 paid via taxation

doctor pays ~40% marginal 1040 rate
staffers pay ~27% marginal rate

~$33 paid via doctor office earned income taxation

~$27 paid by outside party taxation, including that of corporations

[Brian Griffin]

“make babies”

The problem is raising babies and children.

Seven days a week jobs and childcare can be shared.

Week 1

Mom 1
4 days job
3 days childcare
Mom 2
4 days child care
3 days job

Week 2

Mom 2
4 days job
3 days childcare
Mom 1
4 days child care
3 days job

If the workday is 10 hours long, each mom will average 35 hours a week working on average.

[Brian Griffin]

ENHANCED HOSPITAL SERVICE COMPETITION

To reduce hospital costs, state law would be changed to allow:
1. large hospital complexes and systems to be split up
2. competitive hospitals to be built adjacent to existent hospitals
(if a building purchase request is refused)
3. independent surgical, imaging, lab and nursing care facilities to coordinate
to state law requirements to effectively function as hospitals

[Jonty30]

I think we need to go back to pre-nuclear family, where the mother and father worked the fields during the day time, so to speak.

We need it so both mother and father are involved, because that is the way it used to be before the nuclear was a norm.

[Theoria]

'Government social insurance systems pay out heavily at older ages because Americans/Brits would not stick around in the high-priced USA/UK if they didn't.'

But, that is the main reason of the expensive doom loop of government spending. If you weren't paying into the system, the system would be much cheaper. Same for all expensive problems, college, healthcare via medicare etc. Government payouts help to keep things so expensive.