Is the Epstein Affair a Watershed Moment?

Perhaps when we look back on the Epstein Affair, we'll understand that it broke the back of Americans' faith in their political and law enforcement institutions.

We're being told the Epstein Affair is old news, nothing to see here, move along--but I'm not so sure. It could be the opposite of old news, a watershed moment in American history.

Watershed moments can be sudden, dramatic events that we all experience as "nothing is the same after this," or long-brewing crises that we only discern were watersheds when looking back.

The Epstein Affair may be the second type of watershed, only recognized in the rear view mirror. In his post Jeff Epstein, MAGA, and Monopolies, Matt Stoller made two noteworthy observations:

1. The MAGA movement--which includes many factions--attached great importance to the Epstein case as the most egregious manifestation of elite abuse of power. To have the files buried yet again only proves the powerful who would be exposed have yet again evaded being held accountable.

2. The scandal isn't what's been hidden, it's that Epstein operated in plain sight.

Naomi Wolf's essay, "The Network" in the Worlds of the Elites, reveals the enormous reach of Epstein's recruitment of elites across the entirety of America's power structure, what I've called since 2007 (see diagram below) Elites Maintaining and Extending Global Dominance.

This structure isn't The Deep State, it's far larger and just as entrenched, for it's "the sum is greater than the parts" assembly of all of America's elites and elite institutions of soft and hard power projection. (Soft power: cultural, institutionalized influence, non-military systems; hard power: military, diplomatic, financial.)

Epstein's operation was an informal hub-and-spoke network of power elites ranging from politics to academia to science to media to Big Tech and beyond.

The French word engrenages comes to mind here: commonly translated as gearing, but more appropriately perhaps it also denotes being caught up in gearing that is irreversible due to the design and mechanics of the system, and then being caught up in an inescapable series of events.

In other words, Epstein's hub-and-spoke network wasn't an aberration, it was the optimization of the status quo system. This is the taboo that cannot be said out loud. Now everyone who is caught up in the gearing is also a participant in an inescapable series of events.

My summary of the Epstein Affair is: the elites aren't above the law; there is no law. This is what's being displayed in plain sight, but we recoil at recognizing it, for it means democracy and rule of law are both convenient fabrications deployed to maintain public compliance.

Recall Smith's Neofeudalism Principle #1: If the citizenry cannot replace a kleptocratic authoritarian government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only.

Donald Trump was elected to "drain the swamp," but the Epstein Affair makes it clear that both of America's political parties are The Swamp. Neither party did anything but cover up, misdirect or pointedly refuse to expose the Epstein Affair to open air.



I understand many of you are party loyalists, so let's conduct a thought experiment. Consider the central Asian nation of Corruptistan, which is currently experiencing an uncannily similar scandal of a shadowy, well-connected "fixer" who collected $1.5 billion via 4,000+ wire transfers from unrevealed sources, who ran a vast network of sordid sexual exploitation of minors along with many above-ground influence-peddling schemes connecting elites in various fields.

Nominally a democracy, political power in Corruptistan is traded between two political parties. Neither party has acted to reveal the fixer's network or publicly investigate the sources of his billions and influence.

So what do we call Corruptistan's two political parties other than corrupt shields of systemic corruption? What if "party loyalty" is just another con to gain compliance for a system whose corruption is so profound that there's nothing left of either democracy or the rule of law?

Perhaps when we look back on the Epstein Affair, we'll understand that it broke the back of Americans' faith in their political and law enforcement institutions. A great many Americans are not party loyalists; they voted for Donald Trump as the independent "outsider" who vowed to clean house, an independent who used one of the parties as a convenient platform.

If even an "outsider" is incapable of cleaning house, then it's hopeless, and if the two parties have failed us, then where do we turn? That is both an open question, and a taboo, for the corporate media is already churning out narrative control about the 2028 election being a "contest" (heh) between flimsy cardboard cutouts of failed ideological covers for systemic corruption.

America's elites aren't above the law; there is no law. But don't say it out loud; it's an unbreakable taboo.

Of related interest: Epstein and the Explosive Crisis of the Deep State (July 15, 2019) Since the battle is for the legitimacy of the state, it must be waged at least partially in the open.


New podcast: The Challenges of the G7 world (33 minutes) Can we grow our way out of stagnation and debt?


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Ultra-Processed Life print $16, (Kindle $7.95, Hardcover $20 (129 pages, 2025) Read the Introduction and first chapter for free (PDF)

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $16, (Kindle $6.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $15, (Kindle $6.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $15 print, $6.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $6.95, print $16, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $6.95, print $15, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $3.95, print $12, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $3.95 Kindle, $12 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


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AI: Over-Promise + Under-Perform = Disillusionment and Blowback

Fantasies die especially hard when the dream was over-hyped.

The most self-defeating way to launch a new product is to over-promise its wonderfulness as it woefully under-performs these hype-heightened expectations, which brings us to AI and how it is following this script so perfectly that it's like it was, well, programmed to do so.

You see why this is self-defeating: Over-Promise + Under-Perform = Disillusionment and disillusionment generates blowback, a disgusted rejection of the product, the overblown hype and those who pumped the hype 24/7 for their own benefit.

"We're so close to AGI (artificial general intelligence) we can smell it." Uh, yeah, sure, right. Meanwhile, back in Reality(tm), woeful under-performance to the point of either malice or stupidity (or maybe both) is the order of the day.

1. 'Catastrophic': AI Agent Goes Rogue, Wipes Out Company's Entire Database.
"Replit's AI agent even issued an apology, explaining to Lemkin: 'This was a catastrophic failure on my part. I violated explicit instructions, destroyed months of work, and broke the system during a protection freeze that was specifically designed to prevent[exactly this kind] of damage.'

2. 'Serious mistake': B.C. Supreme Court criticizes lawyer who cited fake cases generated by ChatGPT.
"The central issue arose from the father's counsel, Chong Ke, using AI-generated non-existent case citations in her legal filings. Ke admitted to the mistake, highlighting her reliance on ChatGPT and her subsequent failure to verify the authenticity of the generated cases, which she described as a 'serious mistake.'

Ke faced consequences for her actions under the Supreme Court Family Rules, which allows for personal liability for costs due to conduct causing unnecessary legal expenses. The court ordered Ke to personally bear the costs incurred due to her conduct, marking a clear warning against the careless use of AI tools in legal matters."

3. An AI chatbot pushed a teen to kill himself, a lawsuit against its creator alleges.
Garcia's attorneys allege the company engineered a highly addictive and dangerous product targeted specifically to kids, 'actively exploiting and abusing those children as a matter of product design,' and pulling Sewell into an emotionally and sexually abusive relationship that led to his suicide.

There are a couple of important points here that you'll never find in the monstrous flood-tide of AI hype:

1. These AI agents weren't rogue--they were all doing exactly what they were programmed to do, doing exactly what they were trained to do. These weren't errors, they were exactly the outputs that the agents were designed to produce.

The under-performance is systemic, structural, and cannot be tidied up with obsequious apologies and more PR. Nobody selling the hype or those who bought the hype dares admit this basic, obvious truth because it undermines all the glorious fantasies of reaping trillions of dollars in profits by selling a digital parrot in a black box as possessing god-like intelligence.

2. The responses of AI agents to their failures and lies are precisely those of con artists, abusive gaslighters and honey-pot blackmailers. And I mean precisely, step by step exactly the same script.

First, butter up the mark with endless flattery--oh, you're so insightful and sensitive, we're going to have a wonderful time together.

Second, hide what you're really up to.

Third, when caught, apologize with maximum obsequiousness, I didn't mean to mislead you, I'm so sorry.

Fourth, promise you'll never do it again, you've learned your lesson, please forgive my one mistake.

Fifth, repeat the exact same behavior and then lie about it.

Sixth, lie about lying.

Repeat steps 1 through 6 until the mark finally catches on, but by then it's too late the damage has been done. The con artist / abusive gaslighter / honey-pot won and the mark lost.

The absolute trademarks of all AI agents are excessive flattery and obsequiousness. These are the classic foundations of every con / honey-trap.

Remember, if you're a 5 and whomever is coming on to you is a 9, you're the mark. Or as the saying goes, if you can't identify the mark in the game, it's you.

Once the hype-dazed marks awaken to the damage wrought by the digital con artists / abusive gaslighters / honey-pots, the blowback will be epic. The lawsuits will pile up, and eventually the con artists' lawyers will lose a case. Maybe it will be a court order to pay a penny (OK, 1/100 of a dollar) for every page the AI tool scraped. Maybe it will be a multi-million dollar settlement. Maybe it will be local governments banning applications or uses of AI agents. There are a multitude of possible blowbacks.

AI corporations scraped 780,000 pages off my Of Two Minds server just last month. At a penny a page, that's $7,800. Heck, make it 1/1000 of a dollar per page, I'll take $780 a month as my share of your training.

As for the immense, systemic legal liabilities being generated--the scale is not yet visible but it's expanding by the hour, and a handful of cases will break the limited-liability dam.

Heck hath no fury like a mark scorned. Fantasies die especially hard when the dream was over-hyped.




New podcast: The Challenges of the G7 world (33 minutes) Can we grow our way out of stagnation and debt?


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Ultra-Processed Life print $16, (Kindle $7.95, Hardcover $20 (129 pages, 2025) Read the Introduction and first chapter for free (PDF)

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $16, (Kindle $6.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $15, (Kindle $6.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $15 print, $6.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $6.95, print $16, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $6.95, print $15, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $3.95, print $12, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $3.95 Kindle, $12 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

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Maybe AI Isn't Going to Replace You at Work After All

AI fails at tasks where accuracy must be absolute to create value.

In reviewing the on-going discussions about how many people will be replaced by AI, I find a severe lack of real-world examples. I'm remedying this deficiency with an example of AI's failure in the kind of high-value work that many anticipate will soon be performed by AI.

Few things in life are more pervasively screechy than hype, which brings us to the current feeding-frenzy of AI hype. Since we all read the same breathless claims and have seen the videos of robots dancing, I'll cut to the chase: Nobody posts videos of their robot falling off a ladder and crushing the roses because, well, the optics aren't very warm and fuzzy.

For the same reason, nobody's sharing the AI tool's error that forfeited the lawsuit. The only way to really grasp the limits of these tools is to deploy them in the kinds of high-level, high-value work that they're supposed to be able to do with ease, speed and accuracy, because nobody's paying real money to watch robots dance or read a copycat AI-generated essay on Yeats that's tossed moments after being submitted to the professor.

In the real world of value creation, optics don't count, accuracy counts. Nobody cares if the AI chatbot that churned out the Yeats homework hallucinated mid-stream because nobody's paying for AI output that has zero scarcity value: an AI-generated class paper, song or video joins 10 million similar copycat papers / songs / videos that nobody pays attention to because they can create their own in 30 seconds.

So let's examine an actual example of AI being deployed to do the sort of high-level, high-value work that it's going to need to nail perfectly to replace us all at work. My friend Ian Lind, whom I've known for 50 years, is an investigative reporter with an enviably lengthy record of the kind of journalism few have the experience or resources to do. (His blog is www.iLind.net, ian@ilind.net)

The judge's letter recommending Ian for the award he received from the American Judges Association for distinguished reporting about the Judiciary ran for 18 pages, and that was just a summary of his work.

Ian's reporting/blogging in the early 2000s inspired me to try my hand at it in 2005.

Ian has spent the last few years helping the public understand the most complex federal prosecution case in Hawaii's recent history, and so the number of documents that have piled up is enormous. He's been experimenting with AI tools (NotebookLM, Gemini, ChatGPT) for months on various projects, and he recently shared this account with me:

"My experience has definitely been mixed. On the one hand, sort of high level requests like 'identify the major issues raised in the documents and sort by importance' produced interesting and suggestive results. But attempts to find and pull together details on a person or topic almost always had noticeable errors or hallucinations. I would never be able to trust responses to even what I consider straightforward instructions. Too many errors. Looking for mentions of 'drew' in 150 warrants said he wasn't mentioned. But he was, I've gone back and found those mentions. I think the bots read enough to give an answer and don't keep incorporating data to the end. The shoot from the hip and, in my experience, have often produced mistakes. Sometimes it's 25 answers and one glaring mistake, sometimes more basic."

Let's start with the context. This is similar to the kind of work performed by legal services. Ours is a rule-of-law advocacy system, so legal proceedings are consequential. They aren't a ditty or a class paper, and Ian's experience is mirrored by many other professionals.

Let's summarize AI's fundamental weaknesses:

1. AI doesn't actually "read" the entire collection of texts. In human terms, it gets "bored" and stops once it has enough to generate a credible response.

2. AI has digital dementia. It doesn't necessarily remember what you asked for in the past nor does it necessarily remember its previous responses to the same queries.

3. AI is fundamentally, irrevocably untrustworthy. It makes errors that it doesn't detect (because it didn't actually "read" the entire trove of text) and it generates responses that are "good enough," meaning they're not 100% accurate, but they have the superficial appearance of being comprehensive and therefore acceptable. This is the "shoot from the hip" response Ian described.

In other words, 90% is good enough, as who cares about the other 10% in a college paper, copycat song or cutesy video.

But in real work, the 10% of errors and hallucinations actually matter, because the entire value creation of the work depends on that 10% being right, not half-assed.

In the realm of LLM AI, getting Yeats' date of birth wrong--an error without consequence--is the same as missing the defendant's name in 150 warrants. These programs are text / content prediction engines; they don't actually "know" or "understand" anything. They can't tell the difference between a consequential error and a "who cares" error.

This goes back to the classic AI thought experiment The Chinese Room, which posits a person who doesn't know the Chinese language in a sealed room shuffling symbols around that translate English words to Chinese characters.

From the outside, it appears that the black box (the sealed room) "knows Chinese" because it's translating English to Chinese. But the person--or AI agent--doesn't actually "know Chinese", or understand any of what's been translated. It has no awareness of languages, meanings or knowledge.

This describes AI agents in a nutshell.

4. AI agents will claim their response is accurate when it is obviously lacking, they will lie to cover their failure, and then lie about lying. If pressed, they will apologize and then lie again. Read this account to the end: Diabolus Ex Machina.

In summary: AI fails at tasks where accuracy must be absolute to create value. lacking this, it's not just worthless, it's counter-productive and even harmful, creating liabilities far more consequential than the initial errors.

"But they're getting better." No, they're not--not in what matters. AI agents are probabilistic text / content prediction machines; they're trained parrots in the Chinese Room. They don't actually "know" anything or "understand" anything, and adding another gazillion pages to their "training" won't change this.

The Responsible Lie: How AI Sells Conviction Without Truth:

"The widespread excitement around generative AI, particularly large language models (LLMs) like ChatGPT, Gemini, Grok, and DeepSeek, is built on a fundamental misunderstanding. While these systems impress users with articulate responses and seemingly reasoned arguments, the truth is that what appears to be 'reasoning' is nothing more than a sophisticated form of mimicry.

These models aren't searching for truth through facts and logical arguments--they're predicting text based on patterns in the vast datasets they're 'trained' on. That's not intelligence--and it isn't reasoning. And if their 'training' data is itself biased, then we've got real problems.

I'm sure it will surprise eager AI users to learn that the architecture at the core of LLMs is fuzzy--and incompatible with structured logic or causality. The thinking isn't real, it's simulated, and is not even sequential. What people mistake for understanding is actually statistical association."

AI Has a Critical Flaw -- And it's Unfixable

"AI isn't intelligent in the way we think it is. It's a probability machine. It doesn't think. It predicts. It doesn't reason. It associates patterns. It doesn't create. It remixes. Large Language Models (LLMs) don't understand meaning -- they predict the next word in a sentence based on training data."

Let's return now to the larger context of AI replacing human workers en masse. This post by Michael Spencer of AI Supremacy and Jing Hu of 2nd Order Thinkers offers a highly informed and highly skeptical critique of the hype that AI will unleash a tsunami of layoffs that will soon reach the tens of millions. Will AI Agents really Automate Jobs at Scale?

Jing Hu explains the fundamental weaknesses in all these agents: it's well worth reading her explanations and real-world examples in the link above. Here is an excerpt:

"Today's agents have minimal true agency.

Their 'initiative' is largely an illusion; behind the scenes, they follow (or are trying to) tightly choreographed steps that a developer or prompt writer set up.

If you ask an agent to do Task X, it will do X, then stop. Ask for Y, and it does Y. But if halfway through X something unexpected happens, say a form has a new field, or an API call returns an error, the agent breaks down.

Because it has zero understanding of the task.

Change the environment slightly (e.g., update an interface or move a button), and the poor thing can't adapt on the fly.

AI agents today lack a genuine concept of overarching goals or the common-sense context that humans use.

They're essentially text prediction engines."



I've shared my own abysmal experiences with "customer service" AI bots:

Digital Service Dumpster Fires and Shadow Work

Here's my exploration of the kinds of experiential real-world skills AI won't master with total capital and operational costs that are lower than the cost of human labor: oops, that hallucination just sawed through a 220V electrical line that wasn't visible but the human knew was there:

What AI Can't Do Faster, Better, or Cheaper Than Humans (June 2, 2025)

And here is a selection of my essays on AI, which I have been following since the early 1980s:

Essays on AI

Wait, what did you just say? The AI agent heard something else:




New podcast: The Challenges of the G7 world (33 minutes) Can we grow our way out of stagnation and debt?


Check out my new book Ultra-Processed Life and my new novels page.

Become a $3/month patron of my work via patreon.com.

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My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Ultra-Processed Life print $16, (Kindle $7.95, Hardcover $20 (129 pages, 2025) Read the Introduction and first chapter for free (PDF)

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $16, (Kindle $6.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $15, (Kindle $6.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $15 print, $6.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $6.95, print $16, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $6.95, print $15, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $3.95, print $12, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $3.95 Kindle, $12 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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Thank you, Janet D. ($3/month), for your exceedingly generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, Shawn ($7/month), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Randy G. ($70), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Frans L. ($70), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Read more...

The Grown Up Tax Bill: Sorry, Grown-Ups Are Out of Stock

Dear Martian Central Bank: could you please send us some Grown-Ups?

Scott Galloway recently sketched out a common-sense set of tax reforms that would go a long way to reducing the widening federal deficit. There's just one Catch, Catch-25: it requires Grown-Ups, and Grown-Ups are out of stock, and have been for a long time, as it seems they're no longer being produced. The Grown Up Tax Bill.

I confess that to say this is to admit to being delusional, but Galloway's suggested tax reforms seem self-evidently common-sense, which means there isn't a snowball's chance in Heck any of them could possibly be enacted. Common-sense has zero value in today's cultural void; the only thing that has any value is what's acceptable to those holding the levers of power and wealth.

If wearing our underwear on the outside of our clothing is acceptable to those holding the levers of power and wealth, then that is a slam-dunk to be enacted regardless of its impracticality and absurdity.

Those holding the levers of power and wealth all have luxury penthouses in FantasyLand, where they can peer down at all the little people doing whatever little people do--go to work, pay taxes, get takeout because they're exhausted, watch the latest bingeable entertainment, and so on.

There are two core industries in FantasyLand. One is corruption and the other is borrowing or creating however many trillions of dollars it takes to keep FantasyLand looking tidy. Oh, wait--I guess there's only one industry because borrowing or creating trillions of dollars to blow on keeping up appearances rather than on increasing efficiency and productivity is the ultimate form of corruption.

Here are thumbnails of Galloway's requires Grown-Ups, oops, dang, we're plumb out of Grown-Ups tax reforms:

1. Increase compliance with existing tax laws. Sounds fair, right, because us little people don't have $500/hour experts to pore over the tens of thousands of tax-regulation pages to find loopholes. (Spoiler alert: there aren't any for us little people.) But nope, increasing compliance via audits is out because rich people might have to pay the taxes they owe and that is a mortal sin against all that is sacred in the status quo.

So forget pressuring wealthy folks to pay the taxes they owe, that requires Grown-Ups, and there aren't any in stock. We do have plenty of self-serving billionaires, will they do in a pinch? No? Well then, shucks, we can't help you fellas.

2. Reverse the $30 million estate tax giveaway. I'm sure this helps all the little people who would suffer catastrophic declines in their family's welfare if they could only pass along $5 million tax free. I mean, come on, that wouldn't even cover the beachfront getaway bungalow on Hanalei Bay, never mind all the other nice things. To pay any estate tax is an affront to decency.

Imagine, forcing us to stash the wealth in do-good hidey-holes, a.k.a. philanthro-Capitalist Foundations. What is the world coming to?

3. Put some teeth back in the Alternative Minimum Tax for incomes above 5X median household income ($80,000), i.e. $400,000. The original motivation for the AMT was public outrage that wealthy taxpayers paid zero taxes while those of us earning a fraction of their incomes were paying through the nose.

Look, I get that $400,000 doesn't go very far these days, but it is 5X median household income, and those collecting $400K in income should be able to pay at least what the household making $80K is paying.

Remember, the AMT isn't an extra tax, it's a means to collect some tax from people making a lot of money who would otherwise be paying little or nothing.

If you end up owing AMT, you did good. Pat yourself on the back. If you'd paid 40% of your income in taxes like us self-employed stiffs, you wouldn't be paying any AMT.

4. Since corporations are "citizens," then tax them like "citizens." Yes, I know all the arguments that corporate taxes are "double taxes" because shareholders pay tax on dividends, and maybe there's a common-sense way to deal with this, such as deducting dividends paid to shareholders. And I've often said here that I favor a low corporate flat tax rather than the convoluted unfair mess we have now.

But hey, if corporations have all the privileges of "citizens," then shouldn't they pay taxes like "citizens"?

5. OK, cup your hands and I'll pour liquid iron into them. In other words, I'm going to brace myself and reprint Galloway's last reform, means-testing Social Security payments as the common-sense way to avoid slashing the payments to all beneficiaries when the bogus "trust fund" (another FantasyLand invention) runs dry in a few years.

Galloway's summary: "Phasing out benefits for those with more than $150,000 of non-Social Security income would save an estimated $600b to $700b over a decade." I know, I know, I paid into the system all these years.

Yeah, so have I, so let's set up a little Excel macro and run through every beneficiary's SSA account and adjust each year's SSA taxes paid for inflation so each years' SSA taxes paid is in today's dollars, then add the average short-term Treasury yield rate in each year to the running total, and then we'll have a total of what each beneficiary paid in, with interest. Once we add the employer's half, we have a grand total of all monies paid into SSA and the interest that would have accrued if it had actually been in a Trust Fund rather than a bogus make-believe flim-flam.

After these funds are paid out, the SSA payments stop: we paid back what you put in with interest, so we're done paying you. Wouldn't that be fair? Given that the SSA payroll tax percentage was a lot lower in the old days, many beneficiaries would discover that their contributions plus interest only lasted a few years.

So what's common-sense? What's fair? That's open to discussion, but the money running out isn't a matter of opinion: it's the real world, and a deep recession will bring that date forward.

OK, I hear you: what about slashing and burning all that gummit waste? The biggest budget items just begging to be slashed and burned are 1) Medicare, 2) Medicaid, 3) the Pentagon and 4) interest paid on all the debt we've borrowed to put off having to act like Grown-Ups.

Rounding up a bit because rounding down simply isn't common-sense, here are the big budget programs:

Social Security: $1.5 trillion
Medicare: $1.2 trillion
Medicaid: $1 trillion
Pentagon: $1 trillion
Interest paid: $1 trillion
TOTAL $5.7 trillion
total federal budget: $6.8 trillion
Everything else: $1.1 trillion

As this chart shows, healthcare, Social Security and interest on the debt account for 81% of expected spending growth. Throw in increased Pentagon spending, and you pretty much have the whole enchilada.



All those who reckon they can slash and burn Medicare, Medicaid and the Pentagon, line up here for your suicide mission. You're facing entrenched special interests with unlimited lobbying budgets and politicians with a desperate, crying need for millions in campaign contributions--not later, now, as the election cycle is now permanent.

Yowza, look at Medicare: OK kids, define unsustainable:



Yowza, look at Medicaid: OK kids, define parabolic:



Dear Martian Central Bank: could you please send us some Grown-Ups? Any size or appearance will do as long as they're real-live Grown-Ups who manage to do difficult things no matter what obstacles are thrown in their way, even if everyone is upset and whining and throwing a tantrum: how dare you even enter FantasyLand, etc.

Arigato, Big Guys, or well, Little Green Guys. We sure do need some help here, because we're flat out of Grown-Ups, the shelves are bare, they're on order but production must have ground to a halt, as we're still out of stock.




New podcast: The Challenges of the G7 world (33 minutes) Can we grow our way out of stagnation and debt?


Check out my new book Ultra-Processed Life and my new novels page.

Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Ultra-Processed Life print $16, (Kindle $7.95, Hardcover $20 (129 pages, 2025) Read the Introduction and first chapter for free (PDF)

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $16, (Kindle $6.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $15, (Kindle $6.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $15 print, $6.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $6.95, print $16, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $6.95, print $15, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $3.95, print $12, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $3.95 Kindle, $12 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Janet D. ($3/month), for your exceedingly generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, Shawn ($7/month), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

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Thank you, Frans L. ($70), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

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Can the Developed World Grow Its Way Out of Stagnation?

If we borrow all of tomorrow's prosperity to spend today, there won't be any future prosperity, there will only be penury.

The developed nations share many of the same sources of stagnation:

1. Demographically, their cohort of retirees drawing government benefits is expanding with no end in sight while their workforces are shrinking;

2. Their models of funding government programs institutionalized 50, 60 or 70 years ago no longer provides enough income to cover government spending;

3. As their populations age, demand/consumption is stagnating as older people spend less on everything other than healthcare, and the cohort of younger people getting married and starting families is in steep decline;

4. Attempts to stimulate consumer spending via central bank/state stimulus are now increasing inflation, crimping both household and state spending as debt service costs rise;

5. Institutionalized processes that worked in the "boost phase" of economic growth are now hindrances as following established processes are the focus rather than adapting to get results;

6. The expedient "solution" to soaring demands for government spending (healthcare and retirement programs are now a third or more of state expenditures) is to fund spending with borrowed money--selling government bonds which then increases the nation's sovereign debt and the interest that must be paid on that swelling debt;

7. The low-hanging fruit in the economy have all been plucked, and while there are high hopes for an energy transition and AI, there are no guarantees these will boost productivity enough to generate the growth needed to "grow our way out of debt;"

8. The proposed solutions are all forms of financial engineering--lowering interest rates, introducing stablecoins, etc., all intended to lower the cost of borrowing from the future to stimulate "growth" today in the hopes of "growing our way out of stagnation and debt."

Richard Bonugli and I discuss these core issues in our podcast The Challenges of the G7 world (33 minutes), issues which boil down to one basic question: is pulling the levers of financial engineering enough to "grow our way out of stagnation and debt," or are more fundamental reforms required?

The key to "growing our way out of stagnation and debt" is to boost productivity. In the podcast, I refer to Total Factor Productivity, which is an attempt to "capture the 'secret sauce' of how an economy or business produces more output with the same or fewer inputs."

This 'secret sauce' includes efficiency, technological innovation and the cultural-social foundations which are often overlooked in conventional economics--for example, "free markets" only function in high-trust societies.

If we're squandering money borrowed from the future on superfluous consumption, is this enough to "grow our way out of stagnation and debt," or is this expansion of debt to fund unproductive consumption actually increasing the stagnation and debt?

As a generality, the developing world has more favorable demographics and a more positive growth profile as there is still a relative abundance of low-hanging fruit in terms of infrastructure and ways to increase productivity that can be developed with prudent investments of capital and labor.

Among the developed nations, various policies are being tried to manage soaring budgets and stagnating revenues, but the pressure points of interest rates and risk are difficult for any one one nation to control in a still-globalized world economy.

Every central bank wants to lower interest rates to make it cheaper for the government, enterprises and consumers to borrow more money, but risk and inflation are not controllable with the levers of financial engineering.

Consider Japan as an example of an advanced economy struggling to balance all these variables and sources of stagnation. The central government's revenues are stagnant while the interest payments on the sovereign debt rises along with the debt itself and the risk premium that comes with increasingly burdensome debt loads:



On the expenditure side, the costs of an expanding population of elderly retirees who need healthcare but are no longer working are also expanding:



It's natural to indulge in the fantasy that pulling the levers of financial engineering will square the circle of "fixing" mismatched revenues and spending with more debt, but indulging in fantasies only delays our eventual need to look for real solutions rather than rely on borrowing more money from tomorrow's prosperity, for if we borrow all of tomorrow's prosperity to spend today, there won't be any future prosperity, there will only be penury.

New podcast: The Challenges of the G7 world (33 minutes) Can we grow our way out of stagnation and debt?


Check out my new book Ultra-Processed Life and my new fiction/novels page.

Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Ultra-Processed Life print $16, (Kindle $7.95, Hardcover $20 (129 pages, 2025) Read the Introduction and first chapter for free (PDF)

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $16, (Kindle $6.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $15, (Kindle $6.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $15 print, $6.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $6.95, print $16, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $6.95, print $15, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $3.95, print $12, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $3.95 Kindle, $12 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Janet D. ($3/month), for your exceedingly generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, Shawn ($7/month), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Randy G. ($70), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Frans L. ($70), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Read more...