Whoa whoa whoa! Who let the crazy old dude in here?!?!

One of my favorite social phenomena is when an individual says something that goes completely against the beliefs of everyone surrounding him, and says it with gusto, not caring what anyone else thinks. After Randy, Ellen, and Kara have praised the performance of an American Idol contestant, Simon Cowell will say, "That was utterly ghastly" in a British accent, as boos from the crowd rain in. But he doesn't care.

Watch this clip in which Marc Faber drops a bomb about halfway through. The reaction from everyone else is as if he stood up, turned around, and dropped his pants.

This is the kind of contrarian strength that, IMO, is vital for successful investing. Watch also how at the end of the clip the CNBC interviewer tries to insult Faber's "doom and gloom". Had he done the slightest bit of research, he'd have known how successful Faber has been. I can only see one really bad trade among many more amazing calls in his 2008 and 2009 picks.   Another interview with Faber on the same topic:

Why have I lately been obsessing about a USG default? Because smart people--contrarians with a track record--like Marc Faber believe it's going to happen. I see the numbers detailing the liabilities and I can't see a way out. People usually conclude, "Taxes will have to rise," but I think they underrate how mobile capital and labor are in this modern era, and how diminished the returns on increased tax rates will be. Additionally, tax hikes are politically unpopular, and spending cuts are disincentivized in a political market.

Just raise the age for Social Security benefits! Even if that was politically possible, that would only make a small dent in the unfunded liabilities.

The dynamic I see is a "point of no return" beyond which it is simply impossible to stop the trainwreck. If we had a benign dictator with absolute power, he might be able to cure our ills, but we live in a democracy, and there are too many factions to make a coherent plan. Obamacare was, IMO, the point of no return, though most likely, it will only accelerate what was already fated.

I don't think raising taxes will be effective (though I'm open to opposing thoughts). Hyperinflation could monetize the debt but I don't think that will change the fundamental dynamic of Western democracies; it will merely enable more entitlements and delay the crash into the future.

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Additionally, tax hikes are

Additionally, tax hikes are politically unpopular, and spending cuts are disincentivized in a political market.

Aren't "politically unpopular" and "disincentivized in a political market" two wildly different ways of saying exactly the same thing?

I suppose they are

But I meant slightly different things by them.

In response to proposed tax hikes, voters threaten to vote politicians out. This is the popularity realm of politics.

The disincentivized part was about focused benefits/ dispersed costs. This is the economic realm of politics.

Really, the easiest solution

Really, the easiest solution is the train wreck itself. The train is old, creaky, and so full of bugs that its better to let it crash and replace it. If I were this benevolent dictator, I would shut down the Federal Reserve, default on all foreign held U.S debt, shut down 70 percent of the Federal Government, take the accompanying revenue boost and use it to pay off the most painful to erase unfunded and current liabilities, but incur no new ones, and do the best to get the state out of the way so the public has more means available to improve it's situation during the "train wreck" times.

I don't think raising taxes

I don't think raising taxes will be effective (though I'm open to opposing thoughts).

I was going to explain why I think you're right, but I got distracted by work. Luckily, Greg Mankiw went on and did my work for me:

The most common metric for answering this question is taxes as a percentage of GDP. However, high tax rates tend to depress GDP. Looking at taxes as a percentage of GDP may mislead us into thinking we can increase tax revenue more than we actually can. For some purposes, a better statistic may be taxes per person, which we can compute using this piece of advanced mathematics:

Taxes/GDP x GDP/Person = Taxes/Person
Here are the results for some of the largest developed nations:
France: .461 x 33,744 = 15,556
Germany: .406 x 34,219 = 13,893
UK: .390 x 35,165 = 13,714
US: .282 x 46,443 = 13,097
Canada: .334 x 38,290 = 12,789
Italy: .426 x 29,290 = 12,478
Spain: .373 x 29,527 = 11,014
Japan: .274 x 32,817 = 8,992

I've actually done this calculation for the entire OECD before, with similar results. I think Mankiw might actually understate the issue though. I'm not sure how to adjust these numbers for the fact that the U.S. government "spends" a lot of money through manipulating the tax code. If the government subsidizes health insurance through a deduction, it's not clear to me how that compares to directly paying, when you think about government "expenditure". But the effect has to be non-zero.

But virtually no economist thinks we're at the Laffer maximum. So what gives? Personally, I think the problem is that economists treat "culture" as exogenous when they calculate, say, the elasticity of income with respect to changes in the tax rate. But it isn't. European tax rates and hours worked were similar to America until the 70s, then they diverged.

Europeans claim they are less interested in the Almighty dollar, but I don't buy it. The "lazy", sit-around-the-cafe-drinking-Ouzo culture of Greece comes from the incentives in the tax code. And it could easily happen here.

So, bottom line, I think you're right. There isn't that much more money to be had from taxation.