MarvinSussman

The US debt has little effect on the economy

This is the real story:

We hold the following t***hs to be self-evident but our website will answer your doubts.

1. World War II finally ended the Great Depression as all that Congressional spending went into war bonds bought by Americans working double shifts and Sundays for four years. After the war, the cashed-in bonds bought cars and homes and finally gave us the prosperity that only required ENOUGH government spending, as Hitler had also proven.
2. Congressional spending on infrastructure is effectively almost doubled as it ripples from consumer to merchant to supply-chain employee/consumer, etc. The GDP growth induced by moderate post-war inflation plus spending on GI housing and education, the Marshall Plan, nuclear energy, the Korean War, rearmament, the Interstate Highway System, NASA, Vietnam, etc., dropped our Debt/GDP ratio from a war-time 120% to 30% in 35 years. The Congressional Budget Office uses a very conservative 1.6 multiplier.
3. Our Treasury borrows the annual federal budget deficit not because Congress needs money but only to drain just enough of bank reserves to enable the Fed to stay on its targeted federal funds interest rate, the basis of other rates. When Congress has a budget surplus, US debt instruments become scarce and Wall Street gets panicky!
4. Congressional spending tends to increase our GDP growth rate and as long as our GDP growth rate exceeds the Fed's interest rate, our national debt can grow indefinitely and safely. (Check the math: http://www.levyinstitute.org/publications/?docid=1379.).
5. A Constitutional amendment requiring that annual federal budgets be balanced would be a deflationary disaster for our economy. Congress' deficit spending is needed to replace the dollars exported by our annual trade deficit. A trade surplus would permit an equivalent budget surplus. That’s why Germany can balance its budget and we can’t.
6. Our optimum budget goal is: “Budget Deficit = Trade Deficit + Private Savings”. Less spending would increase unemployment; more spending would increase inflation. So, Congressional spending is limited ONLY by the onset of harmful inflation controlled by the Fed with moderate long-term interest rates and by Congress with adequate progressive federal tax on discretionary incomes, financial t***sactions, and estates.
7. The US dollar’s reserve currency status (which favors US consumers and exporters) requires our Treasury to maintain a large national debt, much of it owned by foreigners.
8. The Fed’s purchase of US debt decreases interest rates, increases bank deposits, and shifts a potential debt problem into a potential inflation problem, which, if it happens, the Fed will fight with raised interest rates to discourage borrowing and investing.
9. Wars are won with infrastructure and we need as much as we can get. We should now be building enough to stay well ahead of a China going 24/7. Since a pot-hole may delay a vital delivery, all infrastructure is necessary for defense. Since Congress is responsible for national defense, it should pay for all infrastructure, including pot-holes, day-care, K-PhD education, and healthcare, all of which are NECESSARY for national defense. Of course, state and local governments would administrate most infrastructure, coordinating their project schedules with the Administration to avoid inflation,
10. If foreigners want to sell us their goods, they must accept our dollars. If they refuse our dollars, we will get our jobs back and make our own goods. But they will always want a strong dollar, earned through productivity gained from infrastructure.
11. Increased output for the same input is anti-inflationary so Congress will not cause harmful inflation by hiring idle unemployed labor to get infrastructure and productivity.
12. One quitting ones high-paying job for a lower-paying job to cut ones taxes is just crazy. Congress cutting spending to cut taxes is crazier. More than tax cuts, we need infrastructure and technology. In the past, Congress gave us t***sistors, integrated circuits, computers, the internet, solar and wind energy, LCD and touch-screens, GPS, the mouse, SIRI, jet planes, rocket ships, robots, genomics, and a slew of pharmaceutics.
13. High spending with sufficiently high tax revenue can produce lower budget deficits than low spending with low tax revenue. And produce added infrastructure!
14. While excessive unemployment exists, excessive deficits are due only to low tax revenue, not Congressional spending that hires the unemployed to build infrastructure.
15. The existence of excessive unemployment implies a failure of Congress to provide infrastructure for our national defense. Congress members who refuse to hire the idle for building infrastructure are endangering our existence as a free nation as well as betraying our Founding Fathers’ demand that we “…promote the general Welfare and secure the Blessings of Liberty to ourselves and to POSTERITY.” V**ers, your adorable grandchildren will thank you for the arsenal you provided for them. Start taking names!
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Questions? Get answers from economists at www.umkc/econ/???/.edu
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T***hs supplied by Marvin Sussman are derived from the following sources:
*“Austerity” (Oxford U. Press) by Mark Blyth, Brown U. Professor of International Political Economy.
*“Freedom from National Debt” (Two Harbors Press) by Frank N. Newman, former Deputy Secretary of the US Treasury, recipient of the Treasury’s annual “Alexander Hamilton” award.
*”Modern Money Theory” (Palgrave Macmillan) by L. Randall Wray, UMKC Economics Dept.
*NewEconomicPerspectives.org by Dr. Stephanie Kelton, Chairperson, UMKC Economics Dept. *“Seven Deadly Frauds of Economic Policy” (Oxford U. Press) by Warren Mosler, economist.
*”The T***h about the National Debt: Five Myths and One Reality” (Harvard Business School Press) by Francis X. Cavanaugh, US Treasury economist for over 30 years.

nwtk2007 Loc: Texas

In all fairness, a big part of what is attributed to Obama was actually a part of the Bush budget which continued to accumulate increased debt well into the second year of the Obama administration, yet Obama gets credit for it.

Liberty Tree

The warning of attacks about 9/11 were non specific. There have been repeated warnings of terrorist attacks since Obama has been President so all of them are his failure to act. Are you going to apply the same standard? Of course not, you will try and spin Obama out of any responsibility.

Louie27 Loc: Peoria, AZ

What warnings were ever told to Bush?

Louie27 Loc: Peoria, AZ

I guess you do not remember that both the House and the Senate were controlled by Democrats who v**ed on all bills that were put up for a v**e and many Democrats v**ed for the wars. Also the recession started at the end of the Clinton administration when Clinton repealed the Glass/Stegall Act, which kept banks from investing in the mortgage markets. Roosevelt realized, that, was the problem that caused the great depression and he was a Democrat. That just proves that Democrats, in the last two decades, do not have common and use information of the past to help them govern.

nwtk2007 Loc: Texas

Dude, it was still Bushes budget.

Liberty Tree

Presidents propose budgets but Congress is the one who passes the bills putting the budget in place. Presidents can intimidate Congress into enacting certain budget items by threats of vetoes but Presidents cannot put budgets into place with Congress and Congress needs P**********l signature for budgets to go into place . Presidents and Congress have equal responsibility for budgets.

robmull Loc: florida

All the Bush's are "progressives," Slushman.

robmull Loc: florida

"BHB" has DOUBLED the American debt of EVERY American president that came before [him], 11.

Liberty Tree

If Congress followed old Marv's plans the USA would collapse like the old Soviet Union faster than the way it is headed now.

nwtk2007 Loc: Texas

So then, by your reasoning, the current increase in debt under Obama is actually he result of our republican congress.

Richard94611

Aren't you leaving out a little bit from Bush's record ? Liker all the money his war in Iraq cost ? That was entered as a separate accounting category and not counted as his contribution to the debt, even though it actually was. And a good deal of our national debt cost now comes from continued payments for the results of Bush's Iraq war. Nice try, but no dice.

Liberty Tree

It is the responsibility of both.

fullspinzoo

I could ask the same question about Obama.

Dave Loc: Upstate New York

As a conservative, I was very disappointed with W - but will respond to your attempt to bait by an honest answer of both his successes and failures.

Success - He inherited his own financial meltdown in the form of the dot com collapse. His DOJ did actively and effectively prosecute and convict some of the worst offenders - unlike his successors inability to prosecute a single one from the housing/mortgage collapse.

Success - He, using minimal military resources, ousted the Taliban from control over the government of Afghanistan.

Success - After making some initial mistakes in Iraq, he spent his remaining political capital he did succeed in delivering his successor a stable and secure Iraq.


Failures include:
- Having his administration develop the TARP program that Obama has used as the way he "saved" us from a depression.

- Put in a temporary tax cut that Obama, Reid and Pelosi extended then make permanent while telling their dupes how bad it was.

- Extending the federal government's role in education with NCLB - legislation largely written by Ted Kennedy

- Extending another unfunded entitlement with Medicare Part D.

- Furthered federal government over regulation by signing Sarbanes-Oxley into law and further reduced American competitiveness another step.