permafrost wrote:
As the right wing has spent 8 years complaining about the natl dept and now it seems a forgotten topic, I felt a small reminder of the consequences of your vote was in order..
Francis Dickinson
Francis Dickinson, Green Party activist (and, like many, former Lib-Dem)
To quote that well known left winger Vice President Dick Cheney talking about a President from the far left when his White House was busy spending money like a sailor on shore leave after Clinton had balanced the budget “You know, Paul, Reagan proved that deficits don't matter. We won the mid-term elections, this is our due.” Meanwhile if we look at the 2016 election we find which candidate it was that wanted to ignore the debt - and as ever it wasn’t the Democrat.
In short the idea that left wing people ignore deficits is completely counter-factual. Right wing people ignore deficits unless it’s a left winger in power as has been demonstrated consistently over the past 36 years when the only right winger to try balancing the budget was George H W Bush - and his base turned on him for it.
Left wing people on the other hand accept that there are legitimate times where you can run a deficit. The two obvious ones are you can do it to recover from a disaster (like 2008) or you can do it to invest if you’ve costed it out in the same way you might borrow money for a house, a car, or a college education.
As the right wing has spent 8 years complaining ab... (
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NO! WE DON’T HAVE TOO MUCH FEDERAL DEBT !
Now (January, 2017), foreigners own about half of our $14.3 trillion publicly-owned US debt. With their trade surplus, foreign exporters accumulate US dollars and buy US debt for trade collateral. Their US bonds provide some protection against inflation and eliminate currency exchange fluctuation and costs. Foreigners will hold our debt until they find a safer refuge; none is now in sight. They will want to keep earning and holding our dollars unless the US goods that our dollars would buy are not competitive. It’s the job of Congress to keep us competitive by giving us the world’s best infrastructure.
Our debt/GDP ratio is now about 70%. It was over 120% during World War II, which was followed by 35 years of prosperity. Prosperous Japan’s ratio is now over 200%. We have no federal debt crisis!
Federal budget deficits are necessary for prosperity. Just as an individual judges her financial success by her after-tax earnings, so should the public relish the after-tax savings and cheap foreign goods provided by Congress’ spending deficits, which can only exit circulation into savings accounts or imported goods.
Deficit spending should not be large enough to cause harmful inflation but the budget deficit should exceed our trade deficit. Otherwise, we are exporting our savings to import foreign goods. Instead of cutting spending, we should be reducing our trade deficit by spending as much as possible on infrastructure that would lower industry’s costs, raise its exports, and reduce our trade deficit.
Will our debt always find buyers? Designated “primary” dealers are required to bid without collusion and the Fed can always buy their debt without limit, collect the interest, and return 94% of its annual profit to the Treasury, as law requires. And Congress has already and can again seize the Fed’s reserve.
The entire debt, as collateral, could be converted by bankers into dollars that would be added to a similar amount already in the money supply (M2). So, re-phrasing our question: would $29 trillion be too many dollars chasing too few goods and services, thereby causing inflation? If the few individuals owning most of those dollars increased their buying, what would rise in price, other than financial assets? Not food or other essentials! It is difficult now to see inflation being caused by federal debt.
But what about the future? Every year sees a large and growing federal budget deficit with an associated interest burden. Is that sustainable? The answer, according to the math at
http://www.levyinstitute.org/publications/?docid=1379, is that growing deficits are sustainable provided that the rate of GDP growth exceeds the debt interest rate. That implies that our economy must always be competitive, which implies that our infrastructure must be among the best. Our future will not be secure unless we invest in it. Yes, Congress can fund any unfunded liability!
If voters really want to reduce the US debt held by the public, their Congress can easily provide steeply progressive estate tax brackets that will, over time, destroy much of the domestically-held debt. We certainly do not need a hereditary aristocracy with rich kids growing up with enough money to buy a Congressional vote to cut spending on education while our kids are drowning in school debt.
So, how should Congress spend and tax? To maximize infrastructure, Congress should spend almost enough to cause inflation and should tax little enough to almost cause inflation. Ideally, always on the verge of inflation, everybody and every resource would be employed and every material would be in adequate supply or rationed to suit our national priorities, as if we were at war.
When small government nuts cut spending to cut taxes, they also reduce needed infrastructure. The spending scolds are depressing our economy, cheating our grandchildren out of infrastructure, and weakening our defense, which depends on bridges and dams as well as on arms.
Shun the deficit hawks!
© 2017 Marvin Sussman, All rights reserved.