The debt hawks are to economics as the creationists are to biology.
Parade Magazine, in its 7/4/10 “Intelligence Report”, printed an interview by Steven Beschloss and Janet Kinosian titled, “Can These Men Fix the Deficit?” The men are Erskine Bowles, a former White House chief of staff, and Alan Simpson, a former Republican Senate whip. Today, Messrs. Bowles and Simpson are co-chairs of President Obama’s National bipartisan Commission on Fiscal Responsibility and Reform.
Here, with my comments, are what they said:
BOWLES: “If we don’t solve the (federal) debt problem, we will be paying $1 trillion in interest in 2020. That’s money we can’t spend on Social Security, Medicare, education, infrastructure or innovation to make sure America is competitive in a global economy.”
RMM: “Of course, he’s dead wrong. America is a monetarily sovereign nation. Future spending is restricted neither by past spending, by debt, by deficits nor by tax collections. That $1 trillion in interest will function as an economic stimulus. This is classic cognitive inconsistency. Mr. Bowles believes the government cannot do what he sees with his own eyes, the government actually doing, i.e spending trillions on stimulus plans, despite debt that has grown more than 1,500% in only 30 years. In addition to cognitive inconsistency, he suffers from anthropomorphic economic disease – the mistaken belief that the government’s finances are like yours and mine.
BOWLES: “We’re looking at how we can reduce discretionary spending – things like education, transportation, the military, homeland security – and mandatory spending which includes Social Security, Medicare and Medicaid. We also need to raise revenue.”
RMM: He believes that cutting back on education, transportation, the military, homeland security, Social Security, Medicare and Medicaid, while raising taxes, will “make sure America is competitive in a global economy.” The notion would be laughable if it weren’t so dangerous.
SIMPSON: “We’re not going to cut Social Security – we’re going to stabilize it. None of the ideas that have been presented will affect anyone over the age of 58.”
RMM: “Stabilize” is political double talk for, “We are going to cut Social Security for everyone 58 and younger.”
SIMPSON: “As it is, it (Social Security) can’t sustain itself.”
RMM: Ah, the old (and false) “unsustainable” claim.
BOWLES: “We’re going to work our hearts out succeed.”
RMM: In their world, “Fiscal Responsibility and Reform” are code words for austerity, which always causes recessions and depressions. Heaven help us from those who have power, yet cannot learn.
Rodger Malcolm Mitchell
http://www.rodgermitchell.com
No nation can tax itself into prosperity
#Monetary Sovereignty - Mitchell 
How do we get these people to listen to the truth about the defecit? I have been doing extensive reserach on all this stuff since the collapse in Sept. ’08 and I have come to the same conclusion as you have about what the federal govt. can and cannot do. Why doesn’t anyone tell these guys what the government is capable of doing to help pull us out of recession and back on solid economic footing so we can CONTINUE to be competitive in the global economy? It chaps my hide to hear politicians talking about cutting education funding (which my state of CA has done dramatically because of budget issues) and programs to help people. Why don’t they get it???
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Sidnee,
All of the states, including your California, are limited in their spending, by taxes. This is true also for all cities, counties and the EU nations (except England).
Monetarily sovereign nations such as Japan, Canada, Australia and the U.S. are not limited by tax receipts. In fact tax receipts are not in any way related to spending for monetarily sovereign nations.
California, Illinois et al cannot solve their financial problems alone. They must be supplemented by the federal government. This is not solely a case of mismanagement, though that may be part of the problem. Mathematically, no state, city or county can survive on tax receipts alone. Each must have money coming in from outside its borders or must borrow until it reaches its limits, or must sell assets.
Mayor Daley, in Chicago, has sold the parking meters and a toll road. He hopes to sell Midway airport. Many state governments have plans to sell state assets including their Capital buildings. Illinois plans to sell a prison to the federal government. Eventually, the realization will emerge that no non-monetarily sovereign government can survive on its own local taxes.
Rodger Malcolm Mitchell
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I don’t get why you say that mathematically no state can survive on tax receipts alone? I am confused about this. Is it b/c a growing state needs growing receipts? But the tax base is also growing. I am assuming here that the federal govt takes care of the total money supply by deficit spending.
Second question: I think that unlike the federal taxes, the state taxes don’t mean money being destroyed? The money is just changing pockets? Am I right about this?
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Piotrek,
States don’t have the unlimited ability to create money. So, no state can survive on tax receipts alone, because of inflation and federal taxes, both of which reduce the total value of money in the state. (This is the same problem the EU nations have.) States need money coming in from outside, just as the EU nations do.
Second question: You are correct. States spend tax money; the federal government does not.
Rodger Malcolm Mitchell
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Ok, but the federal govt is always there, i am assuming it is doing its job and prints money. So federal taxes are balanced by printing. Inflation eats negligible chunk of revenues. Going to extreme: if a state taxes and provides no services, how it can not survive? I am assuming the state is part of the union and federal monies flow in.
I don’t see a source of problems: i understand the state has to service the deficit etc, but why should it not succeed? It is all a matter of revenues and expenditures.
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“I am assuming the state is part of the union and federal monies flow in.”
“. . .tax receipts alone”” means no federal money flows in. That’s the whole point. All states need more money flowing in than flows out.
With no outside money flowing in, no state can survive.
Rodger Malcolm Mitchell
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