–Debt is bad; debt is good. Take your pick.

The debt hawks are to economics as the creationists are to biology.

There is no functional difference between a federal tax cut and a federal spending increase. Some might argue that federal spending is superior or inferior to private spending, though evidence for either is slim, and either has the same result. They both increase the amount of federal money in the economy. (Mistakenly called the federal “debt.”)

Further, increasing the federal money supply stimulates the economy, and decreasing the money supply depresses the economy. So it is both laughable and sad to see how debt hawks squirm between wanting a lower debt, higher taxes and lower taxes, along with less federal spending, more spending and improved GDP. As the song says, “Something’s gotta give.”

Here are quotes from the always confused editors of the Chicago Tribune, in the editorial dated 8/1/10, titled “Out of debt.”

“. . . Democrats and Republicans are very good at doing one thing: running up the debt. That’s the reason for the National Commission on Fiscal Responsibility . . . to find ways to stem the red ink.” O.K., so federal deficits are bad.

“. . . at this stage (a tax increase) would be a terrible mistake, not only for the health of the economy, but for the nation’s long-term fiscal health.” O.K., so federal deficits are good, in both the short term and in the long term.

“More likely, Congress and the president would spend every nickel (from a tax increase) – and then spend some more.” Oh, oh. Now federal deficits are bad, again.

“Nor does it make sense to place a new (tax) weight on the economy when it is already struggling to grow.” Woops, deficits are good, again.

“Congress can’t afford to indulge the notion that endless borrowing is a sustainable strategy.” So deficits are bad.

“The wisest option is to extend tax cuts for a year . . . “ Deficits are good

“. . . then see what the deficit commissions proposes to curtail our addiction to debt.” Deficits are bad.

“ . . . Erskine Bowles suggests a healthy ratio of $3 dollars in spending cuts for every $1 in tax increases . . . it’s essential if we hope to foster lasting prosperity . . . “ Deficits now are awful. Mr. Bowles “scientific” suggestion equals $4 in spending cuts or $4 in tax increases, or anywhere in between. Guarantee: He has zero data to support his 3/1 ratio, but hey, who need facts?

“ . . . while sparing the taxpayers of tomorrow an unsupportable debt burden.” Deficits are bad.

And here is my favorite: “Coupled with spending discipline, revenue measures can be on leg of the journey back to fiscal sanity. But if they are the first and only leg, they will be a fatal detour.” Huh? They are saying spending cuts and tax increases are good, but first we should have spending increases and tax cuts!

All of the above is classic debt hawk double talk. Federal debt is a taxpayer “burden,” but necessary to grow the economy, but “unsupportable,” even though taxpayers don’t pay for federal debt, and the government has the unlimited ability to service its debt.

That kind of muddy thinking is what needlessly has extended this recession and the unemployment that goes with it. Ignorance may be bliss, but it sure is harmful. As the theme at the top of this post reads, “The debt hawks are to economics as the creationists are to biology.”

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

4 thoughts on “–Debt is bad; debt is good. Take your pick.

  1. Matt,

    The title of this response should be “Stockman doesn’t understand.”

    There is so much Stockman doesn’t understand, it is frightening. He said, ”The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice.”

    This shows he doesn’t understand the difference between federal debt and state debt. And he doesn’t understand the difference between Greece and the U.S. And he doesn’t understand that “austerity and sacrifice” merely are synonyms for widespread, shared poverty. Clearly, he has no idea what a monetarily sovereign nation is.

    Then he said, ”Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too.” This shows he doesn’t even understand the difference between federal debt and household debt.

    In short, he suffers from Anthropomorphic economics disease, the belief that the federal government’s finances are like yours and mine.

    He said, “. . . we have lived beyond our means as a nation for nearly 40 years. . . “ What does this mean? Does it mean the federal government will not be able to pay its bills? No, the federal government went off the gold standard specifically so it could pay any bills of any size. So what are “our means”? Stockman simply doesn’t understand.

    He said, ”. . . chronic current-account deficits result from a nation spending more than it earns, stringent domestic belt-tightening is the only cure.” Yikes! The world’s current account always is exactly zero. When some countries are positive, others are negative. Is this a bad thing? No, it mathematically is mandatory. The U.S. is negative, which means the federal government creates and ships more dollars overseas than it receives in return. How else could it be, since the U.S. government is the only entity that can create dollars. Stockman doesn’t understand that.

    Stockman’s article is so filled with amateurish, populist crap, I could go on and on. Nearly every paragraph is laughable, and containing no evidence to support his fundamental claim that America owes too much. It’s sad that the American public is being fed this junk, because Stockman’s debt-hawk, double-talk beliefs are what have caused an average of one recession every five years.

    Rodger Malcolm Mitchell

    Like

  2. Couldn’t agree with you more! I think the one thing he does understand is that he is coming out with a book so a NYT Op-Ed ripping on his party is good for biz.

    Like

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