It takes only two things to keep people in chains: The ignorance of the oppressed and the treachery of their leaders.
The word “unsustainable” is a favorite among federal debt fear-mongers. They use it all the time. It is a lie, a Big Lie. It is the biggest lie in all of economics.
Do you know what it supposedly means regarding the federal debt? Specifically, what aspect of the federal debt do they claim can’t be sustained?
While you think about that, read this Email I received from my favorite debt fear-mongers: The Committee for a Responsible Federal Budget (CRFB)
Committee for a Responsible Federal Budget (CRFB)
We Must Increase the Statutory Debt Limit and Take Action to Deal with the Debt
August 2, 2017
For Immediate Release
The United States government is quickly approaching the deadline for raising the debt ceiling. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, released the following statement:
The United States faces two major debt challenges: one urgent and acute, the other gradual and long-term but still pernicious. Without a prompt increase in the debt limit, policymakers would threaten default on America’s obligations and could even spark a global economic crisis.
Correct. The day the United States stops paying its bills is the day the world’s economy collapses, making the “Great Recession” of 2008 look like a picnic.
So why does Congress threaten us with it? In fact, why is there a debt ceiling at all?
Federal “debt” is not like personal debt. When you “lend” to the federal government, you tell your local bank to transfer your dollars from your checking account and deposit your dollars into your Treasury Security Account at the Federal Reserve Bank (FRB).
That is the way you buy a T-bill, T-note, or T-bond, which together make up the federal “debt.” You simply transfer your dollars from one of your bank accounts to another one of your accounts at another bank, the FRB.
The dollars are still yours. They just have been moved from one of your accounts to another of your accounts.
Thus, the so-called federal “debt” is nothing other than the total of those deposits in Treasury security accounts at the world’s safest bank, the Federal Reserve Bank.
The so-called “debt” is bank deposits, very much like your savings account deposits at your local bank.
At the same time, the national debt is currently higher as a share of the economy than at any time since just after World War II, and it is rising unsustainably.
The debt fear-mongers often mention the fact that the “debt” (T-security deposits) are a high percentage of Gross Domestic Product. But why is this a reason for concern?
Would you be fearful if your savings account deposits were a high percentage of your income?
You might question whether that was the best use of your money, but it would not constitute a danger to you.
The debt fear-mongers seem to be implying that the “debt” (deposits) are paid off by the economy, and that somehow if the debt is a high percentage of the economy, it can’t be paid off.
That is total nonsense.
Since the misnamed “debt” is deposits, it is paid off the way all your bank deposits are paid off: The Federal Reserve Bank merely transfers your existing dollars from your T-security accounts, back to your checking account.
It’s like transferring dollars from your savings account to your checking account.
The federal government could pay off the entire “debt” tomorrow if it wished, simply by transferring dollars from one account to another. No new dollars needed.
We need to increase the statutory debt limit as soon as possible. We should have done so already to avoid creating undue and potentially costly uncertainty, and we most certainly should not wait until the last moment to make this necessary increase. No Member of Congress should even consider holding this must-pass legislation hostage.
We don’t need to increase the statutory limit; we need to eliminate the entire “debt ceiling” rule. It is total nonsense, meant to deceive you into believing the federal government is limited in its ability to fund social programs.
At the same time, it is important to recognize that the near-record national debt is on an unsustainable path and changes need to be made.
And there’s that inevitable word “unsustainable.” What does it mean? You never will be told. It’s a word meant only to frighten you.
The United States has been “sustaining” growth in the federal debt for many years. Here is a graph showing the Gross Federal Debt Held by the Public. (It is “held by the public,” because you, the public, own the dollars in those T-security accounts at the FRB.
In 1940 the total of “debt” held by the public was $41 billion.
By 2015 the “debt” had reached $13 trillion and climbing. Over the past 75 years, the Federal Reserve Bank has “sustained” a 31,000% increase in T-security deposits.
So, where’s the crisis?
Back in 1940, Robert M. Hanes, the president of the American Bankers Association, said the federal “debt” (deposits) were a “ticking time-bomb which can eventually destroy the American system.”
Every year since then, the debt fear-mongers have issued hand-wringing claims that the debt is “unsustainable,” or a “ticking time bomb,” or a threat to the world as we know it.
We have endured, or shall we say, “sustained,” more than 75 years of hysterical predictions that never come true, about bank deposits at the FRB — and yet, after more than 75 years, the public still has not caught on to the scam.
Would you believe someone who consistently has been proven wrong for more than 75 years?
Given that the debt ceiling is one of the few reminders of this fiscal reality, it would be prudent for policymakers to attach or simultaneously pass measures to help slow the growth of our national debt. In the past, some debt ceiling increases have been productively paired with deficit-reduction policies or processes.
What is the “fiscal reality,” the CRFB writes of? They don’t say. But the real “reality” is that contrary to what you have been told, the federal government does not issue T-securities to fund spending.
In fact, the federal government’s method for creating dollars is to pay creditors. Unlike you, and me, and the states, counties, and cities, the federal government needs no income. It creates dollars, ad hoc, every time it pays a bill.
When the federal government pays a creditor, it sends instructions (not dollars) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account. At the instant the creditor’s bank obeys those instructions, new dollars are created and added to the money supply.
The instructions then are cleared through the Federal Reserve Bank, which is owned by the federal government. Thus, the federal government has the power to approve its own payments, which is why no federal check ever has bounced.
This power is known as “Monetary Sovereignty.“ The federal government is sovereign over its sovereign currency, the dollar. It can do anything it wishes with the dollar. It can create dollars at will, and it can give the dollar any value it chooses. It can create or prevent inflation to whatever level it chooses.
(This is in contrast to state and local governments, which are monetarily non-sovereign regarding the dollar. They use the dollar but it is not their sovereign currency; they cannot create dollars at will, nor can they control inflation.)
Debt fear-mongerers try to confuse you by falsely implying federal finances are like state and local (and personal) finances.
If T-securities simply are deposits in accounts at the FRB, why do they exist?
- They provide a means for interest rate control and inflation control. By setting the interest rates on T-securities, the Fed influences all interest rates, and adjusting interest rates is how the Fed controls inflation.
- T-security accounts provide a safe investment for conservative investors, including nations, worldwide. The Chinese, for instance, deposit their dollars into T-security accounts, because the Federal Reserve Bank is the world’s safest bank. It’s the safest place to hold dollars.
- To facilitate an antiquated law requiring FRB deposits to equal deficit spending. The law became outmoded in August, 1971, when the U.S. went off the gold standard.
The government has the power eliminate T-securities entirely, and to continue deficit spending, forever.
While first and foremost we encourage policymakers to pass the needed increase immediately, we also support their using this opportunity to take long-overdue action to deal with the debt.
When your credit card bill arrives, you pay it. But if it’s too high, you may also need to adjust your borrowing habits going forward.
The CRFB, like all debt fear-mongers, draws a false parallel between federal financing and personal financing. You, as a user of dollars, can run short of dollars to pay your bills.
The federal government, as the sole issuer of dollars, never can run short of its own sovereign currency.
So why all the propaganda about “ticking time bombs” and “unsustainable debt”? Very simply:
- The world’s governments are run by the very rich.
- The Gap between the rich and the rest is what makes the rich, rich. Without the Gap, no one would be rich (We all would be the same), so the primary goal of the rich is to widen the Gap.
- The Gap can be widened either by the rich having more, and/or the rest of us having less.
- Most deficit spending is for social programs that help narrow the Gap between the rich and the rest of us.
- The rich bribe the three primary sources of economic information: the politicians (via campaign contributions and promises of lucrative employment later), and the media (via advertising money and ownership), and the economists (via university contributions and employment in “think tanks) to convince you the government can’t afford the social programs that narrow the Gap.
For more information contact Patrick Newton, Press Secretary, at firstname.lastname@example.org.
Committee for a Responsible Federal Budget, 1900 M Street, NW
Suite 850, Washington, DC 20036
No, don’t bother to contact these people. They won’t answer you. They are owned and operated by the rich and by toadies to the rich. They do not want you to know the facts. They want you to believe the Big Lie.
So, instead, contact your Senators and your Representative, and tell them you know the federal debt ceiling is a lie, designed to cut your social benefits. Tell them you will vote for the first one who tells the truth.
And please contact your local media; tell your friends. Get the word out.
This charade has cost you way too much for way too long.
Rodger Malcolm Mitchell
The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.
Implementation of The Ten Steps To Prosperity can narrow the Gaps:
Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:
Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012
Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.
The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.