If you had read the following, which was published in the New York Times, what would you have thought about the imminent future of America?
New York Times: Deficit Financing is Hit by Hanes: “. . . unless an end is put to deficit financing, to profligate spending and to indifference as to the nature and extent of governmental borrowing, the nation will surely take the road to dictatorship,” Robert M. Hanes, president of the American Bankers Association asserted today.
He said, “insolvency is the time-bomb which can eventually destroy the American system . . . the Federal debt . . . threatens the solvency of the entire economy.”
These comments were made by the respected president of the American Bankers Association on Sept 26, 1940, at which time the Federal debt was $40 billion.
Similar “time bomb” comments were being made continually, until 20 years later, on Feb 11, 1960, we read in the New York Times:
The enormous cost of various Federal programs is a time bomb, threatening the country’s fiscal future, Secretary of Commerce, Frederick H. Mueller warned here today “. . . the accrued liability is a ticking time bomb. Some day someone will have to pay.”
When Secretary of Commerce Mueller made his dire prediction, the federal debt had risen to $236 billion.
The “time bomb” predictions continued, and by Oct 26, 1983, Fred Napolitano, former president of the National Association of Home Builders , jumped into the act:
“ . . . home-building officials called for a commission to propose ways to trim the $200 billion federal deficit. The deficit is a ‘ticking time bomb‘ that probably will explode in the third quarter of 1984,’
By then, the federal debt “time bomb” had exploded to $1.3 trillion, and though Armageddon didn’t come, the predictions continued:
January 12, 1985, Lexington Herald-Leader (KY): The federal deficit is “a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell, a Louisville Republican, said yesterday.
Honest Mitch McConnell, remember him?
Feb 17, 1985, Los Angeles Times: We labeled the deficit a `ticking time bomb‘ that threatens to permanently undermine the strength and vitality of the American economy.”
Jan 5, 1987, Richmond Times – Dispatch – Richmond, VA: 100TH CONGRESS FACING U.S. DEFICIT ‘TIME BOMB‘
Fiscal “time bomb” never explodes.
November 28, 1987, The Dallas Morning News: THE TICKING TIME BOMB OF LONG-TERM HEALTH CARE COSTS A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government and our nation’s elderly.
The ticking bomb is the growing cost of long-term care, which the federal government easily could fund, if it chose to.
October 23, 1989, FORTUNE Magazine: A TIME BOMB FOR U.S. TAXPAYERS The government guarantees millions of mortgages, bonds, deposits, and student loans. These liabilities, now twice the national debt, are growing fast.
Never mind that neither taxpayers nor the federal government are financially burdened by government guarantees. The taxpayer never will pay, and the government easily could pay — no burden on either.
May 1, 1992, The Pantagraph – Bloomington, Illinois: I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion and growing now at an annual rate of $400 billion per year.
The budget deficit is an economic surplus, good for the economy.
October 28, 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion. Seventy-five percent of this debt is due and payable in the next five years.
This is a bomb that’s set to go off and devastate our economy and destroy thousands of jobs.
Ross Perot, remember him? Not much of a forecaster, is he?
Dec 3, 1995, Kansas City Star: Deficit is sapping America’s strength. Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.
No one knows how the deficit, which adds dollars to the economy, saps America’s strength. An no one ever explains what those “devastating consequences” are.
April 14, 2003: Porter Stansberry, for the Daily Reckoning: The baby boomers are heading into retirement with no savings and no productive companies to support them in old age. Generation debt is a ticking time bomb…with about ten years left on the clock.
The ten years have expired.
October 1, 2004, Bradenton Herald: A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB: Lawmakers approved Bush’s request without cutting federal spending by a penny, thereby fattening the country’s projected record deficit of $422 billion by another $145 billion next year.
May 31, 2005, Providence Journal, Defusing the Medicare time bomb, Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb, set to wreak havoc on the budget and shoot future tax rates sky-high.
Well, I guess that didn’t happen.
April 5, 2006, NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.
Dec 3, 2007, USA Today: US debt: $30,000 per American. WASHINGTON (AP): Like a ticking time bomb, the national debt is an explosion waiting to happen.
And waiting, and waiting, and waiting . . .
September 24, 2010, Email from the Reason Alert: ” . . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”
Nice, poetic phrasing . . . not true, but poetic.
And, as the Republicans are working to cut Medicare and Obamacare, this:
July 7, 2011, Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode as the cost of health care rises and the nation’s population ages.
By 2011, the federal debt had reached $10 trillion, a 25,000% increase from its “dire” level of 1940. Still, that debt time bomb refused to explode, and to Henny Penny’s dismay, the sky refused to fall.
Gross Domestic Product had risen from $43 Billion to $15.5 Trillion, but that massive economic growth did not dissuade the fear mongers. The “Big Lie” continued:
In 2014: CBN News: “The United States of Debt: A Ticking Time Bomb.” The vast majority of Americans feel in their gut that the economy is headed in the wrong direction, in no small part because of this debt time bomb.
On Jun 18, 2015: The ticking economic time bomb that presidential candidates are ignoring: Fortune Magazine, Shawn Tully,
On January 23, 2017: Trump’s ‘Debt Bomb’: Deficit May Grow, Defense Budget May Not, By Sydney J. Freedberg, Jr.
On April 28, 2017: Debt in the U.S. Fuel for Growth or Ticking Time Bomb?, American Institute for Economic Research, by Max Gulker, PhD – Senior Research Fellow, Theodore Cangero
The federal “debt” has grown massively, as has the economy. No sign of the “time bomb.”
By 2017 the federal debt had grown to $14.7 trillion, and the slowest time bomb in history still kept ticking. And ticking.
Now we have arrived in 2018. The debt still is growing; the economy still is growing. So these are good things, right?
Not if you read the news of the day:
Trump’s Tax Cuts Are ‘A Ticking Time Bomb,’ Says Former Treasury Secretary January 2, 2018. (Bloomberg) Former U.S. Treasury Secretary Jacob J. Lew said the Trump administration’s decision to add a significant amount of debt through last year’s tax legislation is leaving the country broke.
“It’s a ticking time bomb in terms of the debt,” Lew said in a Bloomberg Radio interview with Tom Keene and Jonathan Ferro. “You cannot run a fiscal policy by spending trillions of dollars you don’t have at a time that the economy is doing well.”
Mr. Lew is well aware that the federal government always spends dollars it doesn’t have, simply because, being Monetarily Sovereign, it creates dollars, ad hoc, by spending dollars. Spending, or more specifically, paying bills is the federal government’s money-creation method.
(Anyone who believes the government spends dollars it has, is welcome to tell me how many dollars the U.S. Treasury has. You might be surprised at not being able to find an answer. But why would a government need to have dollars, if it can create dollars, endlessly?)
We’ll end this explosion, not of time bombs that never explode, but ratherthe explosion of lies, with something from just a few days ago:
REASON.COM What About the Debt? Trump’s State of the Union Ignores a $20 Trillion Time Bomb If a Republican president can’t address a Republican-controlled Congress without paying lip service to the idea of cutting spending, what good are Republicans?
Eric Boehm|Jan. 31, 2018 9:31 am
The tax bill will also add an estimated $1.5 trillion to the national debt over the next 10 years.
Republicans can pat themselves on the back for cutting taxes, but unless spending is reduced all they’ve really done is postpone the payment of taxes for 10 years or so.
Has Mr. Boehm noticed that taxes have not paid for past federal debts? Does he realize that taxes have nothing whatever to do with federal debt? (Even if all federal tax collections fell to $0, our Monetarily Sovereign federal government could pay off all its debts, with no difficulty. That is what “Monetary Sovereignty” means.)
For manyyears, pundits consistently have been wrong about the debt. If that doesn’t convince America federal debt is not a problem, what will?
What will it take for the American public to understand that the federal debt is nothing more than deposits in T-security accounts? These accounts are quite similar to bank savings accounts, that easily are paid off simply by returning the dollars residing in those T-security accounts.
What will it take for Americans (and citizens of other Monetarily Sovereign nations) to understand what “Monetary Sovereignty” means?
What will it take for the public to understand that a federal deficit is income for the economy, and the greater the deficit the more income benefits the economy?
What will it take for the public to understand that the lack of deficit spending leads to recessions and depressions and increased deficit spending cures recessions and depressions?
What will it take for the public to understand that the politicians, the media, and the economists have been paid by the rich to tell “The Big Lie,“ (that the federal government can run short of its own sovereign currency), so that social benefits like Social Security, Medicare, Medicaid, etc. can be cut?
How much evidence is necessary for the public finally to realize that the federal government has absolute control over the value of the dollar, so can cause or cure inflation at will?
The 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:
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.
4 thoughts on “We all are doomed — again. What will it take for us to understand?”
You could do a piece on how treasuries are an institutional arrangement that matches the deficit and also how treasuries have 2 sources being to hit the feds interest target and 2 to match deficits. If the fed set a support rate and congress stopped matching deficit spending with treasuries they would vanish. No more debt.
I often wonder how much the arcane operational rules of the Treasury and Federal Reserve play into the myth that taxes fund spending, especially to those so called ‘experts’ who work within the Treasury Department or Federal Reserve.
When taxes are withheld from paychecks, or when the Treasury auctions off securities, that “revenue” doesn’t immediately disappear from the money supply. Those reserves are actually transferred into special T&L accounts at commercial banks, which means the reserves remain within the commercial banking system. This is specifically done to avoid periodic large fluctuations in banking reserves, which helps to maintain a stable FFR.
The Treasury also maintains a demand account at the Federal Reserve to make payments. This demand account by law has to maintain a minimum balance of $150B and is actually “funded” from the T&L accounts, since the Treasury, again by law, cannot directly “borrow” from the Federal Reserve (meaning the Federal Reserve cannot directly mark up the Treasury’s demand account). Money that goes into the Treasury’s demand account is not counted in the money supply, but it is usually spent right back in, so overall reserve levels are not greatly impacted by federal taxing and spending.
These operational rules, while not fiscally necessary (which we know thanks to the excellent research work by the MMT folks), certainly create the illusion that taxes and treasury sale proceeds (i.e. “borrowing”) are in fact funding spending due to the circular nature of the money flows.
In other words, federal tax dollars are not all destroyed–at least not immediately. No, it’s actually *worse* than that–these tax dollars literally go to the privately-owned FERAL Reserve. Thus, at least at some point, those tax dollars further enrich the oligarchs to one degree or another.
It takes only two things to keep people in chains:
#Monetary Sovereignty - Mitchell 
You could do a piece on how treasuries are an institutional arrangement that matches the deficit and also how treasuries have 2 sources being to hit the feds interest target and 2 to match deficits. If the fed set a support rate and congress stopped matching deficit spending with treasuries they would vanish. No more debt.
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That is correct. Now, tell all your friends and relatives.
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I often wonder how much the arcane operational rules of the Treasury and Federal Reserve play into the myth that taxes fund spending, especially to those so called ‘experts’ who work within the Treasury Department or Federal Reserve.
When taxes are withheld from paychecks, or when the Treasury auctions off securities, that “revenue” doesn’t immediately disappear from the money supply. Those reserves are actually transferred into special T&L accounts at commercial banks, which means the reserves remain within the commercial banking system. This is specifically done to avoid periodic large fluctuations in banking reserves, which helps to maintain a stable FFR.
The Treasury also maintains a demand account at the Federal Reserve to make payments. This demand account by law has to maintain a minimum balance of $150B and is actually “funded” from the T&L accounts, since the Treasury, again by law, cannot directly “borrow” from the Federal Reserve (meaning the Federal Reserve cannot directly mark up the Treasury’s demand account). Money that goes into the Treasury’s demand account is not counted in the money supply, but it is usually spent right back in, so overall reserve levels are not greatly impacted by federal taxing and spending.
These operational rules, while not fiscally necessary (which we know thanks to the excellent research work by the MMT folks), certainly create the illusion that taxes and treasury sale proceeds (i.e. “borrowing”) are in fact funding spending due to the circular nature of the money flows.
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In other words, federal tax dollars are not all destroyed–at least not immediately. No, it’s actually *worse* than that–these tax dollars literally go to the privately-owned FERAL Reserve. Thus, at least at some point, those tax dollars further enrich the oligarchs to one degree or another.
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