Every so seldom, I feel compelled to remind you of the #1 idiocy in economics, the daily, weekly, monthly, and annual warnings that the U.S. federal “debt” is a ticking time-bomb, ready to explode at any moment.
This repeated forecast has been promulgated for at least the 78 years since 1940, with no end in sight.
In any other science, a repeated failed prediction would be a strong signal that either the facts are wrong or misinterpreted, and its forecasters are wrongheaded.
But, because mainstream economics is not a real science, but rather is akin to a religion, its asinine, proven-wrong forecasts are treated with solemn respect.
Imagine the cult leader who tells his followers to climb the mountain and await the world’s end.
When the world fails to end, they climb back down, but still believe the cult leader’s next “world-is-ending” prophecy.
That is economics.
By way of reminder, the debt in 1940 was $40 Billion, and today it is $16 Trillion. Surely, a gigantic 40,000% increase should have caused that debt bomb to explode.
But no, the debt bomb ticks, perhaps the slowest time bomb in recorded history. And our cult leaders continue their false warnings.
By way of further reminder, here is a bit of history from previous posts:
Back in 1940, the federal budget was a “ticking time-bomb which can eventually destroy the American system,” said Robert M. Hanes, president of the American Bankers Association.
By 1960: the debt was “threatening the country’s fiscal future,” said Secretary of Commerce, Frederick H. Mueller.
By 1983: “The debt “probably will explode in the third quarter of 1984,” said Fred Napolitano, former president of the National Association of Home Builders.
In 1984: AFL-CIO President Lane Kirkland said. “It’s a time bomb ticking away.”
In 1985: “The federal deficit is ‘a ticking time bomb, and it’s about to blow up,’ U.S. Sen. Mitch McConnell.
Later in 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.”
In 1987: Richmond Times–Dispatch – Richmond, VA: “100TH CONGRESS FACING U.S. DEFICIT ‘TIME BOMB’”
Later in 1987: The Dallas Morning News: “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.”
In 1989: FORTUNE Magazine: “A TIME BOMB FOR U.S. TAXPAYERS”
In 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.”
Later in 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion.”
In 1995: Kansas City Star: “Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.”
In 2003: Porter Stansberry, for the Daily Reckoning: “Generation debt is a ticking time bomb . . . with about ten years left on the clock.”
In 2004: Bradenton Herald: “A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB”
In 2005: Providence Journal: “Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb.”
In 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.
In 2007: USA Today: “Like a ticking time bomb, the national debt is an explosion waiting to happen.”
In 2010: Reason Alert: “. . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”
In 2011: Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode.”
In 2014: CBN News: “The United States of Debt: A Ticking Time Bomb”
*On Jun 18, 2015: The ticking economic time bomb that presidential candidates are ignoring: Fortune Magazine, Shawn Tully,
*February 10, 2016, The Daily Bell: “Obama’s $4.1 Trillion Budget Is Latest Sign of America’s Looming Collapse”
*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 Cangeros
And now, for your amusement, here is a sampling of this year’s Henny Penny, sky-is-falling, ticking-time-bomb, scare articles:
America’s Debt Bomb By Andrew Soergel, Senior Reporter, Feb. 16, 2018, Conservatives and deficit hawks are hurling criticism at Washington for deepening America’s debt hole.
Paying debt servicing costs associated with what America owes is also tying up federal dollars that could be used elsewhere.
The U.S. must pay interest on its outstanding debt, and, given the trillions and trillions of dollars that the country owes, those payments are becoming particularly expensive.
This latest article drips with ignorance. Here are the facts:
- The U.S. government is Monetarily Sovereign. It has the unlimited ability to create its own sovereign currency, the U.S. dollar. The U.S. government cannot run short of dollars.
- Because the federal government has infinite dollars, its dollars cannot be “tied up,” and there always are plenty of dollars to be “used elsewhere.”
- Federal deficit is necessary for economic growth, so the interest the government pays into the economy stimulates economic growth.
And then, there’s this:
CBO: US Debt Burden Set to Break Record in Early 2030s
Growing deficits to push debt to almost 100 percent of GDP by 2028
Jun 26, 2018
CBO Director Keith Hall said that by 2048, “as interest rates rise from their currently low levels and as debt accumulates, the federal government’s net interest costs are projected to more than double as a percentage of GDP and to reach record levels.”
Hall said interest costs would equal spending for Social Security, currently the largest federal program, by 2048.
CBO has long warned that rising debt poses a risk to the economy, and Hall made the point again Tuesday.
“The prospect of large and growing debt poses substantial risks for the nation and presents policymakers with significant challenges,” he said in the statement.
It’s all a lie. Debt/GDP is one of economics’ more meaningless ratios.
Debt/GDP does not indicate the federal government’s ability to pay its bills, nor does it indicate the likelihood of inflation, recession, depression, economic growth, stagflation or any other economic measure.
Being meaningless, it naturally is a favorite of mainstream economists and the media.
Then there is this:
The Congressional Budget Office recently issued an alarming report on the nation’s debt outlook, which CQ senior budget reporter Paul M. Krawzak says should worry millennials.
“A tidal wave of interest payments on the debt is about to hit us.”
And from the reliably wrong, Committee for a Responsible Federal Budget:
National debt is about to roar back to life as a pressing issue
By Maya MacGuineas, Updated 6:03 PM ET, Tue July 31, 2018
As a result of an unprecedented debt binge by Congress over the past year, the national debt is about to roar back to life as a pressing issue after years of hibernation.
The debt didn’t go away. It has been growing by the second ever since, and the dominoes are about to start falling.
These sums accelerate a coming fiscal freefall and will push the nation over a psychological barrier as soon as next year: trillion-dollar annual deficits.
You would expect worries about debt to center on affordability. If you experience debt problems, your primary concern is, “Can I afford to pay it off.”
You would expect warnings about federal debt to include words similar to: “The government will run short of money.”
But those words never are used because unlike state and local governments, the federal government cannot run short of money.
It can pay off any size financial obligation at any time, and despite the massive debt increase, through wars and depressions, the federal government never has failed to pay a debt.
Instead, we are treated to such meaningless generalities as “ticking time bomb,” “looming collapse,” “tidal wave,” “the dominoes are about to start falling,” “coming fiscal freefall,” “psychological barrier,” and “alarming report.”
After seventy-eight years, that ole’ federal debt bomb still is ticking. Meanwhile, it also has been “unsustainable,” “insane,” and “irresponsible,” a “mounting debt crisis,” and servicing is “problematic.”
All of the above are not based on mere ignorance. Instead, they are part of an intentional plan to deceive you.
The very rich .1%, who run America, do not want you of the 99.9% to know that the federal government has the ability to provide far more benefits for you than it currently does.
They want you to believe falsely, that benefits are a burden on the government and require tax increases. In short, they want to convince you to vote against yourself.
In brief, the very rich want to widen the Gap gap between them and you, and making false claims about the federal debt is their insidious method.
It works. You have been suckered.
Rodger Malcolm Mitchell
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: 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 (Guaranteed Income)) 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
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.
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.