Here we go again: The same old story — the same old lie — we have documented since 1940. Nothing has changed and nothing has been learned.
National debt tops $22 trillion for the first time as experts warn of ripple effects by Michael Collins, USA TODAY Feb. 12, 2019
WASHINGTON – The national debt surpassed $22 trillion for the first time on Tuesday, a milestone that experts warned is further proof the country is on an unsustainable financial path that could jeopardize the economic security of every American.
Yes, way, way 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.
Every year since then, the self-proclaimed experts have told you the federal debt either is a “ticking time bomb,” “unsustainable,” “a threat to the economic security of every American,” or some other bit of scare nonsense.
In 1940, the so-called “debt” (It actually is “deposits,” but why be accurate when you want to fool the public?) was only $40 Billion. Today, it is about $17 Trillion, a gigantic 45,000% increase.
(The $22 Trillion figure includes internal debt, money one department of the government owes another department of the government — left pocket owes the right pocket. The debt scare-mongers use the larger number so as to scare you more.)
Despite that massive debt increase in the past 80 years, where is the “threat to economic security?” Why has that “ticking time bomb” not exploded? Eighty years is a long time to keep ticking and nothing happens.
The Treasury Department reported the debt hit $22.012 trillion, a jump of more than $30 billion in just this month.
The national debt has been rising at a faster rate following the passage of President Donald Trump’s $1.5 trillion tax-cut package a little more than a year ago and as the result of congressional efforts to increase spending on domestic and military programs.
The nation has added more than $1 trillion in debt in the last 11 months alone.
“Reaching this unfortunate milestone so rapidly is the latest sign that our fiscal situation is not only unsustainable but accelerating,” said Michael A. Peterson, chief executive officer of the Peter G. Peterson Foundation, a nonpartisan organization working to address the country’s long-term fiscal challenges.
Here is all you need to know about the Peter G. Peterson Foundation, an organization devoted to spreading the “Big Lie,” that the federal government’s finances are like state and local government finances, and the debt is “a ticking time bomb,” etc., etc., etc.
These folks never seem to be embarrassed about being wrong, wrong, and wrong yet again, year after year. They just keep on making those wrong predictions as though reality means nothing.
The “unfortunate milestone” is the kind of milestone banks boast about: An increase in total deposits.
For Americans, the growing debt should be a concern, experts said, because over time it can push up interest rates for consumers and businesses.
The higher rates can ripple through the economy, nudging up rates for mortgages, corporate bonds and other types of consumer and business loans.
The above two paragraphs are so far out of touch with reality, they are laughable.
First, if the growing debt could “push up interest rates,” why hasn’t the 45,000% increase in debt already pushed up interest rates, which today remain quite low?
Second, the Fed controls interest rates by fiat. When the Fed wants low rates, it mandates low rates. When it wants high rates, it mandates high rates.
If it wants to issue T-securities at a certain rate, and the public doesn’t buy them, the Fed simply can buy the T-securities, itself.
Being Monetarily Sovereign, i.e. sovereign over the dollar, the government can do anything it wishes with the dollar.
Third, higher interest rates actually grow the economy by increasing the number of interest dollars the government pumps into the economy.
The most common measure of the economy is Gross Domestic Product. GDP = Federal Spending + Non-federal Spending + Net Exports. Notice the words “Spending”? They include interest.
Fourth, private interest does not inhibit an economy; it merely circulates dollars. The borrower pays interest to the lender. It’s a cost to one, and income for the other. The total of dollars stays essentially the same.
Then, we come to the biggest lie of all:
A big national debt can also make it harder for the government to increase spending to combat the next recession or devote more money to retraining workers and helping the poor, among other programs.
Here, Peterson confuses federal finances with monetarily non-sovereign state and local finances.
The number of dollars deposited into T-security accounts has no effect on the government’s ability to spend. The government doesn’t touch the dollars in T-security accounts.
When the federal government spends, it sends instructions (not dollars) to a supplier’s bank, instructing the bank to increase the balance in the creditor’s checking account.
When the creditor’s bank does as instructed, brand new dollars are created and added to the money supply measure, M1.
Peterson attributed the growing national debt to “a structural mismatch between spending and revenues.”
The biggest drivers are the aging population, high healthcare costs, and growing interest payments, combined with a tax code that fails to generate sufficient revenue, he said.
“Structural mismatch” is Peterson-speak meaning more dollars are spend than are received in taxes.
But this has no effect on the federal government’s ability to spend. Because the federal government creates brand new dollars, every time it pays a bill, it could continue spending forever, even if total tax collections were $0.
In fact, tax dollars are destroyed immediately upon receipt by the U.S. Treasury.
The debt eclipsing $22 trillion “is another sad reminder of the inexcusable tab our nation’s leaders continue to run up and will leave for the next generation,” said Judd Gregg and Edward Rendell, co-chairmen of the nonpartisan Campaign to Fix the Debt, a project of the nonpartisan Committee for a Responsible Federal Budget.
Let us dispense with the “next generation” nonsense. The “next generation” didn’t pay for the $40 Billion debt of 1940. The “next generation” didn’t pay for the $3 Trillion debt of 1992. And today’s generation is not paying for any past debt.
Taxpayers do not fund federal debt. The deposits themselves are returned upon maturity, and the interest on those deposits is paid by new dollars created by the federal government.
No tax dollars involved. They are destroyed.
Also, let us dispense with this “nonpartisan” nonsence. These guys are rabidly partisan. The root for the rich and against the poor.
They want taxes on the rich cut, and benefits for the poor cut. How much more partisan can you get.
With deficits rising and gross debt scheduled to jump by more than $1 trillion annually, Congress must take action to put the country on a more sustainable path, Gregg and Rendell said.
“The fiscal recklessness over the past years has been shocking, with few willing to step up with a real plan,” they said. “We need responsible leadership to fix the debt, not a worsening of partisanship.”
And that is exactly what the debt fear-mongers have been saying for the past 80 years.
Pretending federal finances are like state and local government finances, or like personal finances, is designed to fool the public.
Because few people understand the basics of economics, the plot seems to have worked.
Rodger Malcolm Mitchell
Search #monetarysovereigntyFacebook: 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
2. Federally funded medicare — parts a, b & d, plus long-term care — for everyone
3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)
4. Free education (including post-grad) for everyone
5. Salary for attending school
6. Eliminate federal taxes on business
7. Increase the standard income tax deduction, annually.
8. Tax the very rich (the “.1%) more, with higher progressive tax rates on all forms of income.
9. Federal ownership of all banks
10. Increase federal spending on the myriad initiatives that benefit America’s 99.9%
The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.
3 thoughts on “Duck! The sky is falling and the “debt” is rising!”
Whadda ya know! MMT and Stephanie Kelton made the news on MSNBC w/Velshiand Ruhle a few days ago. The guest was Austin Goolsbee who tried hard to put it down by calling it somewhat muddled and confusing.
I guess all you need, Roger, is a faculty chair, a previous job with a presidential candidate, a lot of patience and you too can hit the big time w/ monetary sovereignty.
It’s a good step. Now if we can get MMT off their Jobs Guarantee focus. See: https://mythfighter.com/2018/09/06/mmts-jobs-guarantee-the-final-nail-in-the-coffin-of-this-naive-foolish-program/
I feel the MMT Jobs Guarantee focus is a more conservative slant in order to gain acceptance; whereas, MS will run into the “money for nothing” problem.
But MS makes more sense now and in the long run due to a) inevitable job destruction by expatriation and automation, and b) MS’ level of INDIVIDUAL choice and satisfaction without government intervention.
Better to not have someone in the work force that’s an unhappy camper and be paid well to stay home out of the way of people who enjoy being productive and easier to manage.
Either way its probably curtains for unions