Here is your periodic reminder. After 80 years, the federal debt still is being called a “ticking time bomb,” the slowest time-bomb in history.
We don’t need to go into too much detail. We’ve said it often enough:
- The federal “debt” is not debt in the usual sense. The federal government does not borrow. The so-called “debt” is the total of deposits into Treasury Security accounts at the Federal Reserve. The federal government does not touch these deposits, and the accounts can be paid off instantly by returning the balances to the account owners. No tax dollars are involved. No burden on future generations.
- Federal deficits add dollars to the economy. Federal deficits are necessary for economic growth. Recessions and depressions result from decreased deficit growth and are cured by increased deficit growth.
- The U.S. government, being Monetarily Sovereign, cannot run short of its own sovereign currency. It never can become insolvent. Even if federal tax collections totaled $0, the federal government could continue spending, forever. That is why the federal government never borrows.
- The U.S. debt-to-GDP ratio is absolutely meaningless with regard to federal solvency. The ratio could go to 1,000% and the U.S. government still would be able to pay its bills.
These facts do not penetrate the minds of the debt shriekers, who after all these years still do not understand the financial differences between a Monteraily Sovereign government (the U.S. federal government) and monetarily non-sovereign governments (state & local governments).
The former has the unlimited ability to create dollars. The latter, like you, and me, and the states can become insolvent. Vast difference.
So every year, every month, perhaps every day, we see warnings like this:
29 Aug 2020 LOS ANGELES, California: Commentary: America’s mountain of debt is a ticking time bomb. The United States not only looks ill, but also dead broke.
To offset the pandemic-induced “Great Cessation,” the US Federal Reserve and Congress have marshalled staggering sums of stimulus spending out of fear that the economy would otherwise plunge to 1930s soup kitchen levels.
The 2020 federal budget deficit will be around 18 per cent of GDP, and the US debt-to-GDP ratio will soon hurdle over the 100 per cent mark.
Such figures have not been seen since Harry Truman sent B-29s to Japan to end World War II.
Assuming that America eventually defeats COVID-19 and does not devolve into a Terminator-like dystopia, how will it avoid the approaching fiscal cliff and national bankruptcy?
To answer such questions, we should reflect on the lessons of World War II, which did not bankrupt the US, even though debt soared to 119 per cent of GDP. By the time of the Vietnam War in the 1960s, that ratio had fallen to just above 40 per cent.
World War II was financed with a combination of roughly 40 per cent taxes and 60 per cent debt.
It all is utter nonsense, exactly the same nonsense that has been published and spoken by self-anointed “experts, since 1940. Every year, those same-old warnings about the same-old “ticking time-bomb” that never seems to go off.
It would be laughable if not for the fact that many people still believe this stuff.
World War II was not financed with taxes or debt. It was financed the same way all federal spending is financed: The federal government, being Monetarily Sovereign, pays all its bills by creating new dollars, ad hoc.
Federal taxes are destroyed upon receipt.
Federal “debt” actually is deposits into T-security accounts, the dollars in which are not taken by the federal government.
Here is a partial list of the “boy-who-cried-wolf” calls that have emanated from the debt scare-mongers.
September, 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. (“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 yesterday.”)
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. (Remember him?)
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: Heritage Foundation: “Why the National Debt is a Ticking Time Bomb. Interest rates on government bonds are virtually guaranteed to jump over the next few years.
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.”
June 19, 2013: Chamber of Commerce: Safety net spending is a ‘time bomb’, By Jim Tankersley: The U.S. Chamber of Commerce is worried that not enough Americans are worried about social safety net spending. The nation’s largest business lobbying group launched a renewed effort Wednesday to reduce projected federal spending on safety-net programs, labeling them a “ticking time bomb” that, left unchanged, “will bankrupt this nation.”
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,
On 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 January 27, 2017: America’s “debt bomb is going to explode.” That’s according to financial strategist Peter Schiff. Schiff said that while low interest rates had helped keep a lid on U.S. debt, it couldn’t be contained for much longer. Interest rates and inflation are rising, creditors will demand higher premiums, and the country is headed “off the edge of a cliff.”
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
Feb. 16, 2018 America’s Debt Bomb By Andrew Soergel, Senior Reporter: Conservatives and deficit hawks are hurling criticism at Washington for deepening America’s debt hole.
April 18, 2018 By Alan Greenspan and John R. Kasich: “Time is running short, and America’s debt time bomb continues to tick.”
January 10, 2019, Unfunded Govt. Liabilities — Our Ticking Time Bomb. By Myra Adams, Tick, tick, tick goes the time bomb of national doom.
January 18, 2019; 2019 Is Gold’s Year To Shine (And The Ticking US Debt Time-Bomb) By Gavin Wendt
[The following were added after the original publishing of this article]
April 10, 2019, The National Debt: America’s Ticking Time Bomb. TIL Journal. Entire nations can go bankrupt. One prominent example was the *nation of Greece which was threatened with insolvency, a decade ago. Greece survived the economic crisis because the European Union and the IMF bailed the nation out.
July 11, 2019: National debt is a ‘ticking time bomb‘: Sen. Mike Lee
SEP 12, 2019, Our national ticking time bomb, By BILL YEARGIN
SPECIAL TO THE SUN SENTINEL | At some point, investors will become concerned about lending to a debt-riddled U.S., which will result in having to offer higher interest rates to attract the money. Even with rates low today, interest expense is the federal government’s third-highest expenditure following the elderly and military. The U.S. already borrows all the money it uses to pay its interest expense, sort of like a Ponzi scheme. Lack of investor confidence will only make this problem worse.
JANUARY 06, 2020, National debt is a time bomb, BY MARK MANSPERGER, Tri City Herald | The increase in the U.S. deficit last year was about $1.1 trillion, bringing our total national debt to more than $23 trillion! This fiscal year, the deficit is forecasted to be even higher, and when the economy eventually slows down, our annual deficits could be pushing $2 trillion a year! This is financial madness.there’s not going to be a drastic cut in federal expenditures — that is, until we go broke — nor are we going to “grow our way” out of this predicament. Therefore, to gain control of this looming debt, we’re going to have to raise taxes.
February 14, 2020, OMG! It’s February 14, 2020, and the national debt is still a ticking time bomb! The national debt: A ticking time bomb? America is “headed toward a crisis,” said Tiana Lowe in WashingonExaminer.com. The Treasury Department reported last week that the federal deficit swelled to more than $1 trillion in 2019 for the first time since 2012. Even more alarming was the report from the bipartisan Congressional Budget Office (CBO) predicting that $1 trillion deficits will continue for the next 10 years, eventually reaching $1.7 trillion in 2030
April 26, 2020, ‘Catastrophic’: Why government debt is a ticking time bomb, Stephen Koukoulas, Yahoo Finance [Re. Monetarily Sovereign Australia’s debt.]
August 29, 2020, LOS ANGELES, California: America’s mountain of debt is a ticking time bomb The United States not only looks ill, but also dead broke. To offset the pandemic-induced “Great Cessation,” the US Federal Reserve and Congress have marshalled staggering sums of stimulus spending out of fear that the economy would otherwise plunge to 1930s soup kitchen levels. Assuming that America eventually defeats COVID-19 and does not devolve into a Terminator-like dystopia, how will it avoid the approaching fiscal cliff and national bankruptcy?
APR. 16, 2021, NATIONAL POLICY: ECONOMY AND TAXES / MARK ALEXANDER /
The National Debt Clock: A Ticking Time Bomb: At the moment, our national debt exceeds $28 TRILLION — about 80% held as public debt and the rest as intragovernmental debt. That is $225,000 per taxpayer. Federal annual spending this year is almost $8 trillion, and more than half of that is deficit spending — piling on the national debt.
Oooh, “the approaching fiscal cliff and national bankruptcy” still are approaching — but never arriving. The only fiscal cliff we have is the one that Trump + COVID are pushing us over. The people in America may go bankrupt, but the federal government never will.
And yet, the GOP refuses to implement the latest $3 trillion rescue package proposed by the Democrats because . . . well, because it was proposed by the Democrats and it includes benefits for the poor and middle-income groups, and “not enough” for the rich.
Millions of Americans are jobless and starving, but that ole’ federal debt bomb is still ‘a tickin’.
Rodger Malcolm Mitchell
Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
The most important problems in economics involve:
- Monetary Sovereignty describes money creation and destruction.
- Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Ten Steps To Prosperity:
2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
3. Social Security for all or a reverse income tax
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 the rest.
6 thoughts on “Your periodic reminder. After 80 years, the federal debt still is a “ticking time bomb.””
Rodger, did you read the caption under the dollar bills graphic? Gives the impression the federal govt has partially defaulted on its debt. (Impossible of course, those figures represent private, not public debt.)
No, I didn’t. That’s hilarious. That caption has nothing to do with the article, which is about federal “debt,” and includes such brilliance as:
“The US Treasury should give tomorrow’s children a break by issuing 50 and 100-year bonds, locking in today’s puny rates for a lifetime.”
There’s nothing like locking tomorrow’s children into 100-year, low-interest bonds, in order to help the economy. Yikes.
Column 8 cannot be read.
Yes, sorry. It’s a copy of a copy. The headline is, “Deficit Financing Is Hit By Hanes.” The key line is, the federal budget is a “ticking time-bomb which can eventually destroy the American system,” said Robert M. Hanes, president of the American Bankers Association.
If you have time I am curious what your thoughts are on this:
Is this just the same story? He mentions MMT but I don’t understand what he is getting at in that part. Otherwise he just appears to be saying that our debt is out of control.
To phrase it gently, the article is confused bullshit, by someone who seems to think federal financing is just like personal financing. So-called “debt” actually is deposits. Banks boast about the size of their deposits, and they aren’t even Monetarily Sovereign. So why should a nation with unlimited money worry about deposits?
The “deficit” is just a bookkeeping number that has no economic significance, except that the larger the deficit, the more the economy grows.
Just another debt fear-mongering article.