You repeatedly are told that the federal “debt” and “deficit” are too high, and danger to America. Further, you are told that the debt/GROSS DOMESTIC PRODUCT ratio is too high, and if it ever reaches 100, there will be a calamity.
All are wrong.
The federal “debt” is not a debt. It is the total of deposits into T-security accounts, which are similar to bank safe deposit accounts. The federal government never touches those dollars.
The federal deficit is the annual investment by the federal government into the private sector. The federal government has infinite money, and the private sector uses federal investments for economic growth.
The purpose of T-securities is not to supply the federal government with spending money. The purposes are:
- to provide a safe parking place for unused dollars. This stabilizes the dollar.
- to help the Fed control interest rates. This helps prevent inflation.
Because the federal government is Monetarily Sovereign, it pays its bills by creating new dollars ad hoc. It has no need to borrow or even to levy taxes. The federal government cannot unwillingly become insolvent.
Even if all tax collections fell to $0, the federal government could continue spending and paying its bills, forever.
Recessions tend to follow reductions in deficit growth:
U.S. depressions tend to come on the heels of federal surpluses.
1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.
Despite all of the above, self-proclaimed “experts” continue to claim that the federal debt is a “ticking time bomb.” Since 1940, they have made the same claim, and have been wrong.
Yet, they seem incapable of learning from failure, so they continue to disseminate the easily disproved nonsense:
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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.
At this time, the federal debt was $40 Billion.
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.”) At this time, the federal debt was $237 Billion.
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. At this time, the federal debt was $1,137 Billion.
In 1984: AFL-CIO President Lane Kirkland said. “It’s a time bomb ticking away.” At this time, the federal debt was $1,307 Billion.
In 1985: “The federal deficit is ‘a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell. (Remember him?) At this time, the federal debt was $1,507 Billion.
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.” At this time, the federal debt was $1,507 Billion.
In 1987: Richmond Times–Dispatch – Richmond, VA: “100TH CONGRESS FACING U.S. DEFICIT ‘TIME BOMB’” At this time, the federal debt was $1,890 Billion.
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” At this time, the federal debt was $2,191 Billion.
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.” At this time, the federal debt was $3,000 Billion.
Later in 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a total national debt of $4 trillion.” At this time, the federal debt held by the public was $3,000 Billion.
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.” At this time, the federal debt was $3,604 Billion.
In 2003: Porter Stansberry, for the Daily Reckoning: “Generation debt is a ticking time bomb . . . with about ten years left on the clock.” At this time, the federal debt was $3,913 Billion.
In 2004: Bradenton Herald: “A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB” At this time, the federal debt was $4,926 Billion.
In 2005: Providence Journal: “Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb.” At this time, the federal debt was $4,592 Billion.
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. At this time, the federal debt was $4,829 Billion.
In 2007: USA Today: “Like a ticking time bomb, the national debt is an explosion waiting to happen.” At this time, the federal debt was $5,035 Billion.
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. At this time, the federal debt was $9,019 Billion.
In 2010: Reason Alert: “. . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.” At this time, the federal debt was $9,019 Billion.
In 2011: Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode.” At this time, the federal debt was $10,129 Billion.
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.” At this time, the federal debt was $11,983 Billion.
In 2014: CBN News: “The United States of Debt: A Ticking Time Bomb” At this time, the federal debt was $12,780 Billion.
On Jun 18, 2015: The ticking economic time bomb that presidential candidates are ignoring: Fortune Magazine, Shawn Tully. At this time, the federal debt was $13,117 Billion.
On February 10, 2016, The Daily Bell: “Obama’s $4.1 Trillion Budget Is Latest Sign of America’s Looming Collapse” At this time, the federal debt was $14,168 Billion.
On January 23, 2017: Trump’s ‘Debt Bomb’: Deficit May Grow, Defense Budget May Not, By Sydney J. Freedberg, Jr. At this time, the federal debt was $14,665 Billion.
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.” At this time, the federal debt held by the public was $14,665 Billion.
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. At this time, the federal debt held by the public was $14,665 Billion.
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. At this time, the federal debt held by the public was $15,750 Billion.
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. At this time, the federal debt held by the public was $14,665 Billion.
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. At this time, the federal debt held by the public was $15,801 Billion.
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? At this time, the federal debt held by the public was $14,665 Billion.
March 17, 2021, The Democrats’ ‘Big’ Infrastructure Plan: A Giant Debt Bomb? by Rachel Bucchino, a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill. Congress basically has two options: borrowing money or raising taxes, whether it uses reconciliation or not,” Stan Veuger, a resident scholar in economic policy studies at the American Enterprise Institute, said.
Rodger Malcolm Mitchell
Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell
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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:
- Eliminate FICA
- Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
- Social Security for all
- Free education (including post-grad) for everyone
- Salary for attending school
- Eliminate federal taxes on business
- Increase the standard income tax deduction, annually.
- Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
- Federal ownership of all banks
- 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.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
They just won’t quit, regardless of the evidence.
The complete refusal to examine and accept the evidence in front of them is just like the academic macroeconomists who put all of their efforts and faith in their models, rather than the empirical facts.
All models make compromises with reality, by definition. However, when the models have obviously false assumptions as their foundation, there is no valid argument that they are applicable to the real economy.
For the past 60 or so years this has been made worse by Milton Friedman’s contention that the public needs to be deceived into believing that the economic power of the federal government is limited so that they won’t demand too much in the way of federal provision of concrete, material benefits, e.g., your Ten Steps.
He framed it as being similar to the myths propagated by organized religion to keep their adherents in line, and it seems that the ticking time bomb trope has become exactly that, a religion.
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Thanks, John
For many years I have claimed that deception was the fundamental purpose of economic fact denial. Now you tell me Milton Friedman articulated it first?? 🙂
That reminds me of the time when I “invented” MMT, only to discover Warren Mosler did it a few years earlier, so I had to name my version, “Monetary Sovereignty.” The two now have drifted apart in certain key specifics, though the basic ideas remain the same.
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To set the record straight, it was not Milton Friedman who compared deficit myth to religion, that was Paul Samuelson. Paul Samuelson considered the deficit myth to be somewhat of a “noble lie”, as he was concerned (as was Friedman) about “out of control” government spending causing inflation. Of course nobody is in favor of out of control spending, but that is the scare tactic used to promulgate the myth.
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I always learn from my readers.
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Money is an invention gone astray. It was initially intended to assist with trade due to language differences. Then “interest” was invented as a form of profit, and ever since then has put money on an increasingly selfish path through history, now referred to as the Gap. This, to me, is going to be the final test of survival. Will it be the human species or monetary specie? Abundant life or Scare City?
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