The post, “Your periodic reminder. After 80 years, the federal debt still is a “ticking time bomb,” was a September 6, 2020, update to earlier posts, all showing the same thing:
Since 1940, economists and other misguided folks have lamented the growth of the U.S. federal debt, calling it a “ticking time bomb.”
Now, here is your updated periodic reminder.
After 83.5 years, the federal debt still is being called a “time bomb.” Having not exploded, it is 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. The tax check you send to the federal government is taken from your share of the M1 money supply. The instant it is received by the Treasury, it ceases to be part of any money supply measure, thus it effectively is destroyed.
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?
April 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.
April 29, 2022, Don’t Wait! The National Debt Is Only Getting Worse
New CBO report shows that the longer Congress waits to deal with the debt, the bigger the problem becomes. By Eric Boehm: In short, taxes will have to go up and government services—including benefits from programs like Social Security and Medicare will likely have to be reduced. Debt-watchers have been warning for years that benefit cuts and tax increases will likely be needed to have any realistic shot at managing America’s long-term debt. (And, remember, we’re talking about what’s needed to merely stabilize the debt, not reduce or eliminate it).
Actually “debt-watchers have mongered the same warning for at least 82.5 years, and here we are, still growing and still no explosion from the mythical “debt bomb.”
Actually, if/when we do reduce the federal debt, we will have the same results we always have had: A recession or more likely, a depression:
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.
Seemingly, that is what the “debt-watchers” want.
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.
3 thoughts on “A supplement to: “Your periodic reminder. After 80 years, the federal debt still is a ‘ticking time bomb.’””
Did you happen to notice while gathering all of these examples that whenever any particular program or spending category is mentioned, it’s always social spending that is causing the problem and needs to be cut, never, ever military spending?
The only mention of the military budget in your list was in an item about Trump where military spending wasn’t going to be increased, but the deficit was, implying that social spending is to blame.
And now, after sending several billion dollars of military weapons and armament to Ukraine, Biden is asking Congress for another $33 billion. Have you heard anyone asking how it’s going to be paid for or which taxes are going to be raised to keep from adding to the deficit? Of course not, the military budget is magical and never adds to the deficit.
Yes, and that relates to the “mysterious” fact that Social Security, Medicare, Highways, mass transit, and government employee pensions are among the very few federal programs that supposedly are supported by so-called.”Trust Funds.”
The ostensible purpose of these fake “trust funds” is to “provide a more dependable source of funding from the federal government.” Of course, that’s utter nonsense, since not only does the government have the unlimited power to support any federal program, but it also has the unlimited power to raid any “trust fund” for any reason.
The real purpose of federal “trust funds” is to LIMIT the amount spent on these programs that benefit middle- and lower-income America.
Bottom line: Congress and President, which are owned by the very rich, wring their hands in pretended dismay that social programs will soon run short of dollars, so benefits must be decreased and/or taxes increased. It’s all related to the Big Lie, promulgated by the rich, that federal taxes and federal borrowing fund federal spending.
In fact, federal taxes fund nothing, and there is no federal borrowing. It’s all a ruse to fool the suckers into meekly accepting ridiculously low Social Security benefits, along with being taxed on those benefits, and enduring unnecessary Medicare deductibles.
Soaking the poor and middle is how the rich get richer.
What’s easier, explaining Monetary Sovereignty or continuing the same story we’ve heard about the sky falling? It’s so much easier to say it’s dangerous “out there” and fit in with the rest of society.
But to come out of the debt closet and declare the truth about the monetary world is scary. It requires studying and understanding Monetary Sovereignty and jettisoning traditional scarcity economics. This is hard. You must stick your neck out and go against the grain of society, risking your reputation and even your job.
But all of us need to know that the economists are dead wrong; that practically all the problems in the world come back to our view of money and the idea of keeping it scarce. Holding back the truth is no different in outcome than refusing to eat or sleep or drink, or recognize what works.