Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
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Well, you can add it to the long list, another information source that claims the national debt is a “ticking time bomb.”
Since 1940, maybe even longer, some “expert” makes that same claim and uses those same words, “ticking time bomb.”
Which is more disturbing, the wrong-headed pronouncement or the lack of creativity?
This time it’s THE WEEK Magazine. Here are a few truly laughable excerpts:
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.
That means that the total federal debt will balloon to $31.4 trillion over the next decade, pushing the debt-to-GDP ratio to 98 percent, or the highest since World War II.
Nevermind that the “time bomb” crisis has been ticking for 80+ years and still hasn’t exploded, and nevermind that the debt/GDP ratio is absolutely meaningless.
The influential know-nothings will continue to pump the same nonsense into the minds of the populace, who have been trained to fear something — federal deficit spending –that actually is beneficial.
It is absolutely necessary to grow the economy. Without federal deficit spending, we would have nothing but recessions and depressions.
And this wave of red ink is hitting us during boom years, when the country’s deficits should be shrinking so that we can borrow and spend money to stimulate the economy during the inevitable recession to come.
Except for these small facts.
- The federal government does not borrow, nor does it ever need to. It accepts deposits into T-security accounts. It never touches those dollars, and it pays off those accounts by the simple expedient of returning the dollars.
- The government never, never, never can run short of dollars — its sovereign currency. It always can spend whatever is necessary to stimulate the economy.
- Shrinking deficits cause recessions and depressions, which are cured only by increasing deficits.
In short, the author of the above paragraph doesn’t understand the difference between a Monetarily Sovereign government (i.e. the U.S. federal government) vs. monetarily non-sovereign governments (i.e. state and local governments).
The former has a sovereign currency, which it can create endlessly. The latter do not have a sovereign currency, so they often run short of whatever currency they use. It’s Economics 101.
There’s little doubt who’s to blame, said John Cassidy in NewYorker.com.
After campaigning on a promise to pay off the entire deficit, Trump has run up “vast amounts of new debt” to finance a military buildup and the $1.5 trillion tax cut in 2017.
Unfortunately, this relentless fiscal stimulus has achieved little, despite the president’s claims of stewarding “The Greatest Economy in American History.”
Last year, GDP grew 2.3 percent, nowhere near the 4 percent Trump promised, and the CBO now predicts a steady decline to 1.5 percent by 2025.
Let’s stop to examine Cassidy’s strange doubletalk. He admits that “vast amounts of new debt” amount to “relentless fiscal stimulus” — which is correct.
So, if increasing the debt stimulates, what would decreasing the debt do? Right. Decreasing debt recesses. It causes recessions and depressions.
Cassidy doesn’t dispute that. He admits the economy grew. He merely complains that the new debt didn’t grow the economy enough. Doesn’t that indicate there wasn’t enough debt, not that debt should be reduced?
His solution seems to be to stop doing what grows the economy in order to . . . what? Grow the economy less? This is the kind of “logic” to which the public is treated every day.
Americans should be “absolutely furious,” said Jordan Weissmann in Slate.com.
Republicans preach frugality with a Democrat in the White House, but burn money every time they’re in power.
Just watch: If Trump loses, Republicans will “rediscover their old-time faith in fiscal prudence and start shrieking about how the U.S. is on the road to becoming Argentina or Zimbabwe.”
Yes, Americans should be furious about many things — for instance, having a criminal President backed by a Congress filled with Sgt. Schultz wannabes (“I see nothing; I know nothing; I hear nothing”) who turn a blind eye and a deaf ear to the criminality.
But Americans should not be furious about the increased economic stimulus. And there is zero possibility that federal spending will cause another Argentinian or Zimbabwean hyperinflation.
Hyperinflations are not caused by government spending (which actually can cure hyperinflations) but rather by shortages — usually by scarcities of food or oil.
Don’t blame the Trump tax cuts, said Jake Novak in CNBC.com. The U.S. Treasury just booked a record quarter in tax revenue: $806.5 billion. “If tax revenues are rising, then tax cuts can’t possibly be the reason for rising federal debts.” It’s out-of-control spending that’s the cause.
Still, when the deficit bill comes due, said the Los Angeles Times in an editorial, there’s little doubt that the poor will end up paying for our profligacy.
Rather than cut defense or “the vast tax giveaways and subsidies” for the rich, fiscal conservatives will target “safety net programs” like Medicaid and food stamps.
That would be redistributing wealth in the cruelest possible way—“from the impoverished to the well-to-do.”
Total gibberish from Novak. Tax cuts and increased spending both led to increased deficits. But the word “blame” is misused.
Since increased deficits are stimulative, the word “credit” would be more appropriate. The combination of tax cuts and spending increases can be credited for the continuing economic growth.
The Los Angeles Times is correct that the poor will wind up paying, but not because that is a necessary result.
The federal government, being Monetarily Sovereign, does not need to raise taxes on the poor, nor does it need to cut safety net programs. It can create all the dollars it needs, forever.
It will raise taxes and/or cut social programs only because that is what the richest Americans (who run America) want.
The richest of us wish to widen the Gap between the rich and the rest. It is the Gap that makes them rich.
The two ways to widen the Gap are:
- Take from the poorer
- Give to the richer
Reducing social spending will accomplish #1. The Trump tax cuts accomplished #2.
We’ll finish this post by providing our usual reminder about the ridiculous, misleading, verging on humorous warnings about that “ticking time bomb”:
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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. (“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.]
Eighty years of wrong-headed “ticking time bomb” predictions, and still they come. Why are the thought leaders incapable of learning?
My belief: It’s intentional. The rich, who run America, do not want the not-rich to learn that the government can provide all the things described in the Ten Steps to Prosperity (below), without raising taxes.
It’s just that simple.
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:
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 the rest.
MONETARY SOVEREIGNTY
Here is the predicament for bigot Trump and his bigot followers.
#Monetary Sovereignty - Mitchell 