We did it with the “Economic Stimulus Act 2008. The federal government simply sent people money.
Generally, low and middle-income taxpayers received up to $300 per person or $600 per couple.
The purpose was to stimulate economic growth and to cure the recession.
It worked:
As federal deficits (blue) declined, we fell into a deep recession, cured only by a robust increase in federal deficit spending (red).
Gross Domestic Product (GDP) is a common measure of the economy. The above graph should come as no surprise. The formula for economic growth is:
GDP = Federal Spending+ Nonfederal Spending + Net Exports
Mathematically, as federal deficit spending decreases, economic growth falls, and as federal deficit spending increases, economic growth increases.
If you want economic growth, you want federal deficit spending to increase.
I’ve written about this many times.It’s simple algebra. I’m not sure why this is a mystery to the politicians who think a debt limit is prudent finance. It’s exceedingly ignorant finance.
I mention this again because of an article I just read on MEDPAGETODAY:
Uninsured Rate Hits Record Low of 8.3% — But that number will slowly rise as pandemic health insurance protections unwind, experts say by Joyce Frieden, Washington Editor, MedPage Today May 24, 2023
WASHINGTON — The uninsured rate in the U.S. has fallen to a record-low 8.3%, but that percentage is expected to gradually increase as insurance protections from the COVID-19 pandemic wind down, according to officials from the Congressional Budget Office (CBO).
Why will insurance protections “wind down.” For the same reason we currently have a debt=limit battle in Congress. Sheer ignorance.
The federal government has repeatedly proved that it has the infinite ability to pay for anything. Why is it “winding down” payments for healthcare insurance?
The temporary policies enacted in the wake of the COVID-19 pandemic “have contributed to a record low uninsurance rate in 2023 of 8.3% and record-high enrollment in both Medicaid and ACA [Affordable Care Act] marketplace coverage,”said Caroline Hanson, Ph.D., principal analyst at the CBO, during a briefing sponsored by Health Affairs.
“As those temporary policies expire under current law, the distribution of coverage will change and the share of people who lack insurance is expected to increase by 2033.”
CBO is projecting an uninsured rate of 10.1% by 2033, and “while that’s obviously higher than the 8.3% that we’re estimating for 2023, it is nevertheless lower than the uninsured rate in the last year prior to the COVID-19 pandemic,” which was about 12%, she said.
Think about it. America has about 330 million people. A ten percent uninsured rate means 33 MILLION (!) people in America will have to do without health care insurance. I hope you’re not among them.
Whether or not you have insurance, here are some data that should concern you:
“A widely cited study published in the American Journal of Public Health in 2009 analyzed data from the National Health Interview Survey and found that uninsured individuals had a 40% higher risk of death compared to their insured counterparts. This study estimated that lack of health insurance contributed to approximately 45,000 deaths annually in the United States.
“Another study published in the Annals of Internal Medicine in 2017 conducted a systematic review and meta-analysis of previous research. The analysis concluded that uninsured individuals faced a 25% higher risk of mortality compared to those with insurance.”
When you don’t have healthcare insurance, you die younger.
“Throughout the 2023-33 period, employment-based coverage will remain the largest source of health insurance, with average monthly enrollment between 155 million and 159 million,” Hanson and co-authors wrote in an article published in Health Affairs.
Employer-based health care insurance has two features seldom discussed.
It ties employees to their employer, making job negotiation and movement much more difficult
It is paid for by the employee because the employer figures the cost as part of the employment. Salaries could be higher without this “perk.”
If the federal government funded a comprehensive Medicare for All plan, employees would earn more without costing employers more.
However, they added, “in addition to policy changes over the course of the next decade, demographic and macroeconomic changes affect trends in coverage in the CBO’s projections.”
The Families First Coronavirus Response Act of 2020 gave states a 6.2-percentage-point boost in their Medicaid matching rates as long as the states didn’t disenroll anyone in Medicaid or CHIP for the duration of the COVID public health emergency.
Hanson noted that this law “allowed people to remain enrolled regardless of their changes in eligibility. So, for example, even if they had an income increase that would have made them ineligible but for the policy,” they were still able to stay on Medicaid.
The COVID public health emergency has been canceled now. Disenrollments can begin.
As a result of the law, Medicaid enrollment has grown substantially since 2019 — by 16.1 million enrollees, she said. But that has been superseded by another act of Congress, which allowed states to begin “unwinding” the continuous eligibility rules and start disenrolling people from Medicaid and CHIP beginning on April 1.
In total, “15.5 million people will be transitioning out of Medicaid after eligibility redetermination,” said Hanson. “Among that 15.5 million people, CBO is estimating that 6.2 million of them will go uninsured and the remainder will be enrolled in another source of coverage,” such as individual coverage or employment-based coverage.
Of those who are leaving Medicaid, how many are leaving voluntarily and how many are “falling through the cracks” because they didn’t receive their disenrollment notification or failed to fill out the required paperwork to reapply?
“We recognize that before these continuous eligibility requirements were put into place, people were losing Medicaid coverage, both because they were becoming no longer eligible for Medicaid, and … because they did not complete the application process despite remaining eligible,” said CBO analyst Claire Hou, PhD. However, she added, “we’re currently not aware of any data that would allow us to quantify the size of those two different groups.”
All of the above would be unnecessary if our Monetarily Sovereign federal government (which has unlimited funds) simply would fund a comprehensive, no-deductibles Medicare for All program.
Hanson delivered some bad news for those footing the bill for private health insurance. “We are projecting relatively high short-term premium growth rates in private health insurance, and this is for a few reasons,” she said.
“One is the economy-wide inflation that we’re experiencing in 2023 and that we have been experiencing, and that has not fully reflected itself in premiums yet.
And another contributor is the continued bouncing back of medical spending after the suppressed utilization that we saw earlier in the pandemic.”
The study authors project average premium increases of 6.5% in 2023, 5.9% during 2024-2025, and 5.7% in 2026-2027.
The current and projected-to-increase hardship on the American people is totally unnecessary. The federal government efficiently could ameliorate this hardship by:
Funding comprehensive, no-deductible Medicare for every man, woman, and child in America
Funding Social Security benefits for every man, woman, and child in America.
Both would add dollars to Gross Domestic Product, thus growing the economy.
Instead, Congress battles over the unbelievably stupid debt ceiling. How do those people manage to dress themselves in the morning, much less be elected to America’s Congress? It boggles the mind.
Here is what former Federal Reserve Chairmen said when they were being honest:
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.”
Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
On 60 Minutes Ben Bernanke explained that federal tax money is not spent: Scott Pelley: “Is that tax money the Fed is spending?” Bernanke: “It’s not tax money . . . We simply use the computer to mark up the account.”
Get it? The U.S. government cannot run short of dollars unless it wants to.
Now mull that over and explain to yourself why the federal government, having the infinite ability to create dollars, should be concerned about the dollars it supposedly owes.
Read the following articles as you keep that infinite ability in mind:
Treasury Secretary Janet Yellen said the U.S. is projected to reach its roughly $31.4 trillion borrowing limit in less than a week.
The question, “Why does the U.S. government have a borrowing limit?” leads to two questions:
Why does the U.S. government, which is Monetarily Sovereign (i.e., having that infinite ability to create its own sovereign currency), borrow dollars?Answer: The U.S. government never borrows dollars. It accepts deposits into Treasury Security accounts, the purpose of which is not to supply the government with its own dollars (The government never touches those deposits.)The purpose of T-bills, T-notes, and T-bonds is to provide a safe place for dollar users to store unused dollars. This helps stabilize the dollar.
Why does the U.S. government limit acceptance of deposits into T-security accounts (aka “debt”).Answer: There is no rational financial reason. The con is to make the public believe falsely that federal finances are like personal finances, where spending must be limited to income.But federal finances are entirely different.The federal government cannot run short of dollars.The con goes something like this:Congress cannot control its spending, so to be “prudent,” a law that limits spending is needed. Unfortunately, this is all hogwash. Spending does not need to be controlled (as demonstrated by the repeated increases in the “debt limit)
the debt limit law does not control spending. It controls paying for what already has been spent.
Yellen shared the estimate in a letter to Speaker Kevin McCarthy (R-Calif.) on Friday. She also warned the department would soon have to begin taking “extraordinary measures” to stave off a default to buy time for Congress to find a bipartisan solution.
Those measures include temporarily redeeming existing and suspending new investments of the Civil Service, Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund, as well as suspending reinvestment of the Government Securities Investment Fund of the Federal Employees Retirement System Thrift Savings Plan.
We’ve accented the word “temporarily” to demonstrate that Yellen, Congress, and the world know the debt limit will be raised.
It will happen only after the Republican Representatives have had their chance to parade their fake thrift by giving speeches about spending cuts
Then, they will return to spending. It’s all a charade for the benefit of you, the voting public.
Yellen added that the funds would be “made whole” after the debt limit impasse has ended.
“Impasse has ended” means the limit will be raised again after all the lies have been told.
How will the funds be made “whole?” The government will do what it always has done: It will create new dollars from thin air, to pay all its bills.
That is precisely what the government has done every year of the phony debt ceiling and will continue to do in the future.
While the secretary said it’s unlikely cash and extraordinary measures will run out before early June, she stressed the measures will only last for “a limited amount of time” and pressed for Congress to “act in a timely manner” to raise or suspend the ceiling.
The letter to McCarthy comes as a high-stakes fight over raising the debt ceiling looms over the further Congress after Republicans took back control of the lower chamber last week.
McCarthy has pressed for any action to address the debt ceiling to be tied to spending cuts sought by Republicans.
The “spending cuts sought by Republicans are cuts to social programs — Medicare, Social Security, poverty aids — whatever helps those who are not rich. Benefits to the rich will not be cut, as the rich are the main contributors to the Republican party.
Also, anything that will help grow the economy will be cut because, in advance of the next elections, the Republicans want the Biden administration to be blamed for a weak economy.
However, proposals for significant cuts are likely to find trouble in the Senate, where Democrats still hold control.
“If you’re going to ask for an increase in the limit, at some point in time, you’ve got to sit down and say why are we hitting the limit? Why are we maxing out the credit card?”
The “credit card” analogy often is used. It is a false analogy, and anyone using it is ignorant about federal finance, a liar, or both.
The federal government does not use anything even remotely resembling a credit card. It pays all its financial obligations the same way: It creates new dollars, ad hoc.
There is no credit card. There is no borrowing. In fact, the federal “debt” isn’t even a real debt.
The T-security accounts are mere dollar storage — similar to bank safe deposit boxes. The government never touches those dollars. It creates all the dollars it uses. The dollars remain the property of the depositors.
Just as your bank does not count what you have in your bank safe deposit box as “debt,” the federal government does not owe the contents of T-security accounts. To pay off this misnamed “debt,” the government merely returns the contents of those accounts.
This is not a burden on the government or on taxpayers or on T-security holders.
Previous Fed Chairmen have testified that the federal government cannot run short of dollars. Even if the government collected $0 in taxes, it still could continue spending forever.
It’s a little-known secret that federal taxes are unlike state/local government taxes. All taxes are paid with dollars from the M2 money supply measure, but when federal tax dollars hit the U.S. Treasury, they disappear from any money supply measure.They effectively are destroyed.
Yes, those tax dollars you work so hard to earn and you waste so much time and money calculating and paying are destroyed upon receipt by the federal government.
Never used, never needed, the purpose of federal taxes is not to fund federal spending. They help the government control the economy by punishing what the government doesn’t like and by rewarding, via tax breaks, what the government wishes to aid.
(By contrast, state/local tax dollars remain in the economy as part of one or more money supply measures.)
The Gap is what makes the rich richer. Without the Gap, no one would be rich — we all would be the same — and the wider the Gap, the richer are the rich.
To widen the Gap, the Republicans try to cut benefits to the populace, all in the name of “prudence.”
The Democrats try to demonstrate their frugality chops by pushing the “debt limit” button, but only when they are out of office, so the Republicans can be blamed for a weakened economy.
This con has been running for your amusement since 1939 when the so-called debt was called a “ticking time bomb.” That bomb has been ticking for 84 years and presumably will continue ticking as long as liars are in Congress, i.e., forever.
Congress has made many attempts to lower the national debt, but it hasn’t been able to reduce the growth of what the nation owes.
Yes, Congress has made many attempts to lower the federal debt.
For clarity, federal debtis not real debt. It is the net total of depositsinto Treasury security accounts — T-bills, T-notes, T-bonds — since the nation’s founding. To pay off this “debt,” the government merely returns the accounts’ balances.
The national debtis a nonsensical figure that totals the above T-security accounts plus all U.S. private debt (mortgages, credit card debt, etc.) It’s something like adding water in the lakes to alcohol to find the total amount of liquid in America.
The U.S. debt is the outstanding obligation owed by the federal government.
Now, the author refers confusingly to “U.S. debt.” Presumably, she means federal debt, though it is not owed by the federal government any more than the contents of a bank safe deposit box are owed by the bank.
Those deposits are owned by the depositors and are merely held for security by the U.S. Treasury.
It exceeded $31 trillion in for the first time on Oct. 4, 2022, and it has increased by at least $1 trillion each year since 2016.1
Federal debt is at its highest point in American history. Raising taxes and cutting spending are two of the most popular solutions for reducing debt, but politicians may be hesitant to do both.
The word “solutions” indicates that the writer believes the federal “debt” is a problem. It isn’t. The federal government quickly could pay off the entire federal “debt” today merely by returning all the dollars that exist in T-security accounts.
This would cost America and American taxpayers $0.
Sadly, the “solutions” for reducing the federal “debt” often involve reducing federal deficit growth or even running federal surpluses.
This is what happens when the government reduces deficit growth:
Reductions in federal deficit growth introduce recessions, which then must be cured by increases in deficit spending. The red line is federal deficit growth. Vertical gray bars are recessions.
This is what happens when the federal government reduces the federal “debt” by running 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.
When the federal government runs a surplus (taxes exceed spending), we usually have a depression.
The reason: Recessions and depressions are measured by decreases in Gross Domestic Product, which is:
GDP = Federal Spending + Non-federal spending + Net Exports
Federal spending decreases also cause non-federal spending decreases in an overall decrease in money creation. The economy shrinks and, in an endless feedback loop, will continue to shrink unless the federal government cures the depression or recession with a healthy dose of deficit spending.
The author posts this illustration that is utter nonsense:
She begins with “Cut government spending” and “raise taxes,” i.e., reduce deficit growth — precisely what we see causes recessions.
Then she adds, “Drive economic growth at a faster rate,” but does not say how to do that when government spending falls and taxes rise.
Finally, she says, “Shift spending to areas that create the most jobs.”
Again, she doesn’t explain how that would be done with less spending and higher taxes, but spending in areas that have more jobs may not be efficient, economically.
Diverting spending from the military to other sectors may boost job growth, which could spur consumer spending and help the economy.
She doesn’t explain why diverting spending from the military boosts job growth. The military not only is a massive employer, but far more importantly is a massive consumer.
It purchases everything from weapons to research to all sorts of ancillary products and services, many of which transition to non-military use (think GPS, etc.)
And of course, the military defends us, but hey, when you’re cutting deficits, who cares about defense. Right?
What’s Stopping the U.S. From Paying Down Its Debt?
Most creditors don’t worry about a nation’s debt, also known as “sovereign debt,” until it’s more than 77% of gross domestic product (GDP).
That’s the point at which added debt cuts into annual economic growth, according to the World Bank.
When economists don’t know what they are talking about, it usually is because they don’t understand Monetary Sovereignty.
There is a vast, sometimes diametric, difference between a Monetarily Sovereign government and a monetarily non-sovereign government. Studies that lump the two usually come to wrong conclusions. It’s like lumping professional football and backyard croquet into a study of athletics on health.
The above-referenced World Bank study is a classic example:
Public debt has surged during the current global economic crisis and is expected to increase further. This development has raised concerns whether public debt is starting to hit levels where it might negatively affect economic growth.
Does such a tipping point in public debt exist? How severe would the impact of public debt be on growth beyond this threshold? What happens if debt stays above this threshold for an extended period of time?
The present study addresses these questions with the help of threshold estimations based on a yearly dataset of 101 developing and developed economies spanning a time period from 1980 to 2008.
Of the “101 developing and developed economies” few would be massive, developed, Monetarily Sovereign. Perhaps, three or four, and none of those is like the United States.
It’s a phony study that ignores reality, namely the non-effect of the “Debt”/GDP ratio on GDP growth in America.
A comparison of GDP growth (red) vs. “debt”/GDP (blue). There is no evidence that high “debt/GDP levels adversely affect GDP growth.
In America at least, no evidence points to the assumption that a high “debt”/GDP ratio negatively affects GDP growth. It’s just a belief unfounded in data.
At the end of the second quarter of 2021, the U.S. debt-to-GDP ratio was 125%.3 That’s much higher than the tipping point and is a concern for many.
“Much higher than the (fake) tipping point and a concern for many (unsupported by data).
Over $22 trillion of that national debt is public debt, which is what the government owes to investors and taxpayers.
“Owed to investors” are the dollars deposited into T-security accounts, which the government could pay off tomorrow simply by returning those dollars.
“Owed to taxpayers” are tax overpayments, which the government could pay off tomorrow simply by creating dollars ad hoc.
Congress places a limit on public debt. It increased the limit by $2.5 trillion in December 2021 to nearly $31.4 million.
Why isn’t the U.S. eliminating its debt and paying people back? There are a few reasons.
U.S. economic growth has historically outpaced its debt. The U.S. debt was $258.68 billion in August 1945, but the economy outgrew that in a few years. GDP more than doubled by 1960. Congress believes that today’s debt will be dwarfed by tomorrow’s economic growth.
As always, remember that federal “debt” is the total of deposits into T-security accounts. Whether economic growth is greater or less than deposit growth says nothing about the economy’s health.
The federal government has the right to stop accepting deposits. This would not injure economic health.
Members of Congress have a lot to lose by cutting spending. They could lose their next election if they cut Social Security or Medicare benefits.
Yes, they could, and well deservedly so. Also, tarred and feathered might be appropriate because it would be an unnecessary penalty for the non-rich.
Raising taxes can be politically unpopular. Experts believe President George H.W. Bush lost reelection because he raised taxes after promising he wouldn’t at the 1988 Republican convention.
He raised taxes in 1990 to reduce the deficit, and voters remembered.
He lost because he broke his promise. But he should have lost because the federal government neither needs nor uses tax dollars. As described earlier, federal tax dollars (unlike state/local tax dollars) are destroyed upon receipt by the Treasury.
Bush unnecessarily impoverished the private sector (aka “the economy”). He deserved to lose his job.
There are two main themes in most discussions about paying off the national debt: cutting spending and raising taxes.
There are other options that might not enter most conversations but can aid in debt reduction, too.
The 2010 bipartisan Simpson-Bowles report is a good example of how the government could cut spending to reduce debt.
The report proposed balancing the budget through a mix of spending cuts and tax reform.
Congress didn’t adopt the complete plan, but the government did implement parts of it with some success. Note A 2015 report from the Committee for a Responsible Federal Budget indicated that although a piecemeal approach reduced debt, full-fledged adoption of the Simpson-Bowles plan may have produced a significantly lower debt-to-GDP ratio.
Very simply, Simpson-Bowles suggested cutting Social Security and Medicare while increasing FICA in order to impoverish the working class at the behest of the rich.
And for what purpose? To reduce the so-called “debt” which as we repeatedly have seen has no adverse effects on the economy. None.
(The real purpose is to widen the Gap between the rich and the rest. Enriching the rich is what the bribed economists, media, and politicians are paid to do.)
Raising taxes can generate revenue that the government can use to pay down debt as well as invest in programs that support the economy.
But it can cut into tax revenue and hurt the economy if the government raises taxes too high.
Finding the correct balance is expressed by a concept known as the “Laffer Curve.”
Wrong on so many fronts. First, the government does not use taxes to pay down “debt,” i.e. deposits in T-security accounts. It merely returns the dollars already exisiting in those accounts.
Second, federal tax revenue is destroyed upon receipt.
Third, the Laffer Curve is a case of BBB (Bullsh*t baffles brains). You can click the above link to understand why, but it is telling that the author, Kimberly Amadeo, mentions this discredited hypothesis. It’s especially telling that she thinks the Laffer Curve finds “the correct balance,” which it absolutely does not do.
Increasing the GDP has a twofold benefit: It generates extra revenue to pay down debt, and it reduces the debt-to-GDP ratio if GDP growth outpaces debt growth.
Federal revenue does not pay down anything. All federal revenue is destroyed. All payments are made with newly created dollars.
The debt-to-GDP ratio is meaningless.
Driving economic growth is one way to reduce the national debt, but Congress tends to disagree on how to create that growth.
Most Democrats push increased spending, while most Republicans champion lower taxes.
Both are correct. Increased spending adds more growth dollars to the economy. Lower taxes remove fewer growth dollars from the economy.
However, unlimited growth is an unrealistic goal, so growth alone can’t solve the federal debt.
Spending Congress could shift spending from defense to job-creation areas like infrastructure and education. Almost 15% of government spending goes to the military. But past studies indicate that money spent on the military is less effective in creating jobs than money spent in other areas.
According to a report from the Political Economy Research Institute at the University of Massachusetts, Amherst, $1 billion in education and mass transit spending could produce more than twice the jobs created by military spending.
Job creation can help boost the GDP, which can help lower the nation’s debt-to-GDP ratio in many cases.
Job creation does not rely on reduced military spending. The federal government has the infinite ability to spend.
What is the U.S. debt limit? The debt ceiling is the limit on what the U.S. government can borrow to pay bills that have come due. Congress puts this limit in place each year.
The debt limit isn’t about future debt. Instead, it’s about paying for spending that Congress authorized in previous years. If Congress does not raise the federal debt as needed, then the U.S. government cannot pay its bills and will default.
The final paragraph further demonstrates the ridiculousness of the “debt ceiling.” Either it will be raised or it won’t.
If it’s raised, that merely proves it’s a sham. If it isn’t raised, the U.S. will become a deadbeat nation and the world’s financial systems will fall into chaos.
Given that those are its only two possible outcomes, which fool would like it to continue?
Cameron Craig: “Libertarians are non-interventionists and strong advocates for property rights, free immigration, legalizing all drugs and prostitution. “Libertarians are against taxes, any form of social benefits and believe everyone must pull themselves up by their own bootstraps. “The core tenet of libertarianism is that one’s liberty and right to own property should never be infringed upon.
Reason.com, is a voice of Libertarianism. Read what they say about the National “Debt.”
Immediately, you see that Eric Boehm is spouting ignorance, and I’m not referring to his incorrect use of “are” rather than “is.”
The national “debt” isn’t a priority; it shouldn’t even be a mild concern.
In fact, it’s not “debt.”
It’s the total of deposits into Treasury security accounts, which resemble interest-paying, bank safe-deposit boxes.
When you invest in a T-bill, T-note, or T-bond, you deposit your dollars into your T-security account.
The federal government neither needs, uses, nor touches your dollars, and when your account matures, your dollars are sent back to you.
No tax dollars are involved.
As with the contents of safe-deposit boxes, the government doesn’t owe anyone the deposits in T-security accounts. Neither do you owe them. Nor do your grandchildren owe them. They are not a financial burden on anyone or anything.
So why would a thinking person tell you they are a “priority”?
And as for so-called “deficits,” they represent the net growth dollars our Monetarily Sovereign government pumps into the economy.
The U.S. government hasinfinite dollars to give; the economy needs growth dollars in order to grow. Without federal “deficits” we have recessions and depressions, all of which are cured by “deficits.”
Recessions (vertical bars) follow REDUCTIONS in deficit growth. Recessions are cured by INCREASES in deficit growth.
Mr. Boehm’s article begins with faulty premises, and only goes downhill from there. He asks:
How are we actually going to pay for all this?
“We” (you, and I, and the government) are not going to pay for “all this.” As each T-security account reaches maturity, the dollars that reside in those accounts will be transferred to the owners’ checking accounts, upon request.
It’s a simple dollar transfer. No new dollars are needed.
And even if the federal government did owe the money, it has infinite dollars with which to pay any financial obligation.
Mr. Boehm’s (and the rest of the Libertarians’) deficit/debt concern is based on the Big Lie that federal finances resemble state/local government finances and personal finances.
But the federal government uniquely is Monetarily Sovereign, while you, all local governments and all businesses are monetarily non-sovereign.
The Libertarians don’t want you to understand that a Monetarily Sovereign entity never unintentionally can run short of its own sovereign currency. Even if the federal government collected $0 taxes, it could continue spending, forever.
(The purpose of federal taxes is not to finance spending. The purpose is to control the economy. Taxes discourage what the government doesn’t want, and tax breaks encourage what the government does want.)
The federal government does not borrow dollars. The so-called “national debt” is not a debt to be repaid.
In a letter sent on Tuesday, 24 members of the House of Representatives called on Speaker of the House Nancy Pelosi (D–Calif.) to take some small but important steps to rein in America’s out-of-control national debt.
The misnamed “national debt” (that isn’t a debt), also isn’t “out of control” and doesn’t need to be “reined in.” The federal government controls to the penny, how many T-security dollars to accept from the public.
To prevent the public’s T-security account deposits from growing higher than desired, the federal government can lower interest rates. That discourages further deposits.
Or the Federal Reserve can use its infinite dollar-creation abilities to take the public’s place (what the uninformed would term “borrowing from itself.”)
Similarly, if in its wisdom, the Federal Reserve decides deposits should be higher, it can increase interest rates, or again, the Federal Reserve can increase deposits.
The source of Mr. Boehm’s disinformation is the wrongheaded belief that the federal government borrows when its tax income is insufficient to pay its bills.
That “income vs. borrowing” scenario is true of state and local governments. It also is true of businesses. And it is true of you and me. We borrow when cash at hand is insufficient.
It is not true of our Monetarily Sovereign, U.S. federal government. It has infinite cash at hand.
Here is what knowledgeable people say about Monetary Sovereignty:
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.”
Quote from Ben Bernanke when, as Fed chief, he was on 60 Minutes: Scott Pelley: Is that tax money that the Fed is spending? Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.
Statement from the St. Louis Fed: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit marketsto remain operational.”
Press Conference: Mario Draghi, President of the ECB, 9 January 2014 Question: I am wondering: can the ECB ever run out of money? Mario Draghi: Technically, no. We cannot run out of money.
Messrs. Greenspan, Bernanke, and Draghi, and the St. Louis Fed, were describing Monetary Sovereignty, the unlimited ability of a Monetarily Sovereign entity to create its own sovereign currency.
The U.S. government not only has this unlimited ability, but it also has the unlimited ability to determine, by fiat, the value of the U.S. dollar, an ability it has exercised many times over the years, when fixing the dollar to varying amounts of silver and gold.
Thus, the U.S. federal government has the absolute power to control inflation.
So why do T-bills, T-notes, and T-bonds even exist?
The federal government’s spending and income are recorded in what is known as the “General Fund.”
It’s not really a “fund.” It’s just a bookkeeping record. But for historical reasons, having to do with a young nation needing acceptance for its money, this record is not allowed to have a negative balance.
It’s an obsolete law. There is no current reason why the General Fund, or any bookkeeping item can’t have a negative balance. But the convoluted workaround for this obsolete law is to pretend to borrow by issuing Treasury securities, and allowing the public to invest in them, with the balance being purchased by the government itself.
It’s all bookkeeping hocus-pocus, to satisfy an obsolete set of rules, originally designed to prevent what mathematically cannot ever happen: Unintended federal insolvency.
Today, the functional purpose for issuing T-securities is to provide a safe interest-paying parking place for unused dollars, which helps to stabilize the value of the U.S. dollar.
The letter highlights the fact that policies enacted during the past five years—including pandemic relief, but also “Congress’ perennially broken budget process and fiscal policies”—have added $13 trillion to the projected levels of debt in 2031, at the end of the 10-year window Congress uses for budgeting.
Mr. Boehm is referring to $13 trillion federal growth dollars, without which the economy would fall into the deepest depression in world history.
“It has been over a decade since Congress enacted any legislation that significantly addressed these longstanding structural problemsor improved the nation’s fiscal outlook,” the lawmakers wrote to Pelosi.
“Our national debt should be a top priority for both parties and addressed on a bipartisan basis.”
The misnamed “debt” neither is a structural problem, nor a “priority,” and it has nothing to do with a “fiscal outlook.” It’s all lies.
Yes, the letter represents the view of just 24 of the House’s 435 members. Still, any discussion of the debt and the need to address it is welcome.
It is encouraging that only 24 of the House’s 435 members are misinformed or dishonest enough to sign such a letter.
The Congressional Budget Office (CBO) now forecasts that the debt will be twice the size of the economy by 2051, while the Government Accountability Office (GAO) predicts that the debt will grow to four times the size of America’s economy before the end of the century.
Here, Mr. Boehm referred to the most ridiculous, nonsensical, meaningless ratio in all of economics: The debt/GDP ratio. It is a ratio that says nothing about the health of the economy (see Debt to GDP Ratio by Country 2022). It is a ratio that predicts nothing.
It isn’t even mathematically logical, because it describes different time sequences. “Debt” is the net accumulation of deficits during the past two centuries, while GDP refers to one year.
“U.S. fiscal policy today is not sustainable,” argue Veronique de Rugy and Jack Salmon, researchers at the Mercatus Center, a free market think tank, in a new report published Wednesday.
“Not only is our debt ratio at the highest level in peacetime history, but also our future budgetary outlook is even bleaker.”
The two researchers from the Libertarian Mercatus Center imply that the federal government can run short of its own sovereign currency, a fiscal impossibility. And the “not sustainable” trope has been disseminated, without evidence, since at least 1940.
Libertarians were wrong then. They are wrong now. The federal “debt,” far from being a priority, or a problem or a burden on future generations, is an absolute necessity for economic growth — the larger the “debt” (i.e. net deficits), the faster the growth.
Perhaps it was the symbolic $30 trillion debt threshold that has prompted some lawmakers to call on Pelosi to take action.
But another factor is the high levels of inflation America is currently experiencing.
As Reason has previously explained, inflation and high debt create a trap for policymakers: higher inflation could lead the Federal Reserve raise interest rates, which would increase the payments owed on the debt.
Because Libertarians seem to think that allfederal spending is excessive, the notion that the federal government would pay more interest into the economy upsets them.
In reality however, there is no downside to increased federal interest. The government has infinite dollars, and the economy benefits from additional dollars.
Contrary to the Libertarian philosophy of ignorance, federal spending is stimulative, and also contrary to popular wisdom, not inflationary.
Inflations never are caused by “too much money.” Inflations always are caused by shortagesof key goods and services. Those shortages, and the resultant inflation, can be cured by increased federal spending to encourage the availability of the scarce goods and services.
Today’s inflation is an example: Current shortages of oil, computer chips, food, shipping, and lumber can be cured by federal aid to oil production, computer chips, farming, and lumber.
Current shortages of labor can be cured by the elimination of FICA and income taxes, which serve only to reduce the reward for work.
Fighting inflation with deficit reduction, would lead to recession.
Regardless of the reasons, the 24 lawmakers who signed this week’s letter are asking for two policies that are the lowest of low-hanging fruit.
First, they are seeking the creation of a bipartisan debt commission, similar to one implemented during President Barack Obama’s first term that helped trigger modest reductions in annual budget deficits following the Great Recession.
I’m not sure what economy Mr. Boehm lives in, but the Great Recession was cured by massive increases in federal deficit spending, which then returned to average levels, only to rise again to combat COVID.
Mr. Boehm closes his article with a summary of ignorance and disinformation:
Lawmakers are asking Pelosi to include in the budget changes to how the debt ceiling operates.
The proposed changes would allow the president to unilaterally lift the debt limit as long as Congress has passed a budget resolution that contains certain debt-reduction measures for the current year.
Raising the debt ceiling is not the same as adding to the debt. The debt ceiling merely authorizes the Treasury to borrow funds to pay for spending already approved by Congress.
Objections to increasing the debt ceiling amount to little more than a refusal to pay overdue credit card bills—a temper tantrum that doesn’t address the actual problem of overspending.
Mr. Boehm is correct that the debt ceiling doesn’t address anything, much less the mythical problem of “overspending.” Rather than recommending the end of this laughable anachronism, Mr. Boehm supports Presidential fiddling with the debt ceiling:
“(Deficit cuts) . . . won’t fix America’s fiscal mess, but they are “commonsense ideas” that “would be important steps in the right direction,” according to the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for reducing the deficit.
And they are steps that the country will have to take, sooner or later. “We owe it to our children,”the lawmakers wrote to Pelosi, “to acknowledge our country’s unsustainable fiscal trajectory and work together, across the aisle, to address it over time.”
Yes, Boehm delivers a final dose of utter BS. The ideas neither are “commonsense” nor are they “important steps in the right direction.”
Our children do not owe, nor will they pay for the federal “debt.” Instead, if the debt is reduced our children will be punished by the resultant recessions and depressions.
And, the country’s “fiscal trajectory” (presumably, he means rising “debt”) is not “unsustainable.” It’s necessary. Here is what happens whenever we reduce the “debt.”
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%. Depressionbegan 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%. Recessionbegan 2001.
Libertarians are the kissin’ cousins of Republican conservatives. Birds fly. Fish swim. Libertarians lie. Apparently, those are three constants in nature.
Why do the Libertarians lie about the federal “debt”?
Go back to one of the tenets of Liberalism: “Libertarians are against taxes, any form of social benefits and believe everyone must pull themselves up by their own bootstraps.“
Libertarians want the federal “debt” reduced, and the easiest way to accomplish that is to cut such social benefits as Medicare, Social Security, Medicaid, poverty aids, etc.
Rather than complain about social benefits, which the populace loves (and the government has the infinite ability to provide), Libertarians find it easier to complain about so-called “debt” and deficits.
By convincing the public that “debt” and deficits must be cut, the Libertarians are able to justify cutting benefits to the middle- and lower-income groups.
It’s the backdoor way of making the rich richer by widening the Gap between the rich and the rest.
Thus, Libertarians are Republicans in disguise, pretending to be a middle-ground compromise between liberals and conservatives, but in fact, being as right wing, pro-rich, anti-middle, anti-poor as any Republican, perhaps more so.
[Why would any sane person take dollars from the economy and give them to a federal government that has the infinite ability to create dollars?]
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:
See the amazing penniless federal government. It’s poor. It’s destitute. it’s impecunious. Would I lie to you?
Even if the above laws actually exist, their foolishness pales in comparison to this one, the ultimate law for the ignorant:
Democrats Press Ahead With Debt-Limit Vote Amid Standoff With GOP Kristina Peterson, Kate Davidson
WASHINGTON—A partisan fight over raising the government’s borrowing limit is expected to ratchet up this week, with Democrats moving ahead with a vote in the face of strident GOP opposition, raising doubts about whether Congress will take action before the federal government runs out of cash.
Yes, we’re talking about the “Debt Ceiling,” that ultimate law for the ignorant.
The federal government, being Monetarily Sovereign, has the unlimited ability to create its own sovereign currency, the U.S. dollar.
The federal government has been creating dollars since the 1780s when it created the very first dollars from thin air.
It created as many dollars as it wished and gave those dollars the value it wished, imply by creating laws, also from thin air.
Since then, the only limits on federal dollar creation have been placed on the government by . . . the government.
Nothing limits the government’s ability to create laws, and nothing prevents those laws from creating dollars.
Interesting that no one complains about a law deficit, but people complain about a dollar deficit, when it is the laws that create the dollars.
GOLD STANDARDS
Intermittently in America, there have been periods of “gold standards,” in which the government declared, in essence, “We will create dollars only up to the amount of gold we have.”
But what does that limitation mean?
Assume the U.S. owned ten kilograms of gold. How many dollars would a gold standard allow the U.S. to create?
__________$10 million
__________$100 million
__________None of the above
__________All of the above
__________Whatever number Congress and the President want
See the problem? The answer depends on how many dollars per kilogram are allowed by U.S. government laws.
So, the answer is #5. All gold standards rely on Congress and the President to create laws that will determine the circumstances by which dollars will be exchanged for gold.
Through the decades, the government amended its laws that changed this exchange value many times, or when convenient, rid itself of a gold standard until, in 1971, President Nixon did away with all gold standards, on a permanent basis it is to be hoped.
Given that the government has the unlimited ability to create the laws that create dollars, and to endow these dollars with any value vs. gold it wishes, of what purpose is a gold standard?
Contrary to popular myth, gold never has “backed” the U.S. dollar, if “backing” means to give value or security to the dollar. The government, arbitrarily and without notice, can change the dollar/gold exchange rate, so exactly what value does gold provide to a dollar? None.
The U.S. dollar is a debt of the federal government.All debts are backed by collateral. Most debts have two or more levels of collateral: A physical item plus the full faith and credit of the debtor.
For instance, the collateral for a house mortgage is the value of the house plus the full faith and credit of the borrower. Together, they comprise the “backing” for the mortgage.
The only — ONLY — collateral for the U.S. dollar is the full faith and credit of the U.S. government. Nothing else ever has backed the dollar, not the Grand Canyon, not the Great Lakes, not the Missippi River, not the “amber waves of grain,” and not gold.
The acceptance of the dollar worldwide is based solely on the full faith and credit of the U.S. government, which fools in Congress now are determined to destroy.
The standoff has alarmed Wall Street analysts and business leaders, who in recent weeks have issued warnings about a rising risk of a technical default, in which the government might be unable to make all of its regular payments in full and on time.
The threat of such a default could derail markets and hit U.S. economic growth.
There never is a time when the government is unable to make its payments. That “technical default” merely means the government would be unwilling to make its payments.
If you owe $100 that contractually is due for payment this coming Friday, but today, Wednesday, you decide you are not going to pay any more bills this week, does that mean you are unable to pay or actually are unwilling to pay?
Activating the so-called “debt limit” or “debt ceiling” merely means Congress arbitrarily has decided not to pay any more bills, even though it has the unlimited ability to create dollars.
The debt ceiling is not a budgetary method. It is not a way to rein in spending. It does not demonstrate fiscal wisdom. It demonstrates spiteful idiocy, the desire by one political party to damage the other political party, the American economy be damned.
The budgets and spending already have happened. The debt limit is nothing more than a method for stiffing creditors.
All those who favor the debt ceiling, knowingly or unknowingly, want the United States of American to become a (take your pick) a welcher, a moocher, a deadbeat, a freeloader, a sponge, a parasite, or a reneger.
Employing a debt-ceiling is not a sign of thrift or prudence. It is the mark of a crook.
House Majority Leader Steny Hoyer (D., Md.) said Friday that the chamber would vote this week on a measure to suspend the debt limit and a short-term measure extending the government’s funding beyond its expiration at month’s end.
The correct wording for the above paragraph should be, “House Majority Leader Steny Hoyer (D., Md) said Friday that the chamber would vote this week for the U.S. government to pay its bills.”
It’s a disgrace that the House actually has to vote on whether or not the government should pay what it legitimately owes. What next? A vote on whether or not to hold elections in the future? A vote on whether or not to create sensible laws?
The House will “ensure that America pays its bills on time,” Mr. Hoyer said in a letter to House Democrats Friday.
How very reassuring.
Raising the debt limit doesn’t authorize new spending, but rather allows the Treasury Department to issue new debtto cover spending that Congress has already authorized, including payments to bondholders, Social Security recipients and veterans.
Republicans have said they won’t help Democrats raise the borrowing limit, as a protest over the trillions of dollars in new spending the party is moving through Congress.
Then we come to that oft-misused word, “debt.” In federal lingo, “debt” means T-bills, T-notes, and T-bonds, none of which are debt as you know it, and not even “bills,” “notes,” or “bonds.” And it definitely isn’t “borrowing.”
In the usual sense, borrowing is what one does when one wants money for some use. But the federal government always has had the unlimited ability to create dollars. So, it has no need to borrow.
Rather than “borrowing,” those T-securities represent deposits. When you invest in any T-security, you open a T-security account in your name and then make a deposit into that account.
The government — the so-called “borrower” — never touches those dollars as a borrower normally would. I doesn’t need your dollars.
Some time later, usually upon maturity, you take your money from that account. This erroneously is referred to a “paying off the debt,” but it actually merely means closing out your account and receiving your money.
Think of a bank safe deposit box. The bank never touches the contents. That is how T-security accounts operate.
Republicans have said they won’t help Democrats raise the borrowing limit, as a protest over the trillions of dollars in new spending the party is moving through Congress.
Again, it’s not “borrowing.” And it’s not frugality.
Let’s tell it like it is: The sole function of the debt ceiling is for the minority to obstruct the majority. There is no other purpose.
The “debt ceiling” has nothing to do with debt. It has nothing even to do with finances. It strictly is a political game, a dangerous political game, strictly played to thwart the opposing party.
It’s a game of “chicken,” with the future credit of the United States at risk.
“Let me be crystal clear about this: Republicans are united in opposition to raising the debt ceiling,” Senate Minority Leader Mitch McConnell (R., Ky.) told reporters last week.
“If they want to do all of this on a partisan basis, they have the ability and the responsibility to ensure that the federal government not default, and they will have to take care of that,” Mr. McConnell said.
Democrats have pointed out that they voted with Republicans to suspend the debt limit three separate times during the Trump administration, including in the fall of 2017, when the GOP sought to advance tax cuts using budget reconciliation.
“We didn’t play games. We didn’t risk the credit of the country. We did it,” Senate Majority Leader Chuck Schumer (D., N.Y.) told reporters last week.
McConnell is a traitor in every sense of the word. He repeatedly has been willing to damage America if he feels that will benefit the Republican party.
Yet, you perhaps would be more impressed with the Democrats’ “holier than thou” position if they simply had voted to eliminate the useless, misleading, dangerous, downright stupid debt ceiling, altogether.
In a Sept. 13 letter, the heads of several financial-services industry trade groups urged congressional leaders to raise or suspend the ceiling and emphasized the vital importance of the U.S. Treasury market for investors around the world.
A coalition of real-estate and mortgage-industry groups sent a similar letter Sept. 16 warning about potential instability in the housing market stemming from a debt-limit impasse, and permanently higher borrowing costs.
Treasury Secretary Janet Yellen has said her agency could run out of cash to keep paying the government’s bills some time in October.
Unless Congress raises the ceiling, the Treasury might need to halt more than 40% of its payments, including some to U.S. households, they estimated.
“With no clear path toward debt-limit resolution over the near term, we are at the point where this could begin to impact financial conditions,” they said in a note to clients.
The White House on Friday issued a more blunt warning: Failing to suspend the debt limit could lead to a recession, at a time when the Delta variant has already clouded the economic outlook.
The Republicans again demonstrate more loyalty to party over country, so a recession prior to the next election would be exactly what they want.
And guess which payments would be the first to be halted. All payments that benefit the poor and middle classes. The”Party of the Rich” will do nothing to hurt the rich.
And that’s what this game of chicken is all about.
Raising the debt limit wouldn’t facilitate future spending, and Congress would still need to raise the debt limit this fall even if no new major spending programs are enacted.
That is because Congress has already approved spending and tax policies that result in large budget shortfalls, which the Congressional Budget Office projects will total $12 trillion over the next decade.
In recent years, those budget gaps were driven by large bipartisan budget deals, a GOP tax cut and more than $5 trillion in pandemic relief.
The debt ceiling is the ultimate law for the ignorant. It is a con job on you, an innocent public, to make you believe it is a way for Congress to be thrifty.
But the whole notion of “thrift” for an organization that has the infinite ability to create money, makes no sense and is in fact dishonest. It is especially dishonest for the Republican party which specializes in giving tax breaks to the rich.
Sadly, by misusing words like “debt,” and “borrow,” and by equating the Monetarily Sovereign federal government with monetary non-sovereign states, counties, cities, business, and you, the two political parties have managed to convince you the government can’t afford to provide you with benefits.
So, no free Medicare for you and everyone. No free Social Security for you and everyone. No free college for your children. And, there are all those needless federal income taxes you pay, year after year.
You are being conned by the ultimate con job. Hello, sucker.
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:
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#Monetary Sovereignty - Mitchell 