Tag: government borrowing

–Get rid of big government

An alternative to popular faith

Ever since Ronald Reagan said, “In this present crisis, government is not the solution to our problem. Government is the problem,” (then proceeded to run the largest federal deficits in history), the chic thing has been to criticize big government as an affront to our self reliant, can-do, cowboy heritage. The media pundits, both major political parties and the Tea Party repeatedly call for less government.

On March 24, 2009, Bobby Jindal, governor of Louisiana said, “There has never been a challenge that the American people, with as little interference as possible by the federal government, cannot handle.” Oh, really? Today, May 31, 2010, the Chicago Tribune published a wonderful article written by Leonard Pitts, all government haters should read. I’ll quote a few passages:

“. . . Bobby Jindal . . . is singing a new song . . . Now, he’s BEGGING for federal ‘interference.’ He wants federal money, federal supplies, wants the feds to help create a barrier island to protect Louisiana wetlands from oil.
[…]
“One hears pointed questions about President Barack Obama’s engagement or lack thereof in the unfolding crisis. One hears accusations that the government was lax in its oversight duties and too cozy with the oil industry it was supposed to be regulating. One hears nothing about deregulation, about leaving the free market alone to do its magic […] the sudden silence of the apostles of small government and free markets is telling.

“Yes, government is not perfect […] Any bureaucracy serving 309 million people . . . is likely to have flaws. […] But . . . people like Jindal rail against the very concept of government itself, selling the delusional notion that taxation and regulation represent the evisceration of some essential American principle. They wax eloquent about what great things the free market and the free American could do if government would just get off their backs.

“One thinks of one’s meat oozing with salmonella, one’s paint filled with lead, one’s car getting 12 miles to the gallon, one’s self being breezily denied a job for reasons of race, creed, gender or sexual orientation and yes, one’s ocean covered from horizon to horizon with a sheen of oil. And one shudders.

“[…]there are no small government disciples in massive oil spills. No, . . . Bobby Jindal turned righteously to that big, sometimes bloated, often intrusive federal government and asked for help. He said, Send money, send resources. You will notice he never once said, send less.”

Yes, it is so terribly chic, so wonderfully clever to criticize big government, as though each of us were ready to shoulder the responsibilities of the army, Social Security, Medicare, roads, bridges, education, policing and the thousands of other tasks we happily delegate to the bureaucracy.

I have spoken about this on many occasions, for instance YOUR CHILDREN WON’T PAY FOR DEFICITS and EUROPEAN WELFARE STATE and TEA PARTY CONFUSION, but Leonard Pitts said it better.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Committee For A Responsible Federal Budget

An alternative to popular faith

On May 19th, I received the following Email from the Committee For A Responsible Federal Budget:

“Dear friend, I am excited to share with you the latest CRFB initiative that I believe will quickly become a critical tool in educating the public regarding the fiscal outlook and motivating policymakers to take responsible action to put the country on a sustainable course. Today, we are publicly launching our “Stabilize the Debt” budget simulator (http://crfb.org/stabilizethedebt/).

“The ‘Stabilize the Debt’ challenge continues CRFB’s distinguished tradition of engaging policymakers, opinion leaders, the media, and the public in deliberating and discussing what it takes to be fiscally responsible. This new online endeavor is part of our long tradition of developing timely “Exercise in Hard Choices” exercises, and we are excited about our newest version.
[…]
“‘Stabilize the Debt’ challenges the user to think about reducing the debt in the longer term and maintaining it at a sustainable level, as opposed to simply balancing the budget for a single year. It promotes thinking about the need for both medium- and long-term term fiscal goals and how to attain them. It uses the goals from the Peterson-Pew Commission on Budget Reform from the Red Ink Rising report of stabilizing the debt at 60 percent of GDP by 2018 and keeping it low.

“I encourage you to take the challenge and share with all your friends. Since Congress appears unlikely to produce a budget this year and have the needed debate over fiscal priorities, this simulator can fill that void by enabling Americans to discover and discuss the difficult choices that must be made and engage in a nationwide dialogue on how best to put the country on a sound fiscal course. Sincerely, Maya MacGuineas, CRFB President

“For press inquiries, please contact Kate Brown at (202) 596-3365 or brown@newamerica.net.”
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Not having had Ms. MacGuineas’s Email address at the time, I wrote the following letter to Ms. Brown on May 19th. And again on May 20th. And May 24th. And May 27th. To date, no answer, which is normal for all debt hawk organizations. Knowing they have no data to support their claims, they simply ignore requests for data, even when, as you’ll see, I offered to promulgate their beliefs:

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“Ms. Brown,

If you can supply historical, statistical evidence that the U.S. federal debt and deficit need to be reduced or are not sustainable, or that the federal debt needs to be stabilized at “60 percent of GDP by 2018,” I would be glad to post this data on my web site, https://rodgermmitchell.wordpress.com. I also will mail this information to my list of 100+ economics professors, 50 newspaper and magazine columnists, and 30 newspaper and magazine editors around the country.

Rodger Malcolm Mitchell”
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Try it yourself. Write to any debt hawk organization or any debt hawk politician or economist, and ask for data to support the idea that the debt is too large. In the unlikely event you receive anything that constitutes evidence, please forward it to me.

Subsequently, I did find Maya MacGuineas’s Email address and wrote to her and Ms. Brown. For your interest, here is a calendar of my requests to supply evidence and my offer to send this evidence to economists and the media all over America:
May 19: Wrote to Ms. Brown
May 20: Wrote to Ms. Brown
May 24: Wrote to Ms. Brown
May 27: Wrote to Ms. Brown
May 28: Wrote to Ms. Brown & Ms. MacGuineas
June 1: Wrote to Ms. MacGuineas

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Even Paul Volcker doesn’t get it.

An alternative to popular faith

If even Paul Volcker doesn’t get it, how can the man in the street hope to understand — unless the man in the street is willing to look at the facts and Volcker isn’t?

“5/19/2001: STANFORD, California (Reuters) – Europe’s debt crisis shows the risks for the United States if it does not get its budget deficits under control, former Federal Reserve Chairman Paul Volcker said on Tuesday. ‘If we need any further illustration of the potential threats to our own economy from uncontrolled borrowing, we have only to look to the struggle to maintain the common European currency, to rebalance the European economy, and to sustain political cohesion of Europe,’ Volcker said.
[…]The U.S. budget deficit hit $1.4 trillion in 2009, roughly 10 percent of the economy. The White House projects the deficit this year will reach $1.6 trillion. The large deficits have evoked comparisons to Greece. But in a speech to the Stanford Institute for Economic Policy Research in California, Volcker said the United States differs from that country and other small European countries whose credit markets have come under speculative attack. Unlike those countries, the United States benefits from well-established currency and credit markets that are considered safe havens in times of financial turmoil.
[…]’There are serious questions, most immediately about the sustainability of our commitment to growing entitlement programs,’ said Volcker, who heads an outside panel of experts advising Obama on the economy”.

Here is Paul Volcker, who of anyone, should know better, saying the difference between the U.S. and European countries is we have a well-established currency. No, Mr. Volcker, the difference is we are a monetarily sovereign nation and the EU countries are not. And that difference makes all the difference.

Somehow, the fact that we are running trillion-plus deficits, with none of the problems the EU nations are experiencing, doesn’t seem to penetrate Mr. Volcker’s skull. He has the debt hawk’s “It-hasn’t-happened-yet-but-I’m-sure-one-day-it-will” mentality, rather than the scientist’s “It-hasn’t-happened-yet.-I wonder-why” mentality.

Mr. Volcker, the reason “it” (inability to service national debts) happened to Greece, but not to the U.S., is simple: The U.S. has the unlimited ability to pay its bills, merely by crediting creditors’ bank accounts. EU rules prevent Greece from doing this. Either Mr. Volcker truly doesn’t understand the difference, which would be remarkable, or he has been paid to adopt a debt hawk agenda that forces him to close his eyes to basic fact.

Anyone who says Greece’s problems foreshadow similar problems for the U.S. either is ignorant of the facts or a liar.

And by the way, for those debt hawks who keep warning us that deficits cause inflation, we’re running the deficits, but: “5/19/2010: WASHINGTON (AFP) – US consumer prices fell for the first time in 13 months in April, the government said Wednesday as analysts warned of the risk of deflation in the world’s largest economy.” Isn’t it inconvenient the way facts seem to get in the way of wrong opinion?

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Open letter to Pat Widder of the Tribune

An alternative to popular faith

Ms. Patricia Widder is on the editorial board of the Chicago Tribune. For 15 years I have been trying to educate the Tribune about the realities of federal financing. To date, I have failed. Here is my latest attempt.

Dear Ms. Widder

Your 5/12/10 editorial, “Greece and us” makes a false comparison. The U.S. is a monetarily sovereign nation; Greece is not.

All nations borrow in their own currency and pay back in their own currency. Monetarily sovereign nations (Canada, Australia, China et al) have the unlimited ability to create their currency, to pay their debts. Greece and the other EU nations do not have this ability. That lack of ability to create money, not the amount of their debts, is the cause of their financial problems.

Every nation that lends to the U.S. has two accounts with the Federal Reserve Bank: a checking account and a savings account. To begin the lending process, the nation first must put U.S. dollars (not any other currency) into their checking account. Then, they use those dollars to buy T-securities, which are kept in their savings account. That is when the Fed debits their checking account and credits their savings account.

When the T-securities mature, the Federal Reserve merely debits the nation’s savings account and credits its checking account, plus some extra for interest. The Fed can do this endlessly.

Greece, not being a monetarily sovereign nation, resembles not the U.S., but Illinois and California, which also are not monetarily sovereign. To make a comparison between U.S. and Greece is as misleading as comparing the U.S. with Illinois and California. The states can go bankrupt; the U.S. cannot.

Your call for less federal spending and higher taxes, under the euphemisms, “[…]scale down what they demand from the government and accept the need to pay for what they get” repeatedly has led to recessions and depressions.

You are confusing U.S. federal financing with personal financing. We, the people, also are not monetarily sovereign.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity