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Why do Pete Peterson and Paul Volcker collude? There is a reason.
These two loyal guardians of the very rich recently posted an article. Here are some excerpts.
Volcker: Fed Can’t Raise Rates Because of Rapidly Growing Debt
An op-ed posted by Paul Volcker and Peter Peterson, From Tyler Durden, Wall Street Journal:
Immediately, from the title, you know the article is going to spread the manure thick and wide. The “Fed can’t raise rates”? Utter nonsense.
“. . . because of rapidly growing debt”? Even more nonsensical.
The main issue that troubles the two financial titans, is the lack of any practical discussion of the soaring US debt during the entire bizarre campaign – the one issue both agree is the biggest challenge facing the US economy today:
The biggest challenge facing the U.S. economy is the size of deposits in T-security accounts at the Federal Reserve Bank??
Really?? That is our biggest economic challenge??
Not the wide and widening Gap between the rich and the rest? Not millions of people doing without health care? Not the obscene student debt? Not our crumbling infrastructure? Not the ecology and global warming? Not the mid-east wars?
Yes, this country can handle the nearly $600 billion federal deficit estimated for 2016. But the deficit has grown sharply this year, and will keep the national debt at about 75 percent of the gross domestic product, a ratio not seen since 1950, after the budget ballooned during World War II.
Long-term, that continued growth, driven by our tax and spending policies, will create the most significant fiscal challenge facing our country.
Can anyone explain the significance of the debt/GDP ratio? I really would love to hear from Peterson and Volcker followers why a ratio of 75% or even 750% presents a “fiscal challenge.”
The federal debt (i.e. deposits in T-security accounts) is not serviced by GDP. The misnamed “debt” is paid off by funds already existing in those bank accounts, and the interest is paid by the unlimited dollars the federal government creates every day. The U.S. never can run short of dollars.
Volcker and Peterson know this. So why do they pretend otherwise? There is a reason.
Back to the Volcker-Peterson lament, in which the two point out that “unfortunately, despite a brief discussion during the final presidential debate, neither candidate has put forward a convincing plan to restrain the growth of the national debt in the decades to come.”
Translation: Neither candidate has put forward a plan to increase FICA collections from the 99% non-rich, or to reduce Social Security and Medicare benefits for the 99% non-rich — either of which would widen the Gap between the rich and the rest.
Whoever wins,the new president will eventually face fiscal realities that force him or her to develop strategies for decreasing the national debt as a share of the economy over the long term.
The only reality is the money the rich are spending to bribe politicians to enact laws that would widen the Gap.
Our current debt may be manageable at a time of unprecedentedly low interest rates. But if we let our debt grow, and interest rates normalize, the interest burden alone would choke our budget and squeeze out other essential spending.
There would be no room for the infrastructure programs and the defense rebuilding that today have wide support.
Even with the interest “burden” ten times its current size, the federal government could continue spending on infrastructure and defense, forever. Why does the Peterson/Volcker cabal pretend the federal government can run short of its own sovereign currency, something that never has happened and cannot happen?
There is a reason.
And there you have it: with debt continuing to soar, growing by the third highest amount on record in fiscal 2016, all that would take for US interest expense to spiral out of control is a spike in debt servicing costs, i.e., interest.
But that’s not all: US government debt is just a tiny fraction of total US liabilities and future obligations. How tiny? It is less than 10% of the massive stack of US obligations that amount to well over 1,100% of GDP!
Think about it. Why does the Peterson/Volcker cabal tell you the debt, at 75% of GDP, is too high, but total U.S. obligations are “well over 1,100% of GDP” — which the U.S. has had no difficulty servicing?
There is a reason.
It’s not just federal spending that would be squeezed. The projected rise in federal deficits would compete for funds in our capital markets and far outrun the private sector’s capacity to save, to finance industry and home purchases, and to invest abroad.
Federal deficits occur when the government pumps more dollars into the economy via spending than it removes from the economy via taxing.
How does an increase in the money supply “compete for funds” and “outrun the private sector’s capacity to save”? It doesn’t.
An increase in the money supply adds funds to capital markets and increases the private sector’s capacity to save.
The Peterson/Volcker cabal knows this, of course.
Instead, we’d be dependent on foreign investors’ acquiring most of our debt — making the government dependent on the “kindness of strangers” who may not be so kind as the I.O.U.s mount up.
The U.S. government, being Monetarily Sovereign and so having the unlimited ability to create U.S. dollars, is not dependent on anyone else to supply it with its own sovereign currency.
Contrary to popular myth, the federal government does not borrow. It accepts deposits in T-security accounts.
Even if all T-securities were eliminated, the federal government could continue deficit spending, forever.
And now come the widen-the-Gap “solutions,” good for the rich, bad for the rest of us:
Are the any solutions? Well, according to the authors, “the solutions are clear enough” – they are just unpleasant.
We should make gradual adjustments to the Social Security system that still maintain present benefit levels for those at or near retirement, with particular attention to those most in need.
Our health care systems can be made more efficient, with better approaches toward cost control. Since health care represents 70 percent of the growth of our major entitlement programs over the next 30 years, bending the cost curve is essential to the long-term well-being of our economy.
Yes, indeed, these so-called “solutions” are “unpleasant.” The rich would be richer and the rest of us would be poorer.
Translation: “Gradual adjustments” and “maintain present benefit levels for those at or near retirement” means:
1. No inflation adjustment,
2. Increases in FICA
3. Cuts to our children’s and grandchildren’s benefits.
“Bending the cost curve” means: Cut payments to doctors and hospitals, which will reduce the availability of doctors and hospital service.
Why these unnecessary cuts to our lifestyles? There is a reason.
Tax reform could provide better incentives for economic growth, while raising more revenue, even as the code is simplified.
Translation: Cut taxes on the “makers” (i.e. the rich) while reducing benefits to the “takers”) i.e. the rest of us.
And any scheme that “raises more revenue” will take money from the private sector, a disincentive for economic growth.
As for Volcker and Peterson, they personally have nothing to worry about: “At our age, neither of us will personally suffer from a failure to act. It is those with long lives ahead — grandchildren and great-grandchildren — who deserve the benefit of prospering in a nation with sound finances.
“Take some advice from two observers who have been around for a while: The long term gets here before you know it.”
Yes, yes, how benevolent Peterson and Volcker are. Except, they are rich; their families are rich; their friends are rich, and the people whose opinions they care about are rich.
And all of them want the Gap widened between the rich and the rest.
The Gap is what makes them rich. Without the Gap, no one would be rich. (We all would be the same.) The wider the Gap, the richer they are.
The ultimate goal of the rich is to widen the Gap, and there are only two ways to do that:
1. Increase their own income, wealth, and power
2. Decrease your income, wealth, and power.
The rich tell you the Big Lie — the (misnamed) “debt” and “deficits” are too high and “unsustainable.” The rich tell you the only way to get the “debt” and “deficits” “under control” is to attack the social programs that benefit the rest of us.
The rich want to, and already have, cut Social Security, cut Medicare, cut Medicaid, cut other aids to the middle and the poor. They want to, and already have, increased regressive taxes like FICA and sales taxes, while cutting taxes on the rich.
And here are some of their methods:
1. Misname bank deposits “debt.”
2. Misname economic income “deficits,” so you’ll be fooled into thinking federal spending should be reduced and your taxes increased.
3. Bribe the media (via ownership and advertising) to tell The Big Lie.
4. Bribe the politicians (via campaign contributions and promises of lucrative jobs) to vote for Gap-widening initiatives
5. Bribe the economists (via university endowments and employment in “think tanks”) to brainwash students with, and to provide credibility for, the Big Lie.
6. Pretend Federal (Monetarily Sovereign) financing is like personal (monetarily non-sovereign) financing, so you will find their “debt-reduction” ideas reasonable. (After all, who doesn’t want to reduce debt?)
Back in 1940, the rich referred to the deficit as a “ticking time bomb,” that was about to explode. That was 76 years ago, and that “bomb” still is ticking, the federal government still is paying its bills, and the economy still is growing.
We only can pray that after hearing 76 years of “wolf-cries,” the public finally begins to catch on, and demand the Ten Steps to Prosperity (below).
Rodger Malcolm Mitchell
The single most important problems in economics involve the excessive income/wealth/power Gaps between the rich and the rest.
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 The Ten Steps To Prosperity can narrow the Gaps:
Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich afford better health care than the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ANNUAL ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:
Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012
Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefiting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.
The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.