Since 1981, the CRFB (Committee for a Responsible Federal Budget) has been scaring you about a “soon-to-come economic doomsday.”
The fiscal apocalypse always is imminent — always just around the corner.
Does the fact that it never arrives embarrass the CRFB? Apparently not,
If you made the same wrong predictions every year for the past 40 years wouldn’t you be a bit hesitant about doing it yet again? And if you were one of the CRFB’s readers, wouldn’t you have learned long ago not to trust anything these people say?
It seems that being wrong again and again and again, doesn’t cause them any embarrassment, nor does it cause their followers any second thoughts.
The CRFB keeps peddling the same nonsense every year, using exactly the same words. Only the numbers change.
Today, the Congressional Budget Office (CBO) released its March 2021 Long-Term Budget Outlook, confirming that the federal budget is on an unsustainable long-term trajectory.
Let us pause to examine the word “unsustainable.” What does it mean? The CRFB never says.
Does “unsustainable” mean the federal government will go bankrupt? No, that cannot happen.
It can happen to monetarily non-sovereign entities like U.S. states, counties, and cities. It can happen to euro nations because they are monetarily non-sovereign. It can happen to businesses, and to you and to me.
But it cannot happen to the U.S. government. It is Monetarily Sovereign. It creates U.S. dollars by the very act of paying creditors.
[To pay a creditor, the federal government sends instructions (in the form of a check or wire) to the creditor’s bank. The instructions say, “Pay to the order of________”
When the bank receives those instructions, it does as it is told. It increases the numbers in the creditor’s checking account. At the moment that happens, a money measure known as “M1” increases.
The bank then clears the instructions through the government’s own Federal Reserve Bank, which always approves government instructions. In short, the government approves its own instructions.
That is the way the federal government creates dollars.]
Because the government never can run short of instructions, it never can run short of dollars.
Does “unsustainable” mean the federal government will be unable to pay its debts? No. Clearly having unlimited money gives the government unlimited ability to pay its debts.
Does “unsustainable” mean countries or people will begin to reject payment in dollars? No. The U.S. has a massive economy. Long after people begin to reject euros, and the money of smaller economies like those of Japan, Canada, Australia, England, China et al, they still will accept U.S. dollars.
Does “unsustainable” mean that one day, China will demand a return of all the dollars it has lent the U.S.? No. China has not lent the U.S. any dollars. (The U.S. government, having the unlimited ability to create dollars, has no need to borrow dollars.)
What erroneously is termed “borrowing” actually is China making deposits of U.S. dollars into its own T-security accounts held at the Federal Reserve Bank. There the dollars remain until China wants them back. The U.S. government has no need for them.
Whenever China wants those dollars returned, the Bank merely transfers them to China’s own checking account, at any bank in the world. This is a simple money transfer that is no burden on the U.S. or on taxpayers. It happens every day of the week.
Does “unsustainable” mean we will have uncontrolled inflation? No, our Monetarily Sovereign government has unlimited control over the value of the U.S. dollar, a control it has exercised many times over the years.
It formerly was accomplished by arbitrarily changing the dollar’s exchange value with gold or silver. Today, it is accomplished by arbitrarily changing the interest rates paid on Treasury Securities. Raising the rates makes the dollar more valuable (i.e., decreases inflation).
So what does “unsustainable” mean? It means, “We want you to be worried, frightened even, about some unknown thing lying in the shadows.” But folks, the only thing lying is the CRFB, and they do it every day:
Analysis of CBO’s March 2021 Long-Term Budget Outlook | Committee for a Responsible Federal Budget (crfb.org)
Under current law, CBO projects federal debt held by the public to rise from less than 80 percent of GDP at the end of FY 2019 to 202 percent of GDP by 2051.
Under a more realistic scenario, debt could reach nearly 260 percent of GDP by 2051.
Why is it bad that the total of deposits into T-bill, T-note, and T-bond accounts (wrongly called “debt”) will be more than double Gross Domestic Product?
It isn’t. One has nothing to do with the other. It’s like announcing that the number of blond-haired people will be double the number of fire-plugs in Chicago. The “debt”/GDP ratio is an irrelevant apples/oranges comparison.
So-called “federal debt” is the total of deposits into T-security accounts, similar to bank savings accounts. In today’s federal bookkeeping system, it also is the net total of federal deficits run by the federal government in the 240 years since the U.S. began.
By contrast, GDP is a one-year total of spending by the U.S. public and private sectors. Increases or decreases in deposits do not correlate with increases or decreases in spending. The U.S. government has the power to stop accepting dollars in T-security accounts, while continuing to spend, forever.
Japan, which has a ratio exceeding 250%, long ago proved the meaninglessness of that meant-to-be-scary debt/GDP fraction.
Perhaps, that is why the CRFB never specifically says what problems the ratio supposedly causes — just a vague reference to “unsustainable.”
Deficits Will Explode. Under current law, CBO projects annual budget deficits will grow to 13.3 percent of GDP by 2051.
While this is lower than the COVID-driven deficit of 14.9 percent of GDP in FY 2020, it will be nearly three times higher than the 2019 deficit of 4.6 percent of GDP, roughly four times as high as the 3.3 percent of GDP average seen over the past 50 years, and higher than any point in modern history outside of World War II and the current crisis.
Ooooh, “explode”! How frightening. The CRFB fails to mention that 2020, 2019, the past 50 years, and World War II, all were periods of large deficits and of economic growth.
And what are those terrible “deficits” the CRFB wants to scare you with? Deficits are times when the federal government pumps more stimulus dollars into the private sector than it removes via taxing.
Not only does federal deficit spending stimulate economic growth, but the economy could not grow without federal deficit spending. In fact, when federal deficit spending is reduced, we have recessions and depressions.
Is a growing economy something that should frighten you??? The idea is laughable.
Spending Will Continuously Outpace Revenue.
CBO projects spending will grow from 21.0 percent of GDP in 2019 to 31.8 percent of GDP by 2051, while revenue will grow from 16.3 to 18.5 percent of GDP.
Over the long term, rising health care, retirement, and interest costs will cause a significant increase in spending. Revenue will also grow under current law, but only modestly.
In the above paragraphs, the CRFB confuses federal finances with personal finances.
You and I, and indeed all monetarily non-sovereign entities, use income (“revenue”) to fund spending. Without some form of income, we can’t spend.
The Monetarily Sovereign government, which creates dollars, ad hoc, from thin air, whenever it spends, needs no income. In fact, the federal government destroys all income upon receipt.
When, for instance, your tax dollars reach the U.S. Treasury, they cease to be a part of any money measure (M0, M1, M2, M3). Your tax dollars effectively no longer exist.
While comparisons between revenue and spending are important for you and me, they are meaningless for the federal government. The CRFB intentionally confuses the two.
Major Trust Funds Are Headed Toward Insolvency.
CBO projects Highway Trust Fund (HTF) insolvency in FY 2022, Medicare Hospital Insurance (HI) trust fund insolvency in FY 2026, Social Security Old Age and Survivors Insurance (OASI) trust fund insolvency in calendar year 2032 and Social Security Disability Insurance (SSDI) trust fund insolvency in calendar year 2035.
On a theoretical combined basis, the Social Security program will be insolvent in calendar year 2032.
The major “trust funds” are not really trust funds (See “The phony ‘trust fund’ controversy”), and whatever one wishes to call them, they are not “headed for insolvency.”
Given that the federal government has the unlimited ability to create dollars, no federal agency can become insolvent unless the government wishes it to be insolvent. The federal government could (and should) end collection of the FICA tax, and still pay Social Security and Medicare benefits, forever.
The Long-Term Outlook is Similar to Last Year.
Ultimately, high debt levels will slow income and wage growth, increase interest payments, place upward pressure on interest rates, reduce the fiscal space available to respond to a recession or other emergency, place an undue burden on future generations, and heighten the risk of a fiscal crisis.
Once the current crisis ends, policymakers must work to get our long-term fiscal house in order.
It’s all a lie.
As for “increased interest payments,” they stimulate economic growth by adding dollars to the private sector
And because the federal government has the unlimited ability to create dollars, by definition it always has infinite “fiscal space” to respond to a recession or other emergency. It has demonstrated this infinite fiscal space by repeatedly passing multi-trillion dollar stimulus packages.
There is no burden on future generations. Future taxes will not fund today’s spending. The only burden on future generations would be a poverty burden if the government had not spent trillions to stimulate the economy.
And finally, “fiscal house in order” is a word-salad meaning nothing with regard to our Monetarily Sovereign federal government.
The CRFB article is one gigantic lie, designed to scare those who do not understand the workings of a Monetarily Sovereign entity. It makes false claims that are contradicted by easily seen facts.
These are people who insist you are standing in the midst of a thunderstorm while you plainly can see the sun shining.
Why does the CRFB lie about the economy? Because they are paid by, and controlled by, the very rich, who because of Gap Psychology, want you to accept higher taxes and lower federal benefits.
[“Rich” is a relative term. If you have $1,000, and everyone else has $1, you are rich.; The wider the Gap between you and those who are poorer, the richer you are.
“Gap Psychology” is the desire to become richer by widening the income/wealth/power Gap below, while narrowing the Gap above.
Being funded by the rich, the CRFB spreads lies that will influence you to believe the federal government can’t afford social benefits.
They want you meekly to accept your lower station in life, so that the rich can maintain or increase their control over America.]
This is the same motive behind the repeated, claims that federal deficit spending is the dreaded “socialism.” It isn’t. “Socialism” is government ownership and control. Though all governments are partly socialistic, most federal spending involves neither ownership nor control.
But the rich know that the word “socialism” has pejorative implications, so they apply it to such federal benefits as Medicare, Social Security, SNAP programs, etc.
It is all a lie proxies for the rich continually repeat until the false ideas are implanted so deeply into the public consciousness, that obvious facts are doubted.
Because of liars like the CRFB, the rich own you, and only the truth can set you free.
Rodger Malcolm Mitchell
Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
The most important problems in economics involve:
- Monetary Sovereignty describes money creation and destruction.
- Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Ten Steps To Prosperity:
- Eliminate FICA
- Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
- Social Security for all or a reverse income tax
- Free education (including post-grad) for everyone
- Salary for attending school
- Eliminate federal taxes on business
- Increase the standard income tax deduction, annually.
- Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
- Federal ownership of all banks
- 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.