debts

By

Warren Mosler

(Editor's note: I'm re-posting this here from moslereconomics.com with a follow-on commentary of my own with the permission of Warren Mosler)

From Warren Buffet to Alan Greenspan,

And from all the responses to the S and P downgrade by
economists and financial professionals from the 4 corners of the world,

THE WORD IS OUT!

The US government is the issuer of the US dollar.

So no matter how large the federal deficit might be: Read below the fold...

Yesterday, must have been jobs day at The Washington Post since they ran two columns calling for job creation: one by Katrina vanden Heuvel and the other by Harold Meyerson. The crux of vanden Heuvel's column is: Read below the fold...

(Author's note: I've offered this idea a couple of times over the past few months here, with surprisingly little reaction. I'm trying once again, because I'm persuaded that much of the leverage that conservatives and Republicans have over our fate is due to the belief that most people hold that federal deficits, the national debt, and the GDP ratio are important, and that we must bring them under control to avoid Government insolvency. In addition every one seems to believe that the existence of the debt is due the to the profligacy of the Government, its monumental waste, and the lack of courage of its politicians who spend too freely to please constituents, gain campaign contributions, and help themselves to stay in office. None of this is true. The current existence of the National Debt, and also of a non-zero public debt-to-GDP ratio is the inevitable result of a technical decision that Congress has made about how the Treasury should finance its spending. This post talks about that decision, points out that its consequence is the National Debt, and also points out that the very existence of the National Debt is the fault of Congress.)

It is Congress's fault that we have a national debt at this point in our history. And also Congress can largely get rid of this debt over a 10 year period any time it wants to.

The national debt exists today because when the nation went off the Gold Standard in 1971 and adopted its fiat currency system, Congress did not repeal its mandate, very appropriate when our currency was convertible to Gold on demand, in least in theory, requiring that the Government back all its deficit spending with already existing borrowed dollars whose convertibility was covered by our holdings of Gold. This Congressional mandate to borrow funds by issuing debt instruments when the Government deficit spends, is what has caused the national debt to persist.

Had Congress repealed it when President Nixon took the country off the Gold Standard, and had we ceased to issue debt at that time, then the Government would have re-paid all of our 1971 debts as they came due, and our national debt today would be zero and our debt-to-GDP would now be at 0%.

The Congressional mandate to issue debt when the Government deficit spends has no useful function today, and the interest income it provides for mostly wealthy investors and foreign Governments who buy Treasury Securities is simply a form of welfare for the rich. In fact, it is welfare that will cost the Treasury almost $12 Trillion over the next 15 years if we continue the policy of issuing debt instruments. Read below the fold...

The national debt exists today because when the nation went off the Gold Standard in 1971 and adopted its present non-convertible fiat currency system, Congress did not repeal its mandate requiring that the Government back all its deficit spending with already existing borrowed dollars whose convertibility was covered by our holdings of Gold. This Congressional mandate to borrow funds by issuing debt instruments, has caused the national debt to persist. Had Congress repealed it when President Nixon took the country off the Gold Standard, and had we ceased to issue debt at that time, then the Government would have re-paid all of our 1971 debts as they came due, and our national debt today, as well as our debt-to-GDP would both now be at Zero. So, the existence of the National Debt today is Congress's fault! Read below the fold...

I'm sick and tired of hearing progressive icons like Bernie Sanders, Keith Olbermann, Ed Schultz, and many, many others, talking about the evil of leaving an enormous national debt, now at $13 Trillion plus to our Grandchildren. And I'm especially tired of hearing Congresspeople and Senators complaining about this. The reason why I'm tried of hearing it is that it is Congress's fault that we have a national debt at this point in our history. And also Congress can largely get rid of this debt over a 10 year period any time it wants to.

The national debt exists today because when the nation went off the Gold Standard in 1971 and adopted its fiat currency system, Congress did not repeal its mandate, very appropriate when our currency was convertible to Gold on demand, in least in theory, requiring that the Government back all its deficit spending with already existing borrowed dollars whose convertibility was covered by our holdings of Gold. This Congressional mandate to borrow funds by issuing debt instruments, is what has caused the national debt to persist. Had Congress repealed it when President Nixon took the country off the Gold Standard, and had we ceased to issue debt at that time, then the Government would have re-paid all of our 1971 debts as they came due, and our national debt today would be zero and our debt-to-GDP would now be at 0%. Read below the fold...

There's a flood of reaction out there among Progressives and other Democrats criticizing the recent “tax deal” on grounds that President Obama was rolled again and got far too little for his agreement to extend the Bush Tax Cuts for the wealthy, and agree to Estate tax rates of 35%. I share that opinion. But since a) the Democrats have steadfastly refused to use the constitutional option to get rid of the filibuster, b) the Republicans in the Senate will certainly prevent any legislation from being passed this month without a tax cut deal, and c) the unlikelihood that a Republican House will pass an extension of the middle class tax cuts without also passing the tax cuts for the wealthy, the Democrats still need a deal this month if they want to get unemployment insurance extended and other legislation passed.

So what should they to do? Well, for starters, the House and Senate Democrats could send the Republicans and the President back to the negotiating table with some instructions about what else they want in order to make a deal. The most important price they can make them pay in return for the tax cuts for the wealthy they want so much is an end to debt issuance. Why is an end to debt issuance so important? Here's why: Read below the fold...

Yesterday, R. J. Eskow remarked:

We expected to see an all-out assault on Social Security and progressive taxation in November, and we expected it to come under the banner of "deficit reduction." That was always the plan: Wait until after the election, when a lame-duck Congress could pass the preferred policies with the least political blowback. Then release a flurry of like-minded proposals and supportive editorials to create the illusion of consensus, capped by a coordinated media blitz to pressure the President and Congress into accepting them.

Read below the fold...

In Part One, I addressed the question of whether the AmericaSpeaks argument showing that increasing deficits, debts, and public debt-to-GDP ratios is a real problem America needs to solve make sense. Read below the fold...

The deficit terrorists ask us to believe that the US has a deficit/national debt problem, to believe in their projections about the future, and to make certain hard choices involving spending cuts and tax increases because we believe in the likelihood of their projections coming true if we don't act to prevent them. Tomorrow, AmericaSpeaks, an organization claiming unbiased neutrality on deficit issues, but funded by the Peter G. Read below the fold...