In Washington DC are thousands of people employed by numerous agencies whose purpose is to maintain the pretense that the U.S. government is “bankrupt” and has a “debt crisis.” It is indeed a pretense, since everyone knows that the U.S. government can “print” limitless dollars.
There is the Government Accountability Office, the Congressional Budget Office, the Office of Federal Financial Management, the Office of Management and Budget, and so on. Together they put on a daily show that I’ll call the “National Debt Crisis Follies.”
Recently Gene Dodaro, the comptroller general for the Government Accountability Office, told the Senate Budget Committee that without action on the “national debt” (such as privatizing Medicare and Social Security), the “national debt” will exceed all the goods and services produced by the entire U.S. economy in the next 15-25 years. In other words the U.S. government will be flat broke. It will “owe” more than it “earns.”
Nonsense of course. The “national debt” is not a debt in the sense of money borrowed to fund the U.S. government. It is simply money that various parties (mainly arms of the U.S. government, plus central banks like that of China) have deposited at the Federal Reserve by purchasing T-securities. These deposits present no strain on the U.S. government, which creates its spending money out of thin air. The deposits are only a “debt” in the sense that the Fed must give the deposit money back to the various investors as their various T-securities mature. The Fed pays interest on these deposits (about $251 billion per year), but the Fed creates that interest money out of thin air. And interest money is only a fourth of what the U.S. government creates out of thin air for the Pentagon, for weapons makers, and for perpetual war.
The “National Debt Crisis Follies” want you to think the U.S. government relies on loans, and on tax revenue, and cannot create money out of thin air. The Follies want you to think that since the so-called “national debt” of $19 trillion is more than the entire US GDP ($16.9 trillion), the U.S. government is “insolvent.” Therefore we must privatize Medicare, Social Security and any other federal social programs that help average people.
I’m not sure if federal bureaucrats really want this, since privatization would cost many of them their jobs (perhaps most of them). Perhaps they just present the Follies in order to make their parasitical do-nothing jobs in Washington seem important and vitally necessary.
Gene Dodaro also told the senate Budget Committee that the U.S. government is “Very heavily leveraged in debt.”
More nonsense. Leverage (which in the U.K. is called “gearing”) means you go into debt in order to multiply your gains in a market transaction. If you have $100 million, you borrow $400 million (or whatever) to place a bet of $500 million. If you win your bet, you win big. If you lose, you are $500 million in the hole, plus interest (unless you are a big bank, in which case your losses are covered by the U.S. government). No aspect of the U.S. government is “leveraged,” since the U.S. government creates its spending money out of thin air.
Mr. Dodaro further told the Committee that, “The highest in the United States government’s history of debt held by the public as a percent of gross domestic product was 1946, right after World War II. We’re on mark to hit that in the next 15 to 25 years.”
Dodaro is referring to “war bonds” that the U.S. government sold during WW II in order to control inflation, not to fund the war effort. (See my own explanation of how this worked.) Today the Treasury sells T-securities as a means to control inflation, and to balance the reserves of banks nationwide. (I need to do a post on this.)
The “debt-to-GDP ratio” of the U.S. government is meaningless for the U.S. government. The purpose of these Follies is to make it seem like the U.S. government is “broke.”
Source: an ultra-right-wing blog called the Washington Free Beacon.
As I noted above, the Follies put on a daily show for your entertainment. Last Wednesday (6 April 2016) the Senate Foreign Relations Committee held a hearing on the fake “national debt crisis.” Sen. Ed Markey (D-Mass.) truthfully told the committee that, “This debt is not actually right now a threat to our country.”
Markey’s truthfulness enraged committee chairman Bob Corker (Republican – Tennessee) who responded that the (fake) “national debt crisis” is a “threat to national security.” Corker said that anyone who calls the (fake) “national debt crisis “fake” is a “crackpot.”
Markey responded that if Corker wants the U.S. government to spend less money, we could start by not spending over $1 trillion to make new nuclear weapons.
Richard N. Haass (former U.S. ambassador to the mass heroin factory known as Afghanistan) countered that the “national security threat” came from spending billions on “entitlements,” not from spending trillions on nuclear weapons.