Here’s a cute note …
I am 10 years old and I am very sad that the President and Congress are spending more money that they take in and then passing this burden on to their children and grandchildren.
As though a ten-year-old would actually be interested in such things.
Anyway, people have been spouting this same nonsense for a hundred years, and nothing has ever happened. Moreover the U.S. government creates money; it does not “spend” money.
If you could create infinite money on your home computer by crediting various people’s accounts, would you be “spending” money? No, you would be creating money. And if you debited people’s accounts, you would be taxing money out of the economy.
This is why people will bow to President Hillary when she privatizes Social Security to “save it.”
The Chicago Tribune is whining because the presidential candidates are not lying every five minutes about the fake “national debt crisis.”
A couple of weeks before the 2000 presidential election, the federal government issued a report on its fiscal fortunes. In the fiscal year that had just ended, tax revenues exceeded outlays by $237 billion. It was the third straight year of budget surpluses.
Thanks to a combination of spending restrictions, a tax increase and a booming economy, Washington was not loading more burdens on future taxpayers. The accumulated debt held by the public actually shrank.
Those were the infamous Clinton surpluses, in which the U.S. government sucked more money out of the economy than it put into the economy. The result was not a “booming economy,” but a recession.
Regarding “the accumulated debt held by the public,” this statement is meaningless unless we clarify whether we are talking about private debt (such as student loans) or public debt (such as the so-called “national debt”).
Since 2001, the budget has never been balanced, and the federal debt has exploded to a hard-to-fathom $19 trillion. You might think that damming the river of red ink would be high on the list of pressing issues before the electorate this year. But a balanced budget is not on the agenda for Kasich, Hillary Clinton or anyone else in the presidential race. No one is campaigning on a vow to make Washington live within its means.
If you can create infinite money out of thin air, would you need to “live within your means”? Would you have a “debt crisis”?
In fact, most of the candidates would increase federal spending — as though the $3.92 trillion outlay projected this year were pitifully inadequate.
Yes, the U.S. government expects to create $3.92 trillion out of thin air in FY 2017, which ends on 30 Sep 2016. And the government will claw back ninety percent of that as taxes ($3.525 trillion).
When will these clowns realize that a currency issuer (the U.S. government) is not the same as a currency user (you and me)?
And now here’s a bit of fresh air from the Daily Kos blog…
The U.S. government is not a person or company. The way in which the economy works with sovereign nations is nothing like how it deals with the entities that operate under those sovereigns. This little analogy is useful only for the purpose of distorting what’s actually happening.
The “imagine the national debt was on your credit card” bit, along with calculating the national debt in the form of dollars distributed to every man, woman, and child in the nation, is designed to do one thing—drive up anxiety about the debt. A $19 trillion debt? Why that’s horrible! I’ll never get my Mastercard paid off with a number like that!
In other words the “national debt crisis” is fake. It’s a lie. No individual will ever have to pay a single penny on the “national debt.”
Here’s the International Business Times…
Public debt is not due all at once, now or in the future. Anyone with a student loan debt or mortgage knows that’s not how debt works. The Treasury Department issues debt at maturities ranging from a few days to 30 years. Today, the average dollar owed by the government comes due in 69 months, or 5.75 years.
Correct, except the Treasury Department does not “issue debt.” It issues Treasury securities.
The so-called “national debt” is the amount of money that has been deposited in Fed savings accounts. The government pays interest on it, which is about $240 billion a year. (Each year the federal government takes about $214 billion in taxes from people in New York State alone. This does not include state, county, and municipal taxes.)
When a T-security matures, the government must give back the money that was used to buy the security, plus interest, but this is not the same as the government’s having to “pay the deposit back” as though it was a conventional loan.
The government isn’t a household. If the U.S. wants to issue bonds to cover debt payments, there is literally a world of investors who will happily buy up bonds at low interest rates. The world has little fear that America will ever default.
Correct, except the U.S. government does not “issue bonds to cover debt payments.” The money to pay the interest on T-securities is created out of thin air. Money is not physical. For the U.S. government, money is just a numbers game, like points on a scoreboard. In order to add points to a scoreboard, we simply change the numbers. We do not need to first “issue points.” We do not need to “roll over points” from a previous game.
And then the International Business Times goes awry…
That’s not to say there isn’t reason for some concern. Although the national debt isn’t currently causing the sorts of problems fiscal hawks warn about, it’s poised to be a headache in the future.
Illogical. If the “national debt” is not a problem today, then why will it supposedly be a problem tomorrow? Because, according to the International Business Times, the “national debt” is money that the U.S. government needs to operate. Nonsense of course. The Treasury could stop issuing T-securities today, and give back all the money that’s on deposited at the Fed, plus interest, and still the U.S. government would be able to create money out of thin air, simply by crediting accounts.
David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, says interest rates will eventually rise, our debt will become more costly, and politicians will be tempted to cut spending elsewhere to make up for the shortfall. As a possible solution, Wessel envisions a mix of tax reforms and changes to benefits programs staggered over a decade to ease the future debt burden.
More nonsense. This article previously admitted that the U.S. government is not like a private household– but now the article says it is. The article assumes that the U.S. government runs on loans and on income (i.e. tax revenue) like a private household.
In reality the U.S. government creates money out of thin air. (So do banks when they make loans.) If you can create money out if thin air, then you have no “shortfall.” Hence there is no need to “cut spending elsewhere to make up for the shortfall.”
This article is just another stealth attempt at justifying austerity and the privatization of Social Security. “The national debt is not a crisis today, but it will be tomorrow.” It’s Paul Krugman-style bullshit…
The national debt currently has little bearing on quality of life; the economy could even use some additional stimulus. Eventually we’ll have to reckon with it, but eradicating the national debt is not — and has never been — necessary or desirable.
“Eventually we’ll have to reckon with it.” That’s what the lying deficit hawks say. By the way, the “national debt” has nothing to do with “stimulus.”
Another blog, called The Week, gets it mostly right. I added a comment in blue…
Individuals, families, and businesses are all cash-constrained. To get money, they must get a job, sell goods and services, or borrow. That’s not true of the federal government, since the Constitution invests it with the unique power to create money. We’ve divided that power up between the Federal Reserve and the Treasury Department.
Any government with a fiat currency system, which is what America and most advanced Western nations have now, can always just create money to pay off creditors in a pinch (as long as the debt is payable in the government’s own currency). That’s why interest rates on U.S. debt are so low. It’s a sign of investors’ trust. It’s why we’ve happily run a debt for almost two centuries, and why Japan’s interest rates remain quite low despite a debt load far larger than ours.
A government with a fiat currency is unique in the economy. Its bonds are distinct from those of a corporation or even a local state. They’re a uniquely safe investment, and the people buying them know this.