As President Ronald Reagan said (often), “There you go again.”
For 81 years, the debt-nuts have been predicting the imminent doom of the U.S. government and U.S. taxpayers, because the so-called federal “debt” (which isn’t even a “federal debt”) supposedly is too big.
And in the following article, the doom-sayers do it, again.
The Democrats’ ‘Big’ Infrastructure Plan: A Giant Debt Bomb? by Rachel Bucchino, a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill.
“What would happen to the national debt will depend on the extent to which the bill would include revenue raisers as well as spending.
Of course, Congress basically has two options: borrowing money or raising taxes, whether it uses reconciliation or not,” Stan Veuger, a resident scholar in economic policy studies at the American Enterprise Institute, said.
Wrong, in every respect.
The federal government, unlike state and local governments, and unlike what the debt-nuts tell you, does not need “revenue raisers.” To pay its bills, the federal government creates new dollars, ad hoc. It cannot run short of its own sovereign currency, the U.S. dollars.
The irony is that the debt-nuts, having made exactly the same complaint for 81 years, do not recognize that their complaint actually disproves their complaint.
The so-called “debt,” which isn’t debt, exceeds (depending on who is counting) $25 trillion. So, if “revenue raisers” are needed, where did the revenue come from?
First, why isn’t the U.S. debt actually debt? Because it’s deposits, similar in nature to your deposits into your bank safe-deposit vault.
When you buy federal “debt,” you open a T-security account into which you put dollars. The federal government is Monetarily Sovereing. It has the unlimited ability to create dollars, so it has no need for, or use of, your dollars.
Instead, your dollars remain untouched in your T-security account, earning interest, until maturity, at which time your dollars are sent back to you.
No taxes or other sources of revenue are involved. Those are your dollars simply being returned, unused and unneeded by the federal government.
Immediately, the situation looks less dire than the debt-nuts would have you believe. But, here’s even more proof that all the hand-wringing about federal “debt” is nonsense.
The purpose of borrowing is to acquire money. But the U.S. federal government never needs to acquire money. It creates all the money it wishes, just by pressing computer keys.
Exactly correct. So, if the government does not borrow, what is the purpose of T-securities? Answer: In days past, the U.S. government was not Monetarily Sovereign. It did not have the unlimited ability to create dollars.
Its dollar creation was limited by its gold and silver supplies.
The Bretton Woods System tied all global currencies to the value of the dollar, and set the value of the dollar at 1/35th of an ounce of gold.
In 1971, President Nixon revalued the dollar to 1/38th of an ounce, which in turn caused a run on gold reserves.
In order to stop the run on gold reserves, Nixon severed the ties from gold completely.
The above demonstrates that the value of the U.S. dollar is completely arbitrary, and is under the total control of the U.S. President and Congress. Because inflation is a reflection of the dollar’s value, compared with other currencies and with commodities, U.S. inflation also is controlled by the President and Congress.
The above also demonstrates that precious metals standards limit the government’s ability to create dollars, a limit the federal government has not suffered since 1971.
Days after President Joe Biden’s $1.9 trillion rescue package finally passed, Democrats are already working on another big-spending initiative that will likely target the nation’s infrastructure and invest billions into new projects like broadband internet.
It will likely include provisions aimed at gaining a tighter grip on climate change, mirroring the $2 trillion infrastructure and climate plan proposed by Biden on his campaign trail.
“It is going to be green and it is going to be big,” Rep. Peter DeFazio (D-Oregon), said.
The president’s infrastructure and climate proposal outlined goals including achieving a carbon pollution-free power sector by 2035, upgrading four million buildings and weatherizing two million homes over four years, constructing 1.5 million sustainable homes, expanding broadband internet to every American and investing in 500,000 electric vehicle charging stations.
The initiative also aims to create millions of jobs in related industries such as agriculture, clean energy and auto manufacturing.
Think of what the Biden government wishes to address: Infrastructure, internet, pollution, upgrading, weatherizing, electric charging station, and job creation — and it will not cost you, the taxpayer, one cent. Not one.
The government will create, from thin air, all the money needed. In fact, it could cut tax collections to zero and still pay for everything. And it will do all that while growing the economy.
(Question: Why does the federal government collect taxes if it doesn’t need the money? Answer: To control the economy. It taxes what it wants to discourage and gives tax breaks to what it wants to reward.)
But the debt-nuts in the Republican Party don’t want these wonderful benefits to happen under a Democratic President. So they promulgate lies about the federal “debt,” falsely comparing it with personal debt.
But federal “debt,” not being debt, and not owed by the federal government, is nothing at all like personal debt. It is not a burden on the federal government. It is not a burden on today’s or future taxpayers.
It merely is deposits into quasi safe-deposit boxes.
Think about it. When you put bonds into your bank safe-deposit box, does the bank owe you money? At most, it simply owes you the contents of the box.
While Republicans support widespread infrastructure spending, most have concerns about the overall price tag of the package that would add to the alarming national debt level and the Democrats’ push to incorporate items on climate into a big-spending initiative.
There is nothing alarming about the national “debt” (deposit) level. It is an invented “alarm” to keep you from receiving the benefits our government was designed to create.
These are the same Republicans who supported Trump’s tax cuts for the rich, which also added to the “debt,”
The ratio of debt held by the public to gross domestic product (GDP), which currently stands at 99.37 percent, could reach as much as 110 percent by the end of fiscal year 2021.
It will continue to grow under current law, “but if we were to add another $2 [trillion] from the infrastructure bill by borrowing the full amount, it would go up to a little under 120 percent.
That is very high by historical standards, but interest rates are at historically low levels, making for more moderate annual interest payments.”
Contrary to popular myth, the “debt”/GDP ratio is meaningless. GDP is a measure of spending in any one year. Federal “debt” measures the net amount of deposits into T-security accounts.
Two completely different measures and two completely time scales. The “debt”/GDP ratio isn’t just apples and oranges. It’s apples and adverbs — two measures that could not be more different.
The ratio has no predictive value. You could examine the ratio for every nation on earth, and it would tell you nothing about the health of that nation’s economy.
Anyone quoting that ratio essentially is telling you, “Either I know nothing about economics, or I believe you know nothing, so I feel I can con you.”
“The problem is that rates may go up and that the debt to GDP ratio will go up dramatically over the next few decades if we continue on the current path. Both of those factors will lead to a dramatic increase in interest payments.”
While the growing national debt is a looming issue, some economists pointed to the historically low interest rates for borrowing and that investing in infrastructure projects tends to yield a high rate of return.
“What matters is not the debt but the size of interest payments relative to GDP. Since interest rates are so low, any investment that raises GDP significantly is worth it.
Investing in infrastructure has a high rate of return and so it should be done,” Jonathan Gruber, a former technical consultant to the Obama Administration and an economics professor at the Massachusetts Institute of Technology, said.
Now, a new story: “What matters is not the debt but the size of interest payments relative to GDP”?
See? Now the dept doesn’t matter. It’s that meaningless ratio that matters. No not the Debt/GDP ratio. A new meaningless ratio: Interest payments/GDP.
It’s like eating Jello with one chopstick. As soon as you disprove one lie, the slippery debt-nuts come up with a new one.
They want you to worry about interest payment ratios, all while knowing the federal government has the unlimited ability to make interest payments, no matter how large.
And why exactly does the ratio matter? No one knows, but the debt-nuts are sure that somehow, someway it simply must matter, and you should be very afraid.
The fact: Those interest payments are no burden on anyone, and they will help grow the economy.
Top congressional Democrats have suggested removing former President Donald Trump’s 2017 tax cuts or implementing stiff tax policy on the wealthy to help fund the package, moves that will likely see rejection from the other side of the aisle.
While removing tax cuts for the wealthy will do nothing to “fund the package,” it will help narrow the Gap between the rich and the rest, and that is important. The wide Gap punishes millions of Americans while giving near-dictatorial power to the chosen few.
It’s unclear how Biden and the Democrats will look to fund the infrastructure and clean energy plan at this point, as the focus is more targeted on developing a bipartisan package that won’t resort to budget reconciliation.
What a terrible shame. For no good reason at all, the marvelous benefits the federal government is able to provide, are stalled because of ignorance and politics.
In summary, here is the latest sampling of the ignorant, disgraceful, “ticking time-bomb” references — all proven wrong by history — that we have recorded since 1940.
September 1940, the federal budget was a “ticking time-bomb which can eventually destroy the American system,” said Robert M. Hanes, president of the American Bankers Association.
By 1960: the debt was “threatening the country’s fiscal future,” said Secretary of Commerce, Frederick H. Mueller. (“The enormous cost of various Federal programs is a time-bomb threatening the country’s fiscal future, Secretary of Commerce Frederick H. Mueller warned here yesterday.”)
By 1983: “The debt probably will explode in the third quarter of 1984,” said Fred Napolitano, former president of the National Association of Home Builders.
In 1984: AFL-CIO President Lane Kirkland said. “It’s a time bomb ticking away.”
In 1985: “The federal deficit is ‘a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell. (Remember him?)
Later in 1985: Los Angeles Times: “We labeled the deficit a ‘ticking time bomb’ that threatens to permanently undermine the strength and vitality of the American economy.”
In 1987: Richmond Times–Dispatch – Richmond, VA: “100TH CONGRESS FACING U.S. DEFICIT ‘TIME BOMB’”
Later in 1987: The Dallas Morning News: “A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government.”
In 1989: FORTUNE Magazine: “A TIME BOMB FOR U.S. TAXPAYERS”
In 1992: The Pantagraph – Bloomington, Illinois: “I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion.”
Later in 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion.”
In 1995: Kansas City Star: “Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.”
In 2003: Porter Stansberry, for the Daily Reckoning: “Generation debt is a ticking time bomb . . . with about ten years left on the clock.”
In 2004: Bradenton Herald: “A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB”
In 2005: Providence Journal: “Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb.”
In 2006: NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.
In 2007: USA Today: “Like a ticking time bomb, the national debt is an explosion waiting to happen.”
In 2010: Heritage Foundation: “Why the National Debt is a Ticking Time Bomb. Interest rates on government bonds are virtually guaranteed to jump over the next few years.
In 2010: Reason Alert: “. . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”
In 2011: Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode.”
June 19, 2013: Chamber of Commerce: Safety net spending is a ‘time bomb’, By Jim Tankersley: The U.S. Chamber of Commerce is worried that not enough Americans are worried about social safety net spending. The nation’s largest business lobbying group launched a renewed effort Wednesday to reduce projected federal spending on safety-net programs, labeling them a “ticking time bomb” that, left unchanged, “will bankrupt this nation.”
In 2014: CBN News: “The United States of Debt: A Ticking Time Bomb”
On Jun 18, 2015: The ticking economic time bomb that presidential candidates are ignoring: Fortune Magazine, Shawn Tully,
On February 10, 2016, The Daily Bell: “Obama’s $4.1 Trillion Budget Is Latest Sign of America’s Looming Collapse”
On January 23, 2017: Trump’s ‘Debt Bomb’: Deficit May Grow, Defense Budget May Not, By Sydney J. Freedberg, Jr.
On January 27, 2017: America’s “debt bomb is going to explode.” That’s according to financial strategist Peter Schiff. Schiff said that while low interest rates had helped keep a lid on U.S. debt, it couldn’t be contained for much longer. Interest rates and inflation are rising, creditors will demand higher premiums, and the country is headed “off the edge of a cliff.”
On April 28, 2017: Debt in the U.S. Fuel for Growth or Ticking Time Bomb?, American Institute for Economic Research, by Max Gulker, PhD – Senior Research Fellow, Theodore Cangeros
Feb. 16, 2018 America’s Debt Bomb By Andrew Soergel, Senior Reporter: Conservatives and deficit hawks are hurling criticism at Washington for deepening America’s debt hole.
April 18, 2018 By Alan Greenspan and John R. Kasich: “Time is running short, and America’s debt time bomb continues to tick.”
January 10, 2019, Unfunded Govt. Liabilities — Our Ticking Time Bomb. By Myra Adams, Tick, tick, tick goes the time bomb of national doom.
January 18, 2019; 2019 Is Gold’s Year To Shine (And The Ticking US Debt Time-Bomb) By Gavin Wendt
[The following were added after the original publishing of this article]
April 10, 2019, The National Debt: America’s Ticking Time Bomb. TIL Journal. Entire nations can go bankrupt. One prominent example was the *nation of Greece which was threatened with insolvency, a decade ago. Greece survived the economic crisis because the European Union and the IMF bailed the nation out.
July 11, 2019: National debt is a ‘ticking time bomb‘: Sen. Mike Lee
SEP 12, 2019, Our national ticking time bomb, By BILL YEARGIN SPECIAL TO THE SUN-SENTINEL | At some point, investors will become concerned about lending to a debt-riddled U.S., which will result in having to offer higher interest rates to attract the money. Even with rates low today, interest expense is the federal government’s third-highest expenditure following the elderly and military. The U.S. already borrows all the money it uses to pay its interest expense, sort of like a Ponzi scheme. Lack of investor confidence will only make this problem worse.
JANUARY 06, 2020, National debt is a time bomb, BY MARK MANSPERGER, Tri City Herald | The increase in the U.S. deficit last year was about $1.1 trillion, bringing our total national debt to more than $23 trillion! This fiscal year, the deficit is forecasted to be even higher, and when the economy eventually slows down, our annual deficits could be pushing $2 trillion a year! This is financial madness. There’s not going to be a drastic cut in federal expenditures — that is, until we go broke — nor are we going to “grow our way” out of this predicament. Therefore, to gain control of this looming debt, we’re going to have to raise taxes.
February 14, 2020, OMG! It’s February 14, 2020, and the national debt is still a ticking time bomb! The national debt: A ticking time bomb? America is “headed toward a crisis,” said Tiana Lowe in WashingonExaminer.com. The Treasury Department reported last week that the federal deficit swelled to more than $1 trillion in 2019 for the first time since 2012. Even more alarming was the report from the bipartisan Congressional Budget Office (CBO) predicting that $1 trillion deficits will continue for the next 10 years, eventually reaching $1.7 trillion in 2030
April 26, 2020, ‘Catastrophic’: Why government debt is a ticking time bomb, Stephen Koukoulas, Yahoo Finance [Re. Monetarily Sovereign Australia’s debt.]
August 29, 2020, LOS ANGELES, California: America’s mountain of debt is a ticking time bomb The United States not only looks ill, but also dead broke. To offset the pandemic-induced “Great Cessation,” the US Federal Reserve and Congress have marshalled staggering sums of stimulus spending out of fear that the economy would otherwise plunge to 1930s soup kitchen levels. Assuming that America eventually defeats COVID-19 and does not devolve into a Terminator-like dystopia, how will it avoid the approaching fiscal cliff and national bankruptcy?
March 17, 2021, The Democrats’ ‘Big’ Infrastructure Plan: A Giant Debt Bomb? by Rachel Bucchino, a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill. Congress basically has two options: borrowing money or raising taxes, whether it uses reconciliation or not,” Stan Veuger, a resident scholar in economic policy studies at the American Enterprise Institute, said.
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
- 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.
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