Liars, fakers, and fear-mongers lurk among us. They masquerade as prudent economics advisors. They sell you their snake oil linament to cure your . . . whatever.
That brings us to one of America’s most prominent snake oil sales groups, the CRFB (Committee for a Responsible Federal Budget).
They have been selling the same nonsense for many years. Their president even testified before Congress, with all those old, sage heads nodding dumbly in agreement at the foolishness she was spouting.
Those are the facts. The federal “debt” (that isn’t a debt of the federal government) grew eleven thousand percent since 1951. Is today’s America more financially unstable than it was after WWII?
And there’s this:
If a high Debt/GDP ratio caused inflation, one would expect some correspondence between the peaks and valleys of Debt/GDP and inflation. No such parallel exists.
What does cause inflation?
The price of oil, not the Debt/GDP ratio, is the prime driver of inflation. The peaks and valleys of the Oil Price / Inflation ratio correspond.
The RBFB’s B.S. continues:
Perhaps most troubling is the effect of these changes on interest spending.
Under CBO’s baseline, interest costs were already projected to triple from roughly $400 billion in 2022 to $1.2 trillion in 2032.
As a result of higher debt and higher interest rates, we now expect them to rise to $1.3 trillion in our baseline scenario, $1.4 trillion in our intermediate scenario, and $1.6 trillion in our high-cost alternate scenario.
As a share of the economy, interest costs would be in uncharted territory. In all of American history, federal interest costs have never exceeded 3.2 percent of GDP.
We project interest costs will reach 3.4 percent of GDP by 2032 under our baseline scenario, 3.9 percent under the intermediate alternate scenario, and 4.4 percent under the high-cost alternate scenario.
And why is this a problem? It isn’t. The U.S. federal government never, never, never can run short of dollars to pay interest. And those dollars go right into Gross Domestic Product.
Federal interest payments add directly to GDP. They stimulate economic growth. They make the private sector richer.
GDP = FEDERAL SPENDING + NON-FEDERAL SPENDING + NET EXPORTS
Objecting to federal spending is objecting to GDP growth. Why does the CRFB object to that?
There is a reason, which I will get to shortly.
At the same time as inflation is surging and interest rates are rising, our new projections show that the United States faces an unsustainable fiscal outlook.
Liars like the CRFB have called the federal debt “unsustainable” (and a ticking time bomb) every year since the 1940s. Yet, here we are. Sustaining. We are “sustaining” an eleven thousand percent increase in federal “debt” (that isn’t debt) very nicely, thank you.
Year, after year, for 75 years, liars, fakers, and fear-mongers have been wrong. Again. Again. Again. How stupid do we have to be to keep believing the same lie when every scary prediction fails?
We laugh when the Peanuts character Lucy keeps pulling the football away, and Charlie Brown keeps believing. But we are the Charlie Browns, the CRFB, and all the other lying pundits are Lucy. They keep “pulling the football away,” and we keep believing that next time . . . but next time never comes.
And the beat goes on: The lies just keep coming:
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
We are asking lawmakers to take one small step towards fiscal responsibility and agree there should be no new borrowing for the remainder of 2022. There is not one single economic justification to borrow rather than pay for any new priorities.
This is only 46 days, and it will be good practice for politicians to break their addiction to debt. Those who are being negatively affected by high levels of inflation – as in, all of us – should ask any policymaker who votes for new borrowing why they are choosing to make inflationary conditions worse rather than better.
The last thing this country needs is a Christmas Tree package full of unpaid-for tax breaks and spending hikes.
Any policymaker who votes for new borrowing instead of paid-for legislation under these economic conditions is not taking the hardships they are creating on working families seriously enough.
What’s wrong with it? It’s all a lie.
First, the U.S. government never borrows dollars. Why should it, given that it can create dollars simply by pressing computer keys.
Statement from the St. Louis Fed:
“As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”
That thing erroneously called “borrowing” is the acceptance of deposits into T-security accounts, and the federal government never touches those dollars. It’s like accepting deposits into safe deposit boxes. Is that bank borrowing?
Second, tax breaks are nothing more than dollars not taken from the economy. Tax breaks are economically stimulative. Leaving money in the private sector is the only way the economy can grow.
Third, no one ever pays for tax breaks. The only thing paid for is taxes, which take growth dollars out of the economy.
Fourth, all legislation that requires spending dollars is “paid for.” The federal government pays all its bills by creating new dollars ad hoc. It never fails to pay, despite all the hand-wringing about “unsustainability.”
And finally, federal deficit spending never causes inflation. The sole cause of all inflations and hyperinflations throughout history is the scarcity of critical goods and services, usually oil and food, but additionally, computer chips, shipping, rare earths, labor, water, etc.
What caused these shortages? Not federal spending. Federal spending didn’t cause the oil shortage, or the food shortages, or the lumber shortage. Primarily, COVID caused the shortages that caused inflation.
Before COVID, we had massive annual deficit spending and near-zero inflation.
WHY DO THEY LIE, AND WHY DO WE BELIEVE?
Some in the CRFB, the media, economists, and politicians may lie out of ignorance. But many lie because they are bribed by the rich to lie.
The rich bribe the media via advertising dollars and ownership. The rich bribe the politicians via campaign contributions and promises of lucrative employment later. The rich bribe the economists via university contributions and promises of lucrative jobs in think tanks.
The CRFB is supported by rich people who want nothing more than to see benefits to the middle and the poor cut.
Raising taxes or cutting federal spending are recessionary steps that affect middle- and lower-income people. This is particularly true because the cuts always focus on Medicare, Social Security, Medicaid, and other benefits for those who are not rich.
Those cuts widen the Gap between the rich and the rest. Widening the Gap makes the rich richer. The Gap is what makes the rich rich.
The Debt/GDP ratio is comparable to a Contents-of-Bank- Safe-Deposit-Boxes / Bank Spending ratio. It’s a meaningless nonsense ratio that predicts nothing, demonstrates nothing, and reveals nothing but the ignorance of those who quote it.
The ratio tells you nothing about the health of a nation’s finances or its ability to pay its obligations. It is a ratio quoted by those who are ignorant of economics or are lying about economics. No other alternatives.
To paraphrase, “There are lies, damned lies, and the Federal Debt / GDP liars, the damnedest liars of all.
May the Debt/GDP liars’ spawn be forever cursed.
Rodger Malcolm Mitchell
Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell
The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
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