Grover Norquist is Winning Thanks to a Debt Ceiling Crisis Every Few Months

That's right. I don't know in what world some people are living in, but they should pay attention. Yes they should actually pay attention to what Grover Norquist is saying and how much these stupid debt ceiling crisis I predicted are playing into his hands. (h/t Addison)

Norquist: Republicans Should Hold Federal Government Hostage Every Month

And so this constant state of crisis and delayed/short term appropriations are going to be official soon.

House passes short-term debt limit deal

The Republican-led House today passed a bill to "suspend" the nation's debt limit until May, which if passed by the Senate and signed into law, would stave off for a few months the risk of letting the U.S. government default on its loans.
{.......}

House Democrats, meanwhile, grumbled that the short-term bill amounts to political gimmickry that keeps Washington in crisis mode.

{.......}

"The premise here is pretty simple," House Speaker John Boehner said on the House floor. "It says there should be no long-term increase in the debt limit until there's a long term plan to deal with the fiscal crisis that faces our country. Every hardworking taxpayer in America knows that they have to do a budget. Every hardworking taxpayer understands that you can't continue to spend money that you don't have."

{........}

House Democrats also complained that the bill prolonged the debate over the debt limit rather than solving it.

"The good news is that our Republican colleagues finally realized that America should pay its bills and dropped their condition that that be matched by cuts," Rep. Chris Van Hollen, D-Md., said in a news conference. "The bad news is they've decided that America only needs to pay its bills for three more months."

Yes, even when that 3 month suspension becomes a raise only every few months more down the line it won't be close to normal standard procedure as some have tried to claim. This is true for a number of reasons; past raises of debt ceilings were never crisis showdowns and always were routine until Obama put them on the table as something to be negotiated. So given the completely different context comparing past debt ceiling raises to now I needn't go any further, but I will. What happened in 2011 was unprecedented and we are still dealing with the fallout right here and right now. It almost happened to former President Bill Clinton in the 90s but even Jonathan Chait admits Clinton was much more politically savvy in dealing with it than Obama so it was averted.

 

Leading up to the post WWII boom from 1940-1945 during FDR's last term there was one debt ceiling raise a year. Then when Truman became President he was savvy enough not to leave it or raising taxes on the rich to fund things instead to the GOP in Congress in sellout deals just to pass routine measures. Also LBJ prevented that from occurring from 1964 to 1967 when there was one debt ceiling raise a year and even one for two years from 1967-1969; these were all years of serious spending and public investment appropriations; the creation of Medicare and the Great Society could not have been possible under this modern political travesty across the political spectrum. FDR, Truman, and LBJ were real leaders who knew how to handle Congress and their threats. 

Of course I relate all of this from the past to now thus assuming Obama didn't want this to happen, but one now has to wonder if Obama actually wanted this crisis. After all, he is rejecting the only two solutions for getting out of the mess he made via the fully legal Platinum Trillion Dollar Coin leading to High value Platinum Coin Seigniorage and invoking the 14th amendment but I shouldn't need to explain that again. Back during this whole mess in 2011 President Obama threatened to veto a clean debt ceiling raise unless the dumb-ass sequester would be put in. You know, because austerity is awesome in a prolonged period of high unemployment, higher real unemployment, and rising poverty.

Not to people who really care about such things of course, but you get the idea; the delusion that we live in the 90s and there are such things a confidence fairies and bond vigilantes wanting balanced budgets to get serious about for their investments, which is nonsense BTW. Yeah, because that is what's important instead of real people suffering needing real resources. Nope. And because people need real resources they need income to get those resources and spending is income for all of them. And we need more spending since the bust of the Housing bubble to the this net jobless recovery than we are currently outputting.

So basically in order to excuse having to pay off Congressional appropriations every few months as "normal" one would have to assume that it would have been no problem for Congress to pass portions of the American Recovery and Reinvestment Act of 2009 each quarter even though it barely passed as it was. And from that example, one would truly hope some people would understand that you can't authorize or pay for the kind of spending appropriations needed for any real long term good this way. And since debt ceilings have now become legislation fights like the ARRA was we can loosely compare them that way even though the stimulus was just an appropriation that would be paid for over the years by each bi-yearly and then yearly debt ceiling; a badly needed one that helped, but one that wasn't up to the task.

You get the idea. This is a failure, a massive one. I said so multiple times in 2010 and 2011 and that it would lead to this.

How Some Democrats Enabled Failure and Shoved it Down Our Throat

I'm not the only one who has noticed this. The failure that just keeps on being extended amounts to a United States of Crisis to Crisis causing permanent damage. (h/t bobswern)

United States of Crisis Seen Costing Jobs, Wasting Money

Congressional Republicans “are determined to try to take advantage of what they believe to be the leverage afforded by these deadlines to force policy changes they could not get through normal politics,” said Ronald Peters, a political scientist at the University of Oklahoma’s Carl Albert Congressional Research and Studies Center. “Once the president and Congress begin to think in terms of leverage points instead of policy, the whole system gets out of kilter.”

It also gets costlier. Unable to agree on annual spending bills to fund the government, Congress and the president have settled for stopgap measures -- known as “continuing resolutions” -- that do little more than maintain current budget levels and breed inefficiencies within agencies.

{.......}

According to estimates prepared by the House Appropriations Committee, the failure to enact a full-year spending measure last year meant, for instance, that the Defense Department couldn’t award a five-year contract for the CH-47 Chinook Helicopter that would have saved the agency $423 million or a multiyear contract for the V-22 Osprey tilt-rotor aircraft that was projected to save $762 million because the negotiated pricing agreements expired in December.

Reforms to an affordable housing program estimated to save taxpayers $300 million were also pushed off, according to the panel, while U.S. Customs and Border Protection was left with a $315 million shortfall for salaries and expenses that could harm efforts to guard the nation’s borders.

You see failing to enact a full years' spending measure is not something routine or desirable that we can look back on to now as no big deal as some have tried to claim. when the government has to spend for longer periods because of the damage left over from the downturn of the housing bubble as well as the fact that government just doesn't work well this way it shows that there are really no excuses. Short term appropriations mixed with every short term crisis every few months because of political malfeasance is an example of our government as a whole not being able to govern.

This system is not well designed as it is, but when we have politicians looking to preserve its worst elements by rejecting the only real solutions to this self induced political debt ceiling and austerity crisis it shows a form of entropy. There is too much at stake to keep this circus rolling. This what must change about our system. This is a long piece from Dan Kervick at NEP, but one of the best I have read in a long time. It gets to the heart of the matter of what needs to change about our fiscal and monetary system operating together properly instead of failing the American people like the politicians who refuse to change it.

From Central Bank Independence to Democratic Public Finance

The fundamental point here is that in its decisions about currency issuance and bond issuance our hypothetical government follows Abba Lerner’s Second Law of Functional Finance:

LL2: The government should borrow money only if it is desirable that the public should have less money and more government bonds, for these are the effects of government borrowing.

The use of the term “borrowing” is actually quite misleading in application to a currency-issuing government. To say the government borrows money only means that it issues bonds and exchanges the bonds for currency that the public already holds, currency that was itself issued earlier by the government. Lerner’s point is that the government should carry out these swaps only if it sees a public policy interest in swapping interest bearing bonds for non-interest-bearing currency. Since the government issues the national currency, it can never have the problem of being unable to redeem its IOUs, since it can always simply issue the currency it uses to redeem the bonds.

{…………}

Notice that for our hypothetical currency-issuing government the decision about whether to issue bonds and swap them for currency while running a deficit is strictly a policy option. The government doesn’t need to borrow to run a deficit, and always has the option of simply spending more currency into the private sector than it taxes out of the private sector, in effect creating and issuing currency in the process. It doesn’t need to finance the deficit by acquiring the additional money from some external source, since the government itself is the source of the currency. If the private sector economy is stagnating, and running below capacity with high unemployment, the option of deficit spending without further borrowing might prove best.

Now suppose our imagined government wishes to run a deficit during a given period of time, and voluntarily makes the decision to issue new debt to accumulate back from the public sector a total amount of currency equal to the gap between spending and tax revenues. We’ll say that the government is in that circumstance operating a bond-driven deficit. With bond-driven deficit spending the net amount of currency held by the non-governmental sector does not change. However, the total value of government-issued financial assets held by the public does increase by an amount corresponding to the value of the bonds that are issued. Suppose instead, however, the government carries out its deficit spending in such a way that none of the gap amount is offset by bond sales – it simply spends more into the economy than it taxes out of the economy. In this case we will say that the government is running a currency-driven deficit. With a currency-driven deficit, the quantity of currency held by the public increases, while total value of the bonds held by the public does not. Obviously, our imagined government can operate deficits that fall on a spectrum between the two extremes of a bond-driven deficit and a currency-driven deficit.

Thanks to our Representatives in all branches being essentially unable to govern and a central bank unaccountable to the public, our system is being constrained politically even though it has very little real constraints operationally except for politics. There is very little reason to tie spending to issuing new bonds so the elites in our society that essentially own the bond market can lend us our own money and get paid interest off of it. We can spend using a currency driven deficit and manage wealth that is automatically created for the private sector through these deficits. We can do this while managing government created financial assets on a lesser level to set interest rates per one of the only uses not useful at the moment.

So essentially this is our system's capacity should we be smart enough to realize it and use one of the only two real solutions(high value PCS) to get around the political malaise we are in; especially with a do nothing Congress set for the horizon thanks to Dems revealing that most of them actually like the filibuster and didn't really care about our concerns. It can't be said that there are no solutions. There is just no will.

There is no honesty in Washington DC. They are deluded themselves into thinking this crisis to crisis mode won't have massive damage. And anyone else making excuses for a general lack of governance is also deluded into thinking a system works with broken levers.

Topic: 

Tags: 

Rating: 

3
Your rating: None Average: 3 (6 votes)

Comments

Obama is very politically savvy. He is very intelligent.

Ohio Barbarian's picture

Got your attention, yet? Obama knows exactly what he is doing. He is neither stupid nor naive. He is, however, a fascist. A very smart fascist. Let me define that term. 

"Fascism should more properly be called corporatism because both believe in advancing corporate interests by the use of State power."

That was Benito Mussolini who said that. And he was serious about it, the ridiculous-looking poltroon. Hell, he helped invent the damned thing. Fascism, that is. 

Has Obama even once used the power of the State, of the government, to actually curtail corporate interests? Significantly? Especially the interests of Wall Street? 

Au contraire. It's not a failure, dude. Rather, it is a resounding success, if you're a corporatist. 

This man is no "progressive" in any shape, way, or form. Look at what he does, or does not do, in any way, shape, or form. He's very consistent. It's not puzzling at all. 
Forget the "D" after his name. Look at his actions and, just as importantly, his inactions. 

As for our "Representatives," look at them in the same light. There's no magical coin here, IMO. This is all about power. We can agree to disagree about the Coin. It' just not that important. The question is: Who is wielding the power, and why? 

I think the answer begins with a "C". Good night, and good luck. I look forward to your response; but it must be tomorrow. Work. Food. Clothing. Shelter. Transportation to and from. All that. 

 

3
Your rating: None Average: 3 (3 votes)

Yep, but it's hard not to buy into the confusion

geomoo's picture

It's not confusing if you accept that corporate control of government is a fait accompli and that Obama is a willing participant in that.  I'm not sure there's that strong a disagreement with priceman.  I see the misunderstanding arising from the meaning of the word "we", as in

 

 We can spend using a currency driven deficit and manage wealth that is automatically created for the private sector through these deficits. We can do this while managing government created financial assets on a lesser level to set interest rates per one of the only uses not useful at the moment.

Who is this "we" and do "we" actually have any agency?  I read priceman as saying that, if there were a functional government that actually represented we the people, there would be solutions.  The fact that those in power pretend these solutions don't exist can be seen as evidence of corporatism or fascism.  Of course, if one already accepts fascism as fact, there is less interest in forcing a definition of this state of affairs.

The use of the word "fascism" reminded me of hearing Pete Seeger speaking about Woody Guthrie in one of the documentaries.  I think I told the story in one of the movie reviews:  During WWII, Woody had the famous phrase on his guitar, "This machine kills fascists."  After the war, Pete asked him why he kept it on there.  Woody answered, "Because fascism comes around again every time the rich get the generals to do what they want."

3
Your rating: None Average: 3 (2 votes)

I think you may be misinterpreting me

priceman's picture

I am not only speaking about Obama as having flaws.  I always constantly infer that he knows what he is doing even if I don't say it outright. I don't say it outright because I am talking to his core supporters. I want to shame them but first bring them along to listen to what I have to say. So for argument's sake I entertain the flawed liberal/progressive/whatever view that he's just not strong enough or acting intelligently enough assuming he wants progress. Then I go to the conclusion as to what you are saying that he is winning for the 1%.

 

Of course I relate all of this from the past to now thus assuming Obama didn't want this to happen, but one now has to wonder if Obama actually wanted this crisis. After all, he is rejecting the only two solutions for getting out of the mess he made via the fully legal Platinum Trillion Dollar Coin leading to High value Platinum Coin Seigniorage and invoking the 14th amendment

I'm aware of the Mussolini quote which is apt. It is a success if you are a corporatist, but if you are a blind Obama supporter who doesn't know this saying Obama is a fascists will turn people off right away immediately. So for the sake of argument I entertain the flawed idea that Obama wants progress but his hands are tied before deconstructing it.

It's like not telling someone to go fuck themselves, which I do want to all the time to these sheeple, but explaining to them that it's probably a good idea. That way they don't accuse one of going Godwyn on the Internet and get others to shut out debate on the blogosphere.

There are a handful of Democrats who mean well, literally, but once that call from Obama comes down they fold, which is why Glen Ford of Black Agenda Report calls Obama the more effective evil instead of the lesser evil. The keeping of the filibuster by Harry Reid and Democrats voting for BS recently was a way to preserve corporate interests so we just have different styles of speaking and a slightly different POV while agreeing on a lot.

3
Your rating: None Average: 3 (2 votes)

the deficit/debt is a problem, however.........

sartoris's picture

Sorry for being late to the party.  I don't think Obama is a fascist, a totalitarian, an evil man or anything else except a highly incompetent president.  I never thought that Bush II was evil, just stupid.  That being said, Obama has surrounded himself with the wrong people and he is pursuing policies that will do little,or nothing, to either grow the US economy, or prevent future financial meltdowns from occurring. 

Thanks for continuing to highlight this issue.  I fear that the silence on this matter is becoming deafening and severe cuts to the social safety net will be implemented with very little oppostion.

The national debt is a problem which needs to be taken seriously.  However, the drivers of the debt are not the social programs.  Social Security does not contribute to the debt/deficit.  Should not be mentioned at all in any discussion of the debt/deficit.  The problem of Medicare/Medicaid will not be solved by mandating that everyone buy insurance. 

Taxes must be raised.  The opportunity to end the disasterous Bush Tax Cuts (now as much a part of Obama's legacy as his vaunted Lily Ledbetter legacy) has passed.  It will be virtually impossible to raise revenue now.  A real financial transaction tax, estate inheritance tax, carbon tax and progressive income tax should be actively pursued by this administration.  That's not going to happen.  One would have to visit a Master Origamist to see a better folder than Obama. 

3
Your rating: None Average: 3 (3 votes)

It really isn't a problem, but I appreciate you weighing in

priceman's picture

And before I begin I just want to say I don't blame you for thinking this as it's the orthodox view that is pretty widely accepted even though it's wrong.

The national debt/deficit isn't a problem. Just like it isn't a problem in Japan, debt to GDP ratio of 230% while it's bailing out the eurozone) the U.K or anywhere else that issues its own currency. You can see it in the 10 year interest rate spreads.

(right click and open image in new tab)

Political leaders act like it is but it's simply not even if we take the neoclassical view. The only countries that had their own currency and defaulted also had a currency board that pegged their currency to dollars but no one else.

What is a serious problem is a stupid or corrupt government stupidly deciding to weigh politically(only way it could happen) defaulting on it's debt obligations; this would cause a bigger downturn than in 2008 for everyoen that hold US debt. The creator(Treasury and Fed as its fiscal agent or Treasury alone minting coins as we talked about) of the currency cannot default on it's own currency. Even Alan Greenspan and Ben Bernanke have admitted this.

However using the orthodox view on the national debt is used to whip people up into a frenzy; this is the Shock Doctrine scenario that is going to be used to cut SS and Medicare along with political default which is the only default that could ever occur. That would be a huge problem; a problem Obama caused when he put the debt ceiling up for debate. So there is leverage as we limp from miniature crisis to crisis for Obama and the Democrats he will bend to his will and Republicans to enact austerity killing the New Deal and Great Society

All that doesn't take away your points about SS not being part of the deficit or that if one wanted to pay down the deficit the military and its waste should be the place to look, but rather than pay off debt that money should go to right income inequality. Public Debt only needs to be paid as the obligations come through as payments legally which otherwise throws the whole bond market and financial system out of whack if people think they won't be paid because we decided not to. Otherwise the debt is never a problem because we create the money the debt is paid with leaving aside that we don't even have to issue new debt to spend and we should stop doing it and run just currency driven deficits if you read my diary. Soon enough if you read me enough you might learn to love deficits like John Harvey lays out.

We agree on the ACA not being adequate and for profit insurance not solving our health care problems.

On Obama, he is definitely being controlled by corporate interests like Bush. I don't think Obama just folds. I think Obama is just not a liberal and is doing what he wants to do. I'm not going to use the term fascists but given the NDAA, prosecuting whistle blowers, taking away our privacy, what his DOJ did to Aaron Swartz with no Wall St CEOs in jail does rise to the top and those are decision. Also there was this in 2006.

Obama 2006—”Too many of us have been interested in defending programs as written in 1938″

 

So it's not a CT. It sounds a lot like Peter Peterson.

The President said he kept the pitch forks away from Wall St and put their man Geithner at the helm along with a new Wall St Treasury that doesn't think deregulation caused the crash. Republicans don't like Jack Lew so this wasn't something Obama had to do; these are pro corporate pro Wall St policies. Obama has always used the crisis word when it came to SS during the primaries which always bothered me, but he never used the crisis in 2008 to really push for accountability for what Wall St did and to end TBTF. He actively fought Sherrod Brown and Ted Kaufman in 2010 during the Dodd Frank debate working Congress to make sure that was defeated. Wall St owns him.

But you're not alone in thinking this. However, I agree with David Sirota.

Obama isn’t weak (he just isn’t a liberal)

Anyway I appreciate the accolades for covering this. No one is paying attention to this and all think the crisis is averted but it's not and these miniature crisis events in the place of governing will put Chained CPI at the very last on the table. and that is unacceptable. There will be more cuts in addition to that.

Modern Monetary Theory is reality and we must not accept deficits as a fear mongering tool, period, because accepting it puts our safety net in danger and it's nonsense. Deficits only mattered during the gold standard when was ended in 1971 because we had to dig up gold and ship it off. They want us to be scared so we will sacrifice our safety net.

We may disagree on that, but it is my goal to spread that reality and others like debtless money creation that can end austerity politics for good because our government cannot function for our benefit when it is wholly owned by financial Oligarchs.

Thanks, Sartoris.

3
Your rating: None Average: 3 (3 votes)

the cost of financing the debt is a problem

sartoris's picture

I'll explain my thinking on the debt and why it is a problem that should be addressed. 

First of all, there are 2 components of the debt.  Not all debt is created equal.  Take a look at the GAO's website.  At the end of 2011 the total debt was 14.8 Trillion dollars.  Of that amount, 4.7 trillion came from debt held by government accounts like Medicare and Social Security.  That debt is not financed.  The remaining 10.1 trillion is debt held by the public.  That debt has to be financed.  The reason that the fed is keeping interest rates at near zero levels is because if the interest rate was raised to a more realistic figure, that would make the cost of financing the debt prohibitive.  

In 2011, the amount the US spent simply financing the debt was 227 billion dollars.  That's a lot of money.  A lot of money that was paid that did absolutely nothing for the country. 

So, in my opinion, carrying the amount of debt (10.1 Trillion in 2011) is unjustifiable.  The only other time in history that our debt represented this much of our GDP was in WWII.  An event such as WWII justifies debt.  There is nothing that justifies this much debt.  Our revenue stream is too low.  Far too low.  I don't think that debt financing should be the 4th largest portion of our budget.

 

3
Your rating: None Average: 3 (4 votes)

I really recommend the Scott Fullwiler peice I linked to

priceman's picture

Financing the debt is not a financial burden. Whenever debt has to be paid with interest it is marked up on a computer at the Fed and that's it. That's the way most Congressional appropriations are.

The problem is creating money and lending it for free to commercial banks or near zero and then having them lend us back the money we pay that interest on when they purchase public debt. It just makes no sense.

Also we don't need revenue; revenue is collected to destroy the money supply and take it out of circulation; to give money value; and to regulate incomes which are not being done well with this tax policy. We create money so no amount of debt or interest is a financial burden or prohibitive. What is prohibitive is Congress and politics as well as the CBO and GAO who do not have a great record depicting debt or economic outcomes. Scott Fullwiler shows why artfully even taking into account this fear which is not true. So does James Galbraith.

The demand for treasuries in the market(which are always a safe investment and always in demand) is partiality what the Fed reacts to which keeps the interest rate low in addition to being purchased by the Fed from commercial banks per monetary policy via an interest rate setting tool in addition to the overnight federal funds rate the Fed sets by itself along with the rate on reserves and everything else. If markets were worried about the US debt load the interest rate would rise on longer maturities which are more volatile, yet 20 year bonds wouldn't are still purchased at 3% by investors. Also Interest rates rose in the 90s when we were paying the debt off so I don't agree that that is why ZIRP exists It's there to try to get the economy moving, which it can' really but that's why they are doing it based on expectations from private investors, not what the government will print off and pay.

(from 2010 and FY 2009 compared to 1999 but still relevant to the point on higher interest rates in the 90s)

And deficits are useful; they put money in the private sector because national accounting works within a double entry bookkeeping framework where the balance of payments within our current and capital account net out to zero. Positive input here, negative input there; put them together and you get zero.

 

If we want money in the economy we should be appropriating more money to be spent regardless of the debt and interest payments which have to be compared to GDP. The economy will grow and the debt will come down anyway as it does. Higher interest rates on bonds in the bond market for government securities show higher risk and no one thinks they are risking anything by buying treasuries nor should they.

But I'm all for not issuing more debt to finance spending because we simply don't have to. We can just crate or mint currency and have Congress appropriate it and we can spend. Our government stopped working that way in 1971 when Nixon ended Bretton Woods. It takes a lot of reading and letting go of the orthodoxy to understand that everything taught in many orthodox classes on the functions of finance and debt is wrong.

The constraint is inflation if we spend too much after everyone has a job and the economy picks up. Nobody likes too much inflation but that is nowhere near happening.

This is why I am not worried about the public debt, intergovernmental debt, or interest payments. It all has the same legal tender promise; it all can and will be paid easily because we are not like Greece; the debt is owed in our own currency and it is a currency we control.

But like I said I don't fault you for worrying about this as this orthodox view affects many different academic circles and even government agencies like the CBO and GAO but it's not true.

They'll scare us with it to cut our safety net, but it's important not to be and to remember this and the documentation I laid out supporting it but it may take awhile to absorb.

Anyway, thanks for weighing in again man. This is important to me that people begin to understand this so I harp on this a lot. Hopefully not too harshly. Deficit lies and fear mongering will be what the elites in DC use to steal our SS, Medicare, and Medicaid.

Anyway I won't force you to agree. Just think about it. Thanks for commenting.

3
Your rating: None Average: 3 (2 votes)

I read the Fullweiler piece and I don't agree

sartoris's picture

I can certainly understand why you believe that the debt is not a problem.  There are a lot of people pushing that message.  There is a grain of truth in that belief, but only a grain, and only in limited circumstances.  One thing I have learned about reading economics is that whatever you believe, whether it's implementing a barter system or a gold standard, there will be economists who have books supporting your argument. 

It's perfectly fine for a government to operate with debt.  There is absolutely no reason for balanced budget amendments or hysteria over a deficit.  However, the size of the deficit matters.  In the situation in which we find ourselves we are spending real money to finance an unnecessarily large debt.  When we spend money on unnecessary items, whether it is a war in Afghanistan or debt financing, it simply means that there is less money available for domestic expenditures.  It's not as simple as printing more money. 

I understand the other side of the argument, I just find it does not hold up either historically, logically or financially.   I'll get out of your essay, though, I don't want to detract from your overall point that austerity is unnecessary. 

3
Your rating: None Average: 3 (2 votes)

That's fine

priceman's picture

This is all fairly empirically proven so it's more than just a grain but I won't argue this with you since we at least agree that austerity is bad. Professors like L. Randall Wray and James Galbraith predicted the surpluses of the 90s would bring on the recession and that there would be a Housing Bubble. Once everyone is employed when unemployment is about 2% that is when inflation gets too high(could have hyperinflation too) as i explained so I'm not saying there are no constraints, but debt defaults are not one of them and this is proven.

There are a lot of schools of thought economically as you said but very few with the kind of record MMT and UKMC has; in fact most schools failed. That's why. Money is not an object in a fiat currency and is a measured unit of account. There really is nothing stopping the US specifically as the reserve currency from typing it up on a spread sheet to make debt and interest payments on that debt or any other appropriation Congress makes. that doesn't mean that we need to be wasting money on war per your great diary on that, but it does mean the debt is not a burden; the burden is the idle human productive capacity and wasted lives that comes from the unemployment by not spending enough money and not enough deficits because the government is not like a household so it is about crating money on a computer then printing it out or even minting it debt free at the Treasury.

You don't have to leave but it looks like this is probably not going to go any further, but I appreciate that you are what is known as a deficit dove like Paul Krugman instead of a deficit hawk. I just think on this you are both wrong on debt though you are both also right about a lot.

Anyway I appreciate the debate anyway.

3
Your rating: None Average: 3 (2 votes)

the fed's absurd interest rate has real world ramifications

sartoris's picture

Since the Fed must keep the interest rate at zero so that the debt can be financed, it affects the financial lives of virtually every American.  Lower rates at the Fed translate into lower rates that a bank pays to it's customers.  Lower rates in the bond market affect retirement accounts.  Now, an argument (a very boring argument) can be made that this 'lost' money is recovered by the lower borrowing costs associated with lower rates.  I would say that is a reasonable assumption IF one is a borrowing a crap load of money.  The little guy with 10k in savings is NOT borrowing enough money to makeup for the money he is losing as a  result of the fed's unrealistic interest rates.

However, the Fed has no choice but to keep the rates absurdly low.  Raising the rate would increase the cost of financing the debt well in excess of 2011's 227 billion dollars. 

3
Your rating: None Average: 3 (4 votes)

James K. Galbraith puts the debt in perspective

geomoo's picture

Sorry I don't have time really to participate, or even to real the comments in full, but it looked as though this Galbraith interview would contribute to defining the extent of the problem.  Galbraith thinks there are a few real world implications, and that these would be easily fixed with minor legislation--or that's how what I remember.  (I'm just rushing by, so if this is out of place or I missed the mark somehow, please forgive.)

 

3
Your rating: None Average: 3 (3 votes)

James K. Galbraith always does

priceman's picture

when I read the Predator State that opened me up to learning  about how our fiscal and monetary system really works.

3
Your rating: None Average: 3 (1 vote)

ZIRP is feckless and in ways damaging

priceman's picture

Want Jobs? Forget the Fed!

Those lower borrowing costs haven't really turned into a lot of lending especially for people who really need it (more than a few years ago but still feckless) and it does not help people with savings accounts and affects some CDs. A lack of diversification and careful investment is more about the bond market relating to pension plan managers(Treasuries are more of a safe bet than a way to make a lot of money) though like how they invested in MBS which paid high interest rates though they turned out to be garbage and thus bankrupted state governments(where debt absolutely matters) the then the unions were blamed like in WI. But for those that have savings accounts ZIRP is not helpful at all.

The Fed's mandate of price stability and battling unemployment mandate with interest rates has nothing to do with keeping down the debt though; it has to do with future expectations of low interest rates for investors and inflation expectations for investors all of which are not creating jobs and won't create jobs. Only fiscal policy will which means massive deficit spending and a job guarantee for 25 million people who need it. 

We can agree to disagree on the problem of debt and the interest burden but also agree on this one.

 

3
Your rating: None Average: 3 (1 vote)