Just saw John Sununu, one of Republicans favorite Bushie junk yard attack dogs all up in arms about the debt subject to the limit (the so-called national debt) reaching $16 Trillion dollars, and going on to tell people that every man, woman, and child in the United States now owes $50,000 to pay that debt off. Now, I’m here to tell you that all that is bull shit.
The debt subject to the limit is a debt incurred by the Congress and the Treasury Department because when the Government spends more than it taxes, the Treasury Department issues debt instruments in the name of the US Government even though it doesn’t have to do that in order to deficit spend. These instruments make the Government a debtor. But they don’t make any individual man, woman, or child in the United States a debtor. So, the idea that YOU owe $50,000 or even a single dollar is BS. You’ve signed no such note. You’ve not charged a single dollar on your credit card for this purpose. And you’ve not made a single promise that any portion of the national debt will be paid by YOU.
Well, you might ask: “Doesn’t the US have to pay the $16 T debt sooner or later by taxing, and won’t we then be responsible for our portion in the form of a tax obligation?”
The answer is that the US must pay all its debts when they fall due. It’s in the Constitution. If the Federal Government refused to do that it would be violating the Constitution, and would be illegal. But saying that the US must pay all its debts, doesn’t say that it must do so only by using taxation to raise enough revenue to run budget surpluses and pay those debts. It’s that lie that Sununu and the other austerians want you to believe!
How we pay US debts is up to us and is a political question. If we do it the way Sununu suggests we’ll condemn the country to permanent recession in the context of a perpetually depressed economy in which the wealthy get wealthier and everyone else gets poorer. That’s what a plutocratic tool like John Sununu wants. But there are other ways to do it.
The best way, because it ends unnecessary welfare for the rich and foreign nations is to stop issuing debt instruments, continue with enough deficit spending to create full employment and an economy operating at its full potential, and make up the gap between spending and revenue by using the legal power of the Government to issue 1 oz. Proof Platinum coins with arbitrary face values, and using the coin seigniorage profits gained by depositing the coins at the Federal Reserve. Here’s the process, along with the political speech explaining it to everybody.
Read it, and understand that There Is An Alternative (TIAA) to making every, or any, man, woman, or child pay $50,000 to pay off that national debt through taxing more than we spend, and that John Sununu, as usual, either doesn’t know what he’s talking about or is lying through his teeth about there not being one. Take your choice!
(Cross-posted from Correntewire.com.)
Very true, Joe.
There are other ways to do it.
http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf
Based on standard monetary economic modeling methods, the Chicago Plan for Monetary Reform would result in dramatic reduction of both public and private debt, an end to potential bank runs(TBTF) and major reduction in the excesse.s of natural business cycles, plus making possible the achieving of greater economic activity.
That WE owe $16 Trillion in public debt is acceptable without blame if we can pay it back with debt-free money when it comes due. It would be just the same as if it had been issued debt-free in the original.
The way to get the Chicago Plan power back to the people is laid out in the Kucinich Bill.
It’s a better choice than the Sununu plan.
Thanks, Joebhed. I’ve got to get into the Chicago Plan. thanks for the link.
Hey Joe,
It’s also advisable to remember that Sununu is showing himself to be more and more of an idiot with each interview.
I read on the intertubes last month that the wealthiest Americans have stashed over 21 trillion dollars in overseas accounts, oh wait.
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Is this really helpful?
Whatever the merits of debt seigniorage as a way to defang the hostage threat the next time the Rs threaten to block a rise in the debt ceiling, it seems really out of place as a solution when we’re talking about the national debt itself, outside the context of R hostage crises. Why shouldn’t our proposed plan on paying off the debt be that we increase taxes on the rich, if only to go back to pre-Bush tax cuts for the rich levels?
Debt seigniorage is very easily attacked as a dodgy gimmick. As such, it’s fine for when it’s reasonable to set a thief to catch a thief and fight fire with fire, when the Rs pull a dodgy gimmick like blocking a debt ceiling rise, and we need a counter-scheme to set things right. In that context, the dodginess of our response is actually a plus, it emphasizes the dodginess of the aggression, blocking the rise in the debt ceiling, that we are being forced to respond to with all means necessary.
But when we’re out from under any sort of fake debt crisis, then our side both needs to propose answers that are achingly straightforward and honest, and has no reason to do otherwise and appeal to any sort of gimmick. We are in deficit trouble for one reason and one reason only, the rich got their employees, Dubya and cohorts, to give them massive unbudgeted tax cuts at a time when they also started an unbudgeted war of choice (and a bad choice at that). The way out of the crunch is to make the rich once again pay their fair share of taxes, plus all the back taxes they cheated the rest of us out of as a result of the Dubya reign of fiscal terror.
We all need to pay our just debts, and we all need to carry our share of common burdens. The rich owe the rest of us for the misdeeds of their paid office-holders, and what they saved as a result of the Bush tax cuts are all ill-gotten gains that simple justice demands be repaid, with interest.
The debt-ceiling is unnecessary buffoonery provided to appease former R-types.
It should be abolished as it is in most advanced economies.
The government has always had its own limitation on deficit spending via money-issuance, a restriction that has been around since day-1-USA.
We were $6 million in debt before we ‘coined’ our first nickel.
The government should have the ability to issue money for commerce without issuing any debt.
If there’s any inflation, then it has been badly done and you need to change the government.
Glen, the problem with your reply is that you assume that deficits are bad and need to be eliminated. That’s flat out not true. When the Treasury spends more than it takes in in taxes, that grows net financial assets in the private sector. That’s good, not bad. Also, in the case of the US, a nation whose imports exceed it exports by 4% of GDP, the private sector cannot collectively save, unless the Government sector’s deficit is at least 4%. And if you want the private sector to repair the tremendous losses it suffered in the crash of 2008 and it’s aftermath, a savings rate at 6% of GDP is what’s needed. That implies that the Government sector’s deficit should be greater than 10%, and perhaps the Federal deficit should be greater than that depending of whether the State and local Governments are now running surpluses.
Anyway, an argument for higher, not lower deficits is right here, and is based on what the sectoral financial balances model tells us. Please read it, and then consider: Would you rather have the Government putting money into your pocket, or taking it out? If taking it out is your preference, then you can have the government run surpluses; but if you want an expanding pie of financial assets, then unless exports exceed imports you must have the government run a deficit.
The platinum coin has to be the most ridiculous idea I might have ever heard. This ‘solution’ is rearranging deck chairs on the Titanic. It does nothing to address the current deficits we run annually now. Your ‘solution’ is basically to turn our currency into monopoly money with a photocopier endlessly spitting out $500 bills. We’ll need a lot of ink, because it will take a wheel barrel full of our bills to buy a loaf of bread. See Zimbabwe for the end result of this fiscal plan.
Hi Chris,
Bill Mitchell has a fantastic piece on his site entitled “Zimbabwe for Hyperventilators 101”. I suggest you look into it :).
http://bilbo.economicoutlook.net/blog/?p=3773
You are incorrect, Chris. Zimbabwe destroyed a huge percentage of their productive capacity, you can’t compare them to us. And where do you think money comes from to begin with? Where you would get the dollars to pay taxes if the govt hadn’t created them first? Do you realize that your income is someone else’s spending, that someone else must spend more than they earn in order for you to earn more than you spend, that the govt deficit = private sector surplus, to the penny? The converse is true too, for the govt to run a surplus, means the private sector must run a deficit. Taxes don’t ‘fund’ the govt, govt’s not truly ‘in debt’. Its liabilities are the publics assets.
There can be absolutely no comparison to Zimbabwe. None. Zimbabwe is the result of farms taken from the original owners forcibly and given to Mubage’s friends, who didn’t know how to farm. Zimbabwe as a breadbasket was over. No food produced, and what little was became astronomical in price. Hence, inflation at 50% per month, which is the real definition of hyperinflation, btw.
Your comment shows the hysterics that result from not, at least, making an attempt to understand how the monetary system works. If I can trudge through this stuff and make an effort, so can you.
Chris, we don’t have to address the deficits. As I said earlier, deficits are good if we want both have private sector savings and more imports than exports. You only worry about the deficits because you’re worried about the debt. But the coin gets rid of the debt. So, now your problem is inflation. But why do you believe that minting money without debt issuance and paying off the national debt will cause inflation. Do you have some theory in mind that hasn’t been refuted which suggests inflation will result?
Here and here are some arguments against the theory that platinum coin seigniorage will cause inflation. If you really want to address the issue instead of just asserting a mere opinion, then please answer these arguments.
It embarrasses me when progressives put out propaganda with no more intellectual content than the wing nuts. If you can’t write about fiscal and monetary policy with some degree of sophistication don’t put out anything at all. The comments are more intelligent than the article.
Why Freda? What makes you think that? Any backup at all to persuade people to take you seriously?
The coin thing may seem a gimmick but the truth is that some deficit spending is almost always good else where will new government money come from? And raising taxes is ill-advised in a Depression.
It always comes down to government control of the medium of exchange, the dollar as merely a tax credit. Ergo, without the nation/state my neighbors, with the benefit of a level of literacy and education never before seen in human history, will be unable to come up with a private, free-market mechanism to enable exchange, store wealth or maintain accounts. Only some anointed (by whom?) wizard or group of wizards can make the monetary decisions that will have a positive effect on EVERYBODY. Sorry, can’t buy that.
I put up a link to the IMF Research/Working Paper 12/202.
This paper reviews the original progressive economist’s proposal to FDR for reform of the monetary system such that all of the benefits cited can be realized.
That was 1933.
Today we have a proposal by progressive Congressman Dennis Kucinich that does the same thing, only integrating the modern monetary economy structure and methods into the proposed systemic reforms.
http://www.gpo.gov/fdsys/pkg/BILLS-112hr2990ih/pdf/BILLS-112hr2990ih.pdf
This proposal cures for many MMT -WTF?’s.
Resolved – the government DOES fund its payments through taxation and new money creation.
Resolved that government therefore does NOT need to issue debts.
Resolved that government HAS money when it spends.
Resolved that government creates money without debt, see Greenbacks, via ‘former-deficit-balance’ spending.
Resolved that commercial banks operate on a non-reserve basis so that all monies lent are first created by the government.(So-called full-reserve banking)
Resolved that the national money system operates under the public monetary authority.
Resolved, no NEED for platinum or other coin seigniorage for funding the government.
These are progressive proposals based on progressive ideals and methods.
Like I said, we owe the 16 Trillion to whomever is holding the government securities and we can pay them off at any time with real money just as if they were never issued as debts.
It’s already our money system.
We just need to take it back.
Joebhed,
The Kucinich bill may well do all of these things – it is probably the best monetary reform bill introduced in a long time. However, it still has to be passed by an elected US Congress, and signed into law by the President. The platinum coin siegniorage law already exists, and all it takes is for the Secretary of Treasury to take the appropriate action. I would not even require a formal Presidential authorization in the form of an executive order. The Platinum Coin Law gives all authority to the Secretary of the Treasury to do the needful. Retiring the debt using this coinage could also be done unilaterally.
Thanks.
Given the Congress’ authority to create money, any real solution to today’s massive political-economic problems CAUSED by failed monetary system constructs must also be remedied by the Congress.
Yes, the design of the Kucimich Bill is to meet those needs and that purpose.
I am not against the idea of the $Trillion+ Platinum coin proposal as it intends to right those same wrongs.
I am a bit more skeptical that it could actually be pulled off both despite and because of the provisions of HR 2018.
The basic proposal seems to be to surprise the American people with the coinage of some multiple of a $Trillion dollars that we would have in the bank(TGA) on day one (having been secretly designed, minted, transported and deposited).
It would be hard to imaging the tumult as day two dawned.
The HR 2018 authorizations are for numismatic coins that are designed for sale at varying prices.
One might imagine the report of the Comptroller, Treasurer or Auditor in the accounting for the receipt of these novel balances.
Suffice to say that anything except an open proposal, approved by the necessary functionaries, could well result in claims of power-grabbing by the Executive, with the potential for paralyzing both markets and government finance.
What we NEED is a means to accomplish the same end – that of having the required balances in the TGA to achieve our economic goals of full-employment and price stability.
Perhaps the concern I have is best expressed as the ease with which MMT proponents can ignore the real potential benefits of the Kucinich Bill and thus the actions required for it to be passed by that elected Congress and signed by the President.
Thanks.
Joebhed
I don’t know what your criteria are for a “real” solution. The $60 T is pretty real. It would change the political situation overnight. Of course, there would be tumult after it were done. But who cares? It would be a fait accompli and after blasting Obama for a week, people would have to cope with the newreality which would be pay off of 40% of the debt-subject-to-the-limit in a single week. So, debt ceiling fights would be gone; and excuses for not deficit spending based on solvency fears would also be gone.
That means a new politics within a week. It will have been demonstrated to everyone what the sovereign power of a fiat currecy really means.
The Rs would then try to repeal the 1996 law of course. But 1) they might no longer have a majority by then or 2) they might well have to face a presidential veto if they tried. In any event, the filling of the purse would be a fait accompli, and that would be that! No shutting the barn door after the Cow’s gotten out.
Attention would then shift to their new justifications about why they oppose Medicare for All, Jobs programs, FICA tax holidays and State Revenue sharing. This effort of course would be futile, because there are no compelling justifications after they lose “we’re running out of money.” Oh, and there also would be no further justifications for “grand bargains” with these tools of the plutocracy either.
I agree, Joebhed, but the problem is that taking it back is a heavy lift that’s not going to happen for years. Until then, PPCS provides a way for the Executive Branch to change the political climate so progressives can win back lost ground and get to the point where they use the Congress to implement the reforms you’d like to see. Don’t view the coin as a permanent solution. Just view it as a way to get to that solution and provide Medicare for All, full employment, and much else besides along the way.
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