Peterson Thinks We Need Austerity While He Lives It Up!

By Joe Firestone

The Peterson Foundation reacted to the President’s budget document with a report repeating its usual whining about the debt problem, and the need to cut entitlements. Here are quotations from the report and my explanations of why they are ridiculous deficit/debt terrorist nonsense.

While today’s deficits are much lower than those during the financial crisis and recession, over the next ten years debt will remain at historically high levels under the policies outlined in the President’s budget. Over the long term, our debt is on a rising and unsustainable path that harms our economy and threatens our future standard of living.

First, Government deficits that don’t exceed the sum of private sector savings and trade deficits are not bad for the private economy. They are good because they contribute directly to private sector savings and the aggregate demand and subsequent economic growth it can create. It would be nicer for all of if Mr. Peterson learned that lesson before his propaganda turns the US into a third world banana republic; unless, of course, that’s what he’s about.

Second, if the public debt remains at a high level then the private sector savings (net financial assets) denominated in Government debt instruments will also remain at historically high levels. Does Mr. Peterson think that the private sector should go into further debt and have less savings? If so, who else agrees with him?

Third, why is the public debt unsustainable? Is the Government limited in the amount of debt instruments it can issue if it wants to, so long as Congress cooperates and either raises or gets rid of the debt limit?

And fourth, if the debt is really growing so unsustainably, then why doesn’t Peterson, along with his foundation, advocate using High Value Platinum Coin Seigniorage (HVPCS) to pay off all the debt subject to the limit as it falls due? Or alternatively, why doesn’t it advocate that Congress place the Fed within the Treasury Department so that Treasury can just order the Fed to issue reserves to spend the deficit appropriations of Congress?

That is, why is Peterson insisting that entitlements be cut and /or taxes be raised to create austerity for people, when all the Government (including the Congress) needs to do to end “the debt crisis” is to issue the money it needs, using he authority it has under the Constitution, to deficit spend and pay off the outstanding debt instruments as they fall due? Why is Peter G. Peterson, a multi-billionaire, so intent on making the rest of us suffer to solve the debt crisis, when he won’t suffer a bit if we either just continue to issue debt, or alternatively issue the amount needed to pay it off?

Under the President’s budget, interest costs will rise rapidly, totaling a staggering $5.6 trillion over the next 10 years. In fact, by 2020 interest costs will become the federal government’s third largest spending category for the first time.

How does Peterson know that interests costs will rise? It is the Fed and the Treasury working together that control interest rates, not the bond markets. If the Fed wishes, it can drive down short-term interest rates to virtually zero. And the Treasury can make sure it issues only 3 month instruments or less.

In that scenario, US interest costs will fall to nearly zero, no matter how much debt we issue. So, whether interest costs rise is up to the Government which can see to it that they do not.

Also, what if the Treasury decides to have the US Mint issue a High Value Platinum Coin (HVPC) with a face value of $60 Trillion? Then again, interest costs will fall to zero as the outstanding public debt is paid off, and no more debt instruments are issued. So Mr. Peterson, where’s the interest cost “crisis” then? And if this crisis is so serious, then why aren’t you advocating this solution to it, rather than one that will make people even poorer than the crash of 2008 made them?

The President’s budget does not adequately address the fundamental drivers of longer-term debt: high and rising healthcare and retirement costs, and an inefficient tax system. Regrettably, the Administration dropped the proposal to use chained CPI, a reform that would improve the long-term fiscal outlook by both reducing spending and increasing revenues.

First, there is no need for chained CPI because revenues can be increased without taxing or borrowing as just described. But, second, apart from that, if Peterson and his foundation really cared about health care costs and bringing them under control, then he’d be advocating for HR 676, enhanced Medicare for All, with no co-pays and no deductibles.

If we could do as good a job as Canada with medical costs in such a program, we’d soon reduce our health care costs from 18% of GDP to 12% of GDP which would save about $900 billion per year reducing current total costs from $2.8 trillion to $1.9 trillion annually. Since Peterson wants to see everything paid for by the public in some way, rather than relying on the Government’s authority to spend without increasing taxes or cutting spending, passing Medicare for All would go right to the private sector’s bottom line, putting that $900 billion per year into people’s pockets rather than into the health insurance and provider, and pharmaceutical industries.

Resolving America’s long-term fiscal problem is critical to ensuring economic opportunity and prosperity for future generations. Because of the absence of policy proposals to address the structural mismatch between federal revenues and spending, long-term debt would continue to grow unsustainably under this budget.

I’ve already pointed out that a) the debt isn’t unsustainable; and b) if we wanted to pay it off the Government could do so over time at will. So, the “structural mismatch” Peterson sees exists only because the Congress and the Government, more generally, chooses not to rectify the “mismatch” by using its authority to issue reserves without issuing debt instruments.

In addition, however, Peterson’s long-term fiscal problem is a figment of his lack of imagination because he refuses to suggest solutions that would be easy for Congress to enact because they would have broad popular support. But, instead, he insists on advocating solutions like chained CPI and Medicare/Medicaid cuts which people find very hard to swallow.

If there is a long-term fiscal problem, it is a fiscal policy problem which is political at its root. Our politicians refuse to enact fiscal policies that will close the output gap and employ everyone who wants to work. They refuse to pass legislation that will make full use of the capabilities and motivation of all the American people.

Under the President’s budget, debt is projected to be at historically high levels.

— Over the next 10 years, debt held by the public is projected to increase by $6.1 trillion, from

— $12.9 trillion today to $19.0 trillion in 2024.
As a share of GDP, debt is projected to be 75 percent in 2015–higher than it has been in any year since 1950, shortly after the end of WWII.

Well, that’s true, according to the projections in his budget. But, so what? That’s not the real issue. The real issue is whether his projections can’t easily be avoided if he and the Congress use the full fiscal authority they have. As I’ve argued, those debt projections are neither a problem, nor does the United States have to keep issuing debt along with its deficit spending. So, there’s really no debt problem for the Government, is there?

Also, the statement above illustrates the fundamental dishonesty of the propaganda continually released by the “think tanks” and lobby groups Peterson and his allies fund. The report does point out correctly that the President’s budget projects the debt level at 75% of GDP in 2015, but why does it fail to highlight that it also projects that the debt as a percent of GDP will decrease to 69% of GDP in 2024?

Is it hoping that the mass media people who summarize its report won’t read it carefully and will just miss the 2024 projection? In any case, neither the level of debt nor the debt/GDP ratio affect the capability of the US Government to continue to deficit spend, for the reasons I’ve offered earlier.

One of the concerns about the rising level of federal debt is the financial pressure that it places on important programs in the budget. As interest payments and spending on mandatory programs (such as Social Security, Medicare, Medicaid and other health programs) grow under the President’s budget, other essential federal activities are placed at increased risk of being crowded out.

— Over the next 10 years, spending on interest payments and mandatory programs will climb from 70 percent of total spending in 2015 to 79 percent in 2024. Spending on everything else — including national defense, homeland security, food and drug safety programs, national parks, affordable housing, and the National Institutes of Health — will drop from 30 percent of spending in 2015 to 21 percent in 2024.

Well, this problem is easily solved, though perhaps not in the way Peterson would like. Specifically, the Treasury could just stop issuing debt, and use platinum coins to command the Fed’s authority to create reserves. It could then use those reserves to pay down existing public debt and also pay for entitlement spending and any of the other spending for things that would accomplish public purposes. Then the percent spent on interest costs and on mandatory programs would decrease and the percent spent on whatever else we needed would rise. Of course, Peterson would never favor such a solution since if he did, he and his friends wouldn’t have any safe harbor Treasury debt instruments to buy anymore.

. . . In fact, the Administration dropped its proposal to use chained CPI, which is a more accurate measure of inflation for indexing Social Security and taxes that was included in last year’s budget and would improve the long-term fiscal outlook by both reducing spending and increasing revenues. Solving our long-term fiscal problems involves more than any single proposal, but chained CPI would have notable long-term structural impact. For example, its impact within Social Security alone would be to eliminate a significant portion (approximately 20%) of the imbalance and strengthen the program’s financial health.

This is really both dishonest and disgusting. The Peterson Foundation knows very well that the chained CPI doesn’t reflect the actual cost of living seniors experience while trying to maintain a deent quality of life, because it doesn’t reflect increasing medical costs as does the CPI-E. But, of course, Peterson would never advocate or even acknowledge the policy option of a really fair CPI for the elderly because he’s interested in cutting what is spent on them, not on increasing their pensions. That is part of the dishonesty in the Peterson formulations.

As for removing his “structural imbalance,” there isn’t any, because entitlements need not be funded, as he assumes, by taxes, payroll contributions, or debt instruments. They can be funded by using either seigniorage, or reserves creation by Treasury (with new Congressional legislation allowing it). Peterson also won’t acknowledge this, which is the other part of his dishonesty.

Now here comes the disgusting part. Peterson, again, is a multi-billionaire, but instead of advocating solutions to the problems he sees that will require seniors and most of the American population to experience hardship, he prefers to devote many hundreds of millions of his fortune to setting up a political network that is going after the bread-and-butter of seniors and others needing a social safety net to avoid abject poverty and suffering. What kind of person spends his time and ample funds for nearly 40 years doing that? I leave it to the reader to make that judgment?

The Congressional Budget Office (CBO) publishes a long-term fiscal outlook every year. In its latest analysis, CBO projected that, within 25 years, federal debt held by the public would rise under current law to 100 percent of GDP, and, under an alternate scenario, would rise to 190% of GDP. The alternative fiscal scenario that makes less optimistic assumptions about future budget policy and incorporates the negative effects of debt on the economy.

CBOs projections are a joke. The CBO emperor is naked. Did CBO not project surpluses as far as the eye could see in the last days of the Clinton Administration? Did they have an inkling of the Crash of 2008? Did they project the surpluses that would occur during the last four years of the Clinton Administration? Have they projected the rapidity with which the Obama deficits would fall? When do they ever project a future that holds even two or three years out? And Peterson wants us to pay attention to 25 year projections, provided current law remains the same?

Of course, current law won’t remain the same over 25 years, so their projections are pure irrelevant fantasy; not even good science fiction. But even if current law did remain in place, that law allows the Treasury Secretary to order the US Mint to create and deposit High Value Platinum Coins at the Fed, allowing the US to cease issuing debt. If some future President does that an alternative scenario would become reality that is perfectly consistent with current law, if not current practice. So, the bottom line here is that CBO projections aren’t valid even under current law, since they require the Executive to either stupidly or with malice aforethought to continue to follow current practice in the face of an unnecessary and therefore faux, fiscal crisis.

Lastly, it really doesn’t matter for fiscal solvency whether Federal debt rises to 100% of GDP or to 190% of GDP. In either case, the capability of the Federal Government to continue to deficit spend would be unaffected, unless the high level of debt scares off a Congress that is incapable of understanding the nature of sovereign fiat currency systems like the US. And even in that case, the President could counter Congress’s reluctance by using HVPCS to pay down that debt to whatever ratio made Congress feel comfortable.

In addition to many others, CBO has articulated the risks that high levels of debt pose, stating “the high and rising amount of debt… would have significant negative consequences for both the economy and the federal budget.” In a recent report, CBO outlined four of these consequences:

“–Increased borrowing by the federal government would eventually reduce private investment in productive capital because the portion of total savings used to buy government securities would not be available to finance private investment. The result would be a smaller stock of capital and lower output and income in the long run…”

How does buying a Government debt instrument reduce savings or make money unavailable for private investment? Isn’t a debt instrument essentially an interest bearing savings account? And if a holder of such an instrument needs cash for a private investment, can’t they easily sell it at auction, or borrow against that safest of all investments at any bank?

There is nothing to this argument, it is just nonsense that incorrectly assumes that savings in a checking account at a bank are more capable of being turned into investments than financial assets held in Government bonds. Where is the empirical evidence for a claim such as this. Can CBO prove it, or are they just blowing smoke?

“–Federal spending on interest payments would rise, thus requiring more substantial changes in tax and spending policies to achieve any chosen targets for budget deficits and debt.”

Again, this ignores that the Fed and the Treasury can control interest rates and prevent interest costs from causing a crisis by reducing them as much as these agencies desire. In addition, it ignores that seigniorage can be used to get rid of interest entirely. Still further, it ignores that the Government of the United States can pay any interest bill no matter how high it is with high – powered money that it alone can issue. So, this conclusion is wrong on three counts.

“–The government would have less flexibility to use tax and spending policies to respond to unexpected challenges, such as economic downturns or wars.”

Of course, for reasons already stated again and again, there is nothing to this. High debt levels do not affect the capablity of the government to tax, or to spend, or to use seigniorage for that matter, as long a nation has a non-convertible fiat currency, a floating exchange rate, and no debts in a foreign currency.

“–The risk of a fiscal crisis–in which investors demanded very high interest rates to finance the government’s borrowing needs–would increase.”

The Government doesn’t need to borrow, and it can also control interest rates, so this conclusion is more nonsense. The only way it can happen is if Government officials continue to cedit myth and fantasy rather than reality.

As a share of the economy, our national debt is already higher than at any time since 1950, shortly after the end of World War II. This level of debt leaves our nation poorly prepared to enter an era in which demographic changes pose enormous budgetary challenges for the federal government. The Peter G. Peterson Foundation’s Fiscal Confidence Index recently found that a significant majority of voters — 83 percent — agree that policymakers should spend more time addressing the nation’s debt.

Again, the level of debt and/or the level of the debt to GDP ratio have no effect on our Government’s capability to deficit spend. The Government can afford to do whatever it needs to accommodate demographic changes just as it could afford whatever needed to be done during World War II and after 1950.

In addition, the results of Peterson’s poll don’t say anything about whether or not the Government’s capability to spend is affected by debt. Their significance is much more that they represent the outcome of Mr. Peterson’s nearly 40 year campaign to manipulate the public into believing that the public debt matters, and that the Government must tax or borrow in order to spend. That outcome can be dissipated by a President willing to Mint HVPCs and use the resulting reserves in a very short time, since it would soon become apparent that the Government isn’t limited by the constraints that Mr. Peterson says keeps it in chains. The US Government was born free and has the capability to divest itself of its fiscal chains whenever it wants to do so.

Stabilizing the debt over the long term is a key part of any sound fiscal policy and viable economic strategy for America. Unfortunately, this budget represents a missed opportunity to address these challenges. Until we confront these budgetary realities and close the structural imbalance between spending and revenues, America’s economy is at risk. We need to resolve America’s long-term fiscal challenges in order to protect critically important health and retirement programs, invest in our own future, and ensure economic growth and opportunity for future generations.

The debt doesn’t matter as a factor affecting financial solvency, and no structural imbalance between revenues and taxes exists. What does exist is a political problem created by propagandists like Peterson and his allies.

What also exists is a structural imbalance in economic and political power that currently causes net financial assets to flow to the top of the economic and political hierarchies, rather than being more equally distributed among the people. That’s the imbalance we need to do something about, and that is the real long-term challenge to fiscal policy.

If we correct that imbalance then we will be able to legislate fiscal policies that produce full employment and achieve a wide range of public purposes, including the greater degree of economic equality that can sustain democracy, and also the health and retirement programs, investments in our own future, and economic growth and opportunity for future generations, of which Peterson’s report speaks. But if we focus on Peterson’s faux problem and implement the policies that he and his allies advocate, then all that awaits us is austerity, periodic deeper and deeper recessions, and eventually a war of all against all, accompanied by lives that will be “nasty, brutish and short.”

23 responses to “Peterson Thinks We Need Austerity While He Lives It Up!

  1. You forget to mention that if the debt was so high in 1950, how did it get reduced and yet we had a growing economy, we were bailing out Europe and Japan at the same time, building the interstate highway system, sending people to the moon, fighting a war in Viet Nam, adding Medicare and Medicaid, and reducing the level of poverty.

    Shouldn’t Peterson be studying all those things we accomplished with a smaller economy than we have today? If we did it once before, why can’t we do it again?

    • Joe Firestone

      He should. But, I didn’t forget about what we did n 1950 to decrease the debt to GDP ratio until it hit its low point in the 1970s. I just didn’t want to make that argument, because I didn’t want t reinforce the idea that low deficits are good.

      • Steven Greenberg

        So what did we do? We had a 90% marginal tax rate. We took the money out of the hands of the wealthy and put it to work? Some states actually had a wealth tax, so that even if you managed to hide the income, the increase in net worth got taxed.

        I maintain that rather than letting the excess income of the wealthy take money out of circulation by their buying Treasury securities to make it look like the government is going into debt, we should just tax away that money and spend it on economically useful things that put people to work. This way, there isn’t the appearance of debt.

        Why do the wealthy the favor of paying them interest when they lend the money to the government, money that they shouldn’t even have?

        This is one kind of tax that would actually put more money into circulation than there would be if the tax did not exist. Plus there wouldn’t be a big overhang of unused liquidity to cause inflation when the economy rebounded, if it ever did manage to rebound by itself.

        There also would be much less free roaming capital that can flood into smaller nations and wreak havoc on their economies.

        • Auburn Parks

          The “wealthy” an amorphous term that undefined, do not own that many T-bonds. Its much more appropriate to say that paying interest on T-bonds is a subsidy to foreign Govts how export to us, Govt trust funds, the Fed and pension funds. These categories own like 75% of all the T-bonds.

          • Steven Greenberg

            Clarification worth noting, thanks.

            The wealthy – we can discuss the definition later – are probably more responsible for the hot money shifting from country to country looking for the highest rate of return than they are responsible for T-bond investments. This hot money causes havoc for smaller economies. If we don’t help to put some brakes on this, these countries probably need to impose capital flow controls of their own.

            What would China, for instance, do with all their dollar reserves if we didn’t have treasury securities for them to earn interest from? What else could they do but leave it as non-interest bearing reserves at the FED?

          • Joe Firestone

            25% of T bonds represents an enormous amount of money; but yes the lion’s share of the debt not owed to other Government agencies s held by foreign nations.

        • Joe Firestone

          1950 is different from today. One big difference is that we didn’t have a non-convertible fiat currency with a floating exchange rate, then. Our currency was pegged to gold for purposes of international trade, and foreign nations holding could demand gold in exchange for dollar credits. So that constrained us in ways we are not constrained today.

          Today we can deficit spend freely without issuing debt if we wish, ad I agree we ought not pay interest to private parties for money the Government created in the first place. We should simply issue reserves to cover deficit spending without debt. But getting back to the point, today we can fund those areas of the private sector that have had wealth extracted from them. We can provide renewed opportunity for everyone who seeks it. We can reduce inequality. And we can end inequality. And we don’t have to worry about taxing anyone until we see our efforts constrained by inflation. At that point it will be easier to politically justify destroying excessive wealth this inflating he economy.

  2. sunflowerbio

    Great post, Joe. One comment on the CBO. The CBO is a creature of Congress. Since it answers to Congress, there’s little wonder that it makes projections in harmony with Peterson’s and the austerians’ views. These are the views of the vast majority, if not the entirety, of Congress. This leads back to your post of yesterday about the importance of changing the makeup of Congress. That’s why I proposed offering a free MMT seminar to all Congress people and especially their aids who do a lot of the research work and writing on bills. MMT ers, Joe has said he could and is willing to offer such a seminar, and I have offered to provide some seed money and a monthly contribution. How about it, are your willing to try to change the outlook of Congress through education, or do you just want to wait for the revolution and hope for the best?

    • Joe Firestone

      CBO is more than a creature of Congress. Since the 1970s it has reinforced the deficit terrorist outlook on the budget. That was Alice Rivlin’s contribution. Early on she reflected the Peterson perspective and made common cause with him. She has been a particularly valuable ally, because she was a Democrat, a harbinger of the New Democrats, who have dome so much to leave us the legacy of inequality we have now.

    • Joe Firestone

      Sun, my e-mail address is [email protected]. An effort is starting here in the DC area to get into Congress to give some briefings. Don’t know if we’ll need your help. But, at least we can coordinate about it.

  3. This article should be posted on every Progressive, Liberal, Democrat, Republican, Neoliberal, Green Party, etc. website in the Internet World. It is the quintessential rebuttal to all the debt and deficit misinformation, indeed, cynical lies of Right Wing ideologues like Pete G. Peterson and the serfs he commands at too many Non-Think Tank Institutions in America.

    • Joe Firestone

      Thanks, Robert. But, as you know it’s just standard MMT, at least as I see it.

  4. Ah….Leviathan, great reference there, and disturbingly I think some may really want such a world.
    But yup, raise taxes on most of us (just not guys like him) and cut social spending, but never gov that benefits the wealthy.
    Honestly, the populace paying heavy taxes while the top pays little or nothing, and a state there to serve them while we fight on, feels like we’re slipping back to the Monarch days!

    • Joe Firestone

      Yes, I think what they want is no less than the defeat of the democracy making the world safe for aristocracy and the rule of inherited wealth again. We almost had them beat in the immediate aftermath of WW II, but the aristicrat wannbes have come back since then, gradually buying their way back into power. The people ignored this as it was happening and now we are behind the 8-ball.

      What we always have to keep in mind is that the impulse for an aristocracy of wealth is always there, because there are so many self-made men who want to pass on their winnings to their children as a matter of right. It is a perfectly understandable impulse, but it also is one that is dangerous to the stability of democracy.

      • It does appear that way.
        That is something I’ve toiled with myself…is it “wrong” to hold on to wealth? After all, isn’t the point of hard work and managing to scrape by, and save, and end your life with make the next generation(s) of a family better off/life a little easier? Of course there are issues, and I think it could dig deeper than these issues we speak of, like that affluenza nonsense, in a way I get it…seems like the wealthy have become so buffered and dominated by their own world that is almost a natural result, they feel they are immune to our laws!

        Perhaps it’s at a certain point when wealth should be given back to the society where it came from? Especially these days when so much wealth seems to be achieved by driving us into debt!

  5. Joe, the following needs clarification:
    You said “First, Government deficits that don’t exceed the sum of private sector savings and trade deficits are not bad for the private economy.”
    By definition government deficits CANNOT exceed the sum of private sector savings and trade deficits. I am a firm believer in MMT but I think most MMTers belief that bigger govt deficits are the cure for slack in the economy (and unemployment) is not necessarily correct. Take a full payroll tax holiday. While on the surface one would think a cut in taxes will lead to a bigger deficit, however, the increase in aggregate demand might result in an increase in business investment to fill that demand. And bigger paychecks and more secure jobs from the increase in economic activity may lead to more household investment. Both these could lead to more tax revenue then the loss in revenue from the original tax cut (or at least enough so the debt ratio stabilizes or falls). I think the 50s and 60s are a good example of this.

    • I’ve thought the same thing: Wouldn’t a JG (more people paying earning $ thus paying taxes) plus the agg demand boosts from it and payroll tax cuts lead to more revenue, even if taxes are lowered? I think maybe we take MMT to mean we WANT deficits, when more it seems to be that deficits are not bad, and trying to reduce them via austerity is bad.
      Because I have read that deficits too large can be inflationary, esp nearing full employment, so I’d imagine increasing revenue/decreasing deficits could be a good thing, as long as it happens through more people earning more money, and not austerity.

  6. Joe Firestone

    Markg, there’s much to be said for your comment. But while it’s true that the flow of Government deficits cannot exceed the sum of the flows of private sector and current account transactions. It’s also true that at any point in time Government deficit spending can either exceed or fall short of these flows depending on Government policy. So, if the flow of Government deficits is increased, then that will cause the sum of the private and foreign sector surpluses, taken together to increase. If the increase in private sector leads to enough of an increase in aggregate demand than full employment will occur, much faster if the Government itself provides that employment through a job guarantee program. And when that occurs and the private sector hires away all the JG employees it can absorb in order to close the output gap, then demand-pull inflation will occur if Government deficit spending is increased even further.

    That said this:

    “most MMTers belief that bigger govt deficits are the cure for slack in the economy (and unemployment) is not necessarily correct”

    is right. Increased Government deficit spending or increased deficits due to tax cuts carry different fiscal multipliers, depending on the type of spending and the type of tax cuts involved. Deficit spending resulting from tax cuts to the wealthy is good for only $.30 on the Government dollar because the dollars contributed to the private sector escape the private through leakages due to savings and foreign trade leakages.

  7. “The Peter G. Peterson Foundation’s Fiscal Confidence Index recently found that a significant majority of voters — 83 percent — agree that policymakers should spend more time addressing the nation’s debt.”

    The statement is a testament to the outstanding success of Petersen’s relentless, multi-decade propaganda campaign, which is aimed at the common people, the majority of voters. It’s a disinformation campaign to “educate” the people about the alleged dangers of government debt.

    • Steven Greenberg

      I wonder how many high level (and low level) politicians know this is a bunch of baloney and how many have been bamboozled by this propaganda campaign. Knowing which ones are which might be important in figuring out how to approach them.

      The fact that President Obama seems to have cleansed his list of advisers of any that tried to educate him, still leaves me wondering about him.

      The average non-academic who reads blogs like this one probably have more understanding of this stuff than the people who are in charge of making the decisions on how to run the country.