All Life Is Problem Solving

Joe Firestone’s Blog on Knowledge and Knowledge Management

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The National Debt Is Congress’s Fault!

December 15th, 2010 · No Comments

I’m sick and tired of hearing progressive icons like Bernie Sanders, Keith Olbermann, Ed Schultz, and many, many others, talking about the evil of leaving an enormous national debt, now at $13 Trillion plus to our Grandchildren. And I’m especially tired of hearing Congresspeople and Senators complaining about this. The reason why I’m tried of hearing it is that it is Congress’s fault that we have a national debt at this point in our history. And also Congress can largely get rid of this debt over a 10 year period any time it wants to.

The national debt exists today because when the nation went off the Gold Standard in 1971 and adopted its fiat currency system, Congress did not repeal its mandate, very appropriate when our currency was convertible to Gold on demand, in least in theory, requiring that the Government back all its deficit spending with already existing borrowed dollars whose convertibility was covered by our holdings of Gold. This Congressional mandate to borrow funds by issuing debt instruments, is what has caused the national debt to persist. Had Congress repealed it when President Nixon took the country off the Gold Standard, and had we ceased to issue debt at that time, then the Government would have re-paid all of our 1971 debts as they came due, and our national debt today would be zero and our debt-to-GDP would now be at 0%.

The Congressional mandate to issue debt when the Government deficit spends has no useful function today, and the interest income it provides for mostly wealthy investors and foreign Governments who buy Treasury Securities is simply a form of welfare for the rich. Any positive effects it produces are vastly outweighed by the bad effects of having to cope politically and economically with the concerns of people who believe that the increases in the debt, and the debt-to-GDP ratio give us a fiscal sustainability problem whose priority outweighs everything else. The national debt is a political problem. It magnifies the political strength of conservatives and weakens progressives because it makes people afraid to deficit spend since then the country will be “going into debt.”

Congress needs to repeal the mandate forcing the Government to issue debt instruments on a dollar for dollar basis with deficit spending, right now. If it does so it will:

— cease to provide welfare payments mainly for the rich and foreign nations,
— gradually pay off the $13 plus Trillion Federal debt entirely,
— have rapidly decreasing Federal interest costs over the next decade until they entirely disappear,
— have no further need to take difficult votes about increasing the Federal debt limit,
— have no further need to worry about borrowing money from the Chinese, or the oil rich states, or the Japanese, that our grandchildren will one day have to re-pay,
— have no further need to worry about what the bond markets think or are going to do, or
— to worry about our debt or deficit spending being “fiscally unsustainable” when we want the Government to spend money to sustain the unemployed, help us end unemployment altogether, fulfill American needs for new infrastructure, develop a re-invented first class educational system, and provide Medicare for All, among our other needs.

If Congress refuses to remove its requirement to issue debt, when it can easily do so at any time, then it’s habitual complaints about its size should cease at once and no longer pollute our political debates. The United States has many very real problems which it can help to address with Government programs. The deficit spending required to solve our problems shouldn’t be constrained by the non-existent problem of that national debt, or the fantasy of stabilizing a debt-to-GDP ratio that also represents a non-existent problem. To make sure that it’s not, Congress needs to repeal its debt issuance mandate now before the American people learn the truth that Congress, itself, is responsible for all the angst we hear about the deficit, the debt, and the debt-to-GDP ratio.

(Cross-posted at FireDogLake and Fiscal Sustainability).

Tags: Politics