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Overcoming my cognitive dissonance of deficits and debt

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  • Liberal Democrat
    Democrat
    Colorado Springs, CO
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    For all my adult life while working and even into my retirement years I was a critic of federal deficits and our public debt. I looked at that big debt number rise every year...every single year.  Always going up...never down. Somewhere around late 1981 it surpassed the $1 trillion mark. I made note of the fact that Ronald Reagan tripled the debt and George W. Bush doubled it.  I waved those statistics in the face of my Republican friends.

    I worried about the debt when President Obama took office, and although I recognized the necessity of having to run up even more debt to avoid a depression, I still worried about it.  It's debt that my generation was passing on to my children.  Would my retirement savings be eaten up by double dip inflation that always has been "just around the corner?"  I recalled the double digit inflation of the late 1970s and early 1980s. I don't want that again.

    Then one day Carlitos Bam Bam wrote a forum post about Modern Monetary Theory that turned my vision of debt upside down. Well, I'll admit it wasn't an "a ha moment."  I was slow to digest what he was saying.  He wrote numerous posts with good links to Warren Mosler and others trying to educate us.  Sometimes his economic jargon left my head spinning. I went along in part, but still had doubts.  I reverted to reading Paul Krugmann and Robert Reich, my favorite economists.  I took comfort in the fact that as far as the short term need for more stimulus spending, Mosler, Reich and Krugmann were all on the same page.  They diverged some in their longer term views.

    I still have questions and some lingering doubt about how it would or could work out in the global context with so many politicians (Tea Partiers) seeking to politicize the great debt debate. And as far as taxation goes, I'm not quite ready to cut taxes further except to fix the inequities in the tax code that disproportionately favor the rich. However, I am now very much on board with our current levels of debt and forecasts of rising debt...and the need for even larger deficit spending to get our economy back to support higher employment. I now read MMT stuff by Warren Mosler, Cullen Roche and Bill Mitchell...as well as the posts by Carlitos.

    I have looked at our historical debt 100 years back and as CBB noted, whenever we have made an effort to pay down the debt, our economy went into a slump, either a recession or in the case of the late 1920s, the Great Depression. The mid 1920s to the year 1930 was especially notworthy because we reduced the public debt in every one of those years, an unprecedented period in our economic history.  And predictably, the worst depression in our history followed that "pay back the debt" period.

    I now fully understand and accept what CBB and Mosler are saying...

    I'll leave this discussion with an exarct from one of Warren Mosler's columns in the Huffington Post: Modern Monetary Theory: The Last Progressive Left Standing.

    "And as for the U.S. national debt and all the talk about borrowing from China, MMT recognizes that U.S. Treasury securities are, functionally, nothing more than savings accounts at the Fed, which the Fed in fact happens to call securities accounts. Yes, the trillions of dollars of U.S. national debt is nothing more than that many dollars in savings accounts at the Fed. So when China buys Treasury securities, which we call going into debt to China, all that happens is the dollars they got from selling things to us that went into their checking account at the Fed, get shifted to their savings account at the Fed. And when we pay back China, which happens every month as some of their Treasury securities come due, all the happens is the Fed shifts those dollars (plus interest) from China's savings account back to China's checking account, all on the Fed's books. (note: there are no grandchildren involved in this process!)

    "Confronted with MMT, all mainstream financial arguments for defunding and 'strengthening' Social Security and Medicare utterly fail. All mainstream financial arguments for defunding education utterly fail. All mainstream financial arguments against maintaining desired public infrastructure utterly fail. And unemployment, for all practical purposes can be eliminated in short order."


    Thank you CBB and Warren Mosler.  I've been slow to get there, but I no longer worry about our debt or hyper inflation around the corner. Neither should American middle class workers. I just wish our politicians would get on board, including President Obama. Maybe in his second term.

    Please read Warren Mosler's column in its entirety at the above link if you want to engage me on this topic.  Don't reply with a snide one line sound bite.
  • Strongly Liberal Democrat
    Democrat
    Dallas, TX
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    I have tears in my eyes.

    Thanks Schmidt.

    By the way, I invited Warren to Occupy Dallas about a month ago. He just reconfirmed June 23rd with me again today. So it's definitely on.

    I'm absolutely ecstatic. I can barely contain myself.


  • North Carolina
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    Schmidt-
    One argument the GOP loves to make is that in 2008 tax collections in the U.S. were at their highest point ever.  This of course was due to high payroll taxes, taxes on the sale of property and so on.

    I love reading Krugman (and to a lesser extent, Reich) - but that column by Mosler was an excellent read for a non economist like myself.  Creating jobs generates revenues.  The Bush Tax cuts should be reversed and a modified Torbin tax should be instituted here.
    The GOP and the austerity freaks are ruining this country as indicated by the huge amounts of debt they have run up.  For them to now be concerned with it is the ultimate in hypocritical thinking....

    Best Regards
    Vog
  • Liberal Democrat
    Democrat
    Colorado Springs, CO
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    People come and go on this website. Most all discussions on deficits and debt have been covered here again and again. Here's one that I wrote back in 2012. My views haven't changed and I do not lose any sleep over our country's debt.
  • Liberal
    Independent
    Durham, NH
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    Nor do I!

    It's about time the American people woke up (and that especially includes our politicians) and realized the federal budget has no relationship whatever to their household budget. This fallacy has been hoisted on the general public for years and most people to this day haven't a clue about the truth!
  • Independent
    California
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    Where the hell were all these Tea Party people when George W. Bush took a $500 million-dollar surplus from the Clinton Administration and turned it into a $10 TRILLION DOLLAR DEFICIT!? The Republicans voted to raise the debt ceiling 8 times during the Bush years. Never a peep from any of them. Now they are outraged that someone in the Democrat party wants to raise the debt ceiling. Hypocrites!

    And what's more, they're committing treason by virtue of stupidity. Jihadist everywhere are working feverishly to take advantage of our security systems during this government shutdown, and Republicans are trying valiantly to make us believe it is the Democrats' fault. Do they think we're complete idiots?! Is it a coincident that Ted Cruz looks just like Joe McCarthy? Maybe he's "Tailgunner Joe's" son!
  • Independent
    Ft.myers, FL
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    garzaman Wrote: Where the hell were all these Tea Party people when George W. Bush took a $500 million-dollar surplus from the Clinton Administration and turned it into a $10 TRILLION DOLLAR DEFICIT!? The Republicans voted to raise the debt ceiling 8 times during the Bush years. Never a peep from any of them. Now they are outraged that someone in the Democrat party wants to raise the debt ceiling. Hypocrites!

    And what's more, they're committing treason by virtue of stupidity. Jihadist everywhere are working feverishly to take advantage of our security systems during this government shutdown, and Republicans are trying valiantly to make us believe it is the Democrats' fault. Do they think we're complete idiots?! Is it a coincident that Ted Cruz looks just like Joe McCarthy? Maybe he's "Tailgunner Joe's" son!
    Guess what? Where did you think this deficit did get from? THE NEVER ENDING PENTAGON SPENDING!!! OUR WARS!!! OUR MEDDLING IN THE WORLD!!! OUR BASES AND MILITARY SPREAD ALL OVER THE WORLD!!! OUR LOVE FOR USELESS PROJECTS LIKE THE F35.
    Our money did not go to make this a better country or a better infrastructure or helping the poor. NO!! OUR HOBBY SEEMS TO BE INVADING OTHER COUNTRIES and HANDING OUT MEDALS TO HERO"S WHO HAD NO BUSSINESS BEING IN ANY SUCH COUNTRY!!!
    In one word, we created our own demise.
  • Liberal Democrat
    Democrat
    Piqua, OH
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    The Republican strategy is simple;1. give to the rich and special interests including corporations 2. Maintain power through deception, misinformation, and manipulating the public ie, pushing their anger, prejudice, and patriotic buttons to perpetuate goal number one. Republicans are a blight on America. They have no loyalty except to their "masters". That's why they've said, "No" to gun control, affordable health care, immigration reform, increasing the minimum wage, extending unemployment benefits, women's rights, medicare, social security, food stamps and education. Our country needs all of these things. All they can offer is "No!" These matters would require dollars... dollars they would be unable to give to their "puppeteers". Now that "Big" money has entered politics, and voter suppression is the rule, we must fight vote by vote to overcome income inequality and the insanity they are thrusting upon us. The ONE PERCENTERS own 37% of this nation's wealth. The Paul Ryan budget will increase taxes by 2 thousand dollars per year on the middle class while the upper class will get tax breaks of almost 100 thousand dollars. We all know how much waste occurred when the government was shut down to deny us affordable health care (25 billion) with repercussions to the economy. They want us to balance the budget on the backs of the elderly, the poor, and the disabled. They don't, won't, can't show any humanity or share. They will keep starting wars to sell their bullets, guns, tanks, helicopters, and planes and keep accusing us of being unpatriotic if we don' go along.





































  • Libertarian
    Darien, CT
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    Bill Clinton had three years of budget surpluses to the point that Wall Street was scared that they were going to run out of debt to sell. Then came "W" who cut taxes and started a war, with The Great Recession as a result. I believe the GOP is going to have the deficit issue cut out from under them if Obama ends his term with a budget balanced or even in surplus in the year 2016 (There is a good chance of it - its not a pipe dream). It will help Hillary remind voters how the last time that happened was when a Clinton was in charge and if the GOP puts up a deficit hawk like Paul Ryan against her, it will make them look stupid as well as mean.
  • Liberal Democrat
    Democrat
    Colorado Springs, CO
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    Unfortunately the "balanced budget" argument has been championed by many Americans, both liberals and conservatives. To the MMTers the argument is bogus. Balancing the budget means you are taking money out of the system through taxation or spending cuts that could otherwise grow the economy and add jobs. The reason we have had such a slow economic recovery is because Republicans in the House have imposed an austerity budget on the President and the country.

    If we do indeed move towards a balanced budget or surplus by 2016 it would spell more economic sluggishness or another recession. It is the worst thing that could happen to our country because all the spending cuts are hurting those needing help the most. And those at the top of the wealth pyramid would be untouched as usual.
  • Strongly Liberal Democrat
    Democrat
    Dallas, TX
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    Remember, the Democrats put "Pay-go" in effect on a party line vote. I think the Republicans just wanted more.

    Elizabeth Warren keeps sabotaging her own bills to help students by insisting on tax increases. Same with whatever Bernie Sanders proposes. It all has to be paid for by rich people who employ a lot of people to prevent that from ever happening.

    Should taxes go up on rich people? That's an issue completely separate from allowing old student borrowers to refinance at the rates available to new borrowers, and as it is a rule change, and not a fiscal expenditure item, it is not even subject to "Pay-go", but E. Warren sees it differently.

    Might make for good political theater, i.e. Republicans voting against students and for millionaires, but the help does not arrive to our people. Obama has said repeatedly that good policies make good politics. Drop the charade. As a friend of mine said, E. Warren's heart might be in the right place, but her head's in the wrong currency.
  • Strongly Liberal Democrat
    Democrat
    Dallas, TX
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    Mosler and Kelton on why elites have not accepted MMT:

    http://www.youtube.com/watch?v=UfW5oI1DvvQ