Yes, I know Peter Peterson is a major source of employment in Washington and that the Washington Post editors and many pundits would have to look for substantive issues to talk about if they couldn't whine about the debt, but really it is time for these folks to grow up.
Yes, wouldn't it be nice if people actually understood the issues involved with government debt? The MSM are too stupid and/or corrupt to explain any of this in a coherent way, and most Americans don't much want to learn about it anyway. "The best lack all conviction, while the worst Are full of passionate intensity."
I challenge Dean Baker to drop the economic blather and tell us all in plain english why deficit spending does not destroy democracy.
Tell us why the constitution assigned budget responsibility to those with the shortest elected term in office. (Hint: So voters could vote out big spenders who raised taxes to pay for expenditures under a balanced budget).
Bond issues that voters approve strengthen voter participation and pay for projects larger than out of pocket tax receipts can cover.
Backroom deals paid for by deficit spending and crony capitalist subsidies destroy democracy, Tell us Mr. Baker why you advocate destruction of US democracy to further fill the one percent's secret bank accounts.
Did you actually read the article? Do you have a comprehension problem? Baker went into some detail citing examples of different ways to pay for things that are necessary to keep our nation in first-world status. There was NO "economic blather."
Thank you for posting the obvious situation that is at the very core of the global economic meltdown: debt. The issue of excessive, runaway debt is given a "pass" or deemed as irrelevant by the vast majority on the left.
It is fascinating to me no one seems all that worried about the systematically dangerous levels of global debt supporting essentially bankrupt governments, banks and consumers. Global debt stood at $142 trillion at the end of 2007, just prior to a worldwide financial meltdown, caused by too much bad debt in the financial system.
To “fix” this problem, central bankers around the globe ramped up their electronic printing presses to hyper-drive and created another $57 trillion of debt by mid-2014. They haven’t taken their foot off the gas since. Today, global debt most certainly exceeds $225 trillion and has surpassed 300% of global GDP.
Global debt issuance reached a record $6.6 trillion in 2016, with corporations accounting for $3.6 trillion – most of which was used to buy back their stock at all-time highs. What could possibly go wrong? The level of normalcy bias amongst financial “experts”, the intelligentsia, and the common man is breathtaking to behold. We are in the midst of the mother of all bubbles, never witnessed in the history of mankind, and we pretend everything is normal, with no consequences for our reckless disregard for honesty, rational thinking, or simple math.
Source: Jim Quinn, The Burning Platform
There are millions of examples from individual debt to national debt that lay out the end result of excessive, runaway debt. I will provide just three national-level examples:
At what point in time did plain, old-fashioned common sense get thrown overboard?
Note: While the quote I posted above is by an individual on the opposite side of politics than I am, I found this debt summation to be informative and useful. I can learn something from just about everyone ... including my political foes.
Do you understand that your 3 examples do not have their own currency?
Are you saying that being able to print your own money, without having anything to back it up with other than a "promise to repay," doesn't have ass-biting consequences?
Let's take the United States' debt as just one example. Raising interest rates by only 1% increases the annual service cost (interest payments) on the current debt by $190+ billion dollars. That is more than the 2016 annual budgets of the following federal agencies COMBINED:
- Dept. of Commerce
- Dept. of Education
- Dept. of Energy
- Dept. of Homeland Security
- Dept. of Justice
Where do the interest payments on the national debt come from? The taxpayers, of course. It is money being taken out of the national economy that doesn't produce a product or provide a service. It is a direct transfer of dollars from the working class (the largest number of taxpayers) to the lenders ... most of which are lead by the global elite.
A nation being able to print it's own currency is a temporary solution, at best. Intimately, it merely delays the inevitable.
Just think, this post is coming from a socialist ... not a neocon.
You seem to think that borrowing is often (usually?) a bad idea. I think borrowing is often good, especially when interest rates are low. I say: borrow to help people with higher education, borrow to keep our infrastructure in good shape, borrow to invest in research, and borrow to give every adult a guaranteed basic income and paid work if that person wishes extra income.
My original post that you responded to was about excessive, runaway debt. In other words, debt taken on without the current ability to repay that debt over a reasonable period of time. That means making payments that actually reduce the principle ... not just making interest payments until the maturity date of the loan (usually a bond for corporations or nations) when the entire amount is due at which time the borrower will simply "refinance" the debt. Hence, the original, actual debt (principle) may never get repaid.
Taking on new debt to retire old debts (even if the new debt has a lower interest rate) is not actually reducing the debt. It's simply lowering the borrower's interest cost. Smoke and mirror schemes cannot replace the actual practice of responsible borrowing as an individual, a business ... or a nation. Sooner or later, excessive debt will financially destroy the borrower that was brought about by the borrower's own irresponsibility.
Do keep in mind that personal debt, local government debt, and state debt must either be repaid or bankruptcy declared. However, a nation that has its own currency is in an entirely different situation. Principle reduction is not actually necessary. Of course, if debt is too excessive, troubles would surely ensue and debts might have to be inflated away, for instance.
Democracy is government by the people and has actually nothing to do with the economic model we have selected to pursue (capitalism). Economies are just mechanisms for the exchange of goods and services, nothing more. Oh--and since the government issues money, it can actually enlarge and shrink the amount issued at will (quantitative easing). So basically we have a false narrative going on here, which Baker is pointing out: the deficit is an imaginary construct based upon a set of parameters that can be changed at any time. Not easily perhaps, but since things shift all the time based upon the priorities of the individuals in office, our economy ends up lurching around like a drunkard subject to the vagaries of these twits who have little understanding of the mechanisms in play. They just like to push buttons and control people and outcomes, even if the end result is disaster. If you look at the history of the economy of the US, it looks like a roller coaster with huge rises and steep drops, since the very beginning. This is due to the greed/gambling/ignorance/factors that have plagued our government entities since the government was created. Of, by, and for the People at the top.
Yes, I found the parts that have little to do with deficits to be both agreeable and correct; "The argument is that this money could be much better used educating our children, improving our infrastructure, and making health care affordable, among other things."
Really, no argument here; education is the only possible way to avoid human extinction. But what does this have to do with deficit US spending?
This as well, "The debt stuff is just silliness that we really need to get over. The problem of an actually excessive debt would show itself in high interest rates and high inflation rates."
Here is a hint of mumbo jumbo econ used to obscure what debt is all about and what is actually going on.
And the argument about money going to pay excess profits of drug companies is also interesting, even though it has nothing to do with Mr. Baker's defense of deficits spending by those who want eternal war and destruction of democracies world wide. Oh, I suppose some deficit spending might have gone into development of the science that taxpayers give to corporations.
No, my point is that Dean Baker does a lot of writing in defense of deficit spending and advocating deficit spending and never ever mentions that the money has gone into the US state of perpetual war as well as destruction of the US democracy and military occupation of the homeland.
US democracy was never perfect. Even so. The United States has become a terrorist totalitarian military empire. It has killed maybe 20 million people since 1945 and this continuing dark deed is funded by deficit spending. Economists like to imagine they know about how society works yet almost none of them ever consider the importance of democracy to an economy or that the economy is a subset of the environment.
Economists want to prime the economic pump and grow the economy to full employment with deficit spending. They do not look at reality and see specie extinction as a symptom of an economy that has already grown so large it is destroying life on Earth.
Prime the pump with deficit spending to make species go extinct faster? What economist is actually attempting to figure out an economy that provides a happy and fun life as Earth heals? Not many.
I mainly agree with most of your post, but your concluding points seem to push most (all?) of the blame on government and the "People at the top." We must also keep in mind that blame does include a wider group. For instance, if so many in the middle class would have been a bit more cautious about purchasing homes during the huge price run-up preceding the Great Recession, we would have had a much smaller calamity. There has been some recent study on this (I don't have a link) which was done, I believe, to counter the notion by some on the right that it was mostly caused by too many lower class getting loans that they should not have gotten.
Yes, I can mainly agree with you here. I do hope we can come up with a better choice of measuring an economy than GDP, for instance. As far as militarism, yes, we have often done a poor (horrific) job, yet withdrawing from the world would also likely allow much carnage.
The main need to borrow beyond voter approved bonds is that so much money is used to train foreign police forces and moderate insurgents, bomb hospitals, bridges and destroy anything else US deficit spending focuses on. (All this, so corporatists get the land, mines and water).
Cut the military 90% and stop limiting social security taxes for the rich and the need for deficit spending will look very different right away.
Dean Baker said, "The problem of an actually excessive debt would show itself in high interest rates and high inflation rates." Well not exactly. The US is in debt for two reasons: First there has been a huge shift of power away from people and governments towards corporations and the wealthy. This means lower tax revenues and higher deficits since the tax revenues are no longer available. Second, the economy is basically stagnant and this reduces interest rates. I know, pundits are claiming that the US is doing marvelously but they are neglecting how much the federal government is pumping up the economy. For example: in 2016 the economy grew by about 2.3% or about $450 billion; the debt grew by just over $1.0 trillion. This means the economy went another $550 billion in the hole.
The US is a safe haven for foreign money, hundreds of billions of dollars migrate into the country each year. It isn't investment in the classical sense, it is more a transfer of ownership. America's huge fiscal and trade deficit creates a demand for $US and it also helps pump up the price of real estate and the stock market. It makes some feel giddy because the country is getting a free lunch. In reality there is no free lunch and all that foreign capital inflow does not translate to dynamic economic growth.