Fiscal Solvency

Well, the proverbial s__t is now hitting the fan in our State Governments, and we're looking at struggles in State after State between newly elected Republican Governors scapegoating civil servants, while they insist that taxes can't be raised on the wealthy and large corporations during a recession. Put briefly, the moves to austerity and the resulting conflicts in Wisconsin and other States are partly Democrats' fault, because they failed to pass a State revenue sharing bill to close the gap in State budgets, so that no cuts in services, employee benefits, or jobs would be necessary. Read below the fold...

Warren Mosler has an important forthcoming book called The Seven Deadly Innocent Frauds, which is, fortunately, available right now in a pre-publication version for reading and commenting from Warren's site. Read below the fold...

Warren Mosler, an international financial consultant, and Independent Party Candidate for the Senate in Connecticut has issued a challenge to his opponents. Here's the nub of it.

A 37 year ‘insider’ in monetary operations, Mosler knows as a fact of actual monetary operations that, operationally, there is no such thing as the US government running out of dollars, being dependent on foreign borrowing, or potentially facing a solvency crisis like Greece. Nor is there any financial reason to cut Social Security or Medicare benefits. To make the point, he’s offered to pay $1 million of his own money to any of his Senatorial opponents on the ballot who can prove him wrong. ‘Those fears come from pure fear mongering from supposed experts, with no factual basis, and those unwarranted fears are the true obstacles to the return of full employment and prosperity’ said Mosler.

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By

Warren Mosler and Joseph M. Firestone

Paul Krugman agrees that “We're Not Greece.” But he only appears to have a glimmer of an understanding of the most important reason why this is so. We hope this commentary on his op-ed piece improves his understanding, and that of other deficit doves who appear to disagree with the deficit terrorists, but who in the end share their false basic assumptions about deficits, national debts, fiscal responsibility, and fiscal sustainability.

It’s an ill wind that blows nobody good, and the crisis in Greece is making some people — people who opposed health care reform and are itching for an excuse to dismantle Social Security — very, very happy. Everywhere you look there are editorials and commentaries, some posing as objective reporting, asserting that Greece today will be America tomorrow unless we abandon all that nonsense about taking care of those in need.

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Professor Pavlina Tcherneva, one of the speakers at the recent Fiscal Sustainability Teach-In Counter-Conference, in a striking post entitled “Do Not Confuse Solvency with Sustainability,” says this about solvency and sustainability:

”Mad obsession with debt- and deficit-to-GDP ratios, divorced from any consideration to what is happening to the real economy, boggles the mind. Remember government deficits always create non-government surpluses--to the penny. When the government spends more than it collects, the private sector earns more than it pays in taxes to the government. That is, the private sector accumulates these government liabilities, again, in the form of electronic dollar reserves. The government does not run out of ‘electronic reserves’.These deficits go somewhere! They create income and profits for someone. The real question is “for whom?” and did those earners produce anything of value to society in exchange for getting this money? This is not a matter of financially bankrupting the nation. It’s a matter of bankrupting the economy in real terms. It’s about filling the coffers of a financial sector which has hired 7% of total U.S. employees in increasingly dubious services and who take almost 40% of total corporate profits (half of which are rents and serve no economic purpose). It’s about starving grandma, leaving our kids without world- class education, allowing the sick to get sicker, and the unemployed to become unemployable. And all because we refuse to build the real resources which we all need in order to maintain a decent standard of living. Now I would prefer not just a decent standard of living, but an excellent one—one to boast about, one that the richest country in the world can offer its citizens. Stop confusing solvency with sustainability. Start measuring sustainability in terms of the real goods, services, and jobs government spending creates for the public purpose.”

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