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The National Debt Is Congress's Fault!

letsgetitdone's picture

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 Had Congress repealed it when President Nixon took the country off the Gold Standard, and had we ceased to issue debt at that time, then the Government would have re-paid all of our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 All Life Is Problem Solving and Fiscal Sustainability).

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letsgetitdone's picture
Submitted by letsgetitdone on

that this one hasn't gotten any comments here. I think that: "The National Debt Is Congress's Fault" is a very important meme. The more we can spread it, the better our chances of getting the mandate repealed, and, I'm increasingly convinced, that that would do more for getting progressive economic legislation through Congress than anything else we could do.

Rendering deficit and debt worries unnecessary would do more to unmask the plutocrats in Congress than almost anything else we could do.

Submitted by JuliaWilliams on

And the spreading of this concept is right up your alley, although I do try, in my limited way, when I have discussions with other Greens. However, one drawback is the general lack of knowledge (including mine) that exists in our society relating to how our fiscal policy and monetary policy are intertwined, not to mention how the Treasury and the Fed work. It would be a great service if you could write a "primer for the people"!

letsgetitdone's picture
Submitted by letsgetitdone on

You mean the flows in the process of paying off the national debt by ceasing to issue it; or other flows.

As I'm sure you know Bill has produced some nice diagrams.

Submitted by lambert on

including the accounting control fraud animated say 1975 - 2010.

That would be interesting! Even if on a very macro scale.

letsgetitdone's picture
Submitted by letsgetitdone on

beyond me at this point.

Sounds like a Ph.D. thesis for UMKC people.

letsgetitdone's picture
Submitted by letsgetitdone on

So far, there are some primers out there.

Of course, there's Warren Mosler's 7 Deadly Innocent Frauds book which is free for download and also available in hardcover.

There's Bill Mitchell's "An MMT Lullaby"

and his: "The Consolidated Government: the Treasury and Central Bank."

Then there's Scott Fullwiler's "Modern Monetary Theory: A Primer On the Operational Realities of the Monetary System"

There are other primers on specific aspects, including:

1) "Deficits Do Matter, But Not the Way You Think," (Randy Wray)

2) 'The Federal Budget Is Not Like A Household Budget," (Randy Wray)

3) "Yes, Deficit Spending Adds to Private Sector Assets Even with Bond Sales," (Stephanie Kelton)

So, what should my primer be about? I think Warren's already done the basic primer on the whole thing in simple terms. But I could do another post explaining why we'd pay off our national debt, if only we'd stop issuing more when we deficit spend.

Submitted by lambert on

Or, say, three haikus tops?

That's the real issue, here, not the power of the ideas, which are magisterial.

letsgetitdone's picture
Submitted by letsgetitdone on

I'll try to boil it down to a post card.

Submitted by lambert on

As Pascal said: "I didn't have time to write a short letter, so I wrote a long one" ;-)

Valhalla's picture
Submitted by Valhalla on

to have in one place. I'm not sure that the non-commentary indicates that readers find a lack of importance here. I'm usually just trying to keep up with your posts because many of the basic concepts are not easy to absorb.

letsgetitdone's picture
Submitted by letsgetitdone on

Did you find this one difficult? If so, maybe I need to make the argument much more explicit. Where do you think it's obscure?

Valhalla's picture
Submitted by Valhalla on

translate it to the same level (although NOT the same thrust) as "the government is like a household."

I keep picturing myself around the post-prandial dinner table haranguing over politics with my family, none of whom are political blog afficianados, and trying to boil it down to very straightforward and short points (although not haiku). For instance, to counter the hated, "the government is like your household" I have "the government isn't anything like a household, because it has control over its own money supply which you don't" and "the government isn't limited by a lifetime like people are." (gawds I hope those aren't perversions of your patient and thorough explanations). And, of course, "Social Security has nothing to do with the deficit," although that one is less needed because no one I know, whether D, R, or something else altogether is in favor of cutting Soc Sec.

letsgetitdone's picture
Submitted by letsgetitdone on

I think that's the point. Here's a quote from a comment I made at DailyKos the other day:

A Government that's sovereign in its own currency, i.e. a Government with a fiat non-convertible currency, a floating exchange rate, and owing no debts in a foreign currency doesn't "fund" or "finance" its spending or have to do so for any reason. It is the creator of the currency. It has a monopoly on this. Anyone else who tries to create currency within its borders goes to jail for counterfeiting.

On the other hand, everyone else, every household, every individual, every corporation, every state, county, or municipal Government, every non-profit, every Church, is a user of that currency. Users must fund spending or "finance" spending; but Governments that create money, the basis of all financial instruments and assets, don't need to do these things. All they need to do is to deficit spend to add financial resources to the private sector economy.

Also, take a look at Randy's piece for a good expression of it and also Stephanie Kelton's presentation, transcript, and video from the Fiscal Sustainability Conference.

Potomac Oracle's picture
Submitted by Potomac Oracle on

What is it about this plain language (see below) that Americans fail to grasp? The fact that Congress does not manage fiscal policy in accordance with these irrefutable definitions of what is and is not monetary sovereignty should be the basis for citizen revolt.

Monetary Sovereignty: In the United States, a monetarily sovereign government, there exist many monetarily non-sovereign entities: villages, cities, counties, states, businesses, and individuals. None use their own sovereign currency, so having no sovereign they:

1. Do not have the unlimited ability to create their sovereign currency.
2. Can run short of currency (unlike monetarily sovereign governments, which cannot).
3. Require income in order to pay their bills (unlike monetarily sovereign governments, which require no income).

Thus, taxing, borrowing, and austerity (deficit reduction) are not necessary to fund the Federal Government though for political reasons, a monetarily sovereign nation may borrow and levy taxes and enforce austerity.

letsgetitdone's picture
Submitted by letsgetitdone on

they're starting to wake up!