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The National Debt Is Congress's Fault! Redux

letsgetitdone's picture

The national debt exists today because when the nation went off the Gold Standard in 1971 and adopted its present non-convertible fiat currency system, Congress did not repeal its mandate 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, 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 Had Congress repealed it when President Nixon took the country off the Gold Standard, and had we ceased to issue debt at that time, then the Government would have re-paid all of our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, as well as our debt-to-GDP would both now be at Zero. So, the existence of the National Debt today is Congress's fault!

The national debt is a political problem created by Congress's inaction. It magnifies the political strength of conservatives and weakens progressives because it makes people afraid to deficit spend, since then the country will be “increasing its debt,” and increasing “the burden on our grandchildren.”

Congress needs to repeal the mandate forcing the Government to issue debt instruments on a dollar for dollar basis with deficit spending, right now.

Both Congressmen and Senators should quit their whining and grousing about deficits and the national debt, since it is their lack of action that is translating deficit spending into more public debt. It doesn't have to be that way. As the creator of its own currency, the United States can just spend without issuing debt, and that new spending can include paying off its outstanding Treasury Bonds as they come due until that national debt is gone.

The United States has many very real problems. But the national debt is not one of them. The deficit spending required to solve our problems shouldn't be constrained by that fantasy problem, or the fantasy solution of stabilizing a debt-to-GDP ratio. To make sure that it's not, Congress needs to repeal its debt issuance mandate now, before the American people learn that Congress, itself, is responsible for its existence, and that they are the ones to blame for both the debt and their own phony deficit hysteria.

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).

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letsgetitdone's picture
Submitted by letsgetitdone on

While I still don't do haiku, as Lambert suggested I should do in my last version of this post, I thought it would be worthwhile to make this argument still smaller.

I want this meme "The National Debt Is Congress's Fault" to spread, hence my attempt to come up with a shorter and shorter version of the argument. Comments, as always are welcome.

letsgetitdone's picture
Submitted by letsgetitdone on

But I like my "they're to blame" way of putting it better.

Having said that:

Congress mandates National Debt

followed by:

Congress mandates that we borrow our own money from the Chinese, Japanese, and Arab, and pay them interest on it, while they also complain about the national debt they are always re-creating and increasing, and tell us we can't afford unemployment insurance, enough Federal Spending to create full employment, Social Security, Medicare for All, good educations for our kids and grandkids, and emergency programs to create new energy foundations for our economy.

Congress needs to know we're wise to their game and that next time we're going to vote out everyone of them who are playing it. The national debt is no problem. Get rid of it and move on to jobs and the other things we need.

Submitted by jm on

but I believe in calling a spade a spade. I bookmarked this post and refer back to it from time to time. I like it because it helps explain why the anachronistic mandate to fund deficits with debt persists.

With that said, here's my go (with a tip of the hat to danps for style):

Congress is responsible for the Debt.
Subsidy for the rich.
Austerity for the rest.

letsgetitdone's picture
Submitted by letsgetitdone on

"responsible" is ambiguous. How about

"Congress is to blame for the national debt.
Subsidy for the rich.
Austerity for the rest."

beowulf's picture
Submitted by beowulf on

Congress doesn't need to change the law if Tsy simply funded the deficit with coins instead of debt. Since coin seigniorage is booked as miscellaneous receipts and not debt, we could balance the budget at the same time. The sky is the limit as to coin denomination, though I suppose for a Democratic Administration, a Reagan coin is almost mandatory. :o)

letsgetitdone's picture
Submitted by letsgetitdone on

But doesn't the current Congressional Mandate require debt issuance when they deficit spend, where the deficit is defined as the difference between expenditures and tax revenues?

Or is it your understanding that the deficit is defined as the difference between expenditures and all receipts?

If the latter, then seignorage is a technical solution that would get around the debt ceiling, and also pay off the debt.

beowulf's picture
Submitted by beowulf on

Tsy policy is that seigniorage is not counted as a receipt but rather as an off-budget transfer (an "other financing source" to be exact). It cannot be used to fund deficit spending however it can be used to pay down the public debt. Which would means that we're stuck with the deficit, but not the statutory debt limit since any budget deficit adding to the debt could immediately be paid down by seigniorage revenue. To quote the US Mint's 2009 Annual Report:

Seigniorage adds to the Federal Government’s cash balance, but unlike the payment of
taxes or other receipts, seigniorage does not involve a transfer of financial assets from the public.
Instead, it arises from the exercise of the Federal Government’s sovereign power to create money
and the public’s desire to hold financial assets in the form of coins. The President’s Budget excludes
seigniorage from receipts and treats it as a means of financing the national debt.