Posted on 01/27/2024 5:08:59 AM PST by DoodleBob
In late December, after US Treasury Secretary Janet Yellen borrowed $90 billion in just one day, the federal government’s public debt eclipsed $34 trillion for the first time in history.
The steady accumulation of public debt has become a mainstay in modern America, seemingly as inevitable as death and taxes. But something strange happened when the US passed yet another trillion-dollar debt milestone.
There appeared to be concern.
“The federal debt starts the new year at a level that is hard to grasp: $34 trillion,” the New York Times declared in a piece titled “The Debt Matters Again,” and even “…federal deficits now look scarier.”
CNN, the Associated Press, and other legacy media outlets also reported on the debt situation, offering bleak soundbites.
“Unsustainable,” Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, told the Washington Post while describing the situation.
“Dangerous… a truly depressing ‘achievement,’” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, in a CNN interview.
“Pretty grim,” Loyola Marymount University economics professor Sung Won Sohn told the Associated Press.
That legacy media are no longer shrugging off concerns about the federal debt is encouraging, if long overdue.
After all, it doesn’t take a PhD in economics to realize that racking up $34 trillion in debt — an amount 20 percent higher than the nation’s GDP, with a debt-to-GDP ratio higher than during World War II — is a serious problem.
Yet one media crown jewel informed listeners they had little to fear. NPR’s Leila Fadel asked Stephanie Kelton, a professor of economics at Stony Brook University, if Americans should “be afraid” of this mountain of red ink.
“No. They shouldn’t,” Kelton responded. “It’s the word debt that makes people afraid. And so when I think about this, you know, I look at this number, and I think, well, it’s just keeping track of our savings.”
The idea that debt is just “keeping track of our savings” is peculiar. But Kelton is a peddler of strange ideas.
For those who don’t know, Kelton, an advisor to Bernie Sanders during his 2016 presidential run, is a disciple of Modern Monetary Theory (MMT), a school of economics typically rejected (and often laughed at) by other economists.
MMT is distinguished from other economic schools of thought in that it posits that governments that issue fiat money don’t actually need to collect taxes to pay for their goods and services. As the New York Times stated in a 2022 profile of Kelton, “How will you pay for it?” is considered “a vapid policy question” in the MMT world. Things like budgeting are for cavemen.
In case you think I’m exaggerating, I’ll quote Kelton directly.
“[T]he idea that taxes pay for what the government spends is pure fantasy,” she writes in The Deficit Myth. “[I]t is the currency issuer — the federal government itself — not the taxpayer, that finances all government expenditures.”
Since the state can simply print money, its only real financial constraint is inflation, MMT proponents argue. This is, of course, true in a sense. Governments can print as much money as they want, but there is nothing profound or “modern” about this revelation.
China’s Song dynasty introduced paper money way back in the 10th century. Paper notes were convenient, and all went well initially because the notes were at first backed by coins made of precious metals. Things went south, however, when Chinese officials began printing notes that weren’t backed by coins. Hyperinflation ensued, and Song China was soon swallowed by the Mongol Empire.
History is replete with similar examples, most recently in Argentina, where Peronists for years tried to solve its social problems by printing money.
Inflation is a curse. And MMT is a recipe for hyperinflation, as Harvard economist and former Clinton Treasury Secretary Lawrence Summers has noted, along with countless other economists.
The economics of this are not complex. Every economist knows there’s no such thing as a free lunch. Printing mass amounts of money cannot solve the problem of scarcity. This fundamental economic reality, that we have limited resources and limitless wants, seems lost on Kelton.
“The carpenter can’t run out of inches,” she tweeted in 2019. “The stadium can’t run out of points. The airline can’t run out of [frequent flier] miles. And the USA can’t run out of dollars.”
Kelton’s tweet reflects a fundamental misunderstanding of scarcity.
A carpenter might not be able to run out of inches, but he can run out of lumber and nails. Airlines might not be able to run out of frequent flier miles, but they can run out of seats and fuel, something better economists than Kelton have pointed out.
This brings me back to NPR.
It’s unclear why the media network chose to interview an economist with such discredited views to explain away the country’s mountain of debt. Whatever some may think, public debt is no laughing matter. Thomas Jefferson once described it as “the greatest of the dangers to be feared” for any country.
It seems unlikely that NPR wouldn’t know Kelton’s views on debt, which is to say they would know exactly how she’d answer their questions as to whether $34 trillion in federal debt is a problem. But then why have her on? A cynic might suggest that it stems from the fact that NPR receives 10 percent of its funding from government entities, all of which benefit from the government’s inflationary policies.
NPR would no doubt bristle at such an accusation. After all, the media network quit Twitter after Elon Musk branded the company “state-affiliated media.”
Many took issue with Musk’s label, but there is indeed something deeply troubling about government-funded media. Americans laugh at the clumsy propaganda organs of other countries, but many grow indignant at the suggestion that the government shoveling tens of millions of dollars to NPR could influence its media coverage.
Perhaps NPR’s government largesse is indeed the product of altruism. But there’s another possibility.
The economist Murray Rothbard, who spent a better part of a lifetime analyzing the state, had a dark theory on why the state takes interest in intellectuals like Kelton and media organizations like NPR.
Rothbard understood that the source of political power (“might,” as the economist Ludwig von Mises said) is ideology. Therefore, those who seek to maintain power have an incentive to shape ideas, opinions, and thoughts. And Rothbard argued that a primary purpose of the modern nation-state involved opinion-molding — essentially convincing the masses that its existence was valid, necessary, moral, and useful.
This is where Kelton comes in.
Rothbard wrote:
Since its rule is exploitative and parasitic, the State must purchase the alliance of a group of ‘Court Intellectuals,’ whose task is to bamboozle the public into accepting and celebrating the rule of its particular State. In exchange for their continuing work of apologetics and bamboozlement, the Court Intellectuals win their place as junior partners in the power, prestige, and loot extracted by the State apparatus from the deluded public.
Kelton (and to a lesser extent Fadel) are what Rothbard would describe as Court Intellectuals, tools of the state’s opinion-making machine.
This is not to say that NPR doesn’t do any good journalism. I believe it often does. But it helps explain why NPR tapped Kelton, an economist with bankrupt ideas, for its piece on America’s $34 trillion debt, instead of any number of credible economists.
Kelton was all but certain to say the $34 trillion debt was no problem. Don Boudreaux, Peter St. Onge, David Henderson, Bob Murphy, Antony Davies, or any number of other free-market economists would have given a very different answer, one that no doubt would have been far more grounded in economic reality. But as a media entity receiving tax dollars, NPR has little incentive to promote a free-market economist or free-market views. Indeed, they have an incentive to do precisely the opposite.
Regardless of what NPR told its viewers, the $34 trillion national debt is a serious problem, not a mark of government “savings.”
And we know the primary cause of the problem.
“Washington has been spending money as if we had unlimited resources,” Sung Won Sohn told the Associated Press.
Our leaders in Washington, it seems, suffer from the same delusion as Kelton.
Sometimes these intellectuals are such ass hats.
There is a Freeper who cited the ass hat Paul Krugman as his rationale for an opinion.
'Perpetual bonds' means perpetual servitude and FOR THE NEXT GENERATION.
Liberals think they can just cancel the debt and dare those who we borrowed from to wage war to take the infrastructure back.
That’s basically their reasoning.
Financing government by printing more money seems painless to the taxpayers initially, but comes back to bite the taxpayers with inflation.
Isn’t it amazing that:
1. Cars that were selling for $4000 in 1973 now sell for $40,000.
2. Houses that were selling for $25,000 in 1973 and the same house now sells for $250,000.
Have we really become more wealthy in the past 50 years?
Or do we think we are wealthier simply because we now pay more for the same stuff?
A guy I used to work with went to work for the bureau of Printing and Engraving. He asked me to be a reference for his Top Secret Clearance. When they interviewed me I did think about trashing him so he couldn’t be able to participate in destroying our nation’s economy.
Instead, I told the truth and he is enjoying his new job.
Do they have a theory regarding the methodologies to be used to persuade new lenders in the wake of their planned default?
$34 trillion of debt is what happens when the most affluent nation in the history of mankind is filled with people who think they have a God-given right to enjoy a standard of living they: (1) can’t afford, and (2) don’t have to work for.
Let me add:
1. The National Debt in 1973 was around $500 BILLION.
2, The National Debt today is above $34 TRILLION.
We can only imagine what the prices of STUFF would be today if the National Debt was still $500 BILLION.
Liberals don’t think about consequences. Why else do they support unlimited illegal immigration that will put their own children into servitude?
Consequences is the word that divides liberals from conservatives from the top of the list to the bottom. Conservatives think in terms of consequences for their values. Liberals think in terms of preventing the consequences from their decisions.
Liberals don’t think about consequences. Why else do they support unlimited illegal immigration that will put their own children into servitude?
Consequences is the word that divides liberals from conservatives from the top of the list to the bottom. Conservatives think in terms of consequences for their values. Liberals think in terms of preventing the consequences from their decisions.
Conservatives build societal foundations. Liberals build Jenga towers.
There are some ideas so stupid and unreal that only liberal elitists can believe them with a straight face.
It was a few years ago, I had an arguement with a liberal who argued that the low interest rates should be a reason to rack up the debt to build infrastructure because the carrying costs wouldn’t burden society.
Thanks for reminding me of Paul Krugman.
Then, I thought about Jim Cramer.
Just for kicks I typed “business show Jim, always wrong” into my search window.
Nothing could be more untrue. The only REAL financial constraint is when people, en masse, lose confidence in the currency. Some, I guess, don't believe that possibility exists. That possibility does exist and will bite us all in the butt.
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover they can vote themselves largess out of the public..”
Alexander Tytler.
Liberals defending more debt usually sound like they would provide more alcohol for alcoholics, more drugs for drug addicts, a new a abusive spouse for an abused spouse, and so on. It must be painful whenever they try to untwist their pretzel logic.
The national debt of $34T (plus the over $200T debt not included in that) is no problem whatsoever. If it could be 10 times higher, that would be just fine with me. The same folks will be holding the bag at the end.... the FED, and its owners and about 300 stockholders.
Consider how a “dollar” is created in the first place. The private non-federal non-reserve FED was given “license” to create dollars out of thin air (fiat) with interest, by congress in 1913. Once created, it can generate wealth (interest/taxes/inflation) for the FED owners/stockholders forever.
Numerous times constitutional US Treasury dollars have been attempted to bypass the FED, with disastrous results. Lincoln did (with the precursor to the FED), JFK did (EO 11110).
Trump is doing what Lincoln/JFK started, and will succeed this time. It’s a multi-year process, and well underway. The UNITED STATES INC was bankrupted under Trump. Trump nationalized the FED (he placed it under the Treasury).
When (not if) the process is complete, the FED will have one more year to live alongside the Treasury, removing the FED dollars. It is happening right this second, and actually in some form since 2022 (see money creation on usdebtclock.org).
The problem with paying “cash” for infrastructure is that it’s a huge one-time expense for an asset that will be used for many decades … which means the burden of the cost is carried by one group of taxpayers, while the asset is used by many people who didn’t pay the cost of building it.
Think of a bridge that was built in 1950 without using any bonds, and lasted 70 years before it was replaced in 2020. The resident of that state who began working in 1960 and then retired to another state in 2010 was able to use that bridge for 50 years without ever paying a dime of either the construction cost or the replacement cost.
This is mostly true. The printing of money pays for most of Government spending.
“[I]t is the currency issuer — the federal government itself — not the taxpayer, that finances all government expenditures.”
This is mostly false. Yes the issuer ‘The Fed’ pays for the spending but it is the holder of that currency which mostly the citizens of the United States that is ultimately paying for the US budget through devaluation of their money.
What has made this madness possible for the past decades is the policy of the Petro-dollar. All of the major economies in the world hold US dollars in reserve. Those reserves allow the US to tax those countries economies to fund our profligate spending.
When those countries finally stop holding US dollars and buying US debt the house of card will collapse in a few days and US dollars will at the end of the day be worthless.
It isn’t the word debt that makes people afraid it’s the ramifications of it.
Stephanie Kelton sounds like Biden’s speech writer Kelton was a advisor to Bernie Sanders too.
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