It's too late for massive injections of common sense to produce a successful national economic outcome in this battle over debt and deficits. It is not, however, too late to say "We told you so" as we begin to suffer from the economic rot orchestrated by today's bipartisan maestros of the corrupt ideology underpinning policies of economic austerity.
We told you in 2009 that your premise for attacking the debt; "We're out of money," was nonsense.
SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion.
At what point do we run out of money?
OBAMA: Well, we are out of money now. We are operating in deep deficits,
not caused by any decisions we've made on health care so far. This is
a consequence of the crisis that we've seen and in fact our failure to
make some good decisions on health care over the last several decades.
We excoriated Geithner, Summers, Bernanke, Ortzag, Romer, Bernstein, Stiglitz, Krugman, Reich, and many other econ "EXPERTS" for letting you go before the American public with such claptrap given we issue our own currency by fiat.
It is an axiom of monetary operations that as the sole issuer of the dollar, we have, as a sovereign nation, an infinite supply of dollars. We can't run out of money. What we've run out of is Congressional courage to appropriate sufficient spending authority to meet public purpose needs. Our only REAL constraint is inflation not the supply of dollars.
Mr. President do you not find it a betrayal that none of the aforementioned mavens of the dismal science, informed you of this indisputable fact? That means you have little or no understanding of the implications of monetary sovereignty. If they did inform you and you are well aware of these facts then you have betrayed the 99%.
--For example, you were you not told that America does not depend upon revenue per se to pay its bills?
--Were you not told that federal tax revenue collected from any source manages inflation and is not collected to spend? Why would the sole issuer of the dollar need to take dollars back from recipients. It would simply issue more dollars. Sovereign currency nations tax to manage aggregate demand, income distribution and to force acceptance of the currency because it will only accept that currency to satisfy tax liabilities.
-- Were you not told that the Federal Government must first spend dollars into the economy before it can tax or borrow those dollars. It is not the other way around.
-- Were you not told that we do not borrow from China or any other nation to finance our debt. Those nations do not issue or lend dollars. They invest the dollars we pay them for their goods and services in our Treasury securities. W. Mosler, "The Seven Deadly Innocent Frauds of Economic Policy".
-- It's exactly the same process you use to buy savings bonds for your children. If we call it savings when we do it, why not call it savings when the rest of the world does it? The bond vigilantes would prefer to have us believe that these nations are lending us dollars. This too is nonsense.
-- China has a savings account at the Federal Reserve and it also has a checking account at the Fed. The dollars we pay China for its exports to us go first into their checking account and then they decide to earn interest and transfer those dollars to their savings account. Treasury then transfers those dollars to its own checking account at the Fed and in exchange deposits Treasury bonds into China's savings account. Now, we've got those dollars they've got their bonds. Any other description of this transaction is designed to appeal to America's unsophisticated, who are fearful that China and the rest of the world will someday soon OWN America.
We know you're not an Econ or Finance guy and rely on those claiming they are to give you a decent foundation in understanding how our monetary and fiscal operations actually function. But they failed you, you now firmly believe, since there's been no change in your stance on debt, deficits, taxes and spending that we can run out of money and must do all we can to prevent that. Meaning, raise taxes and cut spending. Having eliminated the other alternative, cut taxes and increase spending, this nation will indeed, but unnecessarily, suffer the pangs of austerity visited upon Greece, Britain, Spain and Italy.
Looking at this nation's economy you see a closed, three sector system; public, non-public and foreign trade. When you, representing the public sector, spend dollars into one or both of the other two sectors you deficit spend and they accumulate, after taxes, a surplus, net financial assets, income. When you reduce your spending you reduce their net financial assets forcing them to go into debt. There is no way for either of those sectors to grow without acquiring more debt. That's what happened with Clinton. He reduced the amount of income going into the non-public sector and after three years of building public sector surpluses the non-public sector was in a debt financed recession.
We have managed to avoid retiring debt since 1837---is 173 years long enough to establish a “sustainable” pattern? We have also experienced six depressions following every period of budget surplus, except for the Clinton surplus that generated a two year recession. With current policy we are likely to make the lucky seventh depression by 2016." L. Randall Wray, "Modern Monetary Theory: A Primer on Macroeconomics for Sovereign Currency Systems"
The goal should never be reducing inputs which ignite economic growth. The goal should be premised on the fact that their is no economic crises so large that cutting taxes and increasing spending cannot solve.
For example, Instead of eliminating the 2% FICA holiday, you and Congress should have suspended FICA in its entirety. That tax revenue does not fund Social Security or anything else. The Trust Funds are record keeping devices not paymasters. That suspension alone would have pumped $1.4 trillion into the economy without broaching the anachronism called the debt ceiling. No one can prove to you or America that FICA actually pays Social Security benefits. It's been a subsidy for the rich since it's inception.