Deficit/Debt Hysteria

It’s hard to check out the latest edition of the MSM shitrags (daily newspapers and newsmagazines) or lying megaphones (radio and TV) without seeing or hearing some screaming stuff about deficits and debts. The stuff is quite dire. In 10 years, debt payments will constitute 80% of the US budget, leaving only 20% for military and all other spending. The only possible conclusion is that this is catastrophic.

However, being fed a steady diet of MSM shit sandwiches my whole life before I finally figured out what the Hell I was eating anyway, I figured these capitalist corporate POS scumbags were lying to me once again.

If a capitalist’s mouth is open, he’s probably lying. And so all capitalist societies are fanciful places where all the world’s a lie, and all of us are liars. We lie to go along with the liars, because everyone else is lying, and because we’re too brainwashed or confused to figure out we are being lied to. Such is the Gramscian dynamic when the capitalists obtain cultural hegemony, as they nearly always do under capitalism.

It is curious that defenders of capitalism, including regular commenters on this blog, never face this World O’ Lies head-on. So is it ok or what?  I mean that living in a capitalist society is about as fanciful an experience as living in a state controlled by Communist propaganda. Capitalist versions of Pravda are replicated every minute across countless TV and radio stations and every corporate shitrag (daily paper and newsweekly) in the land. To say that they were “brainwashed” while we are free is the grossest of delusions, but it is essential to all capitalist societies.

Getting back to the deficit/debt hysteria, I had to search around to find some sane capitalists on the question. One of the evil things about capitalism is that under capitalism, the honest capitalists are rara avis. You really have to look around, as the capitalists try to lock out all the sane and decent voices. You know, just like those evil Commies do? So we spelunked the samizdats of Internet’s honeycombed caverns and came up with a couple of sane capitalists on the debt/deficit question.

Exhibit A: Paul Krugman.

Exhibit B: Martin Wolf.

Yeah, they’re both Jews. Liberal, capitalist Jews at that (No, wait! They must be Bolsheviks in disguise!).

Chew on that bone a bit, anti-Semites.

The depressing thing was that both of the sane people had dire messages. Those evil entitlement thingies, you know, like health care for the old and the poor and pensions for the retired, are gonna have to be slashed to the bone, their recipients cast to the desert winds so the vultures of capitalist society may pick clean their bones.

When even the sane people are channeling Edgar Allen Poe, you know that the horrorshow is the world outside your window, and the droogies are your fellow men.

So much for the end of history.

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10 thoughts on “Deficit/Debt Hysteria”

  1. As individuals, Americans are being bankrupted by the “Three H’s”: Housing, Health Care and Higher Education. (Our governments have the additional expenses of the military at the federal level and prisons at the state.)

    What the three H’s have in common is that their markets are free on the demand side but restricted on the supply. If medicine worked like any other scientifically advancing field, its future would involve inexpensive microfluid tests that tell us more about our health than any doctor’s diagnosis. We all know this isn’t the future of medicine precisely because doctors have too much invested in their education to let their jobs be replaced by automation. So they restrict the ability to provide medical care to themselves.

    Similarly, higher education self-credentials the ability to grant degrees to institutions based on their same model, and denies it to the other myriad opportunities to learn in our society (TLC, Books on Tape, Netflix). Housing works through a slightly different mechanism, but it comes down to homeowners in local jurisdictions are also its voters, so by regulating development at the local level they can keep more housing from being built that would provide price-competition to the one they expect to sell some day. It’s as if Ford, GM and Chrysler could vote to keep anyone else from selling cars.

    As you might surmise, I disagree with Robert about capitalism, but I do agree about liars. Capitalists are extremely good at exempting themselves from their stated principles.

  2. “I mean that living in a capitalist society is about as fanciful an experience as living in a state controlled by Communist propaganda.”

    mmmhh…where have I heard that before? Now I remember.

    The communist creed: From each according to his ability, to each according to his need.

    The capitalist creed: From each according to his gullibility, to each according to his greed.

    ~Joe Stack (1956-2010)

  3. Dear Robert
    Arithmetic has no ideology. It stands to reason that no government can continuously run big deficits. By big deficits I mean deficits that make the public debt grow faster than GDP. It is not the growth of public as such that is worrisome, only a growth rate in excess of economic growth.
    Suppose that Ruritania has a GDP of 200 billion and a public debt of 180 billion. A decade later its GDP is 220 billion and its public debt is 198 billion. In such a case there is no problem because both GDP and the public debt went up by 10%.
    The burden of debt should be measured by the real interest rate. If public debt is 100% of GDP and the real interest rate is 4%, then interest payments on the debt are 4% of GDP. I don’t consider that a very high percentage.
    It is a basis principle of economics that financial assets are always equal to financial liabilities. If you owe me 10,000, then I have an asset of 10,000 while you have a liability of the same amount. The debt of the American government is a liability to the American taxpayers but an asset to those who hold that debt.
    The question then is: Who holds government debt? If a lot of the public debt is held by foreigners, as is the case in the US, then the situation is different from one in which all the debt is held by domestic bondholders. That is the case in Japan.
    In a country like Japan, the amount owed by Japanese taxpayers is exactly offset by the amount claimed by Japanese bondholders. In such a country, interest payments are like transfer payments. Money goes from one set of citizens, the taxpayers, to another set of citizens, the bondholders. There is no transfer of income to foreigners.
    One implication of this is that, in a country like Japan, posterity not only inherits the public debt but also inherits government bonds. In the case of the US, posterity inherits the public debt, but many of the American government bonds are inherited by foreigners, and that is more serious.
    Actually, it doesn’t really matter whether the government owes money to foreigners or not. The important question is whether the country as a whole is in debt or not. Suppose that in a certain country the governments owes 80 billion to foreigners but that the citizens of that country own assets in the amount of 280 billion abroad, then that country is a net creditor by 200 billion. If the rate of return on the government bonds and the privately owned assets abroad are the same, say 4%, then that country will have net investment income inflows of 16 billion.
    It is amazing what hypocrites American conservatives are. When Reagan was running huge deficits, they said that it didn’t matter. That’s because those deficits were caused by tax cuts for the rich. Remember, deficits caused by tax cuts for the rich are nothing to worry about but deficits caused by an increase in government expenditure are very dangerous. That’s conservative logic.
    Money that a government has to pay to bondholders will not be available for social programs. It follows from that that huge debts do put social programs at risk. With the aging of the population, more money will have to go to pensions and health care. In light of this, it is better that we don’t overdo deficit spending now in another not to jeopardize the income and health care of seniors in the future.
    There is no cause for hysteria, but let us not throw fiscal prudence to the winds.
    Regards. James

  4. The deficit is fairly simple. Big taxes and small government mean surplus. Small taxes and big government mean deficit. But if we have big government then we can still get by with small taxes provided the economy is growing faster than the deficit. It only becomes a real problem when the deficit is growing faster than the economy.

    Personally, I prefer smaller taxes AND smaller government with NEITHER surplus NOR deficit. Because paying someone else’s bills just isn’t high on my list of priorities. And for all the crocodile tears produced by liberal politicians, I just don’t think it’s high on their list of priorities, either. Their priority is exactly the same as that of the conservative politicians – getting reelected. And they’ll both lie to get it.

    The real question is, “Which group produces the best results?”

  5. ” …let us not throw fiscal prudence to the winds.”

    You’ve gotta LOL. What is it, 13 effing TRILLION, just given ( according to the estimates of the likes of Paul Craig Roberts and Michael Hudson) to the same shysters that sucked the US economy dry, the same shysters who employ the economists, and whose agents sit in the Fed and in every level of government, who use some of that 13 Trillion to buy politicians to ensure that there’s no restriction on them going on gambling with the work and accumulated wealth of the American people (and what they’ve stolen from the rest of the world, of course). The same shysters who are deliberately shrinking your economy – offshoring your jobs, flooding you with foreign scab labour; the shysters who are even de-skilling your nation so that you will soon lose your technological lead. And what’s the reaction? Like Robert said, the people lie because everyone else is lying, because if you don’t lie when everyone else is lying, then everyone else might gang up on you – that’s people for you. Imagine the US is a boat, a refugee boat say, and there’s rich and poor sections like the good old Titanic. The captain tells the poor section that the rich have demanded twice as much living space, or they’ll bankrupt the shipping company (somehow) and see the captain never works again. So he tells the poor that there isn’t enough room for everyone, so some will have to go overboard. Instead of getting together and saying ” we no take dis shit!” they say, ” yeah, that’s right” ( maybe the rich have bribed a few of the poor to say that, sort of like union leaders) ” throw him overboard, not me. That guy’s useless – throw granny overboard, and that cripple, and those foreign commie-looking types…” Maybe a few say ” let’s get together and take over the ship and throw the rich overboard” and the others think “no, the rich have got police and armies. We’d better throw these guys overboard or they’ll blame us too. ” Then, when the poor section has been culled enough to be easily pacified, the stewards put the rest of them in chains and put them to shovelling coke into the furnace for nothing, and then when the ship reaches shore, they have any that haven’t starved or died of exhaustion hanged for mutiny anyway. That’s the way you’re going USA, and where you go we (Europe – I’m Scottish; that’s why I spell ‘labour’ like that) tend to follow.

    Labouring my point much? You betcha. ” Fiscal prudence ” I really did just burst out laughing when I looked at that phrase again. ‘Fiscal Prudence’ is our PM’s tranny name – Gordon Brown, that is. It’s been his catch-phrase. He’s given proportionately more of OUR future in hock to the banksters even than your lot did; and don’t get me started on PFI’s – that’s Private Finance Initiatives ( google it), a rare wheeze for keeping spending on schools and hospitals off the balance sheets, which essentially means that all such projects will in the long run cost about 10 times as much, and the taxpayer will be committed to paying service charges to the private sector for generations to come, without any legal guarantee of service, of course.
    Well, if it all gets too much, we can just throw granny overboard. Have a nice day – spend it learning to swim.

  6. Oh, yeah – I too loved that comment, Charles. ” From each according to his gullibility, to each according to his greed”. That’s about the size of it.

    Or there’s the old Glaswegian song ( sort of Glasgow’s ‘Knees up Mother Brown’):

    You canny throw yer granny off a bus,
    Oh no, ye canny throw yer granny off a bus,
    Ye canny throw yer granny
    Cos she’s yer mammy’s nanny,
    Ye canny throw yer granny off a bus.

    The sort of simple homespun philosophy that gave us Red Clydeside (google it).

  7. Discoverer of DNA believes blacks to be less intelligent:

    Like, duh. Haiti: average I.Q. 71
    Dominican Republic: average I.Q. 84
    Hmm, now why might that be? Oh yeah, Haiti is mostly mostly black, while D.R. is mostly mulatto. Duh. These liberals are so idiotic they also believe it is possible to power civilization using soybeans or other such nonsense, windmills etc. Civilization is coming to an end due to race mixing and the Clinton administration’s termination of the largest energy research project in U.S. history, the Integral Fast Reactor.

  8. Rob,

    I’ve got a tw0-fer (Of Iranian origin and Jewish..) Nouriel Roubini for you who thinks that the US will print it’s way out of debt, eg debase the US dollar.

    I know people like Glen Beck have been ranting about US deficit since about.. two seconds after GWB left the White House.. but that doesn’t mean we are potentially in some deep do do.

    Let’s look at Martin Wolf’s comments:

    “Prof Ferguson stated that, according to the White House projections, gross federal debt will exceed 100 per cent of gross domestic product by 2012; that the US is forecast never to run a balanced budget again; that monetary policy, not deficits, saved the economy; that higher interest rates are on the way; and, not least, that high fiscal debt is damaging.

    Brad DeLong of the University of California, Berkeley, responded that parts of this argument are wrong or misleading: White House projections are for federal debt held by the public to be 71 per cent of GDP in 2012 and not to exceed 77 per cent by 2020; monetary policy would not have delivered even the limited recovery we have had on its own; and higher interest rates may indeed be on the way, but there is nothing in current yield curves to suggest it. Moreover, there is no reason to balance budgets in a country whose nominal GDP grows at up to 5 per cent a year in normal times.”

    Hmmm, 71 percent of the GDP by 2012.. well by some measures we are already above 90% and that by the way is not taking into account state or local debt which is substantial.

    These guys say more than 90%

    These guys say 83%:
    The debt level is the debt as a percent of the total country’s production, or GDP. Total economic output, or GDP, is $14.4 trillion. The debt is now 83% of GDP, up from 51% in 1988. (Source: U.S. Treasury, Debt to the Penny; Bureau of Economic Analysis)

    I’ll take the latter since they are quoting official government figures. Now add in state and local debt and you are looking easily an excess of 100% public debt to GDP ratio. For comparison Greece had their crisis when their debt hit 113% this year:

    woe is them they can’t print their own money anymore…

    Ahh here we go:

    Congressional Budget Office estimated that gross public debt will rise from 70.2% of GDP in 2008 to 100.6% in 2012.

    So the US administration says a slight rise of debt to GDP by 2020 and keeping it less than 80% but the CBO says in excess of 100% by 2012.

    Another quote from Martin Wolf’s article:

    “As Carmen Reinhart and Kenneth Rogoff point out in a recent paper, once ratios of public debt to GDP exceed 90 per cent, median growth rates fall by 1 per cent a year. That would be costly. Moreover, there is a risk that, at some point, confidence would be lost and interest rates would soar, with dire impact on debt dynamics.”

    Ok… now that’s interesting.. so if the CBO and the above statement are correct..the US has problems.

    And in sum Wolfe says that the US (and the other OECD countries…..) do indeed face a debt crises:

    “Yet, as the BIS paper also noted, long-run fiscal prospects, largely driven by ageing, are dire. Projecting forward from the dreadful starting points, the BIS authors argue that ratios of public debt to GDP could reach 250 per cent of GDP in Italy by 2050, 300 per cent in Germany, 400 per cent in France, 450 per cent in the US, 500 per cent in the UK and 600 per cent in Japan. If the sovereign debts of high-income countries are not to be reduced to junk, these countries do indeed need credible plans for retrenchment. On this there is no disagreement. The best approach would be sharp reductions in long-term growth of entitlement spending.

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