Deleterious Doodling About The Deficit
by Barkley Rosser
lifted from Econospeak
Deleterious Doodling About The Deficit: What Else Is New? Department
In today’s Washington Post business section, Lori Montgomery has a big article on “A renewed focus on spending,” starting with how the GOP is making noises about cutting spending to cut the deficit without raising taxes, while not mentioning anything too serious, although Boehner supposedly might be open to cutting some loopholes in the tax code, thereby de facto raising taxes, if Grover Norquist will let him (assuming as most think that the GOP will take control of the House after next week’s election), and if anybody thinks elimination of the tax deduction for mortgage interest is remotely on the table in a period with a terrible housing market, there is a bridge in Brooklyn for sale to them. Then most of the article lugubriously goes on about all the efforts at supposed bipartisanship on the Deficit Commission.
Yet again, we read about all this agreement to “stabilize social security finances” by raising future retirement ages, because “The current Social Security program will not survive based on upon current rules.” Well, beating a drum beaten often here, this latter is so much baloney. However, the rest of it is even worse. We get scare stories about the deficit of the last two years, when about half of this is due to the recession and the rapidly disappearing stimulus package, while the other half is due to the Bush tax cuts and increased defense spending due to wars in Iraq and Afghanistan, which will hopefully wind down in the not too distant future.
Raising future retirement ages does a great big doodley-squat nothing about any near term deficit, although Lori Montgomery and other reporters somehow fail to point this out in their so-called reporting. So, we suffer from an ongoing deterioration of discourse on this subject as the same old groups and politicians push the same old nonsense formuli for solving a problem that will hopefully mostly take care of itself, with almost no offsetting commentary, although undoing the tax cut part of the deficit is not going to happen if the GOP takes over the House.
Left out unfunded Medicare Part D. It is actually more expensive over any reasonable budget horizon than both wars have been so far. That is not to say the wars were a good idea, or that fighting them on credit made sense. In fact, Medicare Part D actually pays for something that improves the welfare of US citizens, and the Iraq war certainly has not. The war in Afghanistan is a tougher call, but only if we come out with something resembling a win…
There was no fighting, or Medicare, or anything else “on credit”. The U.S. government is a sovereign currency issuer in a floating exchange rate regime. The mechanics of such an entity make it ludicrous to talk about it “borrowing” it’s own currency of issue. U.S. treasury bond sales are a monetary operation, not a funding operation.
If you want to learn more about how the monetary system actually works, check out Warren Mosler’s blog at http://moslereconomics.com.
Seem to have lost the contract I signed agreeing to let you lift material from my site. Oh wait . . .