Jonathan Tasini writes: “I have a new book out today: It’s Not Raining, We’re Getting Peed On: The Scam of the Deficit Crisis.” You can get it here at the site or get a really cool version on Kindle or Nook.

Makes for good holiday travel reading . . .




It’s Not Raining, We’re Getting Peed On: The Scam of the Deficit Crisis
Jonathan Tasini
Tuesday 23 of November, 2010

Category: Taxes and Policy, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

55 Responses to “The Scam of the Deficit Crisis”

  1. [...] The Scam of the Deficit Crisis [...]

  2. on one hand, the author speaks of ‘Engineered Crisis’, and, on the other, lays the blame on ‘Free Markets’ (p.7)…

    good gravy!

    it’s sad..

  3. Estragon says:

    I have issues with much of what he’s saying, but as an investor I have a feeling we’ll be seeing a lot more of this sort of thing.

    This chart illustrates what leads me to this conclusion.

  4. Michael says:

    Barry, Barry! How can you publish something like this? Just one example, “Social Security is fully funded”. You must know that all Social Security assets are government bonds. And must also know that the government cannot loan to yourself and call it an asset!!! I hope this is some kind of joke to see if your readers are paying attention. If not, I’m not sure what to make of you!


    BR: Social Security just fine — it wont go broke, its an in/out fund. You should expect retirement age to rise, contribution cut off to go up, and means testing.

    On the other hand, medicare/medicaid is fucked . . .

  5. DeDude says:

    You can engineer a crisis by pretending that certain actions to stop/prevent it are not possible because it would interfere with the religion of “free markets”.

    Everything he says is correct and well referenced or did I miss some tiny little thing that he got wrong?

  6. Lesly says:

    I have reservations — some statements ooze with ideology — but I share his uneasy feeling because my bullshit meter is spiking again.

    First it was Iraq: If we don’t take out Saddam right now he’ll turn our cities into glass. Then it was the Wall Street bailout: If we don’t give banks billions of dollars right now the financial system will collapse. Today’s false dilemma is recycled propaganda: If we don’t keep tax cuts for the rich and increases taxes elsewhere the U.S. economy will collapse and China will turn our cities into glass.

    If SS was fully funded for the next 100 years the consensus among Very Serious People wouldn’t change. Those who benefited from the government bailing out their sorry asses are likely to say I am naive for thinking the government has a role in ensuring my welfare in my golden years.

  7. Estragon says:


    To pick one thing he misrepresented, if not got wrong; his assertion that if nothing is done to social security, every single person will get at least 75% of their benefits until 2084.

    In order for this assertion to be correct, the US treasury will have to borrow to replace SS tax revenue, and SS “trust fund” principle and interest not rolled over. The fact is there is no “trust fund”. The fund has been used for general purposes, and as SS benefits begin to exceed SS taxes the shortfall will be made up out of general revenues and or debt. The decision to raise taxes, add to debt, cut benefits, or some combination is a political choice that will have to be made. To suggest otherwise is just plain wrong.

  8. DeDude says:

    Every single treasury ever issued has the same problem of “having been spend. Are you telling me that there is no “treasury” mutual funds either? The social security trust fund has papers backed by the full faith of the US government just the same way that any other fund with treasuries have papers backed by the full faith of government. Unless the US government decides to default then the trust fund is just fine.

    We have two tax-systems one paid for by the poor and middle class covering powerty insurance and health care for old people – the other paid for by everybody (including the rich) cover all the other costs of government. The first system has never been underfunded relative to its spending or projected spending (unless you are completely absurd and think we can make predictions more than 25 years into the future). The second system has been chronically underfunded for the past 3 decades because it made some huge irresponsible cuts in rates for the rich. The surplus of the first system was used to cover part of the irresponsible deficits in the second system. Now when that is not happening any more the rich pigs who benefited from the irresponsible administration of the second system is trying to sell the idea that “its all one pot” (so cut benefits and raise taxes in the first system). And the corporate media is trying to get people to swallow that crap. Don’t be fooled.

  9. ashpelham2 says:

    Make no mistake, it’s the bias in the public, easily accessible media that is telling our people that everything is a “crisis” or a disaster of some kind of “epic” proportions. Media sensationalism, to me, is causing a greater divide in this country than any politician or economic calamity ever could. You know the culprits by name: Glenn Beck (idiot), Rush Limbaugh (blowhard), Olbermann (hypocrit), Rupert Murdoch (bat-shit crazy), etc, etc, etc.

    It’s ironic to me that the very idiots who claim that government or whomever is going to kill us and take our children and our 401k’s, are the same morons who are protected under one of the basic premises that made America great: freedom of press. Could it be our own bill of rights will be our undoing?

  10. Estragon says:


    You’re entitled to look at the system as two taxes if you’d like, and you’re quite correct in saying that SS (cash basis) surpluses have funded “the other tax system”. Where you’re wrong is in saying it isn’t all one pot. The reality is that deficits, from whichever “system” they come, are funded by treasury, and it’s the limitations in aggregate on treasury funding which will force the issue. To pretend there’s a pot of money sitting around is just plain wrong.

    You’re also entitled to the view that any cuts or tax increases should be restricted to “the other system”. Reasonable people can and will disagree on such things. All I’m saying is that those choices will have to be made, and pretending there’s a hidden pot of gold doesn’t help.

  11. Hugh says:

    I managed to skim read to the point where he says “some people blame the deficit on roads and education” then I gave up.

    Tasini is angry (OK) but he’s not thinking straight.

  12. James says:

    The decision to raise taxes, add to debt, cut benefits, or some combination is a political choice that will have to be made. To suggest otherwise is just plain wrong.

    Indeed, and it is complicated by a far larger cost issue, our health care system. Even the Dean Baker school of thought, part of what we’re hearing above, argues that the recent health care legislation did nothing to address this (though Baker was notably silent on this as the debate was taking place).

    A lot of difficult political and fiscal choices that will have to be made, like it or not, sooner or later, perhaps forced by a fiscal crisis.

  13. RW says:

    Dismissing Tasini w/o actually reading him is anyone’s privilege but, as to his core position, who could doubt it? Cheney said that “Reagan proved deficits don’t matter” (e.g., ) while corporate media and the wingnut noise machine alike hardly murmured while Dubya’s administration doubled down on the deficit to increase the national debt by 72% from $5.727 trillion to $9.849 trillion.

    And suddenly now, under a Democratic administration, the deficit and national debt are total, front-burner, OMG EMERGENCY?

    Can’t speak for anyone else but my bullshit meter is pegged in the red with no need for assistance from Tasini (although I am interested in how he got there): We aren’t just getting peed on, we’re being soaked.

  14. DeDude says:

    If it was one pot then why has it been separated on the intake side; specifically exempting people with investment income and high regular income from paying to cover the social costs covered in the first system. The laws covering it has also specifically separated it and indeed created a trust fund rather than simply putting excess into the treasury and stating that the treasury (via future taxes) will fix any problem created by population bubbles. There is no “reasonable” legal or logical justification for suggesting that the poor and middle class via social security should help bail out and fund past and future excesses in regular income and capital gains tax-cuts for the rich. No need to unlock the “lock-box” to be raided by the rich, nor by suggesting that it does not exist, neither via privatization.

  15. beaufou says:

    Deficits are the consequences of the way the system is now rigged, not the cause.
    Just like how the grand fuck-ups of the financiers became government debt and private debt problems overnight, I guess you can bail the cause out and keep blaming the consequence.
    It is just one of the particuliarities of usury.

  16. Estragon says:


    I’ll take one more crack at this. SS already has bailed out and funded past “excesses in regular income and capital gains tax-cuts”, and whatever other real or perceived inequities, giveaways, pork, unwise past policy choices, etc. you might want to trot out. There is no “lock box” to be raided by the rich (or anyone else). There are only choices to be made. The only truly wrong way to view it is to continue the fiction that there’s some sort of pot of gold sitting somewhere allowing those choices to be avoided.

  17. “… There is no “lock box” to be raided by the rich (or anyone else). There are only choices to be made. The only truly wrong way to view it is to continue the fiction that there’s some sort of pot of gold sitting somewhere allowing those choices to be avoided…”–Estragon, above

    Who? besides DeLusional, further above, can, honestly, deny the Fact of Estragon’s point?

  18. DeDude says:

    You don’t seem to understand that every dollar given by the social security trust fund to the US government was a purchase of US treasuries (bonds). There is no legal difference between the treasuries (government bonds) regular investors got when they handed their cash to the government and the treasuries (government bonds) that the social security trust fund got when they handed their excess cash to the US government. In both cases the government has spend the cash and in both cases the government is expected (legally bound to) eventually pay back those loans/bonds. If you want to call that a bailout then every bond holder in this country has bailed out those who issued the bond and that is kind of making a joke out of the concept of bailouts. The lockbox actually exist, it is a file cabinet (with a lock) containing the government bonds that social security have gotten in exchange for its cash.

    I would never suggest that there will not be choices to be made regarding our government debt and deficits. All I am saying is that the choices should not be to default on ANY of the bonds used to finance 3 decades of deficits, nor to steal promised (and fully paid for) social security benefits from those hard working people and small business owners who gave disproportionate large shares of their income to have some safety and a modest income after retirement.

  19. DeDude says:


    I understand why you would drink the cool-aid – to you it is sweet (fat tax-cuts paid for by the poor and middle class, sounds good ,right). But you are not entitled to your own facts and the facts about social security are pretty clear.

  20. “…There is no legal difference between the treasuries (government bonds) regular investors got when they handed their cash to the government and the treasuries (government bonds) that the social security trust fund got…”


    actually, there is, at the very minimum, a Huge difference..

    the “USTs” that the SocSec Fund holds are Non-Marketable (read: cannot be sold ‘on the open Market’)

    and, again, with the ‘lock box’–those ‘SocSec’ revenues would never have had to be collected if the Congress, ‘just’, issued those Bonds (Borrowed the ‘Money’) to begin with..

    now, the Taxes were Paid(forcibly collected), Congress spent the Cash, left an IOU–that needs to be paid by Additional, Future, Taxes..

    seems like a big difference..

  21. DeDude says:

    Marketable or not makes no difference related to the legally binding obligations of the issuer. Yes if we had not created a social security system and collected the taxes to fund it, then the bonds and the benefits would not have existed -duh. Old people would be living in Hovervilles and under bridges and all that other fun stuff from before the social security system was passed. However it would make no difference for our debt because we would instead have funded all of our deficit spending with regular treasuries -same difference and same problem. We have to repay the national debt obligations.

  22. RW says:

    [the “USTs” that the SocSec Fund holds are Non-Marketable (read: cannot be sold ‘on the open Market’)]

    They can’t be bought on the open market either and that’s not the only difference but whether those differences are critical vis-a-vis this discussion may be another matter.

    The bonds held by the various trusts are official Treasury issues just like other goverment bonds and are backed by the full faith and credit of the United States. Unlike regular treasuries they are restricted to US trusts such as SS and, also unlike regular treasuries, they can be redeemed for full face value at any time plus interest.

    The trusts used to hold regular treasuries but the law was changed to create these special bonds as a kind of super senior, interest bearing cash to assure a trust never failed to meet its current obligation(s).

    Once the bonds are ‘bought’ by the trusts the cash goes to the general fund just like the cash from all other bond sales where it is indistinguishable.


  23. hey, it’s getting, too, late..

    and, really, others(?), Correct me if I am wrong..

    but, DeD, and RW, what is it that you two can’t grasp?

    There was a Tax Event that raised Cash/Revenue to the USGov’t (under, ostensibly, FICA/SocSec)

    That ‘Cash’ could have stayed ‘on Account’, or invested in myriad ways, no?

    but, it wasn’t.

    It was Spent, and IOU left in its place..

    now, the IOU is nothing, but a promise of Future Taxation.

    and, you’re saying that ~’someone didn’t get ripped-off’ ?


  24. RW says:

    “It was Spent, and IOU left in its place..”

    [lol] It must be getting late Mark …if it was spent and an IOU put in its place then it is no different than any other government bond which, by that definition, gets sold so the government can spend the proceeds with an IOU (the bond someone purchased) put in its place: All government bonds must be paid off by future taxes or future bond sales or what have you so what’s the difference you think you see?

    Either you are arguing that all government bonds are worthless or all government bonds are a ripoff or …what? Or is it not the bond that really bugs you but the form of the tax that purchases it?

    I do believe this baby needs to go to bed. Really. Have a good T-Day, I’m going to try and avoid food coma this time myself.

  25. lulsh says:

    “You don’t seem to understand that every dollar given by the social security trust fund to the US government was a purchase of US treasuries (bonds). There is no legal difference between the treasuries (government bonds) regular investors got when they handed their cash to the government and the treasuries (government bonds) that the social security trust fund got when they handed their excess cash to the US government.”

    I think that’s the point. The “trust” fund is supposed to hold the hard earned dollars of all classes for the payment of their retirement benefits and other benefits. The fact that the government takes that money and spends it and leaves an IOU creates another federal spending crack pipe. Under normal accounting procedure, this would be classified as an unfunded pension plan. In this case, why should their be a trust fund at all?

  26. FrancoisT says:

    We do not have a deficit crisis, but a tax code crisis.

  27. gbgasser says:


    You’re probably right that Medicare/caid are fucked but its not because they are financially any different. They could be “solved” by the same formula to “solve” SS.

    The only question to be asking regarding medical care to elderly (medicare) and the poor/uninsured (medicaid) is how many hip replacements/heart surgeries/thyroidectomies/chest xrays should they be getting? Its not a “can we afford it” question, its a “do we have the resources to provide it” question. Do we have enough cardiac surgeons to do the number of CABGs which are necessary? Is it cost effective to train them? Are there enough people wanting to do it?

    Its NEVER do we have the money to pay for it.

    Happy Thanksgiving all!!

  28. DeDude says:

    Social security has been used before as a tool for the rich to rob the middle class – and now they are at it again.

    First, they instituted this special government program to prevent social unrest. But unlike most other civilized countries, here in the US it was not paid for from general tax funds. Instead they created a special new type of regressive tax that exempt rich peoples rentier income from having to contribute. So these programs, which constitute almost half of our government, are mostly paid for by the middle class, whereas rich people with millions in annual rentiers income pay nothing.

    Second, the rich peoples sock puppets in congress used the surplus of this program (ripped out of the pockets of hard working middle class people), to cover a number of unfunded and irresponsible taxcuts for the rich. By pretending that debt to the social programs trust funds should not be reported as debt, they created false impressions of lower debt and deficits, and used that to push these tax-cuts past the opposition.

    Now the rich and their sock puppets in congress, corporate media, and on the deficit commission are at it again. The are trying to convince people that social security is in urgent need of once again, or to an even more extreme degree, rip off the middle class, by cutting their benefits and increasing their contributions. They know that without huge excess funds from social security it will be hard to finance extension of their unfunded tax-cuts for the rich. Conveniently they are leaving out the most obvious and fair solution to their imaginary problems with social security: to fund all social programs by taxes that apply to all income, regardless of how high it is, and whether it is from rent seeking or work.

    It is time for the middle class to wake up and demand that any “saving” of social security and medicare be done by subjecting capital gains and inheritance income to taxation, and removing any limits on the amount of income taxed. Then we could probably cut a few % of both employer and employee contributions. Now that would be a tax-cut that could help get the economy going again.

  29. DeDude says:

    And to the rich pigs reading the above: No need to choke on your turkey; you still own congress so it would never pass; heck you own the corporate media so it will never be known to more than a handful of the people you are robbing.

  30. DeDude says:


    I completely agree that we need to eliminate expensive procedures and medications that have limited if any additional medical benefits. The simplest way to do that is a single payer system that provides solid basic health care (as in Europe, and for half the price of our system). Those who want to get “more” care can pay for it themselves (via private insurance if they want). Unfortunately, you can not have that debate without some infantile clowns starting to screem about gobinment “death panels”.

  31. kenny powers says:

    The author has his numbers wrong by a mile. The US gross debt to GDP is estimated to stand at over 90% by 2015, not at 67% in 2020. Using total debt (including household, corporate debt) instead in the numerator yields about 350% of GDP, derivatives like MBSs not included. America has a debt problem, we might as well face it. Read Rogoff and Reinhart, and see what the likely consequences are for unemployment and growth. Pretending it’s not happening won’t make it go away.

    By the way, who ever said education and roads are to blame for the structural deficit? Did you make that up? Nobody with a basic knowledge of economics would make such a claim, knowing that education and infrastructure spending empirically speaking leads to higher structural growth rates. Ridiculous, unoriginal article. No question, wall street screwed the little guy over. But congress and the Fed let them do it, and encouraged it through idiotic policy. Democrats were to blame, too, Jonathan.

  32. DeDude says:

    As I understand it, the point was not that the debt would be high in 2015, but that without action it would fall to 67% in 2020 (both very possible scenarios). Total debt is not something the government can solve unless you either think it should take all household and corporate debt onto its balance sheet, or that it should create policy that dictate what households and corporations must do regarding their debt. The relevant issue for government to create solutions/policies for is US gross debt.

    Unfortunately we are not in the situation where we can say: “debt has bad consequences for unemployment and growth, so we will snap our fingers and it will go away. The choices are between the bad consequences of doing nothing and the bad consequences of doing A, B, or C. Before we do something stupid like throwing millions of public employees out on the streets and stop investing in infrastructure (yes that would be needed if you want to balance the budget in a few years), it may be worth figuring out how bad the problem really is. The author has some very good points in that regard, including the fact that debt/GDP after WWII was much higher, yet the next few decades had record economic growth (suggesting that large debt and 90% marginal tax-rates are not something that kills growth)

  33. At first, when I saw, “There is no government deficit or debt crisis,” I thought that finally someone understood Monetary Sovereignty. Sadly, the author reveals he has no such understanding when he tells us Social Security is fully funded through 2037.
    In fact, Social Security is fully funded forever. If FICA ended tomorrow, and benefits doubled, Social Security still would be fully funded, forever. Why? Because the U.S., as a monetarily sovereign nation, never can run out of dollars. So, no agency of the U.S. can run out of dollars unless the government wills it. (See: How Soon Will Medicare Run Out of Money?
    Rather than being a primer on economics, the book seems to be an ongoing conspiracy theory rant, repeatedly accusing the rich and powerful of raping us. O.K., maybe they are, but we always knew that. The real question has been, How? And there, the book falls apart, with some typical debt-hawk nonsense.
    Rodger Malcolm Mitchell

  34. DeDude says:


    The thing that you and your one instrument band seems to not understand is that money is a claim on future work. When the government prints money is says that it can deliver future work (products) with these special little pieces of paper – and as long as we all accept that these pieces of paper have value, it can. So printing money is not different from issuing treasuries, it is just another vehicle for expressing promises of delivering something of real value in the future. The printed money is another form of debt than printed treasuries but nonetheless it is debt. If the government continues to increase it promises on delivery of future work (i.e., print more money, expand M1), eventually people lose faith that this money can deliver the promised amount of work (product) in the future. Then the money loses value, and in the worst case scenario people simply refuse to receive government money as a means of payment for work (and products). The Weimar republic and more recently Zimbabwe is an example of what happens when government try to pay its bills by printing more money, rather than by collecting taxes.

  35. DeDude,

    According to your hypothesis, we should be able to see a relationship between federal deficits and inflation. That is, large deficits should beget higher inflation than small deficits. True?

    If you will bother to read Inflation you will see that since we went of the gold standard in 1971, there has been zero relationship between federal debt and inflation.

    As for my “one-instrument band,” that instrument happens to be Monetary Sovereignty, the very foundation of modern (post-gold standard) economics. Better read up on it, because anyone who does not understand Monetary Sovereignty, does not understand economics, today. That sort of person is likely to have hypotheses that do not square with the facts.

    Rodger Malcolm Mitchell

  36. victor says:

    “Full employment and the Government should guarantee everyone the right to vote”? Even allowing for the source (union activist), please!!! Ask Fidel and his brother how THAT worked out in the workers’ paradise. Dollar is too high? not the Yuan too low? But is the “system” rigged? To a certain degree I think so; may be Elisabeth Warren will fix it? Smile, Happy Thanksgiving Day; and by the way, hasn’t Germany just voted a constitution amendment to mandate federal balanced budgets?

  37. DeDude says:

    No expanding money supply produce inflation.

    If you think we can just do it the Zimbabwe way and print all the money government needs then you may want to do a little reading yourself over the holiday week-end :-)

    I do believe their currency was off the gold standard. So fiddling on their “monetary sovereignty” did not produce a pretty song after all.

  38. Estragon says:


    I’ve read through your pieces on monetary sovereignty and inflation and I still see no reason why there should be a relationship between federal deficits and inflation. Maybe, if the fed contemporaniously monetized federal deficits by expanding currency in circulation, all else held equal, there might be such a relationship. In the real world though, neither condition is true. Federal deficits are financed at changing durations, and all else is never held equal. If, for example, a current year deficit was financed with a 10yr bond, the deficit portion of cash expended is exactly offset by cash collected from the sale of the bond. Cash in circulation is unchanged at the time of the deficit spending in this scenario. Money supply could be influenced up or down. Up, if velocity increases (eg. as a result of the extra gov’t spending). Down, if velocity decreases (eg. as a result of private sector saving in anticipation of higher taxes later). At some point cash in circulation could be increased (if the fed bought the bonds, as they are doing now), but even then it might not appear to be inflationary if done in an otherwise disinflationary environment (as now).

    As I understand it, your point is that the (US) gov’t can never run out of money, so no (US) gov’t program can ever do so either. While that may be technically true, it’s of little practical consequence. As DeDude points out, money (be it non-interest bearing infinite maturity currency, or interest bearing bills and bonds) is only able to compel the rendering of resources to the extent that; a)resource providers are willing to accept (USD) money at the compulsion price in resources, and b)resources are actually available in the quantity being compelled. Saying the gov’t can simply print its way out of debt is just another red herring to get in the way of the making of choices needed to deal with issues like SS (IMHO, of course).

  39. DeDude said, “No expanding money supply produce inflation.” The question is not in English, but I think this is the answer: Federal deficit spending expands the money supply, but deficits have not caused inflation.
    Estragon, you said, “I still see no reason why there should be a relationship between federal deficits and inflation.”
    O.K., so what is the problem?
    Estragon, you said, “Federal deficits are financed at changing durations. . . ”
    Contrary to popular belief, there is a difference between federal deficits and federal debt, and it’s not the difference you may think. Deficits are the difference between taxes received and spending. Debt is the total of T-securities outstanding. There is no monetary connection between deficits and debt.
    It is true that according to current law, the Treasury is required to issue T-securities in the amount of the deficit. That law is an unnecessary relic of the pre-1971 (gold standard) days. In fact, T-securities themselves are unnecessary. A monetarily sovereign nation creates spending money ad hoc, and does not rely on any source of income. If all taxes and borrowing were $0, this would not reduce by even one cent, the federal government’s ability to spend.
    The sole constraint on federal spending is inflation, not taxes or borrowing.
    You mention “resource providers willing to accept USD . . .” If you are talking about inflation, the value of money is based on supply and demand. While increasing the supply reduces the value, increasing the reward for owning money (interest rates) increases the demand. That is why there has been no connection between federal deficit spending and inflation. The Fed raises rates when there is even a hint of inflation, which stops inflation in its tracks.
    You mention “resources available” as being a constraint upon money creation. Aside from the fact that in this recessionary time, world resources are massively ample to satisfy many times our current money supply, there is another consideration: Money begets the creation of resources. When the government purchases, for instance, an airplane, the airplane manufacturer uses the government money to build factories. This is why China has hundreds, if not thousands of new factories. They were built in response to money.
    Finally, I do not say the government can print its way out of debt. That comment indicates you need to study Monetary Sovereignty.. You’re mixing debt with deficits. In the first place, federal debt could be eliminated tomorrow: Simply stop creating and selling T-securities. The government does not need to borrow the money it already has the unlimited ability to create.
    In the second place, Monetary Sovereignty prescribes increasing the deficit, not decreasing it. I don’t care a fig about paying off the debt. Neither should you.
    Finally, DeDude mentioned, as debt hawks always do, Zimbabwe, though he has no idea what happened in Zimbabwe, or why. He just has some vague notion they had hyperinflation (true) and they also printed lots of money (also true), and assumes the later caused the former (false). I’ll outline the Zimbabwe situation (and the other nation debt-hawks always mention, Germany) if you wish.

    Rodger Malcolm Mitchell

  40. Estragon says:


    As I pointed out earlier, federal deficit spending may or may not expand money supply and/or inflation. Velocity is a key variable.

    I’m well aware of the difference between deficits and debt. The former is a flow, the latter is a stock. In simple terms, debt is the net sum of accumulated deficit and surplus at a given point in time. This relationship is clearly “a monetary connection”, at least if I understand your use of the term. In addition to flows affecting the stock of debt, there is a return connection where stock affects flow through debt service.

    I did not “mention resources available as being a constraint upon money creation”. If there’s any constraint, I suppose it would be bits available on hard drives. Resources available are a constraint on the usefulness of money in compelling the rendering of resources to the holder of money.

    I don’t get your third last paragraph at all. You say the gov’t can’t print its way out of debt, then say the debt can be “eliminated tomorrow” by not selling T-securities and instead creating money. Waaa?

    If you really want to get funky in a discussion of deficit and debt, you probably want to go down the road of cash versus accrual accounting (i.e. do you take the expense when you buy the tank, or when it gets blown up in a war?). The most persuasive line of reasoning for increasing deficits is that in doing so the future productive capacity of the economy will be increased (an asset), which will more than offset the cost of servicing the addition to the debt.

  41. seneca says:

    Twenty percent of Social Security payments go not to elderly retirees but to relatively young disabled people and even children with a disabled parent. Why should America’s disabled be supported by a regressive payroll tax on working people?

  42. neutrinoman says:

    The author makes points that are valid, up to a point, about the hollowing-out of the American economy.

    Nonetheless, the idea that there isn’t a deficit crisis is claptrap — government at all levels has promised more than it can deliver. Got that?

    The US has been living beyond its means for more than 40 years. It started with “guns and butter” in the late 60s, went to inflation in the 70s, then to government and corporate borrowing in the 80s. It slowly got better in the 90s, superficially. In reality, foreign and household borrowing ballooned in the 90s and grew even more in the 00s. Now we’re back to gargantuan government borrowing.

    The US has gotten away with this because it has the world’s largest economy and reserve currency. But there’s a limit, and we’re no more than five years away from it.

  43. Estragon,

    “. . . federal deficit spending may or may not expand money supply. . . “ Wrong. Federal deficit spending always expands the money supply, 100% of the time. If you disagree, please explain how deficit spending would not expand the money supply.
    ” . . . debt is the net sum of accumulated deficit and surplus at a given point in time.” Not necessarily. As I explained before, federal debt is the sum of T-securities outstanding. Current law requires the Treasury to create sufficient T-securities to equal deficits, but this is not a monetary requirement. It is a legal requirement. If this obsolete, useless law did not exist, there would be no T-securities, thus no debt. But there still would be deficits.
    “Resources available are a constraint on the usefulness of money in compelling the rendering of resources to the holder of money.” I have no idea what you mean by “usefulness” and “compelling the rendering.” If you are talking about why people accept dollars in exchange for goods and services, there are at least three reasons, perhaps more:
    1. People are required to use dollars to pay their taxes, so they must accept dollars, to be able to pay taxes.
    2. Dollars are legal tender.
    3. Federal, state and local governments pay their bills in dollars. If one wishes to be a vendor to these governments, they must accept dollars.
    “You say the gov’t can’t print its way out of debt.” I never made that statement. That’s your phrasing you attribute to me! Yes, the debt easily could be eliminated. Simply stop creating and selling debt, a completely unnecessary exercise. The government does not spend borrowed money, nor does it spend tax money. It creates money ad hoc, when it spends. There is no relationship between spending and borrowing.
    You seem to have so many hypotheses about what might happen and what could happen, but doesn’t it bother you that these hypothetical events don’t happen? In just the past 40 years the federal debt has increased an astounding 3,600%. So where are the constraints on money creation? Where are the people refusing to use dollars? Why doesn’t inflation seem to correspond with deficit spending? Why do you so strongly believe something that has no basis in fact, but only in your intuition?
    The basic problem may be that you equate federal budgets with your personal budget. You need a source of money in order to spend. The federal government does not. It creates money out of thin air. You could end all taxes and all borrowing, and still the federal government could continue to spend as before. That is the basis for monetary sovereignty. I urge you to study it. Until you understand it, you will not understand economics, and you will continue to rely on intuition. Science is not intuition.

    Rodger Malcolm Mitchell

  44. Seneca,

    “Why should America’s disabled be supported by a regressive payroll tax on working people?” Contrary to popular belief, FICA taxes do not pay for Social Security. See: Ten Reasons to Eliminate FICA

    Rodger Malcolm Mitchell

  45. Neutrinoman,

    You said, “government at all levels has promised more than it can deliver. . . “ While that may be true of state and local governments, which are not monetarily sovereign, it is not true of the federal government, which is monetarily sovereign. You should try to understand the difference between monetarily sovereign and monetarily non-sovereign. Do you know the difference?
    You said, “The US has been living beyond its means for more than 40 years.” You have a “means.” I have a “means.” But the federal government has no “means.” It has the unlimited ability to create money. During the 40 years you mentioned, the federal debt has risen 3,600%, yet the government has absolutely no difficult paying its bills. You are confusing federal finances with your own personal finances.
    The government has no need to borrow. Think about it. Why should a government borrow the money it has the unlimited ability to create? Don’t jump at the answer. Think about it.
    Finally, you said, “But there’s a limit, and we’re no more than five years away from it.” What is the “limit,” what is the “it” we are no more than five years away from, and why five years? What is your evidence?
    Economics is a science. Treat it as such, and don’t lob in vague predictions about hypothetical events, having no supporting evidence. What next? A prediction that general relativity will be disproved in five years?
    Rodger Malcolm Mitchell

  46. DeDude says:

    If government printed its current spending of 3 trillion per year it would create a huge inflationary pressure. If you slow the velocity of all money you may be able to counter that inflationary pressure. But even jacking interest rates up to Volker levels could not contain the effects of 20% of GDP in new money every year, and we know what happens to the economy when rates go sky high. Remember that another 2.5 x GDP worth of debt belongs to the private sector, they would not do so well if they had to pay 25% on their loans. So yes in theory the government could print money and tax people by inflation (and partly contain that inflation by destroying economic growth with huge rate hikes), but that “medicine” is worse than the disease. Shrinking government to the size where it could be completely financed by newly printed money, without destroying the economy, is not realistic either. There are no easy quick fixes and the consequences of current anti-tax sentiment are simply that people get subjected to less visible “taxes” (such as low yield on your treasuries and CD’s and/or inflation).

    I agree that government can, will and is trying to inflate away part of its current debt by printing more money. But that is because it is impossible to raise taxes in the current political environment. That is also why they are trying to change COLA again (it gets in the way of inflating away the debt or “tax by inflation”). But inflation is just another tax targeting small savers and retired people. I also think that if the government ever faced needing to default on its loans it would instead just print more money.

    Anyway no facts can stop you from harping on your little “all-gain-no-pain” scheme so I will not waste any more time on that. Wake me up when you get it published in a peer reviewed journal.

  47. kenny powers says:

    Chartalism = having your cake and eating it too. Sounds wonderful. Too bad it’s just a bunch of crap.

  48. kenny powers says:

    Oh, and btw, RMM: Economics is not a science like physics or chemistry is a science. It’s a science like psychology is a science. There are many interesting common tendencies and patterns to be observed, but no natural laws. Stop deluding yourself, accept it and move on.

  49. DeDude and Kenny,
    You fellows make so many positive statements, for which you provide no evidence.
    I directed you to a simple graph showing there has been no relationship between federal deficit spending and inflation. Those are the facts. You ignore them, because they disagree with your intuition. You remind me of the people who ardently and even violently believed the earth was the center of the universe. Facts could not dissuade them. They were yesterday’s version of today’s debt hawks.
    Kenny says economics is not a science. Yes, when you restrict yourself to intuition, hearsay and popular wisdom, and when you ignore all the facts that disagree with your intuition, Kenny is correct. Kenny-style economics definitely is not a science. Monetary Sovereignty, which deals with facts, not intuition, is a science.
    It takes no brains to moo along with the herd. Examine the facts. Challenge your beliefs against the facts. You may even learn something.
    Rodger Malcolm Mitchell

  50. DeDude says:


    A couple of people have tried to educate you about some simple facts of economic life, and you keep ignoring what they point to and distorting what they wrote into something that can be rejected. Enjoy the fact that someone actually payed attention to your crack-pot ideas and made an attempt at explaining to you why they would not work. Not that it is going to do convince you. But for the sake of other readers who may find the concept of “having your cake and eating it to” attractive it is important that it is pointed out every now and them. But you just keep living in a fantasy world where Rodger Malcom Mitchell have discovered the ultimate secret to “having your cake and eating it too” and just need to convince all the idiots refusing to accept his revelations – I am sure it is a lot more comfortable for you than if you one day opened your eyes and realized what a load of cr@p it is to suggest that government can just print money as it wish without serious collateral damage.

  51. DeDude
    I notice two things:
    1. Your comment does not contain a single supporting fact for your hypotheses, just a lot of gobble-de-gobble expressing your personal intuitions.
    2. You did not address this graph about Inflation which does contain facts showing there has been no relationship between federal spending and inflation.

    Neither #1 nor #2 is new or surprising, as debt-hysterics never are able, or even try, to substantiate their hypothesis that deficits should be reduced. To a debt-hysteric, it is sufficient to say, “Deficits are big, therefore too big. It’s what I believe, so no proof is needed.”

    In the unlikely event you read, America’s future, you will see what rejection of <a href=" Monetary Sovereignty causes.

    People who have no evidence cannot be convinced with evidence.

    Rodger Malcolm Mitchell

  52. To DeDude, Kenny and other interested parties.

    On occasion (rare occasion, unfortunately) I am asked what specific steps I suggest the United States, a monetarily sovereign nation, should take to recover and to grow our economy. At this link, What Should The U.S. Do Next/, I offer four steps I think would be highly stimulative, not require the economic nightmares of austerity programs (See: Austerity disaster , and also not cause the uncontrollable inflation debt-hawks predict whenever a stimulus is mentioned.

    I welcome your comments, if based on facts, rather than intuition.

    Rodger Malcolm Mitchell

  53. cyaker says:

    Rodger Malcom Mitchell is indeed correct but I am not an economist so I will refer you to several who are. Warren Mosler has written a book called The Seven Deadly Innocent Frauds. It is a short book available at Amazon or for free at Mosler’s web site as a PDF document. The book is recommended by both William Black the Savings and Loan prosecutor and James Galbraith Associate Professor University of Texas, Austin who also wrote the forward.

  54. cyaker,

    Warren Mosler’s book is excellent. It’s simple and straightforward. It’s in everyday English. I recommend it all the time, and not just because Warren is a corresponding friend of mine. It completely destroys the myths that federal taxes pay for federal spending, or that the federal deficit and debt should be reduced. It describes the properties of Monetary Sovereignty, which is the foundation of modern (post-gold-standard) economics.

    Unfortunately, cyaker, it relies on facts, an anathema to those suffering from debt-hysteria. So they won’t read it.

    Rodger Malcolm Mitchell

  55. [...] than the bottom 50 percent. In the next month, despite all the far right rhetoric about the “deficit crisis,” the Republicans want to add $700 billion to our already huge national debt of [...]