This is the rebuttal I promised a few days ago ... but first, do you think the Concord Coalition would like the promo material below for their road show?
I’m offering this graphic absolutely free to everyone. Maybe it will start making a dent in the national debate if enough people see it.
As I said before, I am so, so sorry I was not able to attend Concord’s meeting in Austin one week ago. Since then, I have been consulting with several experts in monetary economics, and have decided to post two important things today: (1) Direct quotes from two experts, with links to their work; (2) Seven questions I wish Concord and our Comptroller General would answer—in writing, or at future public meetings.
Experts in monetary economics react to last week’s doomsday speech
First, here’s the question I asked them: “I can't figure out if our Comptroller General is talking this way due to ignorance, or because of some hidden agenda (...such as a doomsday book he's planning for future publication).” [Please note: I did not mean that as a personal attack on the Comptroller General, it was an honest question I had.]
Expert #1’s answer:
I'm afraid our Comptroller General doesn't have a clue about the real nature of government debt though he may be a good bookkeeper. It's scary when you consider the influence on fiscal policy that he can wield in his official position. However he is not alone by any means. There are many who believe as he does. Surprisingly many democrats are in the same boat. Such notables as Treasury Secretary Rubin and President Clinton have made similar comments about the "debt burden", although they didn't go nearly as far as Walker did in predicting impending disaster.
[Link to William F. Hummel’s website.]
Expert #2’s answer:
Yes, it's ridiculous. If you pay your taxes in cash they shred it; how does that pay for anything? It's about inflation, not solvency. If they knew that they'd be calculating future inflation rates, not future deficits.
[Link to one of Warren Mosler’s key papers, Soft Currency Economics.]
Explore those two links in depth. Set your ideological predispositions aside, as I did, and just concentrate on what they say about the way our money system works. If you are at all like me, you will emerge from that with a few more light bulbs burning inside your noggin regarding the way our money system really works—as well as a clearer understanding of how dimly the bulbs are burning on Capitol Hill, I’m sorry to say.
Seven questions for our Comptroller General and the Concord Coalition
If you can attend one of their future road show meetings—Chicago, Denver, and Seattle are next—be sure to ask at least one of the following questions during the Q&A session, which I presume they have on their agenda. Or, maybe we’ll get really lucky and see the Concord Coalition post written answers to all seven on their website—at last fulfilling their decade-old promise of “open, honest debate.”
Question 1:
When the economy grows faster than the debt grows, do we get better off or worse off financially?Question 2:
After decades of doom predictions by people like you over the years, do you think the reason financial disaster has not arrived yet might be because the world still considers the dollar, US savings bonds, and other Treasury securities to be among the safest places on the planet to park their own money?Question 3:
Your intergenerational accounting implies that sooner or later the national debt must be paid off—by us, or our kids, or our grandkids. But instead of doing that, why couldn’t we just keep rolling the debt over and over and over, as we’ve been doing for generations?Question 4:
Many of my friends own savings bonds. Paying off the national debt would require the government to raise our taxes, then use the proceeds to buy those savings bonds back from us. What sense does that make? Our grandchildren would be more than happy to inherit those bonds, so why not just leave our taxes where they are, and let us keep our savings bonds—so we can bequeath them to our grandchildren?Question 5:
When you say we’re headed for “bankruptcy,” I assume you really mean we’re headed for “hyperinflation”—because, as I’m sure you know, it is impossible for the US government to “run out” of money backed by the US government. So if your theory is correct that deficits and debt cause hyperinflation, then please explain why inflation and interest rates today are low and steady, even though we’ve been running deficits and increasing our debt for many decades.Question 6:
We ran surpluses in the late 90s largely by cutting spending on national security; for example, the surplus was larger because of the money we saved when we decided not to bolster security at our embassies in Kenya and Tanzania as we had at other embassies. As you know, both of those embassies were blown up by terrorists in August 1998. In retrospect, do you think it was wise to give surpluses a higher priority than security?Question 7:
Most versions of a balanced budget amendment say it’s okay to borrow money to win a war. That logic puzzles me. Why should borrowing be permissible to win a war, but impermissible beforehand—to prevent costly, long-lasting wars from starting in the first place?
That’s it for today. FYI, I hope it's ignorance that explains the rhetoric we keep hearing, instead of someone's hidden agenda. Reason: Ignorance is fixable; I know this from personal experience.
UPDATE, 11/5/06: I can't believe I left out the most important question of all. This belongs on the list; if only one question can be asked, it should be this one.
Question 8:
We've heard your incessant negative warnings that we'll either have to increase tax rates, cut spending, or both. Tell me: Why don't you seem to have any positive ideas for policies that would help increase our economy's productivity, workforce size, real wages and salaries, and overall gowth rate?
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End note: Credits I almost forgot . . .
One of the images in the animated graphic above is from the movie Bill & Ted's Bogus Journey, the sequel to the timeless standard, Bill & Ted's Excellent Adventure. Both of those movies, depending on your particular brand of humor, are either "must see" or "must skip"; there's no in-between. [Best line from the sequel: "Dinner's over, worm-dude."]
The reaper turns out to be harmless.
