Promoting the General Welfare; Government Has A PurposeBy: Ruth Calvo - FireDogLake
Sunday March 7, 2010 8:00 am
<snip>
One of the constant themes of the financial community is the fear of deficits. Under that artifice, spending money on the public interest is predicted to be very dangerous for the economy. Solemn warnings are coming from the right wing now, under its phobia about the risk we take by increasing spending on the very job and construction programs that the economy needs.
The distinguished economist James Galbraith put out his own warning this week, about the real danger that we run if we give in to the financial community’s fantasy that spending on ‘promoting the general welfare’ is bad for the country. There is, however, good reason that our constitution addresses in its preamble this raison d’etre of any government.
An ideology that fears government fears that its effective operation will make inroads into their power, so they threaten the rest of us with some disaster that well-being for the population will bring on.Nothing is further from the truth.
From Galbraith's Article (Link below):
We also hear, from the same people, about the impending "bankruptcy" of Social Security, Medicare–even the United States itself. Or of the burden that public debts will "impose on our grandchildren." Or about "unfunded liabilities" supposedly facing us all. All of this forms part of one of the great misinformation campaigns of all time.
The misinformation is rooted in what many consider to be plain common sense. It may seem like homely wisdom, especially, to say that "just like the family, the government can’t live beyond its means." But it’s not. In these matters the public and private sectors differ on a very basic point. Your family needs income in order to pay its debts. Your government does not.
Private borrowers can and do default. They go bankrupt (a protection civilized societies afford them instead of debtors’ prisons). Or if they have a mortgage, in most states they can simply walk away from their house if they can no longer continue to make payments on it.
With government, the risk of nonpayment does not exist. Government spends money (and pays interest) simply by typing numbers into a computer. Unlike private debtors, government does not need to have cash on hand. As the inspired amateur economist Warren Mosler likes to say, the person who writes Social Security checks at the Treasury does not have the phone number of the tax collector at the IRS. If you choose to pay taxes in cash, the government will give you a receipt–and shred the bills. Since it is the source of money, government can’t run out.
And...
A recent projection from the Center on Budget and Policy Priorities, based on Congressional Budget Office assumptions, has public-debt interest payments rising to 15 percent of GDP by 2050, with total debt to GDP at 300 percent. But that can’t happen. If the interest were paid to people who then spent it on goods and services and job creation, it would be just like other public spending. Interest payments so enormous would affect the economy much like the mobilization for World War II. Long before you even got close to those scary ratios, you’d get full employment and rising inflation–pushing up GDP and, in turn, stabilizing the debt-to-GDP ratio. Or the Federal Reserve would stabilize the interest payouts, simply by keeping short-term interest rates (which it controls) very low…
What is true of government as a whole is also true of particular programs. Social Security and Medicare are government programs; they cannot go bankrupt, and they cannot fail to meet their obligations unless Congress decides–say on the recommendation of the Simpson-Bowles Commission–to cut the benefits they provide. The exercise of linking future benefits and projected payroll tax revenues is an accounting farce, done for political reasons.
The very use of wealth to promote the general welfare, that purpose for having a government at all that the financial sector fears, is actually the greatest good for the economy. Spending power in the hands of the many who make up our consumer economy disperses into the general wealth, and boosts the total wealth. Only cutting off the general welfare actually threatens our total economy. It was that diminuition of consumer prosperity by wage stagnation and job offshoring that made the financial disaster we’re just emerging from.The top owners of the nation’s wealth make up only 20% of the population owning more than 90% of the total wealth…making it obvious through simple math that this is not enough to spend the nation back to wealth, even if the very rich take a yet larger proportion of the wealth for themselves. What is spent, and goes back into the economy, comes largely from those who live off of their disposable income. Spending about 10% of total wealth is not enough to sustain our total economy.
Even without the simplicity of the math, the economic collapse that resulted from stripping away wealth from the general population shows the destructive consequences of that theft.
The delusion of right wing ideology is dangerous, and its insistence on lowering the spending power of the general population is the worst threat to our national prosperity.<snip>
Link:
http://seminal.firedoglake.com/diary/33746Galbraith Article (The Nation):
http://www.thenation.com/doc/20100322/galbraith:kick:
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