US deficit hawks = big fat liars who want to steal your social security & defund medicare

[Hannah Bell]

Eurotrash Nations Head Into Default
The US is Not Greece
By MARSHALL AUERBACK


...The cries of the deficit hawks grow louder: Repent all ye fiscal profligates, before the day of reckoning comes. Let’s dial down the Biblical hysteria a wee bit while there’s still time for rational debate. The market’s recent response to the intensifying pressures in the euro zone suggests that investors are beginning to differentiate between countries that are sovereign issuers of currency, such as the US or Japan, and non-sovereign issuers, such as Greece or any other nations in the euro zone. The US dollar is rising in value, notwithstanding the federal deficit, while debt distress in the so-called “PIIGS” countries (ie Greece, Portugal, Spain and Ireland, especially Greece,) are intensifying, thereby driving down the euro to fresh 12 month lows against the dollar...

That the US has the reserve currency is an irrelevant consideration here. The key distinction remains user vs. creator. The euro zone nations are part of the former; Canada, Australia, the UK, Japan and the US are representatives of the latter.

Using Greece, Portugal, Spain and Ireland as analogues to the US or the UK, as Rogoff, Ferguson and countless other commentators do, is wrong. Their faulty analysis comes as a result of the deficit critics’ failure to distinguish between the monetary arrangements of sovereign and non-sovereign nations. Any sovereign government (none within the EMU enjoy that status any longer) can deal with a collapse in revenue and an increase in outlays from a financial perspective without invoking the sort of deadlocks that are now crippling the EMU zone. That is why, for example, the Japanese yen is not in free fall against the dollar, despite having a public debt to GDP ratio in excess of 200 per cent, almost 2.5 times that of the US. In fact, over the past few days the yen has actually appreciated against the dollar. Now why would that be, if the lesson we were supposed to learn was the evils of “unsustainable” government deficit spending?

Fiscal sustainability has no relevance in a system where there are no operational constraints on the ability of a government to spend. US Social Security checks will not bounce. Nor will the Canadian or Japanese equivalents. Similarly, their bonds will always be able to pay out interest.
Note that this doesn’t mean that there are no real resource constraints on government spending. Let’s be clear: anyone who advances the use of fiscal policy as an effective counter-stabilization tool is always careful to point out that these interventions can come at a cost. That cost could well be inflation if, as a result of the fiscal expansion, we reach full employment, resource constraints begin to appear, but the government continues to spend. But if the economy recovers, tax revenues will increase and safety net spending will fall. In the US, that means we will likely be back to “normal,” with deficits around 2-4 per cent depending on the state of the economy, which is where we’ve been for the past 30 years aside from 1998-2001.

Why won’t these deficits be inflationary? As Professor Scott Fullwiler noted in a recent email correspondence with me, once the recovery is underway and the economy gets to a significantly higher capacity utilization where price pressures could emerge, the deficit will be declining substantially. It will also be at least a partially offset by a fall in discretionary spending on social welfare. It’s axiomatic that the faster the economy grows, the smaller the deficit becomes, unless the government continues to spend recklessly...


http://counterpunch.org/auerback05072010.html

[JDPriestly]

1. We have bigger problems looming before us than the deficit.

The biggest one in my opinion is post-oil energy production and the related problem of energy independence here and now or at least as soon as possible.

Solving the problems related to energy production means finding a safe way to produce alternative, renewable energy. And that is going to take a lot of government investment. Why? Because private companies have the money to develop alternatives to fossil fuels but have refused to use their resources for that purpose. Why? Because they want fat profits now, not decent profits in the future.

Government is the only entity that can invest in the really basic research we need now in order for private industry to run with the final stages of developing alternative energy in a few years.

What good is it going to do Americans to have a balanced budget and no debt if people in Maine and Massachusetts can't heat their homes in winter, farmers in the midwest can't afford fertilizer and have no way to run the machinery they need to harvest their crops and out here in the west, we can't afford to bring water into our cities and onto our ranches and truck farms?

Our present debt crisis will look like a joke compared to the problems we will have ten years from now if we don't get serious about alternative energy right now. See the video up from Cenk's site on peak oil to learn more about this.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x463837

[Hannah Bell]

2. actually, our immediate problem is the ruling class has slated us all for poverty.

and "peak oil" will be part of their rationale.

i don't notice the rich folk cutting back their trips on jet planes, nor downsizing their houses. not even that peak oiler al gore; he's got three huge houses in different parts of the world. how's he going to get to them all when the jet fuel runs dry?

gosh, for some reason, i don't think it's going to run dry for him & his friends.

the US deficit isn't the problem: the austerity program of the ruling class *is*.

[Hannah Bell]

3. k

[blindpig]

4. Yep

Peak Oil will at least initially be relative, we won't be able to afford it, they will. And they will of course find a way to throw their additional expense on us. They won't be going wanting, they never do.

k&r

[midnight]

7. H.B. you are right on.....

[laughingliberal]

5. K & R nt

[Statistical]

6. Worrying about a deficit in a recession is like worrying about cost of water to put out a fire.

If you don't get the fire out it really doesn't matter how much water you saved.

Still eventually the US economy will recover and eventually we MUST tackle the deficit and likely it will require BOTH spending cuts (DOD good place to start) and tax increases.

[Echo In Light]

8. K/R

[Hannah Bell]

9. k