The Deficit: Nine Myths We Can't Afford

[Hannah Bell]

The national debate over fiscal responsibility and sustainability is entering a new, critical phase. Today, an 18-member bipartisan commission to examine the government's fiscal problem will meet for the first time. Everything is on the table, including Social Security and Medicare.

With so much at stake, the time has come to examine our fundamental assumptions about government deficits and debt. The danger of accepting oft-repeated orthodoxies has been clearly demonstrated in the recent financial crisis. For decades, free market fundamentalism went virtually unquestioned, and we've all seen the result -- an epic economic catastrophe... It's time to consider alternatives perspectives before we rush down potentially destructive policy paths... The Roosevelt Institute's New Deal 2.0 blog asked seven economic thinkers to address what they see as the most dangerous myths currently circulating on the deficit:



Myth #1: The government should balance its books like a private household.

Reality: Our federal government is the issuer of the currency, which makes its budget fundamentally different than the average citizen's...


Myth #2: Fixing Social Security and Medicare will require "tough choices."

Reality: Social Security and Medicare are not facing a financial crisis...


Myth #3: We are passing on debt to our grandchildren...

Myth #4: What we don't tax we have to borrow from the likes of China for our children to pay back...

Myth #5: The government must tax or borrow to get money to spend...

Myth #6: Deficits and government borrowing takes away savings...

Myth #7: We'll end up just like Weimar Germany or Zimbabwe...

Myth #8: Government spending increases interest rates and 'crowds out' valuable private sector investment...

Myth #9: The money spent paying interest on the national debt could be spent elsewhere...



http://www.huffingtonpost.com/lynn-parramore/the-deficit-nine-myths-we_b_553527.html

[maryf]

1. K&R nt

[dems_rightnow]

2. They could lower interest rates to zero?

Yeah, people will line up to buy bonds with a 0% rate of return.

[Hannah Bell]

3. ~Randall Wray, Professor of Economics, University of Missouri-Kansas City, Missouri

short term rates already near zero.

it's a question of what policy outcomes you're aiming for.

right now we're have over 20% un & underemployment & declining wages, + incipient deflation & more bank failures on the way...

heckuvajob! those banksters sure know what they're doing!

[mmonk]

4. Reminds me of the Republican ideology and Wall Street

where they screw it up so bad that there is no where to put your money and get any kind of return unless you "time" their bubbles that pop.

[Hannah Bell]

5. wall street takes 40% of all profits made in the US - by creating bubbles & making bets.

*that's* a bit part of the problem.

they need to be busted, bad.

[ThomWV]

8. 40%? Sounds a bit high

After all, one must leave room in the profit arena for the defense contractors, insurance companies, and Pay-Day lenders.

[Hannah Bell]

12. In the last 40 years, financial profits went from just under 20 percent

of corporate profits to around 40 percent before the financial crisis.

Financial company stocks became 22 percent of the Standard & Poor’s financial index by 2006, up from 13 percent in 1999.

And in New York City, the capital of finance, nearly $1 out of every $4 that companies paid employees in 2007 went to a financial worker.

http://www.nytimes.com/info/wall-street-pay/

[mmonk]

9. Yes, it is most definitely.

It's completely predatory with the average American investor its victim.

[quaker bill]

6. They already did

and people are buying them. When stocks and other equity investments are offering a negative return (loss), treasury notes that pay 0 to 1 percent interest (an actual gain) plus are guaranteed for the full principal amount (assurance of no loss) begin to seem like a pretty good deal.

The interest rate has been near zero for well over a year now.

[ThomWV]

7. Yes, they will do exactly that when conditions dictate it be done

And there has been more than one time when the rate of inflation exceeded returns available from other reasonably save instruments, or at times when no "safe" investment can be found, in which case a 0% Government bond is just fair good protection.

[girl gone mad]

11. um..

where've you been the last couple of years?

[quaker bill]

10. Great article

that points out the advantages of Fiat Money as opposed to Ron Paul's desire for "settled money" (return of the gold standard).

Properly understood, money taxed by the feds is "destroyed" and money spent by the feds is "created". With tax rates currently at a 60 year low, we are "destroying" less money, and with deficits high, we are "creating" more money than ever before. Sooner or later, all that new money ends up somewhere, for me, the large refund is going on vacation.

[Hannah Bell]

13. kik

[amborin]

14. knr