GOP: We've been lying all along … Boehner's admission that we don't really have a debt crisis reveals his party's ulterior, program-cutting motives … I never thought I'd write these words, but here goes: thank you, John Boehner. Thank you, Mr. Speaker, for finally admitting on national television that all the fiscal cliffs, sequestrations and budget battles you've created are, indeed, artificially fabricated by ideologues and self-interested politicians and not the result of some imminent crisis that's out of our control. America owes this debt of gratitude to Boehner after he finally came clean on yesterday's edition of ABC's "This Week" and admitted that "we do not have an immediate debt crisis." (His admission was followed up by Budget Committee Chairman Paul Ryan, who quickly echoed much the same sentiment on CBS' Face the Nation). – Salon
Dominant Social Theme: The US debt is no big deal.
Free-Market Analysis: This article, posted at the leftist Salon website, is not so much a dominant social theme as it is simply a denial of reality. The total debt of the US in terms of what has been promised is closer to US$200 trillion than US$16 trillion. We've written about that here: The US$200 Trillion Debt Which Cannot Be Named.
This was not our perspective but that of a mainstream economics professor who wrote an article for the International Monetary Fund laying out the United States's real indebtedness. We quoted from the article as follows:
Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 percent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. "Let's get real," Prof. Kotlikoff says. "The U.S. is bankrupt." Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged.
To argue about how big the US debt is or whether or not it is payable misses the point. The dollar reserve currency, as we've been writing for several years now, is on the way out. Other countries are using currencies other than the dollar, or even gold, for payment purposes. And China and Japan have quietly ceased to purchase the amount of Treasuries they used to. Nobody thinks the dollar is the world monetary standard anymore, or not in the long run anyway.
But still, in the US this debate continues. As Ron Paul writes in his column in this issue of the Daily Bell, the debate is just a distraction from the real issue – and the real issue is that the sociopolitical system of the US, like the rest of the Western world, is unsustainable. Here's more from the article:
In offering up such a stunningly honest admission, the GOP leader has put himself on record as agreeing with President Obama, who has previously acknowledged that demonstrable reality. But the big news here isn't just about the politics of a Republican House Speaker tacitly admitting they agree with a Democratic president. It is also about a bigger admission revealing the fact that the GOP's fiscal alarmism is not merely some natural reaction to reality, but a calculated means to other ideological ends.
Before considering those ends, first remember that Boehner (like Obama) is correct on the facts.
As Nobel-winning economist Paul Krugman has pointed out, "Even if we do run deficits, federal debt as a share of GDP will be substantially less than it was at the end of World War II" and "it will also be substantially less than, say, debt in several European countries in the mid to late 1990s." It is also lower than the 80 percent of GDP level that many economists say starts to put countries in a precarious position. Additionally, citing Congressional Budget Office data, the Center for American Progress notes that the long-term debt outlook is only dire because the projections simply assume without question that "future Congresses will enact huge new deficit-increasing tax cuts and spending hikes."
"The debt outlook is bad (but) we're not looking at something inconceivable, impossible to deal with," writes Krugman. "We're looking at debt levels that a number of advanced countries, the US included, have had in the past, and dealt with."
So yes, we should start dealing with the long-term debt in a pragmatic and sober way, but we shouldn't pretend it is some sort of imminent crisis worthy of draconian austerity measures.
The article cites a number of ways the US can "grow" its way out of debt, including raising taxes and migrating to a single-payer health care system. In fairness to the article's author, other solutions include cutting the US's vast military-industrial complex.
But again, the reality of the US system is that it is already unsustainable. In fact, the author of this article misses a big point, which is that if the Fed stopped buying US debt and pushing rates near zero, the carrying cost of current and future debt would gradually rise until it consumed most or all of government expenditures.
The ultimate solution to the US debt is going to be a new monetary system that may or may not include the dollar. Some will say that this is merely the outcome of any monopoly money system but our suspicion has always been that the current environment is being gradually destabilized so as to offer a global money provided by a single central bank of some sort.
Another alternative obviously being contemplated by the powers-that-be is a return to some sort of managed gold standard. No matter what, times are changing and denying the reality of the instability of the current global economic environment will not improve matters – either globally or for oneself.