Our fraudulent “debt crisis” debate

By Alan Bean

We have been hearing a lot of wailing and teeth gnashing about the federal debt.  If we keep spending our grandchildren’s money, the logic goes, the future will be bleak.

But how bad is the debt crisis, really, and how did it get that bad?  Where has the tax money gone, and why isn’t there enough of it?

You will notice that the debt Cassandras rarely talk about the balanced budgets of the late Clinton era.  Nor do they have much to say about the scandalous cost of fighting futile wars in Afghanistan and Iraq.  Nor do they want to discuss the unbridled profligacy that defined the financial and real estate sectors until the great collapse of 2008.

Instead, they focus on the temporary spike in government expenditure sparked by the Obama administration’s stimulus spending.

The debt Cassandras want us to believe that nothing can be done about poverty and that well-intentioned attempts to make life easier for poor people just make things worse.  They further suggest that “entitlement” programs like Social Security and Medicaid are the primary contributors to the debt problem.  In other words, nothing can be done to help old people and sick people and any attempt to do so will drive the nation straight into the poorhouse.

And then we read that the rich people of the world have collectively stashed an estimated $32 trillion in offshore tax havens.  I can’t wrap my head around a figure that big, but I suspect that if this money had been taxed at conventional levels, the European debt crisis would dissolve and America’s “debt problem” would evaporate.

Of course that would leave the rich folks a bit poorer.  Forbes magazine argues that if we don’t like the idea of rich people stashing their money in offshore accounts we should lower their tax burden.  That’s a lot like arguing that if you tax us at reasonable rates we will intentionally drive the nation into debt (and there’s nothing you can do about it because wealthy people live above the law).

Unfortunately, there is a lot of money to be made telling wealthy folks what they want to hear, and not much left over for those who value the truth.  In fact, considering the incentives wealthy people have at their disposal, it is amazing that we ever hear the unvarnished truth about anything.  But we do.  Sometimes even wealthy people come clean (I’m thinking in particular of Warren Buffet).

But most of the time the media are handsomely paid to prevaricate and dissemble, about money and practically everything else.  These dismal facts don’t preclude truth-telling altogether, but it is wise, nonetheless, to view the evening news as primarily an entertainment medium, a vehicle for well-heeled advertisers to maximize profit.  Most of what we hear on the news is true, so far as it goes.  Its what we don’t hear that is killing us.

And we aren’t hearing much about the $32 trillion.  And we aren’t hearing much about the obscene cost of fighting wars.  Nor are we hearing much about how the financial sector brought us to the brink of chaos.  Which explains why so few banking executives  currently reside in prison, why life for poor folk just keeps on getting harder and why the debt crisis debate focuses on 23% of the vital facts.

One thought on “Our fraudulent “debt crisis” debate

  1. There is truth in what you say, Alan. However, there is another dimension not exposed. Nations almost never retire debt. It grows and is carried forward. Greece is an example of debt beyond economic sustainability. Nations that contract debt faster than growth in their economy are the ones in trouble. How do they escape? They create more money and pay the debt with currency that buys less than when the debt was contracted. It is an indirect form of taxation. Politicians, lacking courage, proctecting their phony baloney jobs, spend on services to get reelected and finally, in the end, lacking courage to curtail spending or raise taxes to pay for services, take the sneaky way out by creating more currency with which to defray debt. The result is inflation, but, if it occurs gradually, the people usually do not protest. Greece, without their own currency, could not do that.

    Inflation usually does not harm people with significant assets because the value of those assets rise in value, floating on the sea of currency, as it were. Poor people are victims. Without assets, just getting by, the cost of food and other necessities rise in price faster than their income. Warren Buffett does not own gold. He knows the companies he owns will rise with inflation.

    Last year in a press conference, Ben Bernanke, Chairman of the Federal Reserve Bank, stated that it is the policy of the Federal Open Market Committee to cause inflation of 2% per year. It is believed that figure meets the needs of growing population and is needed to keep the economy growing and to avoid the terrifying spector of DEFLATION. It is a top priority of that body to prevent deflation, a serious economic contagion. When people expect prices to rise, they are more inclined to buy. When prices are expected to decline, there is a tendency to wait and buy at a lower price. That is why deflation is so feared. However, inflation of 2% per year means money will lose half its purchasing power in 25 years. People without means to protect themselves from it are being victimized.

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