Guest Commentary: Fiscal Restraint Is Dead…and I Say Thank Goodness!

By Mark Dempsey

The following is an email sent to Debra J. Saunders (dsaunders@reviewjournal.com), whose editorial appears in the March 17, 2024, Sacramento Bee (Headline: “USA IOU. Brother, can you spare a trillion?”) and starts with what is quoted first in my email.

Dear Ms. Saunders,

I read your editorial in today’s Sacramento Bee, the one starting with “Fiscal restraint is dead” and that includes the clever characterization of Biden’s fiscal policy “Call it: Tax and Spend More–and Still Borrow More.”

It’s cute, succinct, and, unfortunately, sadly misguided.

In effect, you ask us to believe dollars grow on billionaires, and the federal government must get its dollars from the population. That would make federal debt the equivalent of household debt. But, unlike a household, the federal government creates dollars. It can make as many as it needs at the direction of Congress. Federal debt is nothing like household debt. It’s like bank debt.

Your bank account is your asset, but thanks to double-entry accounting, it’s also the bank’s liability–the money the bank owes you. Getting the bank to diminish that debt would simply make your account smaller. Not very sensible.

You also cite the sequence of federal fiscal events as “tax and spend.” Where do people get the dollars to pay those taxes if the monopoly creator of dollars doesn’t spend them first? The correct sequence is “spend first, then retrieve dollars in taxes.”

Since the spending logically must precede any tax revenue, it cannot be provisioned by taxes. The taxes are important to create the demand for dollars, but they do not fund federal programs.

Incidentally, what do we call the dollars spent, but not retrieved in taxes? You know…the ones in your wallet? Answer #1: the dollar financial assets of the population. Answer #2: national debt. Both answers describe the same thing, just as your bank account is your asset, but the bank’s liability.

Like most fans of “Fiscal Responsibility™,” you also seem to believe we’ll run out of dollars if we continue on this path. Do you also believe the Bureau of Weights and Measures will run out of inches, or the scorekeeper at the ball game will run out of points?

No less than former Federal Reserve Chair Alan Greenspan says the federal government “cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit.”

Alan Greenspan even lectured Paul Ryan about the same thing.

Deficit scolds want to cut federal spending, especially the programs responsible for 85 percent of federal outlays–the military, Social Security, and Medicare. Military spending is seldom cut, but social safety nets enjoy no such immunity.

Cutting those is especially cruel since these programs are not particularly generous now and 65 percent of seniors have only Social Security and Medicare to fund their retirement.

The real intent of this proposed austerity, then, is “labor discipline.” That’s the message that you had better take whatever crappy job is on offer or suffer the indignities of poverty, even homelessness and starvation.

If you’re extra rebellious, we’ll put you in a cage. As a consequence of our allegiance to labor discipline, with five percent of the world’s population, the US has 25 percent of its prisoners.

The austerity is cruel and completely unnecessary. Treating people well even reduces crime. The US incarcerates at five times the world’s average, per-capita, seven times more than Canada does, even though Canadian crime is actually less than US crime (per-capita).

But, unlike the US, Canada doesn’t have medical bankruptcies. The US has half a million every year.

What you’re promoting is, in effect, the whip in the hands of the plutocrats–perhaps the ones for whom you work. Is that really what you want to do?

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