Santa knew what we needed: a new Grand Bargain!
The perfect Christmas gift is a fully satisfactory solution to a true need. It is not the pile of scraps from which desperate efforts might or might not yield a makeshift winter coat for a child, but is the well-made, well-fitting coat with hat, gloves and scarf that arrives before the full bite of winter. So it is as we enter December surrounded by last year’s discarded idea scraps and a sense of resigned desperation, lacking a realistic plan to avoid our second “fiscal cliff”. We hear dispirited talk of things that did not work before, and of theories of what might happen in a show-down yet to come…but there has been no equivalent to the timely arrival of a coat that is ready, complete and capable of providing warmth when needed. We do have a babe in a manger – the Affordable Care Act – but as many seem bent on strangling that babe as on working out the salvation it can be for those most in need of it. We did have food stamps, which have fed many hungry children, no matter how our scrooges may have wanted to judge their parents. But our society has gotten so jaded that we select vestigial efforts to feed the hungry and care for the sick as those things to first discard, while the ultra-wealthy rack their brains to think of things they do not already have to put on their list for Santa. What we have seemed to lack, barreling toward our January deadlines with our eyes firmly closed, is a solution for our affairs of state, come January, as practical as a winter coat!
For many months, talk of a solution to our fiscal crisis has involved the idea of a “grand bargain” – an agreement that the quid pro quo for not savaging the present budget would be cuts in long-term spending, with mention most frequently made of entitlements. “Don’t get too over-wrought about near-term deficits”, is the proposition, “we’ll deal together on spending in the long term bye and bye.” Those who have read our last two newsletters know we propose dealing with our deficits now, not in the bye and bye, by using a small store of debt-free United States Notes as our country has done, quite successfully, in the past. We have pointed out that our current Federal Reserve Notes (upon which all those electronic debits and credits are based) are a printed, fiat money currency with absolutely nothing “behind them” but the authority of the government to declare them “Legal tender for all debts, public and private.” For reasons that escape a great many of us and have since Franklin and before, the government is willing to borrow a congressionally-determined amount of fiat money from others which it has created, plunging the nation further into debt, rather than use the orthodox system of printing up the same number of dollars, on the same presses, for its own use, within the medium of exchange requirements of the economy.
Last year’s “grand bargain” of which we heard so much, nominally focused on issues of debt, short-range vs. long-range. Why should our proposal, which would reduce the debt, call for the negotiation of such a “grand bargain?” Why wouldn’t the Party of Lincoln embrace the solution of Lincoln and his Republican Congress? It is not, unfortunately, the Party of Lincoln we will have to contend with. It would have to be someone even older than us and preferably a Republican to tell the tea party newcomers, “I knew Abraham Lincoln – and you, sir, are no Abraham Lincoln.”
The truth is debt itself has never been the number one item on the agenda. It’s talk about debt that is. Talk about debt can be used to keep government from growing, and to minimize government spending so as to avoid the true concern of very rich contributors – inflation. We do not hear inflation-fearing calls from this interest group for increased bank reserve requirements, which would temper the amount of money being created “out of nothing” by our private banks, as most of our money is. The Congressional Research Service Report for Congress #96-672, Paragraph 4 under “Other Forms of Money”, states that United States Notes are no more inflationary than a like dollar amount of Federal Reserve Notes. What we have is the unfounded fixed idea among some that any spending by the government (yet not by others) raises the specter of inflation; that any lending (not spending) by the Federal Government directly comparable to lending done by private banks…is inflationary, whereas lending done by private banks is not; and that any investment by government, however similar to that done by private investors and Wall Street is inflationary when done by the government but not so when done by private investors and Wall Street.
It is for these rather spurious reasons, as we see it – yet reasons we must acknowledge and address - that we need a “grand bargain”, even to negotiate the elimination of our FY 2014 deficit. It would be interesting to observe a debate in which the erstwhile deficit hawks protest, “No! We want a deficit!” even as their opponents argue for greenback elimination of it. Human nature being what it is, however, we know we have to provide for a resolution of such a dispute before it even begins.
As we have sent our newsletter to over 1,000 economists during the last year, we have learned what the substantive arguments are concerning our often-proposed use of debt-free greenbacks. It turns out there is only one such argument against it – the concern that being able to fund a deficit without cost would make it too easy for government to grow and spend too much money over time, resulting in problematic inflation. Getting the real issue on the table is the first step to finding a solution. Debt never has been the most-feared thing, and no plan to reduce our national debt has ever been sufficient to relieve what is. Indeed, if we totally got rid of the national debt, what would happen to the Treasury bond reserves against which banks can leverage by a factor of ten or so to lend money they don’t actually have? Preservation of the Federal Reserve and of a healthy amount of national debt is vital to the big banks and the big-money interests – so our proposal concerns only a minuscule portion of the money supply, a minor correction to our insolvency iceberg course.
So the “grand bargain” we propose is akin to a balanced budget amendment for future government spending in exchange for debt-free funding of our current skinnied-down FY 2014 budget. We would hope for a way to bring back food stamps and to make affordable health care, the noblest idea of Republican as well as Democratic administrations, work – but those are no new ideas.
United States Notes would be a new and immensely useful tool in near-future years when realistic spending goals will still leave a small delta versus tax receipts. We need to avoid what even the IMF now sees as ruinous austerity in order to give our economy a chance to fully recover rather than weaken this coming year, and we should co-invest with banks and private investors in real, income-generating assets as described in our September newsletter. The 535 members of both houses could form many committees to find ways for government to operate more efficiently, to lower healthcare costs, to eliminate outmoded subsidies and to better enlist private sector investments to profitably do things society needs done and not necessarily by government. We can reduce our total debt, not just our annual deficit, if we follow in the footsteps of those most notable for doing it - Harry Truman and Bill Clinton. (Republicans have had more modest successes, but for fairness’ sake we should mention Dwight D. Eisenhower and the holding of the line by Richard M. Nixon).
As cited in last month’s newsletter, Abraham Lincoln declared: “the privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest opportunity.” The needy girl in the story quickly recognized the gift she had been given was good enough, and started to wear her new coat. Whether Washington will remember its past triumphs and act upon them in the manner of Lincoln and the practical young girl in our story remains to be seen - and indeed will be, in the very near future. Meanwhile, the gift is for the taking.
The perfect Christmas gift is a fully satisfactory solution to a true need. It is not the pile of scraps from which desperate efforts might or might not yield a makeshift winter coat for a child, but is the well-made, well-fitting coat with hat, gloves and scarf that arrives before the full bite of winter. So it is as we enter December surrounded by last year’s discarded idea scraps and a sense of resigned desperation, lacking a realistic plan to avoid our second “fiscal cliff”. We hear dispirited talk of things that did not work before, and of theories of what might happen in a show-down yet to come…but there has been no equivalent to the timely arrival of a coat that is ready, complete and capable of providing warmth when needed. We do have a babe in a manger – the Affordable Care Act – but as many seem bent on strangling that babe as on working out the salvation it can be for those most in need of it. We did have food stamps, which have fed many hungry children, no matter how our scrooges may have wanted to judge their parents. But our society has gotten so jaded that we select vestigial efforts to feed the hungry and care for the sick as those things to first discard, while the ultra-wealthy rack their brains to think of things they do not already have to put on their list for Santa. What we have seemed to lack, barreling toward our January deadlines with our eyes firmly closed, is a solution for our affairs of state, come January, as practical as a winter coat!
For many months, talk of a solution to our fiscal crisis has involved the idea of a “grand bargain” – an agreement that the quid pro quo for not savaging the present budget would be cuts in long-term spending, with mention most frequently made of entitlements. “Don’t get too over-wrought about near-term deficits”, is the proposition, “we’ll deal together on spending in the long term bye and bye.” Those who have read our last two newsletters know we propose dealing with our deficits now, not in the bye and bye, by using a small store of debt-free United States Notes as our country has done, quite successfully, in the past. We have pointed out that our current Federal Reserve Notes (upon which all those electronic debits and credits are based) are a printed, fiat money currency with absolutely nothing “behind them” but the authority of the government to declare them “Legal tender for all debts, public and private.” For reasons that escape a great many of us and have since Franklin and before, the government is willing to borrow a congressionally-determined amount of fiat money from others which it has created, plunging the nation further into debt, rather than use the orthodox system of printing up the same number of dollars, on the same presses, for its own use, within the medium of exchange requirements of the economy.
Last year’s “grand bargain” of which we heard so much, nominally focused on issues of debt, short-range vs. long-range. Why should our proposal, which would reduce the debt, call for the negotiation of such a “grand bargain?” Why wouldn’t the Party of Lincoln embrace the solution of Lincoln and his Republican Congress? It is not, unfortunately, the Party of Lincoln we will have to contend with. It would have to be someone even older than us and preferably a Republican to tell the tea party newcomers, “I knew Abraham Lincoln – and you, sir, are no Abraham Lincoln.”
The truth is debt itself has never been the number one item on the agenda. It’s talk about debt that is. Talk about debt can be used to keep government from growing, and to minimize government spending so as to avoid the true concern of very rich contributors – inflation. We do not hear inflation-fearing calls from this interest group for increased bank reserve requirements, which would temper the amount of money being created “out of nothing” by our private banks, as most of our money is. The Congressional Research Service Report for Congress #96-672, Paragraph 4 under “Other Forms of Money”, states that United States Notes are no more inflationary than a like dollar amount of Federal Reserve Notes. What we have is the unfounded fixed idea among some that any spending by the government (yet not by others) raises the specter of inflation; that any lending (not spending) by the Federal Government directly comparable to lending done by private banks…is inflationary, whereas lending done by private banks is not; and that any investment by government, however similar to that done by private investors and Wall Street is inflationary when done by the government but not so when done by private investors and Wall Street.
It is for these rather spurious reasons, as we see it – yet reasons we must acknowledge and address - that we need a “grand bargain”, even to negotiate the elimination of our FY 2014 deficit. It would be interesting to observe a debate in which the erstwhile deficit hawks protest, “No! We want a deficit!” even as their opponents argue for greenback elimination of it. Human nature being what it is, however, we know we have to provide for a resolution of such a dispute before it even begins.
As we have sent our newsletter to over 1,000 economists during the last year, we have learned what the substantive arguments are concerning our often-proposed use of debt-free greenbacks. It turns out there is only one such argument against it – the concern that being able to fund a deficit without cost would make it too easy for government to grow and spend too much money over time, resulting in problematic inflation. Getting the real issue on the table is the first step to finding a solution. Debt never has been the most-feared thing, and no plan to reduce our national debt has ever been sufficient to relieve what is. Indeed, if we totally got rid of the national debt, what would happen to the Treasury bond reserves against which banks can leverage by a factor of ten or so to lend money they don’t actually have? Preservation of the Federal Reserve and of a healthy amount of national debt is vital to the big banks and the big-money interests – so our proposal concerns only a minuscule portion of the money supply, a minor correction to our insolvency iceberg course.
So the “grand bargain” we propose is akin to a balanced budget amendment for future government spending in exchange for debt-free funding of our current skinnied-down FY 2014 budget. We would hope for a way to bring back food stamps and to make affordable health care, the noblest idea of Republican as well as Democratic administrations, work – but those are no new ideas.
United States Notes would be a new and immensely useful tool in near-future years when realistic spending goals will still leave a small delta versus tax receipts. We need to avoid what even the IMF now sees as ruinous austerity in order to give our economy a chance to fully recover rather than weaken this coming year, and we should co-invest with banks and private investors in real, income-generating assets as described in our September newsletter. The 535 members of both houses could form many committees to find ways for government to operate more efficiently, to lower healthcare costs, to eliminate outmoded subsidies and to better enlist private sector investments to profitably do things society needs done and not necessarily by government. We can reduce our total debt, not just our annual deficit, if we follow in the footsteps of those most notable for doing it - Harry Truman and Bill Clinton. (Republicans have had more modest successes, but for fairness’ sake we should mention Dwight D. Eisenhower and the holding of the line by Richard M. Nixon).
As cited in last month’s newsletter, Abraham Lincoln declared: “the privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest opportunity.” The needy girl in the story quickly recognized the gift she had been given was good enough, and started to wear her new coat. Whether Washington will remember its past triumphs and act upon them in the manner of Lincoln and the practical young girl in our story remains to be seen - and indeed will be, in the very near future. Meanwhile, the gift is for the taking.
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